Learning Series by Shekhar Ganagaluru (Issue 1)

5/21/2022

Q1. Is the Principal Employer liable for the payment of wages to the Contract Labour?
Yes.
In case, the contractor fails to make payment of wages to its employees, then the principal employer is liable for the payment of wages to the contract labour.
As per the Section 21 (4) of the Contract Labour (Regulation & Abolition) Act, 1970, in case the contractor fails to make payment of wages or makes short payment to its employees, then the principal employer shall be liable to make the same to concerned contractor’s employees.
The principal employer, however, may recover the same from the contractor on the basis of his agreement with the contractor.

Q2. Is the Principal Employer liable for the payment of EPF Contribution to the Contract Labour?
Yes.
In case, if the contractor has not been having/allotted independent Provident Fund Contribution Code Number, in such case the contributions in respect of contractor’s employees shall have to be paid at the first instance by the principal employer. And, later recover the same from the contractor.
In case if the contractors is having an independent code number under EPF Act, 1952, in such case the principal employer is not liable to pay the EPF contribution in respect of employees of contractor.

Q3. Do Contract Employees become employees of the Principal Employer in case EPF Contribution remitted by the Principal Employer?
No.
On the basis of EPF contribution, the contract labour shall not become the employees of the principal employer.
Merely that the principal employer has been depositing the provident fund contributions for the employees of the contractor, it would not mean that they have become the employees of the principal employer under the Industrial Disputes Act, 1947, since the Employees Provident Fund & Miscellaneous Act, 1952 only casts the liability of payment of the provident fund contributions on the principal employer.

Q4. Is the Principal Employer liable for the payment of Statutory Bonus to the Contract Labour?
No.
The concerned contractor is liable to pay statutory bonus as per the Payment of Bonus Act, 1965 to the contract labour employed by him.
The Payment of Bonus Act, 1965 is applicable to all private establishments and establishments set up by the State Government, who employ 20 or more workers on any day during an accounting year.
Minimum bonus payable is 8.33% of the basic and dearness allowance paid to the employees. Bonus is payable within 8 months of the close of the accounting year.
All contractor establishments are covered under the Payment of Bonus Act provided they employ 20 or more workers on any day during the accounting year.
It is the statutory responsibility of the contractor to pay such bonus to contract employees, as they are the employers for such contract employees.

Q5. Are contract employees eligible for the Maternity Benefits under the Maternity Benefit Act, 1961?
Yes, as the Maternity Benefits Act doesn’t delineate rights based on how employees are classified or engaged.
The Maternity Benefit Act, 1961 is a legislation that protects the employment of women at the time of her maternity.