sudhakarsaraswathi
Dear Sirs, I am ever grateful to this platform and the clarifications received from learned members.

I am troubling you once again. I need one more help. Shall be much thankful, if my query is clarified plz.

The following is my query.

This is in connection with Bonus payment. The contractor in question is paying bonus 8.33% as min bonus under existing laws. Under the principle employer there are other contractors also. These contractors are paying one month wage to their workmen. Is it correct to pay one month wage to contract labour instead of 8.33% under CLRA Act or Bonus Act. If it is legal to pay one month's wage as a Bonus to contract labour, it will be paid. I require legal provisions in this matter. Hope you help me in this regard.

Regards

From United States, Cambridge
PROFESSIONALS AND BUSINESSES PARTICIPATING IN DISCUSSION
Umakanthan53
Labour Law & Hr Consultant
Saswatabanerjee
Partner - Risk Management
Nanu1953
Ceo-usd Hr Solutions
Sitaramsn
Hr Freelancer
Sudhakarsaraswathi
General Manager (accounts & Admn.)

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umakanthan53
5943

Dear friend,

Bonus under the Payment of Bonus Act,1965 is computed as a percentage of the total wages earned by the employee in the accounting year comprising of 12 calendar months. That's why the quantum of minimum and maximum Bonus payable under the Act is expressed in terms of percentage as 8.33 and 20 respectively. By approximation, 8,33% is equal to one month's wages.
For example 8.33 X 12 is 99.66 only. By rounding off, it amounts to 99.70%. It is colloquially expressed as one month's wages as we divide the annual total wages by 12, we arrive at one month's wage only. Therefore, no confusion in this regard.

From India, Salem
saswatabanerjee
2355

As Umakanthan sir has explained, 8.33% of annual wages is basically 1 months wages.
However, please note that whether the contractor is required to pay 8.33% or 20% of wages, depends on the profitability of his operations and therefore 8.33% minimum wages is not always the correct one.

From India, Mumbai
sudhakarsaraswathi
Dear Sirs,
The ceiling limit of wage as Per Bonus Act is Rs.7000..If an employee gets more than Rs.7000 bonus is calculated on Rs.7000 @ 8.33%.

Then an employee will not get one month wage equivalent to his original wage. Then what to do plz.

Regards

From United States, Cambridge
saswatabanerjee
2355

Sudhakarsaraswathi

You are wrong in reading the act (or you are looking at an older version of the act)

The current rule is that wage ceiling for bonus is ₹ 7,000 or minimum wages, whichever higher.
Therefore the bonus is to be paid on minimum wages (as it is higher everywhere now).
this page has the details : https://labour.gov.in/wageboard/info...ent-bonus-1965
Or download the latest copy of the act from codeindia.nic.in

From India, Mumbai
sudhakarsaraswathi
Dear Sirs,
The ceiling limit of wage as Per Bonus Act is Rs.7000..If an employee gets more than Rs.7000 bonus is calculated on Rs.7000 @ 8.33%.

Then an employee will not get one month wage equivalent to his original wage. Then what to do plz.

Regards

From United States, Cambridge
nanu1953
288

Bonus paid by any Organization is depend on the available surplus of the organization. Contractors in India are not calculating Bonus as per Payment of Bonus Act rather paid 8.33% or one month salary ( both are same ). Though it is a practice but to my opinion it is not the right approach specially for very big contractors.

Now come to calculation base of the Bonus. As per last amendment it is 7000/- or minimum wages whichever is higher. In case the salary is less than 7000/-, then it will be on actual.

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531

USD HR Solutions – To Strive towards excellence with effort and integrity

From India, New Delhi
umakanthan53
5943

Dear Sudhakar,

I think that you are a bit obsessed with the phrase " one month's wages " colloquially used for the sake of convenience of understanding. If you please go through Section 10 of the Payment of Bonus Act, 1965 which fixes the quantum of minimum bonus under the Act expresses the same in terms of percentage only i.e., 8.33%.
On the other hand, only Section 12 of the Act which deals with the quantum of Bonus in respect of certain classes of employees stipulates the calculation of Bonus on notional basis when their salary or wages per mansem is more than a certain amount which is fixed as Rs.7000/= at present. The latest amendment in this regard specifies further that in respect of scheduled employment under the Minimum Wages Act, 1948 where minimum rates of wages are fixed, bonus for such employees shall be calculated at Rs.7000/= OR the minimum wages WHICHEVER IS HIGHER.

From India, Salem
sitaramsn
26

Bonus payment by contractor depends on different factors, especially manpower service providers or labour contractors. It depends on the terms and conditions between PE and Contractor. If the contract is silent about bonus to contract workmen, then how the contractor pay. Normally the service charges hang around 4 to 10 percent and can we expect minimum of 8.33% from contractor!
In all these contractors PE fix the rate of bonus to be paid as most of the times, contractor will not get enough to pay bonus.
Now a days it is observed PE is paying bonus along with monthly wages @ 8.33% to avoid future complications of non payment of bonus. This is practice came into existence mostly because of the high level movement of contract workers ranging from one day onwards.

From India, Hyderabad
nanu1953
288

Dear Sitaramsn,

You are absolutely right. But I have a different observations as follows:-

1. There are broadly 4 types of manpower supplier - small contractor supplying 50-1000 contractual employees mostly proprietary organization. Received 8.33% Bonus from PE and disburse. Profit margin is low.

2. Medium size contractor supplying 1000-50,000 contractual employees both partnership and proprietary organization. Follow the same policy like point no.1 and profit margin is medium.

3. Large size contractor 50,000 - 1,00, 000 contractual employees either partnership or Private limited organization. Follow the same policy like point no.1 and profit margin is high.

4. Very large size contractor more than 1,00,000 contractual employees and mostly Private limited organization. Follow the same policy like point no.1 and profit margin is very high. Organizations in these group are also MNCs.

None of the above category contractors are paying bonus following the payment of bonus act. It may be accepted for small and medium size contractors. But for large and very large contractors if it is calculated on the basis of bonus act -available surplus, allocable surplus and 8,33% paid by the PE , it may come 10% (appx) which is my personal feel.

In most of the cases service charge is 6% (appx).

Thanks & Regards,

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531

USD HR Solutions – To Strive towards excellence with effort and integrity

From India, New Delhi

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