Maternity Leave for Contract Workers: Who Should Pay the Benefits?

Dear All,

I want to understand, when a female staff member on contract goes on maternity leave, is her employer (contractor) supposed to pay her the benefits under the Maternity Benefit Act, 1961? If yes, then which section covers this?

Can the principal employer refuse to pay for the benefits (salary) of the contract employee deployed to work under them?

Thanks,
Dinesh Sudhakar Jadhav

Maternity Leave Benefits for Contractual Employees

It's categorically stated that the benefits of maternity leave with full salary cannot be denied to a female employee appointed on a contractual basis. They are entitled to maternity leave as per the provisions of Section 5 of the Maternity Benefit Act.

Please see the relevant provisions:

Definitions

In this Act, unless the context otherwise requires:

(d) "Employer" means:
(i) In relation to an establishment under the control of the Government, a person or authority appointed by the Government for the supervision and control of employees, or where no person or authority is appointed, the head of the department;
(ii) In relation to an establishment under any local authority, the person appointed by such authority for the supervision and control of employees, or where no person is appointed, the chief executive officer of the local authority;
(iii) In any other case, the person or authority which has ultimate control over the affairs of the establishment, and where the said affairs are entrusted to any other person, whether called a manager, managing director, managing agent, or by any other name, such person.

(o) "Woman" means a woman employed, whether directly or through any agency, for wages in any establishment.

Right to Payment of Maternity Benefit

(1) Subject to the provisions of this Act, every woman shall be entitled to, and her employer shall be liable for, the payment of maternity benefit at the rate of the average daily wage for the period of her actual absence immediately preceding and including the day of her delivery and for the six weeks immediately following that day.

Explanation: For the purpose of this sub-section, the average daily wage means the average of the woman's wages payable to her for the days on which she has worked during the period of three calendar months immediately preceding the date from which she absents herself on account of maternity, or one rupee a day, whichever is higher.

(2) No woman shall be entitled to maternity benefit unless she has actually worked in an establishment of the employer from whom she claims maternity benefit for a period of not less than one hundred and sixty days in the twelve months immediately preceding the date of her expected delivery.

Dear Sir,

Thank you for the detailed explanation. I would like to understand one simple concept. Suppose X is a contract worker who is deputed at Y (Principal Employer) location. X goes on Maternity Leave for 6 months, who will bear the maternity cost? The employer of X or the Principal Employer Y.

Warm Regards,
Dinesh Sudhakar Jadhav

The Importance of the Maternity Benefits Act

See the beauty of the Acts passed in the fifties and sixties. Had the phrase "through any agency" not been there, the new generation of employers who feel that engaging employees through a contractor or manpower outsourcing is the final word for doing business peacefully would have utilized it for their business benefits. True, there are a lot of employers who deny it. But the intention of passing the Maternity Benefits Act was not to discriminate against employees by denying the benefits to those who are not under the direct payroll but to ensure that all who work for the employer should be treated equally.

Dear Dinesh,

The payment under maternity benefit is to be borne by the employer (paymaster). In this case, the Contractor is the employer and has to provide the benefit. The payment by the Principal Employer does not exist but shall make payment by the direction of the authority when the contractor fails to oblige.

Dear all,

If the contractor is paying the salary for the maternity leave period to the contractual employee, can he claim the same paid amount from the principal employer in the monthly bills under the ongoing contract?

Dear Hitesh,

In general, the principal employer may not consider the amount paid towards any welfare measures as per the CL(R&A) Act in force. This is because the Work Order is issued by the principal employer with the clause that the contractor would abide by all the rules and acts that are in force and prevailing at this time. The principal employer would only consider any new laws and acts brought by the appropriate government hereinafter; the MB Act is not a new law that has been imposed after the award of the Work Order.

The contractor is also an employer, and in respect of the employees hired by him, he is the employer who has to take care of the employee benefits and welfare. Therefore, allowing 26 weeks' leave on account of maternity and paying maternity bonus, etc., are to be done exclusively by the contractor. At the same time, the contract is for deploying a required number of persons on a daily basis. If X is on leave, the contractor is expected to send another person, Y, to the plant/site. For the principal employer, it does not matter who is doing the work, but what is important is whether work is being done by the employee(s) of the contractor.

The above being the legal side, in respect of some contracts, wherein the contractor is asked to deploy persons with special skills or persons identified by him, then the contractor will be sourcing persons with such special skills or persons suggested by the principal employer, as the case may be, exclusively for the principal employer. If that employee has to undergo long leave with pay, say maternity leave, then the employer will have to bear the cost of retaining the person.

In either case, if the employee is covered by ESI, the ESIC will take care of her leave and benefits. Ultimately, the contributions paid by the contractor towards ESI are a cost to the principal employer only because it will be the total cost including the wages, contributions towards PF, ESI, etc., and other benefits like bonus by way of deploying employees that will be agreed to be paid to the contractor. As such, whenever the contractor is asked to deploy a woman employee on a salary above the ESI limit, he should factor the maternity benefits payable in the cost of deployment, or should reach an agreement as to the treatment of the maternity period with the principal employer.