Hi,
Our team is making a presentation on Contract Labour. I wanted to know as a HR person what are your views on the issue of Contract Labour taking into account that many Cos are going for CL. Also I wanted to know what a contract worker feels about working on a contract. I will be glad to know both sides of the coin.
Thanks
Hrishikesh A M
From India, Mumbai
1Our team is making a presentation on Contract Labour. I wanted to know as a HR person what are your views on the issue of Contract Labour taking into account that many Cos are going for CL. Also I wanted to know what a contract worker feels about working on a contract. I will be glad to know both sides of the coin.
Thanks
Hrishikesh A M
From India, Mumbai
There are two important interpretations for the term ' contract labour'.
The first is that appointing a personnel for a certain period of time under a contract which specifies that his service would be terminated without notice on the date mentioned therein. A variant of this kind of contract employment is that a person may be employed under a contract whereby he will be required to work to accomplish a specified task. Under both these cases termination will take place automatically either on the expiry of the date mentioned or on completion of the job for which he is appointed.
This kind of contractual employment is common now a days. It is believed that if appointed on contract basis, the employer has no liability and labour laws will not be applicable to those who are so appointed. It is also believed that a contractual employee shall not be given any benefit like ESI, EPF, Gratuity, retrenchment or lay off compensation etc. But the real picture is different. The status of an employee employed on contract is at par with any other regular employee provided the work assigned to him is of regular nature. He will be eligible for leave (earned leave) provided he had worked for 240 days in the preceding year. He will be eligible for bonus provided he had worked for 30 days and his salary is not above Rs 10000. An employee is required to be covered by ESI and EPF irrespective of any contract of employment. Moreover, retrenchment of service before the date mentioned in the contract requires prior notice and retrenchment compensation as provided in the ID Act. As such, what is positive in employing on contract basis?. Had he been given regular appointment, he would have worked better with a feeling that he had been treated well. However, if he is given an impression that he is on contract basis and his services could be terminated at any time, it is expected that he will not be a part of 'work force' and go for 'collective bargaining'!
The second interpretation of contract labour is that appointing employee(s) through a contractor. Under this style, employees are engaged to do work for the company but they are not under the company's roll. The labour will be 'supplied' by a contractor and the company, called the Principal Employer, will make payment to the contractor as per bills raised by him. The contractor, in turn, will pay wages to the workers. In this case, the relation ship between Principal Employer and the contractors employees is not employer- employee relationship. As such the principal employer has no liability towards the employees but his liability is limited to the act of payment of bill raised by the contractor. However, being the principal employer, he has to ensure that the contract employees are getting their salary from the contractor in time. It is the responsibility of the principal employer to ensure that EPF/ESI in respect of these workers are remitted by the contractor in time. He has also to ensure that bonus is given to those who are eligible for. Besides, he has to obtain permission from the appropriate authorities for hiring employees through a contractor.
When application of any Act to an establishment is to be decided, the number of employees on roll of the company as well as those engaged through a contractor will be taken. If, due to any reason, the contractor fails to pay ESI/ EPF or wages due, it becomes the duty of the principal to pay it on behalf of the contractor.
Therefore, there seems to be nothing postive for an employer to go for contractual employees.
Regards,
Madhu.T.K
From India, Kannur
The first is that appointing a personnel for a certain period of time under a contract which specifies that his service would be terminated without notice on the date mentioned therein. A variant of this kind of contract employment is that a person may be employed under a contract whereby he will be required to work to accomplish a specified task. Under both these cases termination will take place automatically either on the expiry of the date mentioned or on completion of the job for which he is appointed.
This kind of contractual employment is common now a days. It is believed that if appointed on contract basis, the employer has no liability and labour laws will not be applicable to those who are so appointed. It is also believed that a contractual employee shall not be given any benefit like ESI, EPF, Gratuity, retrenchment or lay off compensation etc. But the real picture is different. The status of an employee employed on contract is at par with any other regular employee provided the work assigned to him is of regular nature. He will be eligible for leave (earned leave) provided he had worked for 240 days in the preceding year. He will be eligible for bonus provided he had worked for 30 days and his salary is not above Rs 10000. An employee is required to be covered by ESI and EPF irrespective of any contract of employment. Moreover, retrenchment of service before the date mentioned in the contract requires prior notice and retrenchment compensation as provided in the ID Act. As such, what is positive in employing on contract basis?. Had he been given regular appointment, he would have worked better with a feeling that he had been treated well. However, if he is given an impression that he is on contract basis and his services could be terminated at any time, it is expected that he will not be a part of 'work force' and go for 'collective bargaining'!
The second interpretation of contract labour is that appointing employee(s) through a contractor. Under this style, employees are engaged to do work for the company but they are not under the company's roll. The labour will be 'supplied' by a contractor and the company, called the Principal Employer, will make payment to the contractor as per bills raised by him. The contractor, in turn, will pay wages to the workers. In this case, the relation ship between Principal Employer and the contractors employees is not employer- employee relationship. As such the principal employer has no liability towards the employees but his liability is limited to the act of payment of bill raised by the contractor. However, being the principal employer, he has to ensure that the contract employees are getting their salary from the contractor in time. It is the responsibility of the principal employer to ensure that EPF/ESI in respect of these workers are remitted by the contractor in time. He has also to ensure that bonus is given to those who are eligible for. Besides, he has to obtain permission from the appropriate authorities for hiring employees through a contractor.
When application of any Act to an establishment is to be decided, the number of employees on roll of the company as well as those engaged through a contractor will be taken. If, due to any reason, the contractor fails to pay ESI/ EPF or wages due, it becomes the duty of the principal to pay it on behalf of the contractor.
Therefore, there seems to be nothing postive for an employer to go for contractual employees.
Regards,
Madhu.T.K
From India, Kannur
Thanks Madhu for the info.
Now this raises another question. If there is nothing positive re CL then why do companies nowadays go for CL. Also government(eg.BMC) has joined the fray. One more thing is the contractor doesn't pay attention to paying wages on time and is less aware of their employee's safety. I came across a case of Otis where the contractor's negligence of providing safety equipments and harassing the employee resulted in his death. I also wanted to know that do companies like Tata and other model employers do check whether the contractors provide health, safety benefits and wage payment.
Thanks
From India, Mumbai
Now this raises another question. If there is nothing positive re CL then why do companies nowadays go for CL. Also government(eg.BMC) has joined the fray. One more thing is the contractor doesn't pay attention to paying wages on time and is less aware of their employee's safety. I came across a case of Otis where the contractor's negligence of providing safety equipments and harassing the employee resulted in his death. I also wanted to know that do companies like Tata and other model employers do check whether the contractors provide health, safety benefits and wage payment.
Thanks
From India, Mumbai
It is undeniable fact that every company is outsourcing non-core and non-regular operations through contractors. The contention that the responsiblity towards the contract workers is as much as the regular employees for the employer, it is not to circumvent the statues or pay less to contract workers. It is only for the flexibility which is some time hard to get from regular workers drive the employers to go in for outsourcing.
From India, Durgapur
From India, Durgapur
Resp seniors,
Please confirm whether outsourcing the Core Operations creates employee-employer relationship between the workmen of the contractor and the principal employer. What are the legal aspects to employ the workmen through contractor on the core production activities?
Thanks
Prasad
From India, Pune
Please confirm whether outsourcing the Core Operations creates employee-employer relationship between the workmen of the contractor and the principal employer. What are the legal aspects to employ the workmen through contractor on the core production activities?
Thanks
Prasad
From India, Pune
Hi Madhu
The scenarios which you have mentioned apply to CLRA.
Point 1 . It applies basically to factories and small establishment where the employer directly hires a resouce on contract. Nevertheless, hired by the employer directly ESI & PF ceases to be applicable right from the day of inception of the employee. The employer is directly responsible for the statutory obligations and benefits of the Contractor under the State and the Central Rules which include, Maternity, Minimum Wages ESI, PF, ISMWA etc.
Point 2. It applies where large institutions like Software companies & Telecom companies where some of the administrative & support roles are being outsourced to a third party ( as how software is being outsourced from various parts of the world). In such case the obligation ceases to be of a principal Employer ( the Company ) and Contractor ( the vendor who supplies resources) These resources are permanent employees of the vendor and is being posted in the site of the Principal Employer ( company). Again all the statutory benefits are liable to be entrusted to the contract employee. The applicablity of permanency does not arise as this is a Contractual obligation with the vendor and the Agreement exectuted also clearly should indicate the relationship between the Principal employer and the Vendor as CONTRACTORS. It becomes the principal employers liability to oversee the statutory compliance and payments made in respect to the contract executed. It does not restrict itself to the payment of bills. The ESI & PF act very clearly indicates this.
The advantage which is being derived out of CLRA ( Contract Labour Regulation & Abolishment Act) is beneficial for Large companies where they do not fall under the purview of ESI. This operational inconvenience is being transferred to the Vendor ( contractor). Also when it is not the perinal nature of the company, then such activities are outsourced.
Strict enforcement on the statutory obligation & Scope needs to be established with the vendor.
Thanks
mahesh
From India
The scenarios which you have mentioned apply to CLRA.
Point 1 . It applies basically to factories and small establishment where the employer directly hires a resouce on contract. Nevertheless, hired by the employer directly ESI & PF ceases to be applicable right from the day of inception of the employee. The employer is directly responsible for the statutory obligations and benefits of the Contractor under the State and the Central Rules which include, Maternity, Minimum Wages ESI, PF, ISMWA etc.
Point 2. It applies where large institutions like Software companies & Telecom companies where some of the administrative & support roles are being outsourced to a third party ( as how software is being outsourced from various parts of the world). In such case the obligation ceases to be of a principal Employer ( the Company ) and Contractor ( the vendor who supplies resources) These resources are permanent employees of the vendor and is being posted in the site of the Principal Employer ( company). Again all the statutory benefits are liable to be entrusted to the contract employee. The applicablity of permanency does not arise as this is a Contractual obligation with the vendor and the Agreement exectuted also clearly should indicate the relationship between the Principal employer and the Vendor as CONTRACTORS. It becomes the principal employers liability to oversee the statutory compliance and payments made in respect to the contract executed. It does not restrict itself to the payment of bills. The ESI & PF act very clearly indicates this.
The advantage which is being derived out of CLRA ( Contract Labour Regulation & Abolishment Act) is beneficial for Large companies where they do not fall under the purview of ESI. This operational inconvenience is being transferred to the Vendor ( contractor). Also when it is not the perinal nature of the company, then such activities are outsourced.
Strict enforcement on the statutory obligation & Scope needs to be established with the vendor.
Thanks
mahesh
From India
HRishi,
It is purely on how the organization and the employees view the resources. The organisations where i have worked with, we have never treated them as contractors, but as collegues.
There is a thin line of difference between contractors which is more wrongly perceived. The contracts like Housekeeping , maintenance are also called as Contractors.
This is where people try to consolidate as contractors
Resources tagged with support functions like HR, Admin, IT need not be called as vendors, but as a collective team of such functions.
Thanks
Mahesh
From India
It is purely on how the organization and the employees view the resources. The organisations where i have worked with, we have never treated them as contractors, but as collegues.
There is a thin line of difference between contractors which is more wrongly perceived. The contracts like Housekeeping , maintenance are also called as Contractors.
This is where people try to consolidate as contractors
Resources tagged with support functions like HR, Admin, IT need not be called as vendors, but as a collective team of such functions.
Thanks
Mahesh
From India
:confused: Hi,
Having contract labour will help your company to ramp up &ramp down on the resources depending on your demand and supply forcasted by your production dept.
During slow down like this if your production down u can ramp down the contract labour.
All mgt should have 30 % on the total manpower as contract labour in order to protect your self from the up/ downs of the market conduction.
I would advice you should attach all the CL to a staffing company to protect yourself from troubles and only monitor them.
From India, Madras
Having contract labour will help your company to ramp up &ramp down on the resources depending on your demand and supply forcasted by your production dept.
During slow down like this if your production down u can ramp down the contract labour.
All mgt should have 30 % on the total manpower as contract labour in order to protect your self from the up/ downs of the market conduction.
I would advice you should attach all the CL to a staffing company to protect yourself from troubles and only monitor them.
From India, Madras
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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