Payment of Bonus Act Exemption: Should Principal Employers Pay Bonuses to Contract Workers?

I have a specific question. If the principal employer is exempted from the application of the Payment of Bonus Act, 1965 i.e. under Sec. 20, is the principal employer liable to pay bonus of 8.33% to the contract labours engaged by it through contractors?

For the purpose of statutory rights and obligations pertaining to contract labor in general, all the Acts applicable to the Principal Employer's establishment during the contract period are the sources of entitlement. If the Principal Employer's establishment, being a Public Sector establishment, is exempt under Sec. 20 or 32 of the Payment of Bonus Act, 1965, the Principal Employer need not pay any bonus to the contract labor employed during the exemption period. However, such contract labor still have the right to demand a bonus from the Contractor.

Sir,

Thank you for the input. If the same can be substantiated by judgments, then the above will have a greater thrust.

The contractor is liable to pay a bonus, failing which it becomes the liability on the part of the Principal Employer to make such payment.

Nowhere in Section 20 of the Payment of Bonus Act, 1965, does it speak of any exemption of the principal employer.

Dear All,

Based on the definition of an Employee stipulated under the Payment of Bonus Act Section 2(13), which does not include Contract Labour. Please deliberate upon the Kerala High Court Judgment in the case of Cominco Binani Zinc Ltd. vs Pappachan on December 28, 1988.

Furthermore, the Apex Court in the matter of Food Corporation of India, 1985 II LLJ 4, has considered the relationship of the contractor Labour with the Principal Employer.

Regards

Dear Ajim, do not misinterpret things based on your own understanding. Section 2(13) in The Payment of Bonus Act, 1965 "Employee" means any person (other than an apprentice) employed on a salary or wage not exceeding ten thousand rupees per mensem in any industry to do any skilled or unskilled manual, supervisory, managerial, administrative, technical, or clerical work for hire or reward, whether the terms of employment be express or implied. The definition is crystal clear; the word "employee" is to be understood as an employee of the contractor, and "work for hire" means contractual.

Form V Issued by Principal Employer The FORM V issued by the Principal Employer already provides an undertaking to the authority as per the following:

(See Rule 21(2)) Form of Certificate by Principal Employer Certified that I have engaged the applicant (name of the contractor) as a contractor in my establishment. I undertake to be bound by all the provisions of the Contract Labour (Regulation and Abolition) Act, 1970, and the Contract Labour (Regulation and Abolition) Central Rules, 1971, insofar as the provisions are applicable to me in respect of the employment of Contract Labour by the applicant in my establishment.

Place Signature of Principal Employer

Dear "PRABHAT RANJAN MOHANTY",

With due respect to you and your position, I have not misinterpreted the matters based on my own understanding as alleged. I request you to spell my name correctly.

Specific Question Raised by Ashish

Is the principal employer liable to pay a bonus of 8.33% to the contract laborers engaged by it through contractors under Section 20 of the Payment of Bonus Act, 1965?

Kindly do not jump to baseless conclusions without applying your mind. I request you to go through the entire judgment laid down by the Kerala High Court in the case of Cominco Binani Zinc Ltd 1989 I LLJ 452, the Karnataka High Court in the case of Shachindra Kumar, Factory Manager, HUL, 2013 LLR 595, and the Apex Court in the matter of Food Corp of India, 1985 II LLJ 4, which have considered the relationship of the contractor labor with the principal employer.

After all, your word is not above the law as interpreted by the Honorable Courts of Law.

Regards,

Small correction in Mr. Prabhat Ranjan Mohanty's statement:
The Amended retrospective (01.04.2014)Payment of Bonus Act, 1965 (13) “employee” means any person (other than an apprentice) employed on a salary or wage not exceeding 10 [ten thousand rupees] per mensem to be read as not exceeding (Rs.21,000/- Twenty One Thousand Rupees).
Suresh

Dear PRABHAT RANJAN MOHANTY, the ratio of judgment analyzed by you is distinguishable. The opinion given therein by the Madras High Court, by Hon'ble Justice K. Chandru, pertains to gratuity payable to the contract employee, The Superintending Eng. v/s Appellate Authority. Further stated by you, all the above are the opinion of the Hon'ble Apex Court is misleading as the opinion given by the Madras High Court and not by the Apex Court in the above matter.

The query raised in the forum by Ashish pertains to whether a bonus is payable to the contractor employer by PE. Please do not shirk your responsibility towards members of Cite HR by stating, "It is needless to discuss the matter further, everyone is free to go by the line of their understanding."

Regards,