Principal Employer's Liability: What Happens When Contractors Underpay Bonuses?

Dear All, What will be the liability of the principal employer if a contractor is paying only 8.33% bonus to his employees even if he is in profits and capable of making the bonus payment at 20%?

As per the Payment of Bonus Act, 1965, every employer (including a contractor) should assess his financial capability of paying the bonus through Forms A & B, and the bonus percentage should be determined accordingly. However, in the majority of cases, contractors do not even bother to fill out Forms A & B and pay the minimum bonus of 8.33%.

I would be truly grateful if anyone could provide any judgments in this regard.

Thank you.

Regards, Arshad Khan

The responsibility on the part of the Principal Employer is to the extent of a minimum bonus of 8.33%. The 20% is the maximum limit which could only be ascertained and declared by the direct employer, the contractor. It's not practical for the Principal Employer to impose a higher percentage of bonus arbitrarily. The notion of higher profitability can be refuted by the concerned parties. Unless the workers involved raise a dispute or resort to agitation, nothing concrete can be expected.