As he is not an employee of the Principal Employer, the question of paying any layoff compensation by the Principal Employer does not arise. Having said that, kindly note the following points:
1) The Registration Certificate (for the PE) and the License (for the Contractor) must be in place, and the assumption here is that the establishment is covered by the Contract Labour (R&A) Act 1972.
2) The contract between the Principal Employer and the Contractor is not a sham.
3) The statutory compliances by the Contractor and/or PE are up to date with respect to all Contract Labour.
Next, despite the above position, many Principal Employers agree to reimburse the Contractor for such expenses if the need arises. Such reimbursements can include layoff compensation, retrenchment compensation, gratuity, and the bonus (though the applicable does not compel the PE to shoulder this burden) since the Service Charges payable to the Contractor do not cover such expenses anyway, hence the approach.
Regards,
Samvedan
January 16, 2015