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Resource centre on India's rural distress
 
 

Unfair contract
-The Business Standard

Hiring contract labour must come with more commitments

Almost a third of India’s organised labour force is on contract. This is an inevitable consequence of archaic labour laws that make it impossible for India Inc to disengage permanent workers even if they can’t afford them, don’t need them or they don’t perform. Companies such as Maruti Suzuki India have thus used contract workers liberally — almost half the workers at the company’s Manesar plant have that status. Yet companies often forget that they are dealing with human beings and cost minimisation alone can’t sustain an employment model. The Maruti management had enough warning signals: for example, over the last 15 months or so, there have been complaints about the huge disparity in salary between contract and permanent workers. While the permanent workers earn between Rs 16,000 and Rs 21,000 a month, contract workers, who do the same work, get just around Rs 7,000. In fact, contract workers have been a recurrent theme in the Maruti story. Last year’s strike was triggered by the demand for reclassifying temporary workers as permanent ones so that they are not denied benefits such as leave (contract workers are not entitled to any leave) and medical allowances. Such disparity within a workplace breeds discontent and is a fertile ground for a full-blown labour crisis.

The problem of contract labour has of course been compounded by an archaic law which is supposed to protect these workers. Section 10 of the Contract Labour (Regulation and Abolition) Act, 1970, prohibits their employment in certain situations. The list is pretty long, confusing even the country's courts which have taken contradictory positions in the recent past. For example, one judgement said priority must be given to absorption of contract labour whenever a new position comes up, while another said no such guarantee can be given by a company because the terms of employment itself talk about a fixed contract. In practice, the Act has been interpreted as requiring the abolition of contract labour for all services that are of a regular nature and are performed on the factory premises. But it’s not as simple as the law apparently suggests. For example, for work in canteen, cleaning, gardening, loading and unloading, etc — jobs that require work on the premises — employers outsourcing these run the risk of courts asking them to absorb the contract labour permanently.

The fallout of such outdated law has been obvious: most companies make sure that the outside labour used for such services are changed frequently so that no one makes a claim for permanent absorption. There are numerous examples of companies asking outside workers to do regular work on their premises without any paper work to avoid the legal hassle of giving them contract worker status. These workers get no benefits and are paid much lower than their permanent counterparts for the same amount of work. There is thus merit in Teamlease Chairman Manish Sabharwal’s argument that the notion that legislation or regulators should decide a company’s core or perennial activity is intrusive and outdated. If companies wish to continue to enjoy the freedom to employ contract labour, they must expect to be asked to provide for social security, better wages and all other benefits at levels at least as good as with regular workers. The amendment is long overdue.