A contractor got a work from Govt. by qualifying the tender. The Contractor entered into an agreement with Govt and got LOI to start work from 18-06-2018. The contractor provided form V to appy for labour licence. The licence obtained for 300 workmen on 15-09-2018 and was valid 31/12/2018. Again contractor applied for the renewal of licence and got it renewed on 10-01-2019, the validity 31-12-2019. The contractor got bill of 0.75 crores till 31/03/2019, whereas contractors expenditure was 3.5 crore.
The contractor paid minimum bonus @8.33% to 35 workmen who were enrolled. The licencsing authority is asking to provide the details of (i) Allocable Surplus amount (ii) Set-on and Set-Off amount on allocable surplus.
In view of the above please guide : The establishment does not have work on 2017-18, then how to calculate allocable surplus and put the amount set on and set off surplus.
Regards
From India, Mumbai
589The contractor paid minimum bonus @8.33% to 35 workmen who were enrolled. The licencsing authority is asking to provide the details of (i) Allocable Surplus amount (ii) Set-on and Set-Off amount on allocable surplus.
In view of the above please guide : The establishment does not have work on 2017-18, then how to calculate allocable surplus and put the amount set on and set off surplus.
Regards
From India, Mumbai
First of all it is required to check the contract between Contractor and PE. Is there any clause regarding Bonus? If so, analyse that and reply to the authority accordingly.
If there is no such agreement between PE and contractor and Contractor received payment from PE and paid to contract labour which is all inclusive cost, then Contractor should maintain balance sheet ( which is very uncommon ) and based on 2018-19 balance sheet allocable surplus has to be determined to pay bonus in 2019-20. If the contractor had balance sheet for past years, then set on, set off amount will also reflect.
Usually for contractors, PE is determining the Bonus amount and reimbursed the same because one contractor is working under several PE with different terms and conditions.
Considering all above factors one should take a call how to approach in the instant case.
S K Bandyopadhyay ( WB, HOWRAH)
From India, New Delhi
If there is no such agreement between PE and contractor and Contractor received payment from PE and paid to contract labour which is all inclusive cost, then Contractor should maintain balance sheet ( which is very uncommon ) and based on 2018-19 balance sheet allocable surplus has to be determined to pay bonus in 2019-20. If the contractor had balance sheet for past years, then set on, set off amount will also reflect.
Usually for contractors, PE is determining the Bonus amount and reimbursed the same because one contractor is working under several PE with different terms and conditions.
Considering all above factors one should take a call how to approach in the instant case.
S K Bandyopadhyay ( WB, HOWRAH)
From India, New Delhi
In continuation of Mr. Bandobathyay's reply, I would like to ask first whether the licensing authority under the CLRA Act, 1970 can call for such particulars.
If he is designated as an inspector under the Payment of Bonus Act, 1965, of course, he can do so.
In such a situation, the contractor would also be an " establishment in private sector " as defined u/s 2(15) of the CLRA Act, 1970. There cannot be any exemption as to the size of the establishment or the contractual nature of its operations with a single or more no of principal employers. The percentage of bonus payable by the contractor would be assessed not on the basis of the amount he receives from each principal employer under the head of bonus but on the actual profits earned in totality of his contract services done in a particular accounting year.
Therefore, he has to furnish the accounts relating to his entire business. He should produce the registers pertaining to allocable surplus, the provision for set on and set off made periodically,and to the particulars of bonus payable to each and every employee, deductions and actual bonus paid in Form A,B and C respectively.
From India, Salem
If he is designated as an inspector under the Payment of Bonus Act, 1965, of course, he can do so.
In such a situation, the contractor would also be an " establishment in private sector " as defined u/s 2(15) of the CLRA Act, 1970. There cannot be any exemption as to the size of the establishment or the contractual nature of its operations with a single or more no of principal employers. The percentage of bonus payable by the contractor would be assessed not on the basis of the amount he receives from each principal employer under the head of bonus but on the actual profits earned in totality of his contract services done in a particular accounting year.
Therefore, he has to furnish the accounts relating to his entire business. He should produce the registers pertaining to allocable surplus, the provision for set on and set off made periodically,and to the particulars of bonus payable to each and every employee, deductions and actual bonus paid in Form A,B and C respectively.
From India, Salem
Dear Sri S K Bandyopadhyayji,
Thank you for the reply.
The whole problem is the absence of the clarity in Law & Acts. The allocable surplus and set on & set off is meant for the permanent establishment but the authority under the law wants to bring all under the same canopy.
The contract between Contractor and PE is clear, the dictation is to comply the applicable labour laws has already in force. The contractor paid @8.33% as envisaged section 10 of the act as per the contract, inspite of loss & work stoppage due to non-availbility of various clearances by the PE.
The Contractor profit & loss has to be determined from the income & expenditure on head of contract amount to be received as payment from PE.
This particular establishment in relation to Labour licence is on loss in FY 2018-19, how to determine the allocable surplus and to do set on 2018 and set off for 2019-20.
If the contractor had balance sheet for past years, then set on, set off amount will also reflect.
I have raised all these in line of your suggestion but in vain to make people understand having blocked mind.
From India, Mumbai
Thank you for the reply.
The whole problem is the absence of the clarity in Law & Acts. The allocable surplus and set on & set off is meant for the permanent establishment but the authority under the law wants to bring all under the same canopy.
The contract between Contractor and PE is clear, the dictation is to comply the applicable labour laws has already in force. The contractor paid @8.33% as envisaged section 10 of the act as per the contract, inspite of loss & work stoppage due to non-availbility of various clearances by the PE.
The Contractor profit & loss has to be determined from the income & expenditure on head of contract amount to be received as payment from PE.
This particular establishment in relation to Labour licence is on loss in FY 2018-19, how to determine the allocable surplus and to do set on 2018 and set off for 2019-20.
If the contractor had balance sheet for past years, then set on, set off amount will also reflect.
I have raised all these in line of your suggestion but in vain to make people understand having blocked mind.
From India, Mumbai
Dear Sri Umakanthanji,
Thanks for putting your insight on the subject.
Kindly put your valid insight to the following;
Where is the problem to pay under section 10, where the establishment come in to existence on date contractor signed the contract with PE? In this context how could entire business of the contractor be put on question, when they are different.
The payment of bonus based on "Profits" to employees employed in establishments as per the resolution No.WB-20(9)/61, dated 6th December, 1961 on recomendation of the tripartite commission set by the Government of India.
Therefore, the contractor should produce the registers pertaining to allocable surplus, to make the provision for set on and set off as per the current balance sheet.
Your opinion pl,
From India, Mumbai
Thanks for putting your insight on the subject.
Kindly put your valid insight to the following;
Where is the problem to pay under section 10, where the establishment come in to existence on date contractor signed the contract with PE? In this context how could entire business of the contractor be put on question, when they are different.
The payment of bonus based on "Profits" to employees employed in establishments as per the resolution No.WB-20(9)/61, dated 6th December, 1961 on recomendation of the tripartite commission set by the Government of India.
Therefore, the contractor should produce the registers pertaining to allocable surplus, to make the provision for set on and set off as per the current balance sheet.
Your opinion pl,
From India, Mumbai
Dear Mr.Prabhat Ranjan Mohanty,
My request to you is to get convinced that basically any contractor's establishment is an establishment independent of any one or all the principal employers' establishments to whom the services of his contract labor are lent out so as to attract the provisions of the CLRA Act,1970.
As such, like I mentioned earlier, the contractor becomes a private establishment u/s 2(15) of the Payment of Bonus Act,1965 when the no of his employees reaches the threshold limit prescribed u/s 1(3) of the Act and all the employees employed by him would be employees u/s 2(13) for the purpose of the PB Act if their salaries do not exceed the limit prescribed therein. Therefore it would be immaterial whether such contract labor are deputed to any particular principal employer or being rotated among the various principals' establishments. Similarly, his profits or losses have to be assessed only with reference to this total earnings in a year and not with reference to a particular contract he has undertaken. Thus, by and large, a contract entered into with a new principal employer alone by the contractor cannot be a factor to decide whether the contractor's establishment is a newly set up one or not so as to avail of the operational concessions granted u/s 16(1-A) of the PB Act,1965.
Moreover, it is common that industries like large scale manufacturing activities will have long gestation periods and not a service industry like a contractor's establishment for he is paid on periodical completion basis then and there. Therefore, there would be no possibility of enjoying the concession that could be called as " bonus holiday " for a contractor. You may argue that the particular person was a new one to the contract business and the one and only contract he had on hand in that particular accounting year was the one with the Government. The tender rate quoted by him would have included all his statutory liability towards his labor. Even assuming he incurred losses due to his own fault, was not he in receipt of minimum bonus from the principal employer? Then also he becomes liable to pass on the minimum bonus to his contract labor notwithstanding the concession granted u/s 16 of the PB Act,1965.
Coming to the recommendation of the Bonus Commission,1961 you quoted, it is the recommendation of the Bonus Commission to fix the minimum bonus at 4% and maximum at 20% of the earnings of employees comprising of basic and dearness allowance. That is what incorporated in the PB Act,1965 as minimum bonus of 8% u/s 10 whether or not there is allocable surplus and as maximum bonus to the extent of 20% u/s 11 when the allocable surplus exceeds the amount of minimum bonus payable.
Therefore, it becomes mandatory on the part of every establishment falling under the PB Act,1965, whether it is small or large,to properly maintain the registers pertaining to allocable surplus, particulars of bonus payable to each and every employee and the payment details.
But, I am of the firm opinion that submission of the above documents pertaining to statutory bonus is not necessary for the grant or renewal of contractor's licence under the CLRA Act,1970.
From India, Salem
My request to you is to get convinced that basically any contractor's establishment is an establishment independent of any one or all the principal employers' establishments to whom the services of his contract labor are lent out so as to attract the provisions of the CLRA Act,1970.
As such, like I mentioned earlier, the contractor becomes a private establishment u/s 2(15) of the Payment of Bonus Act,1965 when the no of his employees reaches the threshold limit prescribed u/s 1(3) of the Act and all the employees employed by him would be employees u/s 2(13) for the purpose of the PB Act if their salaries do not exceed the limit prescribed therein. Therefore it would be immaterial whether such contract labor are deputed to any particular principal employer or being rotated among the various principals' establishments. Similarly, his profits or losses have to be assessed only with reference to this total earnings in a year and not with reference to a particular contract he has undertaken. Thus, by and large, a contract entered into with a new principal employer alone by the contractor cannot be a factor to decide whether the contractor's establishment is a newly set up one or not so as to avail of the operational concessions granted u/s 16(1-A) of the PB Act,1965.
Moreover, it is common that industries like large scale manufacturing activities will have long gestation periods and not a service industry like a contractor's establishment for he is paid on periodical completion basis then and there. Therefore, there would be no possibility of enjoying the concession that could be called as " bonus holiday " for a contractor. You may argue that the particular person was a new one to the contract business and the one and only contract he had on hand in that particular accounting year was the one with the Government. The tender rate quoted by him would have included all his statutory liability towards his labor. Even assuming he incurred losses due to his own fault, was not he in receipt of minimum bonus from the principal employer? Then also he becomes liable to pass on the minimum bonus to his contract labor notwithstanding the concession granted u/s 16 of the PB Act,1965.
Coming to the recommendation of the Bonus Commission,1961 you quoted, it is the recommendation of the Bonus Commission to fix the minimum bonus at 4% and maximum at 20% of the earnings of employees comprising of basic and dearness allowance. That is what incorporated in the PB Act,1965 as minimum bonus of 8% u/s 10 whether or not there is allocable surplus and as maximum bonus to the extent of 20% u/s 11 when the allocable surplus exceeds the amount of minimum bonus payable.
Therefore, it becomes mandatory on the part of every establishment falling under the PB Act,1965, whether it is small or large,to properly maintain the registers pertaining to allocable surplus, particulars of bonus payable to each and every employee and the payment details.
But, I am of the firm opinion that submission of the above documents pertaining to statutory bonus is not necessary for the grant or renewal of contractor's licence under the CLRA Act,1970.
From India, Salem
Dear R N Mohanty / Umakanthan / S K Bandyopadhyay.
With due respect to you and to your chair,, My Humble submission to all.
Kindly refer t o the Apex Court ruling in case of workmen of Food Corp. of India V/s M/s FCI reported in 1985 II LLJ 4. Court has considered the relationship of the contract labourer with the statutory corporation, having regard to the definition of employee found in section 2(13) of the POB Act, the claim of the labour department has no legal basis and it does not amount to violation of Section 11 of the Act,attracting punishment under Section 28 of the said Act.
Opinion of All are invited on my submission
From India, Mumbai
With due respect to you and to your chair,, My Humble submission to all.
Kindly refer t o the Apex Court ruling in case of workmen of Food Corp. of India V/s M/s FCI reported in 1985 II LLJ 4. Court has considered the relationship of the contract labourer with the statutory corporation, having regard to the definition of employee found in section 2(13) of the POB Act, the claim of the labour department has no legal basis and it does not amount to violation of Section 11 of the Act,attracting punishment under Section 28 of the said Act.
Opinion of All are invited on my submission
From India, Mumbai
Dear Mr. Azim,
Thanks for supplementing the inputs to consider for:
The original issue is not the employee but the contractor;
In the instant subject, a newly appointed contractor asked to declare allocable surplus. Whereas the contractor hardly worked for 5 months with working loss for the year ending 31/03/19 how the contractor would able to do set-off for payment of bonus for 2018-19 and set-on for 2019-2020.
Where the Bonus is paid based on "Profits" to employees employed in establishments as per the resolution No. WB-20(9)/61, dated 6th December, 1961 on recommendation of the tripartite commission set by the Government of India...............
Regards
From India, Mumbai
Thanks for supplementing the inputs to consider for:
The original issue is not the employee but the contractor;
In the instant subject, a newly appointed contractor asked to declare allocable surplus. Whereas the contractor hardly worked for 5 months with working loss for the year ending 31/03/19 how the contractor would able to do set-off for payment of bonus for 2018-19 and set-on for 2019-2020.
Where the Bonus is paid based on "Profits" to employees employed in establishments as per the resolution No. WB-20(9)/61, dated 6th December, 1961 on recommendation of the tripartite commission set by the Government of India...............
Regards
From India, Mumbai
I am also in the same opinion like Mr. Umakanthan that under the CLRA Act for granting licence to a contractor no need to check the compliance under Bonus Act. Please meet with the higher ups under the authority and explain them the situation. Even after all this , if the authority is rigid - there must be some other agenda which I hope all of you can understand.
S K Bandyopadhyay ( WB, Howrah)
From India, New Delhi
S K Bandyopadhyay ( WB, Howrah)
From India, New Delhi
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