Late Salary Payments Under CLRA: Are There Penalties and Can Employers Act?

Dear seniors, Under the Contract Labour Regulations and Abolition Act, salaries must be paid to workers by the 7th of the month. Last month, due to certain reasons beyond the control of the organization, salaries were disbursed on the 13th. I would like to know if there is any provision for a penalty for this default under the Act.

Secondly, can the principal employer, under whom the contract is carried out, initiate punitive action against the contractor?

Regards,
Seshan

For the first time, you can send them a show-cause notice. Upon their reply, you can decide your further steps if their response is not satisfactory. If they fail to pay their salary on time, then you have to pay the salary of your contractual employees, and you have the right to withhold the contractor's payment until the situation is resolved.

Risk Mitigation Strategies

To avoid these obligations, you can start deducting a certain amount to mitigate this risk. You can set aside these funds for circumstances such as late payment of salaries, non-payment of salaries, and non-payment of PF or ESIC dues.

According to section 21(4) of the Contract Labour (R&A) Act, 1970, the Principal Employer is responsible for making the payment of wages if the contractor fails to pay the workers on time. The Principal Employer will recover the amount paid as per the procedure laid down under this Act. Section 21(4) of this Act may be read as follows:

Responsibility for Payment of Wages:

(4) In case the contractor fails to make payment of wages within the prescribed period or makes a short payment, then the principal employer shall be liable to make payment of wages in full or the unpaid balance due, as the case may be, to the contract labour employed by the contractor. The principal employer can recover the amount paid from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.

Regards,
R.N. Khola

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