Who Handles Bonuses and Gratuity for Contractor Employees? Seeking Your Insights

Dear all friends,

I want to know who is responsible for the payment of bonuses and gratuity in the case of contractor employees.

Thanks,
Sheetal Gupta

Dear Sheetal,

The contractor himself is responsible for the payment of bonuses and gratuity to his employees. I feel the principal employer is responsible for the payment of wages to contractor employees.

Thank you.
J.S. Malik

Dear,

The principal employer is the only one responsible for the payment of Gratuity & Bonus.

Regards,
Parvez.

Dear Pravez,

If you have read something like that, please elaborate with clauses of the particular act. Please go through the Contract Labour Act, then we can discuss the same issue. The principal employer is responsible for the wages of contract workers, and as far as I know, bonus and gratuity are not considered as wages.

Thank you.

JS Malik

Dear Member,

The Principal Employer is liable for all defaults on the part of the Contractor. In relation to Payment of Bonus and Gratuity, the statutory provision remains silent. We all know very well that the Government is the largest employer engaging contractual laborers. Therefore, there is a silent provision for Bonus & Gratuity for contractual workmen.

Regards,
Murugavel.B
Dy. Manager - HR

Dear Shweta,

The contractor is responsible for bonus and gratuity according to the act. If he fails to provide them, in this case, the principal employer is liable to give bonus and gratuity. The principal employer can recover this amount from the contractor later on.

Rahul

Dear all,

I have given an explanation earlier and asked you to give your comment with judgment or based on the act. There is a provision in the act or no provision in the act; no word I have heard like silent provision.

Regarding bonus and gratuity - neither the Contract Labour Act nor the Payment of Bonus Act/Payment of Gratuity Act provides that an employee engaged through a contractor will be entitled to bonus/gratuity from the principal employer. It was held by the Kerala High Court that the principal employer is liable to pay wages to the employees of the contractor if the latter fails to make the payment of wages to his employees. It has been further held that bonus and gratuity will not be payable by the principal employer to the workers engaged by the contractor since the bonus and gratuity do not come within the purview of wages.

You are advised to refer to COMINCO BINANI ZINC LTD VS PAPPACHAN, 1989 LLR 123 (KERALA HIGH COURT).

Thanks,
J S MALIK

Dear Malik Sir,

I have gone through the act and your comments and came to know that you are absolutely right. Principal Employer is liable only for wages. I want to know one more question: if any contractor does not take a license after many days of work in any establishment and running continuously, then in this case, who is liable - principal employer or contractor.

Rahul

Dear Rahul,

If a contractor supplies contract labor without a valid license, and the employer is paying through the contractor, in such a case, the employee is directly employed by the employer, not the contractor. Hence, the principal employer is responsible for paying all dues.

Sachin

Dear Members,

Mr. Malik has rightly answered the query that the PE is only responsible for non-payment of wages, and that too when the contractor fails to make the payment. According to Section 21(1) of the CL Act, 1970, the contractor is liable to make the payment of wages to its workers, and in case of failure, the PE, under Section 21(4), is liable to make the payment.

Regards,
R.N. Khola
Sr. Associate
Skylark Associates, Gurgaon