Contractor Dilemma: How to Handle Bonus Demands When Principal Employer Denies Responsibility?

Hi everybody, I am a contractor with the Ordnance Factory. The Ordnance Factory, as the principal employer, has not made any provisions in their price bid format for bidders to quote a bonus. Although the format automatically calculates EPF, ESIC, and service tax, as well as the total contract value, there is no mention of a bonus, and there is no column to fill in the percentage of the bonus.

Issue with Bonus Provision

Now that we have received the supply order, we have not been paid a bonus for many years. The laborers are now demanding the bonus, but the principal employer is stating that it is a contractor liability. Please help me solve this issue. Can you suggest what I should do?

It is the statutory responsibility of the contractor (Employer) to pay a bonus of at least 8.33% of wages. It does not matter how you have filled the tender form or what value you have quoted for the tender. Otherwise, as a Principal Employer, the ordnance factory may pay the statutory bonus amount directly to your worker, deducting it from your bill amount. Please note that the demand of your worker is legitimate.

With regards,
Sandip Saha

Mr. Sandip Saha has given you the completely right advice. In case you fail to give a bonus to your workers, you may be prosecuted under the Contract Labour (R&A) Act. Please ignore this and pay the bonus to your workers.

Press Release on Contract Labour Safeguards

Please find enclosed the press release from the Government of India, Ministry of Labour & Employment, dated 30-04-2012. This document outlines how Contract Labour is safeguarded under various acts, including the Payment of Bonus Act, 1965.

With Regards,
Sandip Saha
[Email Removed For Privacy Reasons]

I fully agree with what you have said. I appreciated your answer right from the start. However, my question is directed towards our dear friend Harshil Ji concerning his statement that failure to pay a bonus attracts prosecution under CLA.

I am aware of the press release, and I thank you for sharing it in this forum. Through the amendment of 2007, construction employees engaged by contractors are also covered under the POB Act, effective from 01.04.2006. Therefore, there is no exclusion of contract labor in the POB Act. According to the POB Act, an employee is entitled to a bonus from their employer. As you rightly mentioned, the Principal Employer (PE) can make bonus payments to their contract laborers if the contractor fails to pay, and the PE is entitled to recover the amount from the contractor's bill.

Thanks with regards,
Keshav Korgaonkar

Thank you very much, Harshil Patel, Keshav Ji, Sandip Shah, and everybody for your valuable response. Actually, I am aware of this law that only the contractor is liable to make payment of the bonus. The Principal Employer (PE) is responsible for ensuring that the bonus is paid to laborers. When the PE has to ensure that the contractor pays the bonus to laborers, then why doesn't the PE ensure that the bonus should be paid to the contractor so that the contractor can pass it to his laborers? At least the PE should make some provision in the price bid so that a bidder can quote the bonus. Is there anybody that governs whether the terms and conditions and format to fill the price bid are lawful or not?

After knowing the whole situation and understanding that the bonus is a statutory liability, the PE has still not included the bonus as an integral part of the work order and has still not made any provision in the price bid filling format to quote the bonus. Please let me know, can a contractor take any legal action against this faulty tendering format?

Waiting for your reply.

Thanks and regards.

Cross-Checking PF and ESI Monthly Challans

How do we, as a Principal Employer, cross-check the PF and ESI monthly challans submitted by the appointed Labour Contractor to ensure that these challans are not also submitted by the Contractor with the monthly bill to another employer?

Kindly provide me with tips on how to conduct this cross-check.

Regards,
Pradeep Sharma
HR-NCR

Definition of "Employer" and "Employee" in the Payment of Bonus Act 1965

The definition of "Employer" and "Employee" in the Payment of Bonus Act 1965 includes the Principal Employer or the contract employees. There are cases where the bank, as the Principal Employer, pays the statutory bonus at 8.33% of basic pay to the contractor on a monthly basis as part of their bills. The contractor is expected to aggregate and pay this to the contract employees during the Deepavali festival. In our experience, a good number of contractors do not pay the full amount. Consequently, the employees are compelled to seek the intervention of conciliation machinery.