Chapter: 8.2.1 Quations of The Payment of Bonus Act

Bonus to Contract Labour - Who is to Pay?

A Public Limited Company has engaged a Garden Contractor. The Garden Contractor has engaged Thirty Five employees to maintain the Garden of the Company and two employees to maintain its Garden at the Rest House. The contract between the Company and Garden Contractor stipulates the rates of wages to be paid to the employees as well as their number. The contract also provides that the contractor is to pay the wages to the employees as mentioned in the contract. The contractor was to be paid only service charges at the rate of Rs. 2,000/- per month. Accordingly the Contractor was raising the bill of actual wages paid to the employees + Rs. 2,000/- as his service charges. The company was making the payment to the Contractor on this basis. The Company was also making all payments to the Contractor in respect of the other expenses incurred for maintaining the Gardens on the actual. The workmen of the Contractor demanded bonus from the Contractor on the plea that the contractor should pay the bonus to the employee like wages and should recover the same from the Company by billing the Company. The Contractor approached the management of the Company but the management refused to entertain the request of the Contractor. Being aggrieved, the employees raised the dispute. The Industrial Tribunal rejected the demand of the workmen in respect of Bonus against the Management of the Company. The matter went to High Court and the High Cart ; miffing the writ petition.

Q: Who is to pay Bonus to Contract Labour?

A: The nature of Contract has a direct bearing on this question. If the Contract is of a kind where the contractor undertakes to do certain work for a certain sum, in that case the

Contractor will be responsible for payment of bonus. But in your case in fact it is the company which is paying the wages through the Contractor at a fixed rate and the Contractor is paid only nominal service charges therefore it becomes inconceivable to expect the contractor to pay bonus to the contract employees. Assistance can be taken from the Obiter of Hochtief Gamon, case.

M/s. Hochtief Gamon v. State of Orissa, AIR 1975 (SC) 2226.

Bonus: Contract Employee if Can Demand
From Principal Employer
In our factory. there are about 300 workers. The Company has also engaged a canteen contractor who is employing about 25 workmen. The canteen workers employed by the contractor, through their union have raised demand of Bonus on the Company.

Q: Can contract employee legally demand Bonus from the principal employer?

A: The principal employer's liability to pay the wages to the workmen engaged in the canteen on contractors failure to pay the wages is recognized in Sec. 21(4) of the Contract Labour Regulation & Abolition Act, 1970. The wages due to the contract workmen does not include Bonus and Gratuity. This is made clear by the definition of wages in the Industrial Disputes Act and Payment of Wages Act. Therefore, the principal employer is not liable to pay Bonus to the contract workmen.

Cominco Binani Zinc Ltd. v. Pappachan, 1989
ICLR 151 = 1989 I LLJ 452 (Ker. H. C.)

Bonus - If Payable n Bakwages

By an Award the Industrial Tribunal granted reinstatement with back-wages to seven employees of our Company. The Industrial Tribunal also granted the employees 50% back wages. The amount of back wages was calculated and the calculations were shown to the employees concerned. However, there occurred a dispute in respect of the calculations of back wages as well as on the point of Bonus on back wages. The first one is resolved through mutual discussions. But the Bonus issue is again taken to the Court.

The Payment of Bonus Act, 1965