Navigating Wage Hikes in Contracts: Is Your Contractor's Request for More Money Fair?

We have awarded a job contract (with item rates) to a contractor engaging more than 20 laborers on our premises on a firm price basis. During the currency of the contract, there have been two hikes in minimum wages. The contractor is now asking for reimbursement of the wage hike.

Is the Contractor Justified in Asking for an Increase?

My question is, whether he is justified to ask for an increase?

Dealing with Wage Hikes in Contracts

How to deal with such situations in a contract?

Liability of the Principal Employer

What is the liability of the principal employer in such cases?

Case Law on Wage Hikes

Is there any case law on the subject?

Thanks for your attention.

Regards,
P C Das

Yes, the employer has to pay at least the minimum wages notified by the state/central government. The rate that you finalized was at the time of entering into the contract. However, minimum wages are subject to revision every six months by the concerned government. Accordingly, the revised wage has to be paid to the workers. If the contractor fails to pay the wages to the workers employed by him as per the minimum wage notified or per the terms of employment, then it's the liability of the principal employer to pay the difference in wages to the workers or any shortfall (Section 21 of CL(R&A) Act).

Giving a contract to a third party does not absolve the principal employer from the liability to pay minimum wages. Ensuring compliance with the provisions of the CL(R&A) Act and other applicable social welfare legislation is the responsibility of the principal employer.

Regards,
advsanjaymalik@gmail.com
SB Enterprise
Legal & Compliance Consultant

Thank you for your comments. Let me clarify one point here. The contractor has paid minimum wages to the laborers. This is as per the contract and the Minimum Wages Act. However, since it is a job contract between the Principal and the Contractor on a firm price basis, could he claim the wage difference from the principal? Can you cite some case laws on this?

With thanks and regards,
P C Das

Yes, it does not matter whether it's a job contract or a service contract. If the manpower is engaged by the contractor to carry out activities on your premises, then in the case of failure of payment of wages by the contractor to their workers, the Principal Employer shall be liable to pay.

Continuing the above thread, any amount paid by the Principal Employer (PE) later can be deducted from the final bill submitted by the contractor.

Regards