Indian Laws Insights with Shekhar Ganagaluru

Statutory Bonus & Contract Labour
1. Is the principal employer liable to pay the bonus to contract labor under the Payment of Bonus Act, 1965, and the Contract Labour (Regulation and Abolition) Act, 1970?
The Payment of Bonus Act, 1965, applies to establishments employing twenty or more persons and outlines the obligations of employers regarding bonus payments to their employees. Here's how it applies to contract labour:

1) Employer Definition (Section 2(14) of the Payment of Bonus Act, 1965):

• In a factory, the term "employer" includes the owner, occupier, or the person named as a manager under Section 7(1)(f) of the Factories Act, 1948.
• In any other establishment, "employer" refers to the person or authority with ultimate control over the establishment's affairs. If a manager, managing director, or managing agent is appointed, they assume the role of the employer.

For contract labour, the contractor is the actual employer of the workers, not the principal employer. Therefore, the contractor is responsible for fulfilling the obligations under the Payment of Bonus Act.

2) Eligibility for Bonus (Section 8 of the Payment of Bonus Act, 1965):

• Every employee who has worked in the establishment for at least thirty working days in a year is entitled to receive a bonus from their employer.
• This section clarifies that the bonus payment obligation lies with the direct employer, which, in the case of contract labour, is the contractor.​

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