Contract labor in some organizations is paid Statutory Bonus and Leave with wages on a monthly basis instead of an annual basis. This is done to meet statutory compliance since most contract laborers may work for less than a year, making it difficult to locate them when payments are due. It helps in satisfying regulatory auditors, etc.
However, recently, someone raised an objection to this practice and demanded ESI & PF contributions on these monthly payments. Is this correct?
From India, Hyderabad
29However, recently, someone raised an objection to this practice and demanded ESI & PF contributions on these monthly payments. Is this correct?
From India, Hyderabad
Once statutory bonus and leave salary are paid regularly every month, it assumes the form of retaining allowance, and hence PF & ESI contributions are payable thereon. It has been repeatedly emphasized in this forum that statutory bonus cannot be paid every month. First of all, no such monthly payment could be made after November every year. Then, also, how could the monthly bonus be paid in anticipation of profit/loss every year? Similarly, if leave payment is made every month, then when there is a real need for the employee to avail leave, all that is left will be LWP. That is not correct. Indeed, such payments make the monthly salary figure bloated and are therefore misleading.
From India, Mumbai
From India, Mumbai
Thank you for your response, sir. Here, I wish to seek clarification due to the transient nature of contract work and the short durations of stays. If we have to wait for a year to complete these payments or to take leave, often the workmen may not be actively working, resulting in unpaid periods. This situation would lead to non-compliance.
This inquiry specifically pertains to contract labor and is not related to regular employees within an organization.
From India, Hyderabad
This inquiry specifically pertains to contract labor and is not related to regular employees within an organization.
From India, Hyderabad
As the nature of employment is contractual and short-term, it is essential to make a full and final settlement for each case at the time of leaving instead of paying leave pay and bonus along with wages. There is no need to wait for a full year.
S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in
From India, New Delhi
S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in
From India, New Delhi
Thank you, sir, for your response. Please understand that final settlement can be done if the worker informs and leaves. However, in most cases, there will be no intimation, and workers leave the job. The advance payment of Bonus and Leave wages is to avoid any such shortfall as the workmen leave without any intimation to make any final settlement. Many a time, bank accounts will be closed, and we cannot transfer funds.
From India, Hyderabad
From India, Hyderabad
The monthly payment of bonus and leave salary may not satisfy the Labour Inspector in case you are inspected for this. First of all, bonus cannot be paid before it is decided as per law. Bonus payment has to be made by November. There is a willful breach of the Payment of Bonus Act 1965 in making payment in this manner with its consequences. Similarly, there is no legal provision for making payment of leave salary every month. Indeed, this will prevent the accumulation of leave and hence is not in the interest of employees. The proposal is not legal and proper.
From India, Mumbai
From India, Mumbai
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Amendment to Payment of Bonus Act 2015.jpg
Online payment of PF mandatory from 1.1.2016.pdf
PAYMENT OF WAGES ACT 2009.doc