Appointment of labor through a contractor - Is bonus a liability of the principal employer if the contract agreement is silent on the 'bonus clause'?

I, Pratiti, am working with a company headquartered in Mumbai with a manufacturing setup in Umbergaon. I have attempted to contact all the numbers listed on the website but have not received any response.

My query pertains to the appointment of labor through a contractor. The contractor supplies labor and includes the charges in our monthly bill (wages + PF). Specifically, I have a question regarding bonuses. I would appreciate it if you could provide your views or insights. Are contract employees eligible for bonuses?

If so, to what extent is the principal employer responsible for paying the bonus if the contractor fails to do so? Furthermore, is the bonus considered a liability of the principal employer if the contract agreement does not address the 'bonus clause'?

I am eagerly awaiting your response.

Dear Pratiti ji,

Contractor establishments are not excluded from coverage of the Bonus Act, and therefore, it is the statutory responsibility of the contractors to pay bonuses to their employees as they are employers. Contractors will be held liable for prosecution in case of any default in the payment of bonuses to the contract employees.

In my opinion, the Principal Employer (PE) is not directly liable to pay bonuses to the employees of the contractor. However, it is the responsibility of the principal employer to ensure that the contractors comply with the applicable labor laws.

Please also note that in the proposed rule 56 under the Contract Labour (Regulation and Abolition) Act, 2019, it is stated that where the contractor fails to pay the minimum bonus to their employees, the principal employer will be responsible for such payments.

I hope this clarifies things for you.

Thank you, Akhilji! I shall respond to you on the email shared above!

Akhilji,

The Bonus Act doesn't mention anything about contractor bonuses. Additionally, the definition of wages does not include bonuses. Are there any statutes, judgments, or cases that address this issue? It would be helpful to have this information so that I can strengthen my case accordingly.

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