The Modi Administration does not seem to care for taking people on regular rolls. Everywhere, there is a tremendous emphasis only on what we call "contract labor". Is this a healthy sign? Can we have millions on contract and allow a very small section to enjoy all benefits of a regular job? What will happen to the concept of a welfare state if the present conditions are allowed to continue?
From India, Nagercoil
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1From India, Nagercoil
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Let us not criticize the Modi Administration alone. The contracting out of jobs has become the norm across all governments, including the left ones. Now the increasing trend is to award work on a contract basis; at least the work will be done, or else the job will not be there.
For instance, until almost the beginning of the 21st century, the transport department used to be in-house and was a constant irritant for the administration. Now, almost all offices have outsourced this activity; the contractor provides the vehicle, the driver, the running expenses, the maintenance, etc., for a defined fixed sum payable after a definite period of time. The system now works, and there are very few problems.
From India, Mumbai
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For instance, until almost the beginning of the 21st century, the transport department used to be in-house and was a constant irritant for the administration. Now, almost all offices have outsourced this activity; the contractor provides the vehicle, the driver, the running expenses, the maintenance, etc., for a defined fixed sum payable after a definite period of time. The system now works, and there are very few problems.
From India, Mumbai
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Dear Apadharna Sivakumar,
You have raised a query on the contract workers. Your query is not specific to any industry or company as such, but your query is on the welfare of the contract workers as a whole. My reply is as below:
a) Let us look at the genesis of contract staffing. In Europe and the USA, as wages started rising, it became difficult to keep all the workers on the company's roll. To save costs, low-level service jobs were outsourced. Over a period of time, outsourcing went beyond the borders of the parent country, and jobs started getting outsourced to Asian countries. The outsourcing wave generated millions of jobs in Asian countries, leading to economic upliftment. A classic example is Bangladesh, whose economy thrives on outsourced work.
b) However, businesspersons in a few countries like India realized the importance of outsourcing, and low-level service jobs were outsourced. Whether it really saved their previous working capital is not known, as I am yet to come across any systematic study on this subject. However, the outsourcing industry started booming as it became easy to hire and fire contract workers.
c) Nevertheless, rather than looking at this issue through the prism of social welfare, let me examine it from a management science point of view. Human resources are an important resource. Far from depreciating, the value of this resource appreciates. It is essential for companies to grow their human resources. Growing human resources does not just mean training or promoting them; it also means showing faith in their capabilities and motivating them. Most big corporations have grown not only because of strategic planning but also because of suggestions from ordinary workers.
d) The relationship with contract workers is transactional. Companies do not invest in the contract workers for their growth. Since companies keep them on the fringe, there is no commitment from the outsourced workers. While business owners may derive delight from the flexibility to remove contract employees easily, their failure to generate commitment results in unquantifiable losses. Living under the false assumption that they do not lose anything, the losses remain unaccounted for.
e) What is the way out? When will business owners understand that the disadvantages of outsourcing outweigh the merits? To know this, we may have to wait for one more generation. There is a cycle of economic activities. If there were a cycle of outsourcing, there would be a cycle of insourcing too, though the term "insourcing" is used for convenience.
f) The fallout of the COVID-19 pandemic was the realization by European countries and the USA of the disadvantages of outsourcing. Due to disruptions in supply chain and business activities, the realization of self-reliance or dependence on home-grown activities has dawned, albeit arising from external factors rather than internal ones.
g) Now let me address the Modi government's attitude towards business. Whether to make economic policies "business-friendly" or "businessman-friendly" is a difficult choice for a political leader. The former may improve common citizens' well-being but may not guarantee sustained political power. In contrast, the latter is always beneficial as alignment with businesspersons aids in receiving a continuous flow of political funds. A news report titled "At Rs 1,450 cr, BJP got 61% funding via Electoral Bonds before LS polls" speaks volumes, requiring no further explanation.
Thanks,
Dinesh Divekar
From India, Bangalore
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You have raised a query on the contract workers. Your query is not specific to any industry or company as such, but your query is on the welfare of the contract workers as a whole. My reply is as below:
a) Let us look at the genesis of contract staffing. In Europe and the USA, as wages started rising, it became difficult to keep all the workers on the company's roll. To save costs, low-level service jobs were outsourced. Over a period of time, outsourcing went beyond the borders of the parent country, and jobs started getting outsourced to Asian countries. The outsourcing wave generated millions of jobs in Asian countries, leading to economic upliftment. A classic example is Bangladesh, whose economy thrives on outsourced work.
b) However, businesspersons in a few countries like India realized the importance of outsourcing, and low-level service jobs were outsourced. Whether it really saved their previous working capital is not known, as I am yet to come across any systematic study on this subject. However, the outsourcing industry started booming as it became easy to hire and fire contract workers.
c) Nevertheless, rather than looking at this issue through the prism of social welfare, let me examine it from a management science point of view. Human resources are an important resource. Far from depreciating, the value of this resource appreciates. It is essential for companies to grow their human resources. Growing human resources does not just mean training or promoting them; it also means showing faith in their capabilities and motivating them. Most big corporations have grown not only because of strategic planning but also because of suggestions from ordinary workers.
d) The relationship with contract workers is transactional. Companies do not invest in the contract workers for their growth. Since companies keep them on the fringe, there is no commitment from the outsourced workers. While business owners may derive delight from the flexibility to remove contract employees easily, their failure to generate commitment results in unquantifiable losses. Living under the false assumption that they do not lose anything, the losses remain unaccounted for.
e) What is the way out? When will business owners understand that the disadvantages of outsourcing outweigh the merits? To know this, we may have to wait for one more generation. There is a cycle of economic activities. If there were a cycle of outsourcing, there would be a cycle of insourcing too, though the term "insourcing" is used for convenience.
f) The fallout of the COVID-19 pandemic was the realization by European countries and the USA of the disadvantages of outsourcing. Due to disruptions in supply chain and business activities, the realization of self-reliance or dependence on home-grown activities has dawned, albeit arising from external factors rather than internal ones.
g) Now let me address the Modi government's attitude towards business. Whether to make economic policies "business-friendly" or "businessman-friendly" is a difficult choice for a political leader. The former may improve common citizens' well-being but may not guarantee sustained political power. In contrast, the latter is always beneficial as alignment with businesspersons aids in receiving a continuous flow of political funds. A news report titled "At Rs 1,450 cr, BJP got 61% funding via Electoral Bonds before LS polls" speaks volumes, requiring no further explanation.
Thanks,
Dinesh Divekar
From India, Bangalore
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I don't agree that the Modi government is pro-contract labour. If you go through the new labour codes, it clearly defines core activities and excludes contract labour from core activities. Therefore, you cannot employ millions of contract labourers under the labour code proposed by the Modi government. The old Contract Labour Act passed by the socialist Congress government did not protect the interests of the workers.
Thank you.
From India, Chennai
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Thank you.
From India, Chennai
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Dear colleague,
Yes, it is a fallout of the gig economy. It has come to stay. The concept of permanent employment will go for a toss, and contract workers/fixed-term contracts will dominate the scene.
Regards,
Vinayak Nagarkar
HR and Employee Relations Consultant
From India, Mumbai
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Yes, it is a fallout of the gig economy. It has come to stay. The concept of permanent employment will go for a toss, and contract workers/fixed-term contracts will dominate the scene.
Regards,
Vinayak Nagarkar
HR and Employee Relations Consultant
From India, Mumbai
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I think a worker on a contract has been misunderstood as contract labor. I think the author had apprehension about employment for a certain period or Fixed-Term Contract.
By including Fixed-Term Contract as a group of employees by the central government, the government has given permission to employ people for a certain period in jobs of a permanent nature. Now, most employers have stopped offering jobs on regular rolls but are offering one-year employment. State Bank of India, which used to appoint thousands of clerks every year, has stopped employing clerks but will appoint only Apprentices for certain periods, i.e., three years. Even if the job is of permanent nature, everybody is employing on a fixed-term contract basis only. It is true that at the end of the fixed term when an employee's contract is not renewed, he should be paid gratuity. Who is bothered about 15 days' pay? The employer? Or the employee on a Fixed-Term Contract? For an employer, it is not the 15 days' gratuity that is going to make his nights sleepless, but he will be happy to pay it if he can throw out an employee. For an employee, what is required is permanency in employment. If he goes to a bank and asks for a loan, will he get it if he is on employment for a fixed term? No, he will not. Even in the marriage market, his rating will become POOR when he is on a contract for a certain period. This will invariably reduce his productivity as well.
I think what Apadharna-Sivakumar has said is true. The government has been pro-employer over the last few years. The Codes on labor are not really attractive for the workers but are beneficial to employers only.
KK has said that "The contracting out jobs has become the norm across all governments, including the left ones." Which Left Government has supported the contract work? Only Kerala has left in power. There is no such situation. The Contract Labor Act has been an Act that remains on paper in many states but not in Kerala. There is a system of regulating employing people through contractors. But in states like Gujarat, you can see people being engaged in core activities completely rejecting what is written in the CLRA or the new Labor Codes (yet to be implemented).
Now coming to Aswat1302, I would say that though workers engaged through a contractor have been given a definition under the new Codes, there has been no measure to identify their number in terms of permanent workmen. The interesting thing is that they will come out of the definition of a contract worker once they get annual increments. It would have been better if the government had maintained the old Act (like other Labor Laws) and enforced it properly through administrative measures.
This is not at all a healthy sign. With the Union Government's decision to have apprentices, employees on FTC, workers through contractors, the very purpose of a welfare state has been defeated. You are creating a workforce who is totally discontent due to an insecurity feeling and a bad social status. If you want to make it healthy, you the HR Managers should first of all raise and object to the management decisions rather than keeping quiet and experimenting more and more means of keeping employees on temporary rolls.
From India, Kannur
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By including Fixed-Term Contract as a group of employees by the central government, the government has given permission to employ people for a certain period in jobs of a permanent nature. Now, most employers have stopped offering jobs on regular rolls but are offering one-year employment. State Bank of India, which used to appoint thousands of clerks every year, has stopped employing clerks but will appoint only Apprentices for certain periods, i.e., three years. Even if the job is of permanent nature, everybody is employing on a fixed-term contract basis only. It is true that at the end of the fixed term when an employee's contract is not renewed, he should be paid gratuity. Who is bothered about 15 days' pay? The employer? Or the employee on a Fixed-Term Contract? For an employer, it is not the 15 days' gratuity that is going to make his nights sleepless, but he will be happy to pay it if he can throw out an employee. For an employee, what is required is permanency in employment. If he goes to a bank and asks for a loan, will he get it if he is on employment for a fixed term? No, he will not. Even in the marriage market, his rating will become POOR when he is on a contract for a certain period. This will invariably reduce his productivity as well.
I think what Apadharna-Sivakumar has said is true. The government has been pro-employer over the last few years. The Codes on labor are not really attractive for the workers but are beneficial to employers only.
KK has said that "The contracting out jobs has become the norm across all governments, including the left ones." Which Left Government has supported the contract work? Only Kerala has left in power. There is no such situation. The Contract Labor Act has been an Act that remains on paper in many states but not in Kerala. There is a system of regulating employing people through contractors. But in states like Gujarat, you can see people being engaged in core activities completely rejecting what is written in the CLRA or the new Labor Codes (yet to be implemented).
Now coming to Aswat1302, I would say that though workers engaged through a contractor have been given a definition under the new Codes, there has been no measure to identify their number in terms of permanent workmen. The interesting thing is that they will come out of the definition of a contract worker once they get annual increments. It would have been better if the government had maintained the old Act (like other Labor Laws) and enforced it properly through administrative measures.
This is not at all a healthy sign. With the Union Government's decision to have apprentices, employees on FTC, workers through contractors, the very purpose of a welfare state has been defeated. You are creating a workforce who is totally discontent due to an insecurity feeling and a bad social status. If you want to make it healthy, you the HR Managers should first of all raise and object to the management decisions rather than keeping quiet and experimenting more and more means of keeping employees on temporary rolls.
From India, Kannur
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Dear all,
In support of the views of the originator of the post, I came across a table that shows the decline of the regular employees and the rise of the temporary workers. Please check the attachment.
Thanks,
Dinesh Divekar
From India, Bangalore
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In support of the views of the originator of the post, I came across a table that shows the decline of the regular employees and the rise of the temporary workers. Please check the attachment.
Thanks,
Dinesh Divekar
From India, Bangalore
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The problem is more to do with the cost of labor and the restrictions on removing them. Business needs flexibility. It should be able to hire more quickly when needed but it should not be forced to keep them on for life if the business declines or the workers are not productive.
Contracting of core labor has grown more and more because business cycles are no longer stable as it was before. No company can be sure its factory will continue to run at 90% capacity for the next 10 years. So they want flexibility, which will come from using contract labor.
Permanent employees remain even if they are unproductive or are too costly. Unions will force salary increases for all permanent labor. I have seen problems in Tata Power with a salary of ₹ 45,000 a month, plus LTA of a month, compulsory paid bonus of 20% of the annual salary. Do tell me how it makes economic sense and why exactly the company will not opt for outsourcing the entire Housekeeping function as soon as it can?
I am not sure why you are picking on PM Modi, so I would like you to tell us what previous governments have done to stop or discourage the use of contract labor. The only thing Modi has done is force the change in licensing term from 20 to 50 workers. But licensing never deterred the use of contract labor. It only gave the government officers a source to make money.
From India, Mumbai
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Contracting of core labor has grown more and more because business cycles are no longer stable as it was before. No company can be sure its factory will continue to run at 90% capacity for the next 10 years. So they want flexibility, which will come from using contract labor.
Permanent employees remain even if they are unproductive or are too costly. Unions will force salary increases for all permanent labor. I have seen problems in Tata Power with a salary of ₹ 45,000 a month, plus LTA of a month, compulsory paid bonus of 20% of the annual salary. Do tell me how it makes economic sense and why exactly the company will not opt for outsourcing the entire Housekeeping function as soon as it can?
I am not sure why you are picking on PM Modi, so I would like you to tell us what previous governments have done to stop or discourage the use of contract labor. The only thing Modi has done is force the change in licensing term from 20 to 50 workers. But licensing never deterred the use of contract labor. It only gave the government officers a source to make money.
From India, Mumbai
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Kami Export - Negative Covenant in Contract of Employment.pdf (1).pdf