How Can Contractors Address Missing Bonus Provisions in Labour Contracts with Principal Employers?

Dear all, hello. I am new to this forum. I am a labour contractor, supplying labourers to the ordnance factory. For the past 3 years, my company has been registered with EPF, ESIC, ST, and the shop and establishment. Whenever I secure a contract, I obtain a license from the regional labour commissioner. I believe that by timely depositing PF, ESIC, and service tax, I meet these compliance requirements.

Issue with Statutory Liabilities in Tender Terms

Currently, our principal employer, the ordnance factory, has specified in the tender terms and conditions that the contractor is responsible for statutory liabilities. However, the format of the price bid does not provide a provision to quote for bonuses. There is no space or column allocated for a bonus quotation, even though EPF, ESIC, and ST are mentioned in the price bid. The principal employer also reimburses us for PF, ESIC, and ST, but not for bonuses, despite bonuses being a statutory liability. I understand that the contractor is responsible for bonus payments, and the principal employer should ensure that bonuses are paid to the labourers. Therefore, shouldn't the principal employer also ensure that, as a statutory liability, bonuses should be offered or paid to the contractor to pass on to the labourers?

Possible Actions and Queries

Is there any action that can be taken against the principal employer for violations and negligence? What can a contractor do if they are not allowed to quote for statutory liabilities? I am eagerly awaiting your valuable suggestions.

Thanks and regards.

It is the employer's liability to pay the bonus to all employees (permanent or contract). Kindly talk to the concerned person for the same. Maybe by the end of the year, they may provide the same.

Regards,
Praveen Bhosale

There is no statutory liability for the principal employer to ensure payment of bonuses to contract labor. There is no provision in the Payment of Bonus Act 1963 to this effect. Hence, it is for the contractor to meet this liability from the firm's profit.

Regards,
KK

I do agree with Mr. K.K. Nair. For contractors' employees, the bonus is to be paid based on the profit of the contractor and not the principal employer. Hence, as per your book profit, you have to pay the bonus. When quoting your rate, you could have included a portion in your rate, like ESI and PF. The bonus is not a fixed percentage. It depends on the profitability earned, and there should be an allocable surplus to pay. Whether you make a profit or a loss, you have to pay a minimum bonus of 8.33%.

Regards,
G.K. Manjunath, Sr. Manager-HR