Dear Colleagues, I have some queries regarding Contract Labour:
Eligibility for Bonus under the Payment of Bonus Act
1. Can anyone advise whether a contractor laborer is eligible for a bonus as per the recent amendment in the Payment of Bonus Act?
Benefits for Workers Removed After One Year
2. If a contractor removes his workers from the job after one year of service, what type of benefits is he liable to receive from the contractor/employer?
Please suggest.
Thanks & Regards,
Ajay Kr Sinha
From India, Jamshedpur
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7Eligibility for Bonus under the Payment of Bonus Act
1. Can anyone advise whether a contractor laborer is eligible for a bonus as per the recent amendment in the Payment of Bonus Act?
Benefits for Workers Removed After One Year
2. If a contractor removes his workers from the job after one year of service, what type of benefits is he liable to receive from the contractor/employer?
Please suggest.
Thanks & Regards,
Ajay Kr Sinha
From India, Jamshedpur
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If the contract laborer has 30 days' attendance in an accounting year and his monthly earnings are Rs. 10,000 or below, he is entitled to a bonus. If he is relieved after one year, he is eligible to receive the PF amount, withdrawal benefit from the pension fund, etc., in addition to salary arrears.
Regards,
Abbas. P. S
From India, Bangalore
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Regards,
Abbas. P. S
From India, Bangalore
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Any employee who works for 30 or more days is eligible for a bonus. It is the obligation of the contractor to pay the bonus to their employees and not the principal employer. The bonus is to be paid only based on the profitability or allocable surplus available with the contractor. Contract labor cannot claim the quantum of bonus declared by the principal employer. If the contractor does not pay the bonus, the principal employer has to pay the minimum bonus and deduct the same from the contractor's bill.
Regards,
G.K. Manjunath
Sr. Manager-HR
From India, Bangalore
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Regards,
G.K. Manjunath
Sr. Manager-HR
From India, Bangalore
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There is no need. The employee must work for 5 years continuously without any break in service to be eligible for gratuity. Since their work is casual in nature and the contract is for one year, the contractor has the right to terminate the services once the contract is over.
Regards,
G.K. Manjyunath
From India, Bangalore
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Regards,
G.K. Manjyunath
From India, Bangalore
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I am talking about retrenchment compensation and not about gratuity. I know that if a person works for 5 years, then only he is eligible for gratuity. However, in this scenario, the contractor has removed the workmen, and nowhere is it mentioned that he was on a 1-year contract. So, in this case, the contractor will have to pay retrenchment compensation to that workman.
Thanks and Regards
From India, Mumbai
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Thanks and Regards
From India, Mumbai
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In this case, the contractor worker has completed one year of continuous service with the same contractor. Is he entitled to a retrenchment amount at 15 days' salary for every completed year?
Thanks and regards,
Ajay
From India, Jamshedpur
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Thanks and regards,
Ajay
From India, Jamshedpur
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Dear Ajay, If the contract labour has 30 days attendance in an accounting year and his monthly earnings is Rs. 10,000 and below, he is entitled to get bonus
From India, New Delhi
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From India, New Delhi
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Dear Sir, How to engage contact labours in a organisation. What are the procedures. I want to know about shop & establishment acts also. Thanks & Regards, Anthony
From United States
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From United States
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Contract Labor and Bonus Liability
Contract labor is not covered in the definition of an employee in the POB Act. The definition of wages is the same in the CL (R&A) Act and the POW Act, which has excluded bonus from it. Under the CLRA Act, the principal employer under sections 20 and 21 is liable only if the contractor fails to provide/give the following:
• Canteen
• Rest room
• Other facilities
• First-aid
• Wages
Once again, the bonus is not mentioned. Hence, the bonus is the liability of the contractor.
Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]
From India, Thiruvananthapuram
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Contract labor is not covered in the definition of an employee in the POB Act. The definition of wages is the same in the CL (R&A) Act and the POW Act, which has excluded bonus from it. Under the CLRA Act, the principal employer under sections 20 and 21 is liable only if the contractor fails to provide/give the following:
• Canteen
• Rest room
• Other facilities
• First-aid
• Wages
Once again, the bonus is not mentioned. Hence, the bonus is the liability of the contractor.
Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]
From India, Thiruvananthapuram
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When an employee or contract labor is employed, they are entitled to a bonus at least at the rate prescribed under the Payment of Bonus Act, irrespective of whether the employer makes a profit or not, subject to minimum service and salary ceiling. When contract labor is engaged, the tenure of employment is specific to the period of the contract. Such labor can be terminated on the expiry of the contract or at any time on disciplinary grounds. It does not attract any provisions of the ID Act.
Unless on disciplinary grounds and on the expiry of the contract, the employee shall be entitled to receive pay against the notice period, apart from any entitled bonus, if applicable. EPF and ESI benefits are to be availed from such authorities.
Regards
From India, Mumbai
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Unless on disciplinary grounds and on the expiry of the contract, the employee shall be entitled to receive pay against the notice period, apart from any entitled bonus, if applicable. EPF and ESI benefits are to be availed from such authorities.
Regards
From India, Mumbai
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As regards the bonus, you have to pay an employee (other than an Apprentice) who is employed on a salary or wage not exceeding Rs. 10,000 per month, as per section 2(13) of The Payment of Bonus Act, 1965, provided he has worked for 30 days in the organization for that accounting year, as per section 8 of the said act. Every employer is bound to pay his employee a minimum bonus of 8.33% of his earned wages or Rs. 100, whichever is higher, whether the company has any allocable surplus or not as per section 10 of the act. The allocable surplus provision, as told by Mr. Manjunath, comes into play only when paying the maximum bonus of 20%.
From the above, it is evident that a contract laborer is eligible for getting the bonus on fulfilling the above terms with the Contractor. As rightly suggested by Mr. Manjunath, the onus of paying the bonus to contract laborers rests with the Contractor, and the Principal Employer will only interfere when the contractor fails to pay the bonus to his employees.
Retrenchment Benefits for Contract Laborers
As regards the retrenchment benefits of a workman who completes one year of service with the contractor, the following is to be given:
- (a) His leftover salary/wage as of the date of relieving.
- (b) 15 days' wage/salary for every completed year of service as per section 25F of the Industrial Disputes Act, 1947, provided he has completed 240 days of continuous service in that year.
- (c) One month's notice to be given before his retrenchment or one month's notice pay in lieu as per section 25F of the said act.
- (d) A minimum bonus of 8.33% of his wage for the leftover period, if any, as per the Payment of Bonus Act, 1965.
- (e) Since contract laborers, in general, are not given leave during their employment, they may be given leave salary as per their eligibility. In the construction field, generally, they are given leave pay at the rate of 1 day's wage for every completed 20 days of service (As per the Factories Act, 1947).
- (f) Their PF accumulations to be paid in Form 19 and Form 10(C) as per clause (d) or (e) of sub-para 1 of paragraph 69 of the EPF Scheme, 1952.
For Migrant workmen, you need to give displacement allowance, outward/inward journey allowances, wage for the period of the journey from his place of residence to the workplace and vice versa, in addition to other retrenchment benefits as narrated above, as per the Inter-State Migrant Workmen Act, 1979.
Hope your doubts will be cleared to an extent.
Regards,
P. Vathiraj
[Phone Number Removed For Privacy Reasons]
From India
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From the above, it is evident that a contract laborer is eligible for getting the bonus on fulfilling the above terms with the Contractor. As rightly suggested by Mr. Manjunath, the onus of paying the bonus to contract laborers rests with the Contractor, and the Principal Employer will only interfere when the contractor fails to pay the bonus to his employees.
Retrenchment Benefits for Contract Laborers
As regards the retrenchment benefits of a workman who completes one year of service with the contractor, the following is to be given:
- (a) His leftover salary/wage as of the date of relieving.
- (b) 15 days' wage/salary for every completed year of service as per section 25F of the Industrial Disputes Act, 1947, provided he has completed 240 days of continuous service in that year.
- (c) One month's notice to be given before his retrenchment or one month's notice pay in lieu as per section 25F of the said act.
- (d) A minimum bonus of 8.33% of his wage for the leftover period, if any, as per the Payment of Bonus Act, 1965.
- (e) Since contract laborers, in general, are not given leave during their employment, they may be given leave salary as per their eligibility. In the construction field, generally, they are given leave pay at the rate of 1 day's wage for every completed 20 days of service (As per the Factories Act, 1947).
- (f) Their PF accumulations to be paid in Form 19 and Form 10(C) as per clause (d) or (e) of sub-para 1 of paragraph 69 of the EPF Scheme, 1952.
For Migrant workmen, you need to give displacement allowance, outward/inward journey allowances, wage for the period of the journey from his place of residence to the workplace and vice versa, in addition to other retrenchment benefits as narrated above, as per the Inter-State Migrant Workmen Act, 1979.
Hope your doubts will be cleared to an extent.
Regards,
P. Vathiraj
[Phone Number Removed For Privacy Reasons]
From India
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I am talking about retrenchment compensation and not about gratuity. I know that if a person works for 5 years, then only he is eligible for gratuity. However, in this case, the contractor has removed the workmen, and nowhere is it mentioned that he was on a 1-year contract. Therefore, in this situation, the contractor will have to pay retrenchment compensation to that workman.
Thank you and regards.
Retrenchment Compensation and Applicable Acts
Retrenchment compensation falls under the Industrial Disputes Act and not under the Contract Labour Act or Payment of Wages Act. For the termination of individual labor (or even for the closure of the contractor's business), retrenchment compensation does not apply.
From India, Mumbai
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Thank you and regards.
Retrenchment Compensation and Applicable Acts
Retrenchment compensation falls under the Industrial Disputes Act and not under the Contract Labour Act or Payment of Wages Act. For the termination of individual labor (or even for the closure of the contractor's business), retrenchment compensation does not apply.
From India, Mumbai
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Dear Mr. Saswata Banerjee, you are absolutely right that the retrenchment compensation comes under the Industrial Dispute Act and nowhere is it argued to be covered in the Contract Labour Act. Every employee, whether it is express or implied, whether they are permanent, temporary, or on contract employment, is entitled to retrenchment benefits.
Understanding the Scope of Various Acts
While the Contract Labour Act, Migrant Workman Act, BOCW Act, Shops and Establishment Act, and Mines Act address the terms and conditions of their respective fields, the Industrial Dispute Act discusses industrial disputes between parties, as clearly stated in clause 'k' of section 2 of the Industrial Dispute Act, 1947. It is important to note that the Industrial Dispute Act refers to "workman" rather than "employee," with the definition provided in clause 's' of section 2 of the said act.
Case Study on Retrenchment Benefits
For the benefit of all readers, I am enclosing important updates on labor law judgments of Feb 12. Case Study No. 9 will clarify any doubts regarding the applicability of retrenchment benefits, even to casual labor, in the case of BSNL in 2012.
Regards,
P. Vathiraj
From India
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Understanding the Scope of Various Acts
While the Contract Labour Act, Migrant Workman Act, BOCW Act, Shops and Establishment Act, and Mines Act address the terms and conditions of their respective fields, the Industrial Dispute Act discusses industrial disputes between parties, as clearly stated in clause 'k' of section 2 of the Industrial Dispute Act, 1947. It is important to note that the Industrial Dispute Act refers to "workman" rather than "employee," with the definition provided in clause 's' of section 2 of the said act.
Case Study on Retrenchment Benefits
For the benefit of all readers, I am enclosing important updates on labor law judgments of Feb 12. Case Study No. 9 will clarify any doubts regarding the applicability of retrenchment benefits, even to casual labor, in the case of BSNL in 2012.
Regards,
P. Vathiraj
From India
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Clarification on Retrenchment Benefits for Contract Labor
I am enclosing one more judgment copy which will clarify the issue on retrenchment benefits for contract labor. As mentioned by Mr. Saikumar, the termination of a workman's service due to the non-renewal of the employment contract between the employer and the workman upon its expiration will not fall under the definition of 'retrenchment' as per section 2(oo)(bb) of the Industrial Disputes Act, 1947.
However, if an undertaking or project is shut down leading to the non-renewal of the workmen's contracts, then the retrenchment benefits must be provided in accordance with section 25(FFF) of the Industrial Disputes Act, 1947, provided the workman was employed for a continuous period of one year.
Regards,
P. Vathiraj
From India
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I am enclosing one more judgment copy which will clarify the issue on retrenchment benefits for contract labor. As mentioned by Mr. Saikumar, the termination of a workman's service due to the non-renewal of the employment contract between the employer and the workman upon its expiration will not fall under the definition of 'retrenchment' as per section 2(oo)(bb) of the Industrial Disputes Act, 1947.
However, if an undertaking or project is shut down leading to the non-renewal of the workmen's contracts, then the retrenchment benefits must be provided in accordance with section 25(FFF) of the Industrial Disputes Act, 1947, provided the workman was employed for a continuous period of one year.
Regards,
P. Vathiraj
From India
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Ok, I do not know why you wish to make me read 20 pages of judicial wording when it has nothing really related to our topic at hand. After reading through the 20 pages, I find:
A. Misalignment with Contract Labor
The case is not about contract labor. It is about temporary workers. We are clearly talking about contract labor. I specified that they will not get retrenchment benefits as it is not provided in the contract labor act. Nothing in the judgment is about contract labor. The only time the word "contract" has come up in that judgment is where they have talked about the contract of employment between the temporary workers and the company; it's not about the engagement of contract workers. Please review what you send instead of wasting our time or misleading members.
B. Irrelevance to Factory Closure
The court says that the refusal of work to such temporary workers on account of the closure of the concerned unit is not retrenchment. In any case, the original post does not talk about the closure of the factory. It talks about the termination of a contract. What does that have to do with this?
I hope you are not going to put another such judgment copy in response.
From India, Mumbai
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A. Misalignment with Contract Labor
The case is not about contract labor. It is about temporary workers. We are clearly talking about contract labor. I specified that they will not get retrenchment benefits as it is not provided in the contract labor act. Nothing in the judgment is about contract labor. The only time the word "contract" has come up in that judgment is where they have talked about the contract of employment between the temporary workers and the company; it's not about the engagement of contract workers. Please review what you send instead of wasting our time or misleading members.
B. Irrelevance to Factory Closure
The court says that the refusal of work to such temporary workers on account of the closure of the concerned unit is not retrenchment. In any case, the original post does not talk about the closure of the factory. It talks about the termination of a contract. What does that have to do with this?
I hope you are not going to put another such judgment copy in response.
From India, Mumbai
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Clarification on Contractor Workmen Benefits
First, read the query raised. Everyone is giving their comments, and now this thread is off track. The question that was asked is, "If a contractor removes his workmen from the job after one year of service, what type of benefits is he liable to get from the contractor/employer?"
Nowhere is it mentioned that the contract is for one year or that a workman is employed for any specific service period. It is only the case that the workman has been removed, so it is presumed that the contract is still ongoing. For any reason the contractor has removed him from the work, if the case is like this, the workman is eligible for RC.
Regards,
Nilesh Soni.
From India, Mumbai
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First, read the query raised. Everyone is giving their comments, and now this thread is off track. The question that was asked is, "If a contractor removes his workmen from the job after one year of service, what type of benefits is he liable to get from the contractor/employer?"
Nowhere is it mentioned that the contract is for one year or that a workman is employed for any specific service period. It is only the case that the workman has been removed, so it is presumed that the contract is still ongoing. For any reason the contractor has removed him from the work, if the case is like this, the workman is eligible for RC.
Regards,
Nilesh Soni.
From India, Mumbai
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Clarification on Contractor Labor Benefits
First, please read the query raised. Everyone is giving their comments, and now this thread is off track. The original question was, "If a contractor removes his workmen from the job after one year of service, what type of benefits is he liable to provide?" Nowhere is it mentioned that the contract is for one year or that a workman is employed for any specific service period. It is only the case that the workman has been removed, so it is presumed that the contract is still active. For any reasons the contractor has removed him from the work, if this is the case, the workman is eligible for retrenchment compensation.
Regards,
Nilesh Soni
Discussion on Industrial Disputes Act and Contract Labour
The matter at hand is: Does the Industrial Disputes Act cover contract labour? I believe it doesn't. If it doesn't, then there is no provision for retrenchment compensation elsewhere. What is your opinion on this? I would appreciate more feedback as this is a critical matter.
From India, Mumbai
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First, please read the query raised. Everyone is giving their comments, and now this thread is off track. The original question was, "If a contractor removes his workmen from the job after one year of service, what type of benefits is he liable to provide?" Nowhere is it mentioned that the contract is for one year or that a workman is employed for any specific service period. It is only the case that the workman has been removed, so it is presumed that the contract is still active. For any reasons the contractor has removed him from the work, if this is the case, the workman is eligible for retrenchment compensation.
Regards,
Nilesh Soni
Discussion on Industrial Disputes Act and Contract Labour
The matter at hand is: Does the Industrial Disputes Act cover contract labour? I believe it doesn't. If it doesn't, then there is no provision for retrenchment compensation elsewhere. What is your opinion on this? I would appreciate more feedback as this is a critical matter.
From India, Mumbai
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Entitlement of Contract Labor to Retrenchment Compensation
The contention that contract labor is not entitled to retrenchment compensation because they are not covered by the Industrial Disputes Act is not based on sound law. The Industrial Disputes Act is very much applicable to contract labor since they are considered workmen within the meaning of Sec. 2(s) of the I.D. Act. They are entitled to retrenchment compensation if their termination does not fall within any of the exceptions to retrenchment specified under Sec. 2(oo) of the I.D. Act. The only ground on which a contract worker is not eligible for retrenchment compensation is when they are recruited for a fixed tenure or for the duration of a project, which is a common method in the employment of contract labor.
Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai
From India, Mumbai
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The contention that contract labor is not entitled to retrenchment compensation because they are not covered by the Industrial Disputes Act is not based on sound law. The Industrial Disputes Act is very much applicable to contract labor since they are considered workmen within the meaning of Sec. 2(s) of the I.D. Act. They are entitled to retrenchment compensation if their termination does not fall within any of the exceptions to retrenchment specified under Sec. 2(oo) of the I.D. Act. The only ground on which a contract worker is not eligible for retrenchment compensation is when they are recruited for a fixed tenure or for the duration of a project, which is a common method in the employment of contract labor.
Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai
From India, Mumbai
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Labour law is to be interpreted based on the actual situation. Your generalized question has been answered. Please refer to my response on the 29th. I still stand by it.
Secondly, every contract laborer is an employee of some employer and hence covered under the Industrial Disputes (ID) Act. However, the Principal employer is only required to comply with the Contract Labour (Regulation and Abolition) Act (Section 21). Be specific about the obligations of the employer or Principal employer. I hope this clarifies the issue.
Best wishes.
From India, Mumbai
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Secondly, every contract laborer is an employee of some employer and hence covered under the Industrial Disputes (ID) Act. However, the Principal employer is only required to comply with the Contract Labour (Regulation and Abolition) Act (Section 21). Be specific about the obligations of the employer or Principal employer. I hope this clarifies the issue.
Best wishes.
From India, Mumbai
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Industrial Dispute: Principal Employer or Contractor?
Can the industrial dispute be raised against the principal employer or the contractor? Can a contract worker raise an industrial dispute against the principal employer or factory? It seems to go against the concept or design of contract labor.
Again, can he raise an industrial dispute against the contractor? He does not come under the definition of a factory (his business is not an industry). Furthermore, what happens if the contract workers are working in a commercial establishment or on a construction project? Will the same rules apply?
Regards,
Sai Kumar, Nair
From India, Mumbai
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Can the industrial dispute be raised against the principal employer or the contractor? Can a contract worker raise an industrial dispute against the principal employer or factory? It seems to go against the concept or design of contract labor.
Again, can he raise an industrial dispute against the contractor? He does not come under the definition of a factory (his business is not an industry). Furthermore, what happens if the contract workers are working in a commercial establishment or on a construction project? Will the same rules apply?
Regards,
Sai Kumar, Nair
From India, Mumbai
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Understanding Contract Workers and Industrial Disputes
A contract worker has an employer-employee relationship with the contractor and hence is a workman of the contractor within the meaning of Sec. 2(s) of the Industrial Disputes Act. Thus, they can raise an industrial dispute about any term of employment or conditions of service against the contractor only. The definition of industry under Sec. 2(j) is so broad that it is not confined to a factory or trade, but to any systematic activity carried out with the help of persons employed on wages. It includes even a calling, service, or profession, irrespective of whether it earns a profit or not. This is the essence of the Apex Court's decision in the Bangalore Water Supply and Sewerage case, which is the definitive ruling on the definition of industry. Therefore, a contractor's firm is also considered an industry under the Industrial Disputes Act.
However, contract workers can raise an industrial dispute about a claim - for example, regularization - against the principal employer on the grounds that the contract is a camouflage or sham. This is because only the industrial tribunal under the I.D. Act has the jurisdiction to determine the nature of the contract as a sham or not and the status of a person as a workman of the principal employer or not. The Appropriate Government under Sec. 10 of the Contract Labour Act does not have this authority. This principle is based on the Apex Court's decision in Steel Authority of India Ltd & Ors v. National Union Waterfront Workers & Ors 2001 II LLJ Page 1087.
Regards,
B. Saikumar
Mumbai
From India, Mumbai
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A contract worker has an employer-employee relationship with the contractor and hence is a workman of the contractor within the meaning of Sec. 2(s) of the Industrial Disputes Act. Thus, they can raise an industrial dispute about any term of employment or conditions of service against the contractor only. The definition of industry under Sec. 2(j) is so broad that it is not confined to a factory or trade, but to any systematic activity carried out with the help of persons employed on wages. It includes even a calling, service, or profession, irrespective of whether it earns a profit or not. This is the essence of the Apex Court's decision in the Bangalore Water Supply and Sewerage case, which is the definitive ruling on the definition of industry. Therefore, a contractor's firm is also considered an industry under the Industrial Disputes Act.
However, contract workers can raise an industrial dispute about a claim - for example, regularization - against the principal employer on the grounds that the contract is a camouflage or sham. This is because only the industrial tribunal under the I.D. Act has the jurisdiction to determine the nature of the contract as a sham or not and the status of a person as a workman of the principal employer or not. The Appropriate Government under Sec. 10 of the Contract Labour Act does not have this authority. This principle is based on the Apex Court's decision in Steel Authority of India Ltd & Ors v. National Union Waterfront Workers & Ors 2001 II LLJ Page 1087.
Regards,
B. Saikumar
Mumbai
From India, Mumbai
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