Bonus & Gratuity for a contractual employee


I wanted to seek clarification on Payment of Bonus & Gratuity for contractual employee who is employed in a factory.

Who is liable to pay statutory dues, the Principal Employer or the contractor. Also are there any rules for the Principal Employer to be followed?

Please help me out with the above query.

Thank you in advance!

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Hi Payal,
All statutory dues are liable by Principal employer including payment Gratuity even to the contractual employee if their services are renewed every year continuously for 5years. Also Bonus as applicable.
It is Principal employer’s responsibility to check whether all the statutory payments are done on time by contractor!




Thank you for your reply and assistance.

I also wanted to understand the below points:

  1. what is the definition of Permanent and temporary worker appointed through contractor under Gratuity and Bonus Act.

  2. Is the Contractor liable to pay gratuity and bonus to temporary worker?

  3. What if Principal Employer fails to verify whether the contactor has paid all the statutory dues?

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Hi Payal,

  1. Under Bonus Act, any employee works minimum 30days continuous, he is eligible for Bonus. Here Permanent worker is on company’s roll and Temporary worker is 1year contractual, may extend every year. Under Gratuity even if the temporary worker works 5years continuously, he may be eligible for Gratuity.
  2. Yes based on the employement agreements and contractor agreement. But finally, he should get it from Principal employer only, the payable amounts.
  3. Prinicipal employer is responsible since the workers are working for Priniciapl employer.

If there is any legal issue, better to contact any legal person. The above are my inputs based on my experience!

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