PAYMENT LIABILITY IN CASE OF CONTRACTOR DEFAULTS

Dear all,

Please shed some light on the situation where the contractor fails to pay the wages to workers even if the company has made its payment by cheque to the contractor for the same. What would be the company's stance regarding:

I. Towards contract workers
II. Towards contractor for receiving money back

Please do reply at the earliest.

Thanks,
Nishikant

Hi,

I am providing excerpts from the Contract Labour Act which state that you are ultimately liable to pay the workers.

You will have to recover the amount from the Contractor, although it is a painful job.

Contract Labour (Regulation & Abolition) Act, 1970.

The establishments covered under the Act are required to be registered as the Principal Employer. Similarly, every contractor to whom the Act applies is required to obtain a license and not to undertake or execute any work through contract labour except under and in accordance with the license issued.

The Act has provided for the establishment of canteens. For the welfare and health of contract labour, provision is made for restrooms, first aid, wholesome drinking water, latrines, and urinals. In case of failure on the part of the contractor to provide such facilities, the Principal Employer is made liable to provide the amenities.

The contractor is required to pay wages, and a duty is cast on him to ensure the disbursement of wages in the presence of the authorized representative of the Principal Employer. In case of failure on the part of the contractor to pay wages either in part or in full, the Principal Employer is liable to pay the same. If the contract labour performs the same or similar kind of work as regular workmen, they will be entitled to the same wages and service conditions as regular workmen as per the Contract Labour (Regulation and Abolition) Central Rules, 1971.

Regards,

Vishwanath

I do agree with you that as a principal employer, the company has to pay the wages to the workers. However, I need to know one more thing: who will be responsible in cases where the HR lacks vigilance in monitoring the activities of the contractor and fails to take proactive actions? What actions can we take against individuals who fail to fulfill their duty in controlling the contracted persons?

Hi, I am providing extracts from the Contract Labour Act which states that the principal employer is ultimately liable to pay the workers. Though it may be a challenging task, you will need to recover the amount from the contractor.

The Contract Labour (Regulation & Abolition) Act, 1970, requires establishments covered under the Act to register as the Principal Employer. Similarly, every contractor to whom the Act applies must obtain a license and should not undertake any work through contract labor without the proper license.

The Act mandates the establishment of canteens and provision for welfare and health of contract labor, including restrooms, first aid, clean drinking water, latrines, and urinals. If a contractor fails to provide these facilities, the Principal Employer becomes liable to provide them.

The contractor is responsible for paying wages and ensuring their disbursement in the presence of the authorized representative of the Principal Employer. If the contractor fails to pay wages, the Principal Employer is liable to make the payments. If the contract labor performs the same or similar work as regular employees, they are entitled to the same wages and service conditions as per the Contract Labour (Regulation and Abolition) Central Rules, 1971.

Best regards,
Vishwanath

Hi,

It is purely an internal administrative matter of the company. Normally, the finance department of any organization deals with such kinds of activities.

Regards,
Vishwanath

Please advise on the following query:

If a company declares a bonus to its regular employees based on allocable surplus, is the company legally bound to pay a bonus to the contractor's labor as well, at the same rate applicable to regular employees? The company and the contractor are registered under the Contract Labour Act. Some of the workers of the contractor are performing the same kind of work as regular workers.

If possible, please provide any case laws or circulars related to this matter.

Thanks,
Ramesh Sharma