Are Contractual Workers in Manufacturing Entitled to Bonuses Under the Bonus Act?

Hi,

Please let me know whether the contractual employees in a manufacturing company employed through a contractor or manpower supplier are eligible for payment of bonus under the Bonus Act.

Thanks,
Ramesh Sharma

Hi Ramesh,

Here in our country, contractual employees under a manpower staffing office or contractor have the right to receive the mandatory bonus (we call it the 13th-month pay). However, it should be the contractor who has to pay them directly, not the contracting company.

Hope I was of help.
Carmie

Hi,
Please let me know whether the contractual employees in a manufacturing company employed through a contractor or manpower supplier are eligible for payment of bonus under the Bonus Act.
Thanks,
Ramesh Sharma

Hi Carmie,
Thanks for the reply. Please clarify whether the company that hires employees through a contractor is liable to pay bonuses to the contractor's employees under the Payment of Bonus Act. The prime liability lies with the contractor or the company under the act. What would be the legal position if the contractor does not pay bonuses to its employees employed in a company that pays bonuses to its regular employees? Is the company also liable to pay gratuity to employees of the contractor who have been employed with the contractor for the last 5 years?
Thanks,
Ramesh Sharma

For clarity, Company A entered into a contract with Contractor B to provide them with contractual employees. Company A pays Contractor B for the salary of the contractual employees and the mandatory bonus. Ideally, Contractor B must give the employees their salary and bonuses since Company A paid them. However, in the real world, some contractors don't provide the contractual employees with their mandatory benefits. If that happens and the contractual employee complains to the proper authorities, Company A is also liable along with Contractor B for not practicing good labor relations (this is the case here in our country). What do your labor laws state about tri-lateral employment?

Carmie

The Ministry of Labour has clarified that the principal employer is not liable to pay bonus.

Dear Thiagaraju,

It would be a great help if you could mention the notification/circular number or any citation from the Ministry of Labour stating that the principal employer is not liable to pay bonuses to the contractual workforce employed through a contractor.

Thanks and regards,
Ramesh Sharma

Dear Ramesh,

As a matter of fact, the contract in question should be studied, and then any decision is to be taken. However, based on what you have written, please note that contractor labor is not entitled to a bonus under the provisions of the Payment of Bonus Act. You may refer to Gasliton Colliery Vs workmen 1954, I LLJ, 144: 1953 LAC 525, and Cominco Binani Zinc Ltd. Vs Pappachan, 1989, I LLJ 452, Kerala High Court for full clarity on this matter.

Mohan.

Hi,

Even in India, the law is the same. I have not read the judgment cited on Bonus. But if my understanding is correct, all statutory payments are to be made by the Contractor as they are considered the Employer. In a tripartite situation, the Principal Employer is liable to make the payment if the Contractor fails to do so, and the Principal employer can recover the same from the Contractor.

The Bonus declared by the Principal employer and the Bonus declared by the contractor need not be the same; it can be less or more. I will try to read the judgment soon. If anyone has a soft copy, kindly post the same.

Thanks,
Siva