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Payment of Bonus to Contract Workers

Payment of Bonus to Contract Workers: Understanding the Legal Obligations

In the global economy, contract workers have become an integral part of the workforce. These temporary workers are hired on a contractual basis for a specific period and do not enjoy the same benefits and perks as permanent employees. However, they are still entitled to receive a bonus in accordance with the Payment of Bonus Act of 1965.

The Payment of Bonus Act mandates that every employer who employs 10 or more workers on any day during an accounting year, is required to pay bonus to the workers who are drawing a salary of up to Rs 21,000 per month. This includes contract workers as well. The bonus must be paid within eight months after the close of the accounting year. The minimum bonus that must be paid is 8.33% of the total salary earned during the accounting year and the maximum is 20%.

It is important for employers to understand that contract workers are also entitled to receive bonus as per the provisions of the Payment of Bonus Act, 1965. The Act defines a worker as any person employed in any industry to do any skilled or unskilled manual, supervisory, managerial, administrative, technical, or clerical work for hire or reward. Therefore, contract workers, irrespective of the nature of their work, are entitled to receive bonus.

However, there are certain eligibility criteria that contract workers must fulfil to be eligible for bonus. They must have worked for a minimum of 30 working days during the accounting year. Additionally, they must have worked for the employer for a minimum of one year before they become eligible for bonus. In case a contract worker has worked for less than a year, the bonus amount is prorated for the number of completed months of service.

Employers must also keep in mind that the payment of bonus to contract workers cannot be deducted from their wages. The bonus is in addition to their regular wages and cannot be considered as a part of their salary.

In conclusion, the Payment of Bonus Act of 1965 mandates that every employer who employs 10 or more workers on any day during an accounting year is required to pay bonus to the workers who are drawing a salary of up to Rs 21,000 per month. This includes contract workers as well. Employers must ensure that they comply with the legal obligations and pay the bonus to their contract workers within the stipulated time frame. Failure to comply with the provisions of the Act can lead to legal repercussions and penalties.

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