Who Should Pay Bonuses to Contractor Employees: Principal Employer or Immediate Employer?

Responsibility for Paying Bonuses to Contractor Employees

Please let me know who is responsible for paying bonuses to contractor employees: the Principal Employer or the immediate employer?

Warm Regards,
Garima Vyas

Principal employer is responsible for payment of bonus to contract employees through contractor.

In the corrected version, I changed "Principle Employer" to "Principal employer" as it should be spelled with "pal" instead of "ple." I also added a period at the end of the sentence for proper punctuation. The meaning and tone of the message remain the same.

First of all, please go through the contract wordings. If there is any clause regarding the payment of a bonus, then act accordingly. Otherwise, the Principal Employer has to pay a bonus to the Contractor's employees under his/her supervision.

Regards, R K Singh

Agreement between Contractor and PE

The agreement between a contractor and a principal employer (PE) is crucial to determine who is responsible for what. In most cases, contractors, to secure business, agree to some illogical terms and conditions, while PEs believe they are benefiting. In reality, this sets up a win-loss scenario.

In my opinion, the arrangement should entail all liabilities—such as salary, statutory compliance, gratuity, bonus, etc.—to be borne by the PE, while the contractor may receive a service charge that is negotiable between the PE and the contractor. This approach would create a win-win situation.

Issues with Current Arrangements

When the arrangement is different, the contractor often exploits contract labor by offering lower salaries, inadequate compliance, and failing to pay gratuity, bonuses, etc.

Responsibilities of PEs

PEs should bear more responsibility in properly guiding the contractors, rather than throwing them into the deep end without teaching them how to swim. Contractors naturally do their best to survive. PEs also have a responsibility to choose the right contractors, considering that many lack knowledge of labor laws and their implications. Ultimately, any long-term repercussions will fall on the PEs.

Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] USD HR Solutions - To strive towards excellence with effort and integrity

Liability for Bonus Payment

The liability to pay bonuses is on the establishment that employs the labor as per the Payment of Bonus Act, 1965. Unlike the PF & ESI Acts, there is no Principal Employer under the Act, so it is the contractor who is responsible for implementing it. However, ultimately, the financial liability will get passed on to the Principal Employer.