Late Salary Payments by Contractor: Can Penalties Be Imposed Under Labor Laws?

As per Factory Rules & Contract Labour Act, salaries need to be paid to staff by the 7th of the following month. In my case, the contractor has still not paid the salary for the month of Nov. 2019 even though today is the 26th of Dec. 2019. Is there a provision of any penalty, as per the acts, that can be imposed on the contractor?

As per the provisions under Payment of Wages Act, 1936 wages needs to be paid-
Before the expiry of the 7th day after the last day of the wage period, where there are less than 1000 workers employed and in rest case on the 10th day;
In current coin or currency notes and by cheques or by crediting the wages in the employee's bank account after obtaining his written authority;
On a working day;
Before the expiry of the second day, to the person whose employment is terminated.

The Principal Employer is liable to pay the Due Wages to the Contract Labours employed/engaged by the Contractor. To prevent such Liability/Eventuality, the Principal Employer's Employees should exercise Due Diligence in short-listing reliable Contractors who will not default in CL's wages payment and will keep the Principal Employer in the loop/picture in case the wages payment process is difficult.

Kritarth Team, Bengaluru Office

26 Dec 2019

Principal employer will be liable to make the payment in such cases. PE always cross-checks payments made by contractors to their employees by verifying PF, ESIC payments, etc.

In such cases, PE should directly pay the contract employees after documenting the lack of payment and other issues by the contractor and pay any balance, if applicable, to the contractor for the contract charges.

Even if the contractor fails to make payment of salaries to their staff, the onus of responsibility rests with the Principal Employer. Have you passed the monthly bill of the contractor? If not, hold it until they make payments. If the contractor's bill is passed for payment, and then he (contractor) is not making payment, the principal employer may pay their salaries, and the entire amount will be recovered from their future bills.

Section 21(4) of the Contract Labour (Regulation and Abolition) Act, 1970, provides that if a contractor fails to make payment of wages within the prescribed period or makes short payment, then the Principal Employer shall be liable to make payment of wages in full or the unpaid balance due to the contract labors and recover the amount so paid from the contractor either by deduction from any amount payable to the contractor under any contract or as a debt payable by the contractor.