sitaramsn
26

Contract labor in some organizations are paid Statutory Bonus and Leave with wages on monthly basis instead of annual basis. This is basically to meet the statutory compliance as most of the contract labor may work for less than a year and it is difficult to find them when actually the payment is due. It is satisfying the regulatory auditors etc.
However, recently some one raised an objection for this and demanded for ESI & PF contribution on these payments as being paid on monthly basis.
Is it correct?

From India, Hyderabad
KK!HR
1534

Once statutory bonus and leave salary are paid regularly every month, it assumes the form of retaining allowance and hence PF & ESI contributions are payable thereon. It has been repeatedly emphasised in this forum that statutory bonus cannot be paid every month, first of all no such monthly payment could be made after November every year, then also how could the monthly bonus be paid in anticipation of profit/loss every year. Similarly if leave payment is made every month, then when there is a real need for the employee to avail leave, all that is left will be LWP. That is not correct. In deed such payments make monthly salary figure bloated and is therefore misleading.
From India, Mumbai
sitaramsn
26

Thank you for your response sir. Here I wish this clarification because of the floating nature of contract workmen and short stays. If we are to wait for one year to complete for these payments or availing leave, most of the times the workman may not be working and the same will become unpaid. In that way it will become a non compliance.
This particular question is relating to contract labour only and not related to regular employees of an organization.

From India, Hyderabad
nanu1953
336

As the nature of employment is contractual and short term basis, it is essential to make Full and Final settlement for each case at the time of leaving instead paying Leave Pay and Bonus along with wages.No need to wait for full year.

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531

www.usdhrs.in

From India, New Delhi
sitaramsn
26

Thank you sir for your response. Please understand that final settlement can be done if the worker inform and leave. However, in most of the cases there will be no intimation and workers leave the job. The advance payment of Bonus and Leave wages is to avoid any such shortfall as the workmen leave without any intimation to make any final settlement and many a time the bank accounts will closed and we can not transfer funds.
From India, Hyderabad
KK!HR
1534

The monthly payment of bonus & leave salary may not satisfy the Labour Inspector, in case you are inspected for this. First of all, Bonus cannot be paid before it is decided as per law. So also Bonus payment has to be made by November. So there is a willful breach of the Payment of Bonus Act 1965 in making payment in this manner with its consequences. Similarly there is no legal provision for making payment of leave salary every month. In deed this will prevent accumulation of leave and hence not in the interest of employees. So the proposal is not legal and proper.
From India, Mumbai
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