Understanding Contract Labor Laws in BSNL: Are Bonuses and Minimum Wages Fair?

Dear Sir,

I am working in BSNL on a contract basis. The BSNL department pays minimum wages to contractors as per the State's minimum wage rate. However, BSNL demands a labor license from the contractor. BSNL does not provide bonuses to contractors. Please advise us on the laws regarding contract labor in BSNL as it is a central government unit.

Thank you.

Appropriate Government for BSNL

As per the definition clauses of the term "Appropriate Government" under both the Minimum Wages Act, 1948, and the Contract Labour (R&A) Act, 1970, the Central Government is the appropriate government for BSNL since it is a Central Government Undertaking. Therefore, only the Central minimum wage rates are applicable to the contract labor engaged therein.

Bonus Under the Payment of Bonus Act, 1965

Basically, the bonus under the Payment of Bonus Act, 1965, is a payment due to employees based on the annual performance of the industrial establishment concerned. For all practical purposes under both enactments, a contractor's establishment is a distinct entity in respect of the Payment of Bonus Act, 1965, and the CLRA Act, 1970.

Vicarious Liability of the Principal Employer

Therefore, even courts have expressed divergent views about the vicarious liability of the Principal Employer under the CLRA Act concerning the payment of bonuses to the contract labor engaged by them. However, there is some substance in the argument that since the contractor's charges include all the statutory expenses likely to be incurred by them in respect of the contract labor engaged for the works of the Principal Employer, the bonus payable to such contract labor also falls within the Principal Employer's vicarious liability for the payment of statutory dues to the contract labor thus engaged therein.

I always read your thread with full attention and interest. I appreciate your in-depth knowledge of subjects relating to labor laws. I am from Central Labor Services and have retired from a senior position as well.

Applicability of Minimum Wages to BSNL Contract Labor

Regarding the applicability of minimum wages to BSNL contract labor, the minimum wages, either State or Central, whichever is higher, shall apply. In the case of the NCT of Delhi, state government minimum rates will prevail as they are higher.

Principal Employer's Vicarious Liability

Concerning the Principal Employer's vicarious liability for the payment of statutory dues to contract labor, such liability, in my opinion, is limited to the payment of wages or unpaid dues only. Regarding the Payment of Bonus Act, it is certainly applicable to the contractor's establishment, but they will have to calculate it based on the provisions envisaged under the Act and accordingly pay the bonus to contract labor.

Regards, BS Kalsi

I am an ex-employee of the Central Government, currently doing business. While I agree on the issue of minimum wages (state or center, whichever is higher), I have a slightly different opinion regarding bonuses for contract laborers.

Bonus for Contract Laborers in BSNL

Laborers engaged in BSNL may be service-oriented or involved in manpower supply; thus, the contractor is not engaging laborers for production. According to the Contract Labor (Regulation and Abolition) Act, the contractor might be paying the applicable minimum wages as per the contractual agreement, and he may not have provisions in his service charges for the payment of bonuses.

For this purpose, either BSNL should have included the applicable bonus in the contract rate/estimation or compensate the contractor to that extent. No business entity will pay a bonus out of pocket unless it is derived from that business source. My view on the bonus is, thus, in line with the opinion of respected Shri M Umakanthan Sir.

Correct me if I am wrong.

Thank you very much for the ongoing lovely discussions on the subject. I fully agree with you that much depends upon the contractual agreement between the employer and the contractor. The contractor will not pay from his own pocket unless those laborers are on the permanent rolls of his establishment.

I have worked as a Labor Law Advisor with Reliance Industries Ltd (Mukesh group) for 5 years after my retirement. I found that the Principal Employer used to include components such as ESI, PF contributions, and the minimum bonus amount in the annual contractual agreement of all the contractors. My office used to keep a check and ensure that all the dues are correctly paid to the contract laborers, in addition to ensuring compliance with other labor laws by the contractors.

Regards, BS Kalsi

My sincere thanks to M/S Kalsi and Kanthan for their corrections, which are very vital.

Regarding the bonus payment, I think that all three of us are of the same opinion, but differ in the reasoning behind it.