Industrial Relations And Labour Laws
Partner - Risk Management
Production, Training & Development
Korgaonkar K A
Rakesh Pd Srivastav
Chief Manager - Hr (plant Head Hr)
+3 Others

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Im working in a construction company where nearly 500 (contract labours) employees are working. here there is no bonus paid for them last three years. grade wise their net salary is more than 10000( unskilled, semiskilled, skilled, highskilled, chargehand, supervisor & Sr. Supervisor). according to P.O.B act 1956 an employee who work more than 30 days during the accounting year and less than 10000 salary is entitled to get bonus.
I want to know what are the things to consider for bonus calculation in (i.e Basic, DA, HRA, OT, Project incentives) and whether we have pay them bonus or not?
Thanks & regards
Md. Idreez.
26th November 2012 From India, Madras
Dear Md. Idreez ji,

The definition of Salary or Wage under POB Act 1965 runs as under:

Section 2(21): "salary or wage" means all remuneration (other than remuneration in respect of overtime work) capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his employment or of work done in such employment and includes dearness allowance (that is to say, all cash payments, by whatever name called, paid to an employee on account of a rise in the cost of living), but does not include—

(i) any other allowance which the employee is for the time being entitled to;

(ii) the value of any house accommodation or of supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of foodgrains or other articles;

(iii) any travelling concession;

(iv) any bonus (including incentive, production and attendance bonus);

(v) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the employee under any law for the time being in force;

(vi) any retrenchment compensation or any gratuity or other retirement benefit payable to the employee or any ex gratia payment made to him;

(vii) any commission payable to the employee.

Explanation.--Where an employee is given in lieu of the whole or part of the salary or wage payable to him, free food allowance or free food by his employer, such food allowance or the value of such food shall, for the purpose of this clause, be deemed to form part of the salary or wage of such employee;

I hope the above definition of “salary or wage” will make it clear to you.

Thanks and regards.

Keshav Korgaonkar
26th November 2012 From India, Mumbai
Please work out the Bonus qualifying salary on Basic salary and DA only. Other elements may not be considered for deciding eligibility for bonus.
At the same time, if the salary as derived above is less than the Minimum Wages fixed by the government, then the amount of bonus should be calculated on that statutory minimum wages.
26th November 2012 From India, Kannur
I would disagree Bonus is payable on the full salary as given in the act, not basic and da If the salary as computed above is less than 10,000 then they have to be given bonus.
27th November 2012 From India, Mumbai
I Got it Mr. Keshav Korgaonkar sir,
Thanks for the explanation about "Salary & Wage".
But whether we have to pay them bonus? and when it is applicable..
now we are covered and maintaining registers under B.O.C.W act, Inter state migrant act, EPF act, & Contract labours act.
and a part of building is about to start operational.
Can u please suggest me now what are actions to be undertaken.?
Md. Idreez
27th November 2012 From India, Madras
Dear Friend, Yes, the employees engaged through a Contractor are entitled to receive Bonus. And follow advice given by Mr. Madhu who has correctly advised you on the matter. Best Wishes, Vasant Nair
27th November 2012 From India, Mumbai
Dear Md. Idreez,
By the amendment 2007, effective from 01.04.2006 onwards the category of employees employed through contractors on building operation (section 32 (vi)) is deleted from the list of exempted categories. As such employees engaged through contractors on building operation are now under the preview of Bonus Act effective from 01.04.2006.
Vide ordinance No. 8 of 2007, effective from 01.04.2006 onwards the following amendments also came in to force:
i. the amendment to Section 2(13) raising the eligibility limit for payment of bonus, the salary or wage from Rs.3500/- to Rs.10,000 per month; and
ii. the amendment to section 12 raising the ceiling for calculation purpose, the salary or wage from Rs.2500/- to Rs.3500/- per month.
Even though, you are establishment is covered under BOCW, Interstate, PF, CLA etc. the POB Act 1965 is applicable to you.
Thanks with regards.
Keshav Korgaonkar
27th November 2012 From India, Mumbai
Mr.Madhu has correctly advised by saying that bonus needs to be computed on Basic + DA as teh definition leaves out all other allowances. If any allowance is to be included or not for compuattion depends up on the fact whether it partakes the character of remuneration or not. Thus it leaves one with basic +DA in the ordinary course of wages.
HR & labour Law advisor
27th November 2012 From India, Mumbai
Dear Idreez,
You have to pay bonus on minimum Rs 3500/ as per act. But how many principle employer paid ? Industries used contract labour like a GULAM till date & I m sure after knowing the fact you can not granted bonus for contractor labour. It is the truth.
By gaining the knowledge on this subject may be you will get good job in future but my question is from you & all the respected experts what are the contribution toward this ?
Sunil Kumar Chauhan
Managing Director
FGLA Concept Marketing Private Ltd.
28th November 2012 From India, Calcutta
Dear Saswata,
The definition of bonus as explained by Mr Madhu T. K and Mr. Keshav Korgaonkar is correct. Salary (Basic + DA /VDA) considered for bonus eligibility is up to Rs. 10000.00 per month. Suppose, your basic Salary is Rs. 3000/- and DA /VDA (if applicable to your industry) is Rs. 2000/- per month, then the salary considered for bonus calculation will be as if your salary is Rs. 3500/- i.e. your bonus will be calculated on the basis of Rs. 3500/- per month. To clarify further, if your company has decided to pay 20% of bonus for the year 2011-2012, then your bonus will be Rs. 8400/- (20% of Rs. 3500/- = 700X12 = 8400).
I hope, I am clear.
As rightly said above by the members, contractor workmen are also eligible for Bonus by their respective contractors. Principal Employer needs to ensure that all eligible contract workmen are paid bonus in time.

Rakesh Pd Srivastav
28th November 2012 From India, Gurgaon
Dear Sunil Kumar Chauhan ji,

I appreciate your reply.

By law the employer is liable to pay Bonus. In this forum we are here to enhance our knowledge by sharing and participating in discussions.

The employer is liable to pay not only Bonus. He is liable to pay as per minimum wage rates as declared by government. He is liable to make other statutory compliances also. Failure to do so, he is liable for penal action.

Employer may be a contractor. The contractor or any employer can not take a stand that he can not make payment as per minimum wage rate. He can not make payment of Bonus. He can not extend minimum facilities to his employees which are to be provided as per law. He can not make due compliance of applicable law. All this things are not viable to him. He is not getting price for all this things from his principal employer or he is not getting that much profit to do all this statutory things.

Any contract or agreement is not one-sided. It is both sided. Both the parties to it agree to it in totality. You can not take a stand that your principal i.e. other party to contract is not paying you sufficiently by which I can discharge your legal liabilities. Such contract is illegal ab-initio. You are liable for this illegal contract.

I hope you are convinced that principal employer is not liable to make payment of Bonus.

I will appreciate, if you ask how many contract labours are (actually) paid bonus by his employer (contractors)?

Law does not change even you get the truth.

Who is responsible to it? You and I, i.e. WE or the Government who makes the law or the officers who comes to collect money from you?

Now, the Govt. of Maharashtra vide its ordinance dated 17.09.2010 has mandated payment of bonus through cheque / bank account only. But still is there any guarantee that the poor employers who are indulged in the illegal contracts will adhere to this ordinance and if at they, will they not find some way out to recover the amount from employees?

I think, more discussion we should have in this regards.

Thanks with regards.

Keshav Korgaonkar
28th November 2012 From India, Mumbai
Dear All,
Please read the second last para of above posting as under:
Now, the Govt. of Maharashtra vide its ordinance dated 17.09.2010 has mandated payment of bonus through cheque / bank account only. But still is there any guarantee that the poor employers who are indulged in the illegal contracts will adhere to this ordinance and IF AT ALL THEY, will they not find some way out to recover the amount from employees?
ALL is missing in the original posting.
I request the administrators of CiteHr to edit my posting accordingly to facilitate you all.
Thanks once again.
Keshav Korgaonkar
28th November 2012 From India, Mumbai
POBC act is applicable in your company for all employees drawing 10000 or less, subject to a ceiling of 20% of Rs 3500= 8400/- and minimum 8.33% on 3500., depending on the last three years balance sheet and provision of available surplus and allocable surplus after observing the process of set on and set off . However, please check whether the company is really operating for the last three years and balance sheet for last three years is published or not. However, even if the company is showing loss in the balance sheet for the last three years and there is no set on available, even then they have to pay 8.33% bonus. Dy labour commissioner may intervene suo moto, if any complain/dispute is lodged to him and the company may land in deep trouble.
28th November 2012
Dear All,
Apart from this Bonus issue , i would like to share my quiery regarding the compliance --
1- As per Labour Aboliation Act its manadatory to Principal employer that he should contribute ESI /PF amount as per act ,but if some job contractors are working with premises then is it applicable to share the said contribution by Mgmt?
2- Is it also applicable for canteen contractor ?
Are both agencies comes in Labour contract Act..?
pls have an advise on the same.
13th December 2012 From India, Pune
1. Contract labor regulation and abolition act do not state that principal employer is responsible to pay ESI and PF to contract labors. Actually the contractor, who is called immediate employer, is responsible to comply with the provisions of ESI and PF. However, in case of violation of the said acts, principal employer is also liable to face penal action from the ESI and PF authorities separately.

2. Practically, there is nothing like job contract. If a contractor is paid on the basis of measurement (like X Rs for Y Kg/Cubic feet/pieces of job done), then also the provisions of minimum wages, ESI and PF act is applicable to the contract labors deployed by the contractor. For example, if the minimum wages declared by the state government is say Rs 170/- day/ labor, the contractor has to deposit PF @ 13.61% and ESI @ 4.75% on the minimum wages. Principal employer has to ensure that such contribution is deposited to PF and ESI department by the contractors( immidiate employer). In fact the act makes it mandatory that payment of labours has to be made in front of an authorized representative of principal employer.

3. ESI and PF is applicable to labors engaged by the canteen contractors also.

4. Each contractor should have their own PF and ESI registration number, in which they should deposit the PF and ESI contribution of their labors. However, if any contractor do not have their own PF and ESI code, the principal employer may get a sub code in their name and deposit the ESI/PF of the contract labors.


17th December 2012
Dear Mr Mihir,
Thanks for your reply..!
my question is that , For labour contractors , we are giving the contribuation of ESI & PF i.e (4.75% & 13.61%) but in case of Job contrcators , job contractors are paying the said amount for their work force .Job contractors are the principal employers for job contracto workmen?
Contrarory for labour contractors we are principal employers. so whether we have to pay the ESI /PF share to Job contractors also?
18th December 2012 From India, Pune
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