Hi Seniors, Can someone shed light on this? Paying a bonus is the employer's/contractor's responsibility, and ensuring this is the principal employer's responsibility - this part is clear. When calculating the bonus, whose profit percentage should be considered? If the principal employer's profit is higher, are they liable to pay a higher percentage to contract employees? Since the contractor is the immediate employer, does their profit determine the percentage for their employees?
Regards,
From India, Mysore
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Regards,
From India, Mysore
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If it is a genuine contract, the profit made by the contractor who is the employer in respect of the contract workers should only be considered for deciding what shall be the rate of bonus.
From India, Kannur
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4526From India, Kannur
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This is an interesting question. I do not know why I never asked this!
The Payment of Bonus Act and Contract Labour
The Payment of Bonus Act is silent on contract labour, so legally, I suppose that you can pay it based on the contractor's profit.
However, the legislative intent seems to be that the principal employer does not avoid its dues by pushing workers to contractors, so it is possible that the courts will consider the principal employer's profit. This will be a highly contentious issue and likely to go to courts for 25 years!
In all the cases I have seen, we observe that contract workers are paid a bonus at 8.33% only, and that is accepted by the workers as well as the labor inspectors. So you are not likely to have a problem on this matter. Just ensure you have evidence that the contractor is a genuine, independent business.
From India, Mumbai
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The Payment of Bonus Act and Contract Labour
The Payment of Bonus Act is silent on contract labour, so legally, I suppose that you can pay it based on the contractor's profit.
However, the legislative intent seems to be that the principal employer does not avoid its dues by pushing workers to contractors, so it is possible that the courts will consider the principal employer's profit. This will be a highly contentious issue and likely to go to courts for 25 years!
In all the cases I have seen, we observe that contract workers are paid a bonus at 8.33% only, and that is accepted by the workers as well as the labor inspectors. So you are not likely to have a problem on this matter. Just ensure you have evidence that the contractor is a genuine, independent business.
From India, Mumbai
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The contractor is the immediate employer is responsible to pay the bonus. The bonus payment percentage depends on contractor’s profit and loss.
From India, Mumbai
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From India, Mumbai
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Observations of learned members throw an interesting question of "genuinety" of contract. What are the tests could be to ascertain ?
From India, Bangalore
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From India, Bangalore
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Hi Kumar,
There is no hard and fast rule on what is genuine. However, courts will examine whether the contractor is truly an independent contractor providing a service or merely a front for the employer, intended to prevent workers from receiving fair wages and rights.
Guidelines for Determining Genuine Contractors
Generally, we try to follow Section 10 of the Contract Labour Act. Additionally:
- No direct interference in the selection of the workers.
- No involvement in disciplinary action, leave approvals, etc.
- No direct control over the workers by the Principal Employer (PE), except for quality verification and safety matters.
- Skill training, etc., provided by the contractor, not by the PE.
- Attendance, salary sheets, payment, etc., are managed by the contractor alone and not directly or indirectly by the PE (e.g., using the PE's software to make salary registers, etc.).
We also ensure that the contractor has a proper office, shop, and establishment license to demonstrate that it is indeed an independent business.
From India, Mumbai
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There is no hard and fast rule on what is genuine. However, courts will examine whether the contractor is truly an independent contractor providing a service or merely a front for the employer, intended to prevent workers from receiving fair wages and rights.
Guidelines for Determining Genuine Contractors
Generally, we try to follow Section 10 of the Contract Labour Act. Additionally:
- No direct interference in the selection of the workers.
- No involvement in disciplinary action, leave approvals, etc.
- No direct control over the workers by the Principal Employer (PE), except for quality verification and safety matters.
- Skill training, etc., provided by the contractor, not by the PE.
- Attendance, salary sheets, payment, etc., are managed by the contractor alone and not directly or indirectly by the PE (e.g., using the PE's software to make salary registers, etc.).
We also ensure that the contractor has a proper office, shop, and establishment license to demonstrate that it is indeed an independent business.
From India, Mumbai
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Bonus Calculation.xls
Contract Labor - PPT.ppt
Contract employee & Principal employer 2017.pdf