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Historically, there is a direct employment relationship between the employee and the employer. But the challenges of modern business have shaken this tradition by paving the way for alternative staffing strategies. While some organisations go for outsourcing their work, others look for contract labour as a solution to staffing problems. Outsourcing and contract labour are not the same. In outsourcing, the work is given to an external organisation and it is for that organisation to organise things to get the work done right from setting up the plant and machinery to managing the human resources.

Whereas in contact labour, the external organisation appoints the people in its role and deploys them to your organisation. These contract workers will work in your premises under your supervision. How it works? The practice of contract labour is governed by Contract Labour (Regulation and Abolition) Act 1970. While this law is applicable only to worker and supervisory cadre, the practice of contract employment has spread even to managerial positions. According to this Act, the organisation which utilises the manpower is called Principal Employer and the organisation which appoints people in its role and deploys them to the workplace of its clients is called Labour Contractor. The Act is applicable to an organisation (principal employer) which utilises twenty or more contract labour and to a labour contractor who employs twenty or more contract labour in the preceding twelve months. The principal employer has to obtain the certificate of registration and the contractor has to obtain license from the labour department of the government to engage contract labour. The principal employer pays to the contractor the total amount of salary, allowances and benefits payable to the contract workers on a monthly basis and the contractor in turn disburses the salary to contract workers. The contractor also gets his service charges from the principal employer which is approximately 10 per cent of the salary bill. While contract labourers work under the supervision of principal employer in his premises, they do not have employment relation of whatsoever nature with him. Their employer for all purposes is the labour contractor. The nature of employment is always temporary for not more than one year duration at a time, since the contractor cannot assure regular employment on behalf of principal employer. Even if contract labourers have a grievance or dispute, they have to raise it only with the contractor who happens to be their employer for all practical purposes.

Why contract labour? Contract labour today is employed across several sectors and industries right from government departments to software industries. It is no more confined to worker level jobs, rather there are scientists, doctors, business managers and chartered accountants working on the roles of a labour contractor. In the government departments, the recruitments are mostly frozen for the past twenty years and getting the increased work load completed with regular employees is difficult. Hence, the departments can have contract labourers by showing it as miscellaneous expenses. While directly hiring temporary employees can create an industrial dispute at a later date for regularisation of services, this problem can be easily avoided by hiring people through labour contractor. In the profit making multinational manufacturing organisations, the regular workers are highly unionised, their salaries are high, they are difficult to motivate for increased productivity and get easily provoked even for smaller issues. Taking disciplinary action for misconduct or terminating their services to right size the workforce is a lengthy process under the provisions of Industrial Disputes Act 1947. Hence, more than 50 per cent of the worker category employees in these organisations are hired through labour contractor. In the software development organisations (IT companies), brand image of the employer by ensuring higher salaries and continuous employment is very important to attract and retain talented people. But all the work they do is not necessarily either of high paying or of continuous nature. Hence, they hire the software engineers through the contractor for shorter periods and at lower salaries, and for all practical purposes they are shown as employees of the contractor. Many of the IT companies have more number of contract employees and less number of regular employees. In the research and development organisations, the research projects are tenure-based and thereafter, the organisation may not get another project or they may get the project which may require an altogether new skill set. Hence, this sector prefers contract labour. There is also a universal truth across all sectors that human resource selection techniques are often failing to produce intended results. In other words, all those who are doing well in the aptitude test and interview at the time of selection are not found to be best performers on the job. Hence, many organisations prefer to engage the services of contract employees, watch them on the job for about six months to one year both for high performance and good behaviour and thereafter, consider employing them on company roles, by paying one month salary as recruitment charges to the contractor. Employers also believe that for certain functions like that of a janitor and security personnel, contract labour is the right solution not only to save on costs but also to improve efficiency.

The issue of Article 19 (1)(g). According to the case Basti Sugar Mills Ltd. v. Ram Ujagar and others which was decided before the enactment of this Act but still answers the question that whether obligations regarding conferring amenities on contract labourers is in contradiction to Article 19(1)(g) or not. In this case the court clearly stated that public welfare comes above private interests. Right to carry on trade and business does not give a right to the employer to exploit his workers. The practice of employing a contractor so as to evade the benefits conferred by major Acts on industrial labour was totally criticized and discouraged by the Court. In the case of Gammon India Ltd. and ors. v. Union of India it was held that the duty of the employer is not only paying wages but also to provide them with basic amenities to maintain health and welfare of the labourers. Hence the expenditures incurred are not any tax imposed on the employer but form a part of this duty and in no means can be referred to as waste or unnecessary restrictions. Now by giving this decision the SC clearly gave a message to the industrialists that the right to carry on business cannot be enjoyed without fulfilling the duties whish they are supposed to do

Important provisions of Contract Labour (Relation & Abolition) Act, 1970

1. Registration of the Establishment (Section 7) The Principal Employer to apply in Triplicate to the Registering Officer of the area (Asst. Commissioner of Labour or Labour Officer) by furnishing all the relevant particulars in the prescribed application FORM I. The Principal Employer is required to deposit the prescribed rates of fees for registration as per rules of the (Central or State Rules ) Contract Labour Act. The Principal Employer to take one certificate of registration in respect of each establishment and it may not be linked with to the number of contracts or contractors in an establishment.

2. Regarding rejection of application for registration The Principal Employer should submit the application complete in all respects along with fees for registration. However, in case the Registering Officer requires the Principal Employer to amend or rectify the defects as pointed out the application the Principal Employer should do so within the specified date otherwise the application for registration may be rejected as per rules of the Contract Labour Act (Central or State rules).

3. Temporary Certificate of registration In case of urgency and where the Contract Labour for not more than 15 days is required to be employed in the establishment the Principal Employer should apply in triplicate to the Registering Officer of local Labour Dept. who will grant a temporary registration certificate for a period not exceeding 15 days with certain fees.

4. Amendment of Certificate of Registration Whenever there is any change in the particulars specified in the certificate of registration of the establishment the Principal Employer shall apply to the Registering Officer within 30 days from the date when such change takes place, with the reasons for such changes along with the appropriate fees as per the Rules if necessary.

5. Effect of non-registration (Section 9) The effect of non-registration of the establishment or revocation of the registration certificate is that the Principal Employer cannot employ contract labour in the establishment otherwise he is liable for penal action.

6. Certain circumstances under which the registration of an establishment can be Revoked (Section 8) The Registering Officer, after affording reasonable opportunity to the Principal Employer, the holder of the Certificate of Registration can revoke the registration of an establishment with the previous approval of the appropriate State of Central Govt. in case he is satisfied that :_ The registration has been obtained by mis-representation or suppression of any material facts or. _ The registration has become useless or ineffective for any other reason as specified in the schedules will be advised by the local labour department.

7. Prohibition of Employment of Contract Labour (Section 10) The Principal Employer should not permit a Contractor to employ contract labour in any prohibited process, operation or other work in the establishment as notified by the appropriate Govt. otherwise he is also liable for penal action.


Licensing of Contractors (Section 12)

With effect from such date as may be specified by the appropriate government no contractor shall undertake any work or employ contract labour except under and in accordance with a license to be issued by the licensing officer. Such licenses shall contain the hours of work, fixation of wages and other amenities to be provided for the contract labour in accordance with the rules imposed by the appropriate government.

9. Revocation, suspension and amendment of licenses (Section 14) If the licensing officer is satisfied that a license has been granted any misrepresentation and suppression of any fact or that the contractor has failed to comply with the conditions laid down in the license he shall after giving an opportunity to the contactor to give notice showing cause , revoke the license and forfeit the sum deposited as security

10. Liability of the Principal Employer for provision of Welfare amenities to the Contract Labour (Sections 16,17.18,19) In case the contractor fails to provide the following amenities for the welfare and health of contract labour employed in an establishment within the stipulated time limit then the principal employer is under a legal obligation to provide such amenity for the benefit of the Contract Labour. It also empowers the Principal Employer to recover all expenses incurred by him from the contractor for providing welfare amenities of the prescribed standards from the amount payable to the contractor or as a debt payable by the contractor.

11. Responsibility of the Principal Employer regarding payment of Wages to the Contract Labour (Section 21) Principal Employer shall nominate his authorized representative to ensure his presence at the time and place of disbursement of wages directly in full, without any un authorized deductions (a part from PF & ESI as applicable), such as messing charges, advances given to the contract workers at their native place by the Thekedar / Sub-Contractor, or by the Contractor to his workmen etc., The authorized representative of the Principal Employer re required to record the following prescribed certificate at the end of the entries of each relevant wage period in the Register of Wages or Register of Wages-cum-Muster Roll as the case may be certifying that the wage amounts have been paid directly and in full without any unauthorised deductions to the contract labour Certified that the amount shown in column No------- has been paid to the workmen concerned in my presence on------. There is a joint inter-linked responsibility and liability on the contractor as well as on the principal employer for payment of wages to the Contract Labour. Therefore, in case the contractor fails to make payment of wages within the due date the Principal Employer is legally liable to make payment of wages in full. Thereafter, the Principal Employer is entitled to recover the amount from the contracts bills.

Discuss the present scenario with respect to problems related to Contract Labour

There is an increased incidence of deployment of contractual labour by company managements because resorting to this reduces labour costs, In India, contractual workers get only a quarter of what regular workers are paid, Hence, contractual labour' is undoubtedly a major reason for the increasing labour unrest-even in Manesar where the riots and killing happened, This incident is not particular to Maruti because not only the private sector but even government departments and public sector undertakings have resorted to contractual labour, However, the" reasons behind the incident at Manesar were many, including the fact that workers were not allowed to form a union of their choice. A study by the National Labour Institute says that close to 55 % of the workforce Is on contract and highlights how poorly they are paid. We have pressed the government to amend the Contract Labour Act so that they are paid the minimum wages of the industry where they work. This is important because even the PSUs don't follow this, and instead pay the minimum wages set by the respective states. This is why contract workers are a dissatisfied lot. It is difficult for them to sustain themselves. The situation is similar in other parts of the world, European countries provided social security benefits to their workers, but these are also being curtailed. In India, contract workers are employed for six months, after which a new batch replaces them and this cycle goes on, So, they don't get work all year round, Now even the government has frozen fresh appointments and has started recruiting workers on contract employment with low consolidated pay. , If the Contract 'Labour Act is amended, It will ensure minimum. wages of the industry to these workers even if it does not assure them job security. Another important factor is that MNCs do not tolerate the formation of trade union .and even if they do, the unions remain under their control and most of them become puppet unions. In the case of Maruti, the new union was registered with the blessings of the management in December 2011,The union was recognised, but the management's negative attitude led to the release of this cumulative anger. Of the total labour force, only7% is in the organised sector in India, especially' in automobile and construction industries, and other manufacturing and service sectors, The law permits contract workers 'to form unions or join any union of regular-workers, but they are unable to do so due to repression, victimisation and unemployment. The Joint Action Committee formed by all central trade unions has urged the government to amend the law so that 10000 can be given as minimum wages, besides assured pension and suitable provisions to protect the interest, of contract workers, If these recommendations are accepted, the incidence of labour unrest might reduce to an extent in future.

One must appreciate that the ability to use contract labour enables a very large part of the labour force, who would have otherwise gone without any employment or livelihood options, to be employed While the number of contract workers has gone up in recent years, the numbers of strikes and lockouts is on the decrease. Hence, it is quite unlikely that industrial unrest is related to increased contractualisation. However, the violent stand-off at the Maruti Suzuki Ltd factory at Manesar was unprecedented. Assault and brutality under any circumstances cannot be condoned, and the loss of life is inexcusable. The larger issue for industrial unrest is the labour environment in India. It is unfortunate that economic growth in India has not been accompanied by commensurate employment creation in the organised sector. Although the public sector accounts for the lions share of organised sector workers, incremental accretions are actually higher in the private sector. As against a labour force of 470 million in 2009-10, only 15.6% had regular wage employment/salaried work while about one-third was casual labour and over half was self-employed. This has deprived large sections of society of the benefits of work security and emoluments, leading to social rifts. One must appreciate that the ability to use contract labour enables a very large part of the labour force, who would have otherwise gone without any employment or livelihood options, to be employed . One of the reasons for the preference for contract labour is that while competition and globalisation have brought in their trail severe fluctuations in market conditions, the labour law framework in India discourages flexibility and exit in the use of labour. This is why the ability to use contract labour provides a win-win situation for both sides. It is important to understand that contract workers are protected under several provisions of labour laws. While there may be company and region specific variations in implementation across the country, it will be presumptive to assume that contract labour is the cause of labour unrest. There are many companies who have managed the coexistence of both types of employees i.e. regular and contract. These practices are usually culture-specific and help the employees to trust the employers. Violence, whether it happens inside the premises or outside it, is a law and order issue and not an industrial relations issue. We have to recognise that it is human beings that are pushed to and instigated to unleash violence; this is not necessarily based on the nature of the employment. In fact, studies have indicated that contract labour is a social phenomenon that brings in employability, flexibility and specialisation, enabling industrial competitiveness. CII strongly feels that a convergence needs to be built on the perception gaps that exist around contract labour. It is necessary to revisit the labour laws in India. Currently, we have over 50 Central laws and many more state laws. The term wages has been defined in 11 different ways under 11 different laws. Such rationalisation can bring about the required convergence amongst the stakeholders and can truly leverage the opportunity that contract labour can offer for large-scale employment generation in the country.

What according to you should be the business and human relations oriented strategy in looking for solutions to such problems
1. Availability of skilled labour which you are looking for. 2. Demand Forecast - Get this from your company, what they are looking for, when & in the expected supply flow on a monthly forecast. 3. Today, since the industry is being supplied with all these people, try contacting your counter parts in your city and check with them who are their suppliers. 4. Take contracts on rolls who meet all legal obligations only. 5. Ensure you have a legal dept to whom the contractor needs to sign off all legal formalities, before he starts the supply. This will ensure on time payment (min wages), PF, Bonus, Overtime payments etc on time. 6. Always have alternate contractors and ensure you have ensured that supply is competitively distributed. 7. All payments to be made only through the contractor & he distributes the payment in your premises along with the Finance person to ensure that there are no non-payments. 8. All contract labour will be the responsibility of your company as per the Factories act and any accident or mishap, you are responsible as an employer. So, ensure that you have taken enough safety precautions. 9. These contract labour will keep extending their work hours for over time payment. Ensure that you regulate them with enough replacements on time.