Now the employer can change permanent employees into contract employees. This has been a point of worry for most permanent employees. Is this true?
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Dear member,
Yes, it is a matter of worry. Nevertheless, from the business point of view, keeping manpower on the contractor's roll is not advisable.
The departments that function at the tertiary level like security or housekeeping do not play a major role in developing the products or providing services to the customer. Hence, these are considered suitable for outsourcing. In contrast, the employees from the core department or the employees that are in the support function are directly or indirectly involved in satisfying the customers. Therefore, it is not advisable to put these employees on the contractor's roll.
Let us do costing for keeping the employees on the contractor's roll. Imagine "X" number of employees are on the direct roll of the company. The company contemplates putting them on the contractor's rolls. What are the financial implications? These are as below:
a) Suppose the monthly salary bill (including PF, ESI, etc.) = Rs 10,00,000/-
b) Service charge by the contractor @ 10% = Rs 1,00,00/-
c) Total (a) + (b) = Rs 11,00,000/-
d) GST @ 18% on (c) = Rs 3,24,000/-
e) Total amount payable to the contractor = (c) + (d) = Rs 14,24,000/-
Therefore, there is a whopping increase of Rs 4,24,000/- in the salary bill, which works out to a 42% increase! Which company can afford to do that?
In case one thinks that the 10% service charge by the contractor is too high and the contractor can provide service at 7%, then also the amount payable to the contractor works out to Rs 11,92,600/-, which is an 11.92% increase. Which company can afford to do that?
In fact, today we are passing through the COVID-19 pandemic, and a reduction in backend costs is a primary requirement of any business person. Amidst this, if some business person thinks of putting the employees on a contractor's roll, then it is nothing but "aa bail mujhe maar" (inviting trouble).
Thanks,
Dinesh Divekar
From India, Bangalore
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8227Yes, it is a matter of worry. Nevertheless, from the business point of view, keeping manpower on the contractor's roll is not advisable.
The departments that function at the tertiary level like security or housekeeping do not play a major role in developing the products or providing services to the customer. Hence, these are considered suitable for outsourcing. In contrast, the employees from the core department or the employees that are in the support function are directly or indirectly involved in satisfying the customers. Therefore, it is not advisable to put these employees on the contractor's roll.
Let us do costing for keeping the employees on the contractor's roll. Imagine "X" number of employees are on the direct roll of the company. The company contemplates putting them on the contractor's rolls. What are the financial implications? These are as below:
a) Suppose the monthly salary bill (including PF, ESI, etc.) = Rs 10,00,000/-
b) Service charge by the contractor @ 10% = Rs 1,00,00/-
c) Total (a) + (b) = Rs 11,00,000/-
d) GST @ 18% on (c) = Rs 3,24,000/-
e) Total amount payable to the contractor = (c) + (d) = Rs 14,24,000/-
Therefore, there is a whopping increase of Rs 4,24,000/- in the salary bill, which works out to a 42% increase! Which company can afford to do that?
In case one thinks that the 10% service charge by the contractor is too high and the contractor can provide service at 7%, then also the amount payable to the contractor works out to Rs 11,92,600/-, which is an 11.92% increase. Which company can afford to do that?
In fact, today we are passing through the COVID-19 pandemic, and a reduction in backend costs is a primary requirement of any business person. Amidst this, if some business person thinks of putting the employees on a contractor's roll, then it is nothing but "aa bail mujhe maar" (inviting trouble).
Thanks,
Dinesh Divekar
From India, Bangalore
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Dear colleague,
Even before the present amendments in law, the deployment of contract workers was rampant. Now that the law is in the offing, it is going to permit replacing permanent jobs with contract workers, creating a free-for-all situation. Employers will continue to exploit two prominent advantages - cost reduction and the ease of shedding labor at will. The latter is so difficult today, often resulting in drawn-out legal tangles.
I don't believe the new law will immediately replace existing permanent jobs with contract workers. It will likely happen gradually and perhaps in a phased manner. However, in the future, it will surely pose a threat and be a cause of concern for job seekers. This shift is expected to provide a significant boost to the emerging gig economy but will adversely impact aspiring future job seekers.
Regards,
Vinayak Nagarkar
HR and Employee Relations Consultant
From India, Mumbai
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Even before the present amendments in law, the deployment of contract workers was rampant. Now that the law is in the offing, it is going to permit replacing permanent jobs with contract workers, creating a free-for-all situation. Employers will continue to exploit two prominent advantages - cost reduction and the ease of shedding labor at will. The latter is so difficult today, often resulting in drawn-out legal tangles.
I don't believe the new law will immediately replace existing permanent jobs with contract workers. It will likely happen gradually and perhaps in a phased manner. However, in the future, it will surely pose a threat and be a cause of concern for job seekers. This shift is expected to provide a significant boost to the emerging gig economy but will adversely impact aspiring future job seekers.
Regards,
Vinayak Nagarkar
HR and Employee Relations Consultant
From India, Mumbai
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(Fact Checked)-[The user's reply contains accurate information regarding the impact of potential changes in labor laws on the employment landscape. It correctly highlights the concerns related to the shift towards a more contract-based workforce and the potential implications for job seekers.] (1 Acknowledge point)
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Dear HR buddy,
Engagement of manpower through a contractor and directly hiring manpower on a contract (Fixed Term Employment) are prevalent practices across industries. However, the labor codes are likely to give more momentum to these practices as the obligations are made lighter for employers.
Regards,
Shailesh Parikh
99 98 97 1065
From India, Mumbai
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Engagement of manpower through a contractor and directly hiring manpower on a contract (Fixed Term Employment) are prevalent practices across industries. However, the labor codes are likely to give more momentum to these practices as the obligations are made lighter for employers.
Regards,
Shailesh Parikh
99 98 97 1065
From India, Mumbai
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(Fact Checked)-[The user's reply is accurate. Both engaging manpower through contractors and direct hiring on a fixed-term contract are common practices, especially with the potential lightening of obligations for employers under new Labour codes.] (1 Acknowledge point)
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In another debate, I mentioned that even regular permanent employees are transitioning from contract labor. Why do some advocates give false hope to innocent contract laborers by suggesting that they will become permanent through legal challenges?
When it comes to the present scenario, the business world is dynamic and ever-changing. We must adapt to these changes in the world. This trend is common in the U.S., where a significant majority of employees are temporary recruits rather than permanent. Australia follows a similar pattern.
Similarly, many Indians work in foreign countries on two to five-year contracts. Hence, we need to adjust within our own country as well, despite the initial unease.
Having served as a government employee in a supervisory role, I have often questioned why non-performing, substandard, worthless, devalued, corruptive employees have secured jobs through compensation or reservations. The government ends up burdened with such employees unnecessarily.
I hope and suggest that the government sector should also consider implementing contract employment on a larger scale nationwide, along with compulsory retirement for underperforming employees, based on public opinion.
From India, Nellore
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When it comes to the present scenario, the business world is dynamic and ever-changing. We must adapt to these changes in the world. This trend is common in the U.S., where a significant majority of employees are temporary recruits rather than permanent. Australia follows a similar pattern.
Similarly, many Indians work in foreign countries on two to five-year contracts. Hence, we need to adjust within our own country as well, despite the initial unease.
Having served as a government employee in a supervisory role, I have often questioned why non-performing, substandard, worthless, devalued, corruptive employees have secured jobs through compensation or reservations. The government ends up burdened with such employees unnecessarily.
I hope and suggest that the government sector should also consider implementing contract employment on a larger scale nationwide, along with compulsory retirement for underperforming employees, based on public opinion.
From India, Nellore
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(Fact Check Failed/Partial)-The information provided in the user reply contains inaccuracies. The statement about the widespread use of temporary employees in the U.S. and Australia is not entirely accurate, and the suggestion to implement compulsory retirement for certain employees based on public opinion may not align with labor laws and organizational best practices.
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Dear friends, An analysis on the subject attached is worth reading & debating in the backdrop of ongoing discussion in our forum.
From India, Bangalore
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From India, Bangalore
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(Fact Check Failed/Partial)-[The user reply does not address the specific concern raised in the original post about the employer changing permanent employees into contract employees. It lacks information or clarification on the legality or implications.]
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Good Evening,
Further to Mr. Divekar's post on the financial implications of transitioning from permanent to contract employment:
1) Is the bonus amount lower for a contract worker?
2) Is the gratuity amount any different?
3) Is the principal employer responsible for the working conditions, application of fair and just rules of minimum wage, date of payment, PF, etc.?
Effectively, I want to evaluate the differential impact of transitioning from permanent to contract employment. Looking forward to your responses.
From India, Mumbai
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Further to Mr. Divekar's post on the financial implications of transitioning from permanent to contract employment:
1) Is the bonus amount lower for a contract worker?
2) Is the gratuity amount any different?
3) Is the principal employer responsible for the working conditions, application of fair and just rules of minimum wage, date of payment, PF, etc.?
Effectively, I want to evaluate the differential impact of transitioning from permanent to contract employment. Looking forward to your responses.
From India, Mumbai
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(Fact Checked)-[response] The Bonus, gratuity, and other benefits can differ for contract workers. The principal employer is responsible for certain conditions. (1 Acknowledge point)
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Dear Friends,
It is a matter of concern, but not for those employees who are permanent as of today, as no one can change their terms and conditions of employment. This will have an impact after the applicability date for new recruitment.
The new development is the provision of a "Reskilling Fund," which can be utilized for skill development in the case of technological changes.
The provision for fixed-term employment or contractual employment already exists in the current labor laws.
This will help change the mindset of both employees and employers in many positive ways. Accountability and responsibility will be more clearly defined in public sector companies and government organizations.
There are no major changes in social welfare rules and regulations such as ESI, PF, Payment of Bonus, and Payment of Gratuity.
These codes will provide more support to employees who are currently not covered under existing laws.
These codes will also support employers in enhancing employee productivity and will make compliance easier in the future.
Please feel free to reach out for further discussions or clarifications.
Thanks,
From India, Delhi
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It is a matter of concern, but not for those employees who are permanent as of today, as no one can change their terms and conditions of employment. This will have an impact after the applicability date for new recruitment.
The new development is the provision of a "Reskilling Fund," which can be utilized for skill development in the case of technological changes.
The provision for fixed-term employment or contractual employment already exists in the current labor laws.
This will help change the mindset of both employees and employers in many positive ways. Accountability and responsibility will be more clearly defined in public sector companies and government organizations.
There are no major changes in social welfare rules and regulations such as ESI, PF, Payment of Bonus, and Payment of Gratuity.
These codes will provide more support to employees who are currently not covered under existing laws.
These codes will also support employers in enhancing employee productivity and will make compliance easier in the future.
Please feel free to reach out for further discussions or clarifications.
Thanks,
From India, Delhi
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(Fact Checked)-The user's reply is largely accurate. However, it's important to note that under certain circumstances, conversion of permanent employees to contract employees may have legal implications. It's essential to ensure compliance with labor laws and individual employment contracts. Overall, the response provides a good overview of the changes and their potential impact. (1 Acknowledge point)
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Dear colleagues,
The type of employment will undergo a great transformation in times to come with the 'gig economy' dominating the scene. The concept of a permanent employee will be largely given a go-by, and more and more gig workers will fill the scenario. This means the engagement of Fixed-Term Employees, Temporaries - whether full-time or part-timers, freelancers in niche areas/competencies will occupy workplaces, or those who will continue to work from home. The outsourcing of non-core operations will also increase.
The manufacturing sector in India will continue to engage contract labor and will be the major taker. The conversion or replacing of existing permanent workers/staff by contract workers will be at a gradual pace, but future recruitment will be predominantly non-permanent, except for a very minuscule core/niche/critical staff required to run essential operations.
Largely, employees will be engaged for a specified duration, moving from projects to projects, employer to employer, one location to another, with all the benefits like Bonus, PF, Gratuity, ESI, etc. Between two consecutive jobs, there could be a short break or in continuation under the same employer or different. But all dues will get settled on completion of the previous job, and it will be a fresh start in a new project. This will be the scene largely in non-manufacturing sectors like service, banks, insurance, hospitality, healthcare, to name a few.
With government laws tending to favor gig workers, I attempted a bit of crystal gazing of the future employment scenario. I don't believe it to be complete in all its aspects and implications. I would appreciate further churning of thoughts on this subject from the learned colleagues.
Regards, Vinayak Nagarkar HR and Employee Relations Consultant
From India, Mumbai
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The type of employment will undergo a great transformation in times to come with the 'gig economy' dominating the scene. The concept of a permanent employee will be largely given a go-by, and more and more gig workers will fill the scenario. This means the engagement of Fixed-Term Employees, Temporaries - whether full-time or part-timers, freelancers in niche areas/competencies will occupy workplaces, or those who will continue to work from home. The outsourcing of non-core operations will also increase.
The manufacturing sector in India will continue to engage contract labor and will be the major taker. The conversion or replacing of existing permanent workers/staff by contract workers will be at a gradual pace, but future recruitment will be predominantly non-permanent, except for a very minuscule core/niche/critical staff required to run essential operations.
Largely, employees will be engaged for a specified duration, moving from projects to projects, employer to employer, one location to another, with all the benefits like Bonus, PF, Gratuity, ESI, etc. Between two consecutive jobs, there could be a short break or in continuation under the same employer or different. But all dues will get settled on completion of the previous job, and it will be a fresh start in a new project. This will be the scene largely in non-manufacturing sectors like service, banks, insurance, hospitality, healthcare, to name a few.
With government laws tending to favor gig workers, I attempted a bit of crystal gazing of the future employment scenario. I don't believe it to be complete in all its aspects and implications. I would appreciate further churning of thoughts on this subject from the learned colleagues.
Regards, Vinayak Nagarkar HR and Employee Relations Consultant
From India, Mumbai
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(Fact Checked)-The user's reply contains accurate information regarding the evolving nature of employment towards gig work and the potential shift from permanent to non-permanent roles with various benefits. The discussion on the gig economy and its implications is insightful and aligns with current trends. (1 Acknowledge point)
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Yes, Mr. Vinayak,
With the advent of the new Labour Codes and the reformed labour laws in the country, India will start looking westward for adopting labour practices for engaging labour across semi-skilled and skilled portfolios. With gig employees set to become the norm in India, thoughts of Hollywood, especially Agent 007 movies featuring experts like James Bond, John Rambo, or Rocky, who undertake jobs for a fee without being permanent employees, come to mind. Although it may seem far-fetched, what if employers increasingly turn to engaging more gig employees, starting with minor repairs and maintenance works in the plant? This concept has already made its way into our establishments in areas such as housekeeping, utilities, and the like. It is uncertain how long it will take to fully implement this approach and overcome all obstacles in the process.
From India, Bangalore
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With the advent of the new Labour Codes and the reformed labour laws in the country, India will start looking westward for adopting labour practices for engaging labour across semi-skilled and skilled portfolios. With gig employees set to become the norm in India, thoughts of Hollywood, especially Agent 007 movies featuring experts like James Bond, John Rambo, or Rocky, who undertake jobs for a fee without being permanent employees, come to mind. Although it may seem far-fetched, what if employers increasingly turn to engaging more gig employees, starting with minor repairs and maintenance works in the plant? This concept has already made its way into our establishments in areas such as housekeeping, utilities, and the like. It is uncertain how long it will take to fully implement this approach and overcome all obstacles in the process.
From India, Bangalore
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(Fact Check Failed/Partial)-[The user's reply contains some inaccuracies. The ability for an employer to unilaterally change permanent employees into contract employees without a valid reason is not permissible under Indian labor laws. The Industrial Employment (Standing Orders) Act, 1946, provides protection to permanent employees against arbitrary changes in their employment status. It's important for employers to comply with these regulations and ensure fair treatment of all employees.]
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(Fact Checked)-The information provided in the user reply is generally correct. It correctly highlights the financial implications of converting employees to contractors and the potential increase in costs. The user's analysis and explanation are insightful and align with business considerations. (1 Acknowledge point)