Dear All,
What are the advantages and disadvantages of the appointment of contract labor? Also, can we appoint contract labor for machinery, and are there any exceptions to Section 10 of the Contract Labor Act?
What are the compliance requirements if we want to absorb contract labor as regular employees? What should we provide to contract labor after absorption, excluding bonus, gratuity, and leaves?
Regards,
Saquib🤔
From India
What are the advantages and disadvantages of the appointment of contract labor? Also, can we appoint contract labor for machinery, and are there any exceptions to Section 10 of the Contract Labor Act?
What are the compliance requirements if we want to absorb contract labor as regular employees? What should we provide to contract labor after absorption, excluding bonus, gratuity, and leaves?
Regards,
Saquib🤔
From India
Hi Saquib / Swathi,
Instead of advantages/disadvantages, we can think of the burden on the employer and the cost to the company in the case of both regular workmen and contract workmen. The company needs to pay both direct and indirect costs in the case of permanent workmen.
When the Principal Employer engages Contract Workers through a Contractor, the contractor will be responsible for the entire activities of the contract workmen. The Contractor need not bear any single rupee from his pocket; he claims the wages of engaging contract workmen (including 13.16% PF, 4.75% ESI) and maintaining costs, etc., from the Principal Employer. The contractor only needs to maintain registers, records, and should be responsible for meeting all statutory obligations.
There is a possibility that the contractors take wages to be paid to contract workmen and pay them less. We need to indirectly involve and ensure the payment by the contractor to the contract workmen.
I advise you to please read the Contract Labour Regulation and Abolition Act 1970. You may reply if you require any more clarifications.
Cheers,
PB Ram Swaroop
From India, Hyderabad
Instead of advantages/disadvantages, we can think of the burden on the employer and the cost to the company in the case of both regular workmen and contract workmen. The company needs to pay both direct and indirect costs in the case of permanent workmen.
When the Principal Employer engages Contract Workers through a Contractor, the contractor will be responsible for the entire activities of the contract workmen. The Contractor need not bear any single rupee from his pocket; he claims the wages of engaging contract workmen (including 13.16% PF, 4.75% ESI) and maintaining costs, etc., from the Principal Employer. The contractor only needs to maintain registers, records, and should be responsible for meeting all statutory obligations.
There is a possibility that the contractors take wages to be paid to contract workmen and pay them less. We need to indirectly involve and ensure the payment by the contractor to the contract workmen.
I advise you to please read the Contract Labour Regulation and Abolition Act 1970. You may reply if you require any more clarifications.
Cheers,
PB Ram Swaroop
From India, Hyderabad
Hi, I need the sample appointment letter of contract labour & what are the registers that he need to maintain, May I request you to kindly send this details Pl. Regards, IYER.S
From India, Thana
From India, Thana
Dear IYER.S,
Please go through the State/Central Contract Labour (R&A) Rules whichever is applicable to your establishment. The format of the appointment letter and other formats for maintaining the registers are also outlined in these Rules.
Regards,
R.N.Khola
(Labour Law & Legal Consultants)
09810405361
From India, Delhi
Please go through the State/Central Contract Labour (R&A) Rules whichever is applicable to your establishment. The format of the appointment letter and other formats for maintaining the registers are also outlined in these Rules.
Regards,
R.N.Khola
(Labour Law & Legal Consultants)
09810405361
From India, Delhi
Dear Iyer, Pls. give me ur e-mail id so I can mail it to you! Regards, Saquib 09272990869
From India
From India
Daer All, Please find Enclosed herewith the Report on Advantages and Dis-Advantages of Contract Labour. Please give your comments so as to improve it. Regards, Saquib 9272990869 Mumbai
From India
From India
Dear Iyer, Pls. pls find enclosed herewith the forms you need! Regards, Saquib 09272990869
From India
From India
Hi,
You can use the following link for further info: [Twenty Factor Checklist to Determine Independent Contractor vs. Employee Status - Small Business](http://findlaw.com) *[link updated to site home]* ([Search On Cite](https://www.citehr.com/results.php?q=Twenty Factor Checklist to Determine Independent Contractor vs Employee Status Small Business) | [Search On Google](https://www.google.com/search?q=Twenty Factor Checklist to Determine Independent Contractor vs Employee Status Small Business)) *[link no longer exists - removed]*. Please let me know if it's useful and if you require anything else apart from it. Can you please email me that form?
From India, Mumbai
You can use the following link for further info: [Twenty Factor Checklist to Determine Independent Contractor vs. Employee Status - Small Business](http://findlaw.com) *[link updated to site home]* ([Search On Cite](https://www.citehr.com/results.php?q=Twenty Factor Checklist to Determine Independent Contractor vs Employee Status Small Business) | [Search On Google](https://www.google.com/search?q=Twenty Factor Checklist to Determine Independent Contractor vs Employee Status Small Business)) *[link no longer exists - removed]*. Please let me know if it's useful and if you require anything else apart from it. Can you please email me that form?
From India, Mumbai
Advantages For Contract Employees:
1. They get an opportunity to work for a big company.
2. They get an opportunity to learn.
Disadvantages For Contract Employees:
1. It is very hard for the employee to come on the company payroll in the parent and other organization too.
2. The person works under the mercy of permanent employees whether to appoint him/her on payroll or not.
3. Extended working hours.
Advantages For Company:
1. One of the biggest advantages is that they get the manpower at a very reasonable cost.
Disadvantages For Company:
1. Contract employees can leave at any time which can affect the organization's work.
PAYMENT:
The basic and social purpose of the Contract Labour R&A Act, with specific Rules & notification from the respective State Government, is to ensure that the exploitation of contract labor is avoided. It is the primary responsibility of the contractor to ensure compliance with acts like Payment of Wages, Payment of Minimum Wages Act, Payment of Bonus Act, EPF Act, ESI Act, Workmen's Compensation Act. However, in case of the contractor's failure to comply with these acts, it is advisable that the Principal Employer pays off these statutory amounts to the concerned authorities and deducts these amounts from the contractor's dues. For persistent failures of the contractor to fulfill these basic minimum requirements, it is advisable to terminate the contract with him.
ARTICLE:
Before deciding on hiring staff either on a permanent or contractual basis, companies need to conduct thorough research on the compliances they need to adhere to. These compliances differ from city to city, region to region, and state to state.
Companies often overlook this fact and end up paying fines/high taxes to government officials.
Companies should definitely consider contract staffing. However, they should not overlook the contract labor compliances that the company would need to adhere to. LWF, ESI, Maintenance of Registers, Attendance & Leave Monitoring, Payroll Management, etc., would be a regular affair. The company may need to hire an executive to do this job. For compliances, they may need to hire an external agency depending on the company's location.
A very good practice that most companies follow, which works well both in terms of efficiency and cost, is outsourcing requirements to a third-party vendor.
In this way, all legal, compliance, hiring, etc., issues would be the obligations that the vendor needs to adhere to.
Contract employees are engaged by two methods:
a) An agreement provided under sec 2 [oo]bb] of the I D act. The period is predetermined and at the end, this stands concluded. The benefits and conditions are clearly spelled out here and need not be the same as the regulars. The purpose/motive being important, it is the job necessity that has to be determined. Mainly considered are high profile/high technical which could be an offshoot case and may not be repetitive on a daily basis.
b) The other method adopted is for the non-core areas, i.e., other than the main activity of the organization. The areas presently accepted are housekeeping/security/loading unloading/canteen/office utility area [photocopying/coffee-tea supply]. The long and short term here best followed is below 240 days.
The principal employer can terminate the contract, but not the contract labor; it is the prerogative of the contractor to terminate his employee.
Since a contract worker renders service through a contract agency (labor contractor), you can't terminate the said worker; instead, you can ask your labor contractor to replace somebody in place of him or her.
There is minimal paperwork at the beginning of the contract and no further accounting services are required throughout.
Availability of the option to terminate employment in case of permanent disability. Here, the employee has the option to terminate the contract if the employee becomes "permanently disabled." The employer must, therefore, give prior notice to the employee through registered mail.
Confidentiality agreement relating to business. An employee will not be allowed to disclose, divulge, or communicate to any person, firm, or company in any manner, any information, issues concerning the company and employer, manner of operation, processes, and plans should be confidential and important. Thus, when an employee violates this section, it means he/she simply violated the agreement.
Closure of business will result in the termination of employment. In the event that the employee discontinues his work or service to the company for the abovementioned reason, this agreement will end and terminate as of the given date.
Employee's commitments binding on employer only on written consent. The employee has no right to make any commitments or contracts on behalf of his/her employer without any written consent.
From India, Mumbai
1. They get an opportunity to work for a big company.
2. They get an opportunity to learn.
Disadvantages For Contract Employees:
1. It is very hard for the employee to come on the company payroll in the parent and other organization too.
2. The person works under the mercy of permanent employees whether to appoint him/her on payroll or not.
3. Extended working hours.
Advantages For Company:
1. One of the biggest advantages is that they get the manpower at a very reasonable cost.
Disadvantages For Company:
1. Contract employees can leave at any time which can affect the organization's work.
PAYMENT:
The basic and social purpose of the Contract Labour R&A Act, with specific Rules & notification from the respective State Government, is to ensure that the exploitation of contract labor is avoided. It is the primary responsibility of the contractor to ensure compliance with acts like Payment of Wages, Payment of Minimum Wages Act, Payment of Bonus Act, EPF Act, ESI Act, Workmen's Compensation Act. However, in case of the contractor's failure to comply with these acts, it is advisable that the Principal Employer pays off these statutory amounts to the concerned authorities and deducts these amounts from the contractor's dues. For persistent failures of the contractor to fulfill these basic minimum requirements, it is advisable to terminate the contract with him.
ARTICLE:
Before deciding on hiring staff either on a permanent or contractual basis, companies need to conduct thorough research on the compliances they need to adhere to. These compliances differ from city to city, region to region, and state to state.
Companies often overlook this fact and end up paying fines/high taxes to government officials.
Companies should definitely consider contract staffing. However, they should not overlook the contract labor compliances that the company would need to adhere to. LWF, ESI, Maintenance of Registers, Attendance & Leave Monitoring, Payroll Management, etc., would be a regular affair. The company may need to hire an executive to do this job. For compliances, they may need to hire an external agency depending on the company's location.
A very good practice that most companies follow, which works well both in terms of efficiency and cost, is outsourcing requirements to a third-party vendor.
In this way, all legal, compliance, hiring, etc., issues would be the obligations that the vendor needs to adhere to.
Contract employees are engaged by two methods:
a) An agreement provided under sec 2 [oo]bb] of the I D act. The period is predetermined and at the end, this stands concluded. The benefits and conditions are clearly spelled out here and need not be the same as the regulars. The purpose/motive being important, it is the job necessity that has to be determined. Mainly considered are high profile/high technical which could be an offshoot case and may not be repetitive on a daily basis.
b) The other method adopted is for the non-core areas, i.e., other than the main activity of the organization. The areas presently accepted are housekeeping/security/loading unloading/canteen/office utility area [photocopying/coffee-tea supply]. The long and short term here best followed is below 240 days.
The principal employer can terminate the contract, but not the contract labor; it is the prerogative of the contractor to terminate his employee.
Since a contract worker renders service through a contract agency (labor contractor), you can't terminate the said worker; instead, you can ask your labor contractor to replace somebody in place of him or her.
There is minimal paperwork at the beginning of the contract and no further accounting services are required throughout.
Availability of the option to terminate employment in case of permanent disability. Here, the employee has the option to terminate the contract if the employee becomes "permanently disabled." The employer must, therefore, give prior notice to the employee through registered mail.
Confidentiality agreement relating to business. An employee will not be allowed to disclose, divulge, or communicate to any person, firm, or company in any manner, any information, issues concerning the company and employer, manner of operation, processes, and plans should be confidential and important. Thus, when an employee violates this section, it means he/she simply violated the agreement.
Closure of business will result in the termination of employment. In the event that the employee discontinues his work or service to the company for the abovementioned reason, this agreement will end and terminate as of the given date.
Employee's commitments binding on employer only on written consent. The employee has no right to make any commitments or contracts on behalf of his/her employer without any written consent.
From India, Mumbai
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