The principal employer has cleared all the bills of the labor contractor. If the labor contractor is not paying salaries to laborers, is the principal employer still liable for the payment of salaries to laborers? If so, how can the amount paid to the labor contractor be recovered if no security amount is pending with the principal employer?
From India, Chennai
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From India, Chennai
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Dear friend,
Had the principal employer carefully gone through the provisions of Section 21 of the CLRA Act, 1970, and acted accordingly, the occasion for raising this question would not have arisen at all. Particularly, Section 21(4) imposes vicarious liability upon the PE for the payment of wages to the contract labour. As per judicial decisions, it equally applies to all dues to contract labour falling under the extended meaning of the definition of the term 'wages' as defined under the Payment of Wages Act, 1936.
In the absence of a security deposit of any sort, the PE has no option other than instituting a Civil Suit for recovery from the contractor as a debtor default only.
From India, Salem
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6185Had the principal employer carefully gone through the provisions of Section 21 of the CLRA Act, 1970, and acted accordingly, the occasion for raising this question would not have arisen at all. Particularly, Section 21(4) imposes vicarious liability upon the PE for the payment of wages to the contract labour. As per judicial decisions, it equally applies to all dues to contract labour falling under the extended meaning of the definition of the term 'wages' as defined under the Payment of Wages Act, 1936.
In the absence of a security deposit of any sort, the PE has no option other than instituting a Civil Suit for recovery from the contractor as a debtor default only.
From India, Salem
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Hi,
This is a normal practice of many contractors. Please note that the Principal Employer is liable for everything, even though many case laws give no liability to the principal employer.
Call your contractors and make an agreement specifying in one clause to produce all payroll-related documents, including their bank transfers or mode of payments by the 11th of every month. Please double-check the same. Not paying, as a Principal Employer, makes you responsible. Else, please change the contractor. Fighting cannot help, as the contract employees should receive what they are legally entitled to.
Regards,
Pradeep
Email: pradeep@ullanat.com
Website: Ullanat – Labour Laws, Compliance, Property & Management Consultants
From India, Mumbai
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This is a normal practice of many contractors. Please note that the Principal Employer is liable for everything, even though many case laws give no liability to the principal employer.
Call your contractors and make an agreement specifying in one clause to produce all payroll-related documents, including their bank transfers or mode of payments by the 11th of every month. Please double-check the same. Not paying, as a Principal Employer, makes you responsible. Else, please change the contractor. Fighting cannot help, as the contract employees should receive what they are legally entitled to.
Regards,
Pradeep
Email: pradeep@ullanat.com
Website: Ullanat – Labour Laws, Compliance, Property & Management Consultants
From India, Mumbai
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I agree with Mr. Pradeep that many contractors are doing the same thing. There are PEs also who are not paying contractors on time.
In my opinion, PE cannot escape the responsibility even after some case laws are in favor of PE, as the contract employees are engaged at PE's premises. Ultimately, it is the human factor (contract employees) who will suffer.
Here lies the question of contractors' value system and ethics of doing business. There are a few organized contractors such as Randstad, Genius, Team Lease, etc., who are providing reasonable services to big clients. Obviously, small or medium business houses rely on other contractors where most of the problem actually lies.
In my opinion, the first thing is to select ethical contractors considering past credibility and compliance status, etc.
USD HR Solutions, our organization, has been doing the same job for the last 12 years, and not a single month we have failed to pay salaries to employees on time with no compliance deviations. We have about 180 employees on our payroll. Contractors are available in every location, but one has to find out the same before selection.
S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in USD HR Solutions – To strive towards excellence with effort and integrity
From India, New Delhi
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In my opinion, PE cannot escape the responsibility even after some case laws are in favor of PE, as the contract employees are engaged at PE's premises. Ultimately, it is the human factor (contract employees) who will suffer.
Here lies the question of contractors' value system and ethics of doing business. There are a few organized contractors such as Randstad, Genius, Team Lease, etc., who are providing reasonable services to big clients. Obviously, small or medium business houses rely on other contractors where most of the problem actually lies.
In my opinion, the first thing is to select ethical contractors considering past credibility and compliance status, etc.
USD HR Solutions, our organization, has been doing the same job for the last 12 years, and not a single month we have failed to pay salaries to employees on time with no compliance deviations. We have about 180 employees on our payroll. Contractors are available in every location, but one has to find out the same before selection.
S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions +91 98310 81531 skb@usdhrs.in USD HR Solutions – To strive towards excellence with effort and integrity
From India, New Delhi
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I don't understand how such a mistake can happen? There are many ways to fight such problems.
Before engaging the contractor in the company, deposit the lump sum amount as a security fee. Get the salary paid by the contractor to his concerned workers first and after verifying that payment, make the payment.
Pay the EPF in the same way and if possible, get a separate ECR made for the people working in your establishment and also get it paid separately so that the contribution of any employee can be paid for the working period of your establishment. Because with this, you will be responsible for the duration of the work done for your establishment and not for any other establishment.
Check the EPF passbook of contract workers from time to time whether their contribution has been properly deposited in their account or not. Check their KYC, etc.
Like above, the ESIC should also be paid by the contractor after it is done. With this, all the contractors can see the details of the workers from the ESIC portal.
Bonus should also be paid in the same way. The security fee as per point no. 01 is levied so that the soundness of the financial background of the contractor can be checked, and such situations can be settled.
From India, Rudarpur
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Before engaging the contractor in the company, deposit the lump sum amount as a security fee. Get the salary paid by the contractor to his concerned workers first and after verifying that payment, make the payment.
Pay the EPF in the same way and if possible, get a separate ECR made for the people working in your establishment and also get it paid separately so that the contribution of any employee can be paid for the working period of your establishment. Because with this, you will be responsible for the duration of the work done for your establishment and not for any other establishment.
Check the EPF passbook of contract workers from time to time whether their contribution has been properly deposited in their account or not. Check their KYC, etc.
Like above, the ESIC should also be paid by the contractor after it is done. With this, all the contractors can see the details of the workers from the ESIC portal.
Bonus should also be paid in the same way. The security fee as per point no. 01 is levied so that the soundness of the financial background of the contractor can be checked, and such situations can be settled.
From India, Rudarpur
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Dear All,
I am also working as a contractor. We pay salary by the 7th of every month and also submit the bill by then. The PE reimburses the payment of the bill by the end of the month. No advance payment is made to the contractor by the PE. When the PE reimburses the contractor's bill, they are already aware of whether the contractor has paid the wages or not. Therefore, I don't think this kind of situation will arise.
From India, New Delhi
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I am also working as a contractor. We pay salary by the 7th of every month and also submit the bill by then. The PE reimburses the payment of the bill by the end of the month. No advance payment is made to the contractor by the PE. When the PE reimburses the contractor's bill, they are already aware of whether the contractor has paid the wages or not. Therefore, I don't think this kind of situation will arise.
From India, New Delhi
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I agree with some of the suggestions. Basically, PE should be vigilant and ensure payment of wages and any other payments to contract workers.
I am not sure to what extent the suggestion that the contractor should pay first and PE to reimburse later. I believe many contractors cannot do so unless the bills are of small amounts. I know some contractors handle monthly bills running into crores, but their service charges cannot even meet paltry amounts of the bills. In such cases, how can we expect the contractor to pay first? Further, as per the new code on wages, PE to pay first.
From India, Hyderabad
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I am not sure to what extent the suggestion that the contractor should pay first and PE to reimburse later. I believe many contractors cannot do so unless the bills are of small amounts. I know some contractors handle monthly bills running into crores, but their service charges cannot even meet paltry amounts of the bills. In such cases, how can we expect the contractor to pay first? Further, as per the new code on wages, PE to pay first.
From India, Hyderabad
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Notification No G.S.R. 1128(E) Contract Labour (Regulation and Abolition) Central Amendment .pdf
LABOUR CONTRACT AGREEMENT.doc
Contract Labour Act.zip