Labour Laws & Ir
+4 Others

Dear All,
What are the Advantages and Dis-Advantages of appointment of Contract Labour?
Also whether we can appoint the contract labour on Machinery. whether there are any exceptions to sec. 10 of contract Labour Act.
What are the compliances if we want the absorption of Contract Labour as a Regular employee.
What we should have to give a contract Labour after absorption excepting Bonus, Gratuity and Leaves.
27th April 2009 From India
Hai Saquib / Swathi

Instead of advantages / disadvantages, we can think of burden on employer and cost to the company in case of both regular workmen and contract workmen. The Company needs to pay both direct and indirect cost in case of permanent workmen.

Where if Principal Employer engages a Contract Workers through Contractor, the contractor will be responsible for entire activites of contract workmen. The Contractor need not bear any single rupee from his pocket and he claims the wages of engaging contract workmen (includes 13.16% PF, 4.75% ESI) and maintaining cost etc from Principal Employer. Only thing is the contractor has to maintain registers, records and should be responsible for meeting all statutory obligations.

There is every posibililty that the Contractors takes wages to be paid to contract workmen and pay them less. We need to indirectly involve and should make payment by the contractor to the contract workmen.

I advise you to pl read contract labour regulation and abolition act 1970. U may reply me if you require any more clarificatons


PB Ram Swaroop
5th June 2009 From India, Hyderabad
Hi, I need the sample appointment letter of contract labour & what are the registers that he need to maintain, May I request you to kindly send this details Pl. Regards, IYER.S
6th June 2009 From India, Thana
Dear IYER.S,
Plz go through the State / Central Contract Labour (R&A) Rules which ever is applicable to your establishment. Format of appointment letter & other formats for maintaining the rgisters are also there in these Rules.

(Labour Law & Legal Consultants)
6th June 2009 From India, Delhi
Dear Iyer, Pls. give me ur e-mail id so I can mail it to you! Regards, Saquib 09272990869
8th June 2009 From India
Daer All, Please find Enclosed herewith the Report on Advantages and Dis-Advantages of Contract Labour. Please give your comments so as to improve it. Regards, Saquib 9272990869 Mumbai
8th June 2009 From India

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File Type: doc REPORT ON Advantages & Dis - Advantages of CONTRACT LABOUR ACT..doc (56.5 KB, 2868 views)

Dear Iyer, Pls. pls find enclosed herewith the forms you need! Regards, Saquib 09272990869
8th June 2009 From India
you can use the following link for further info
Twenty Factor Checklist to Determine Independent Contractor vs. Employee Status - Small Business <link updated to site home> ( Search On Cite | Search On Google )
<link no longer exists - removed>
please let me know if its usefull n u req nething apart from it.
can u pl mail me tat form?
9th June 2009 From India, Mumbai
Advantage For Contract Employee: -

1. They get an opportunity to work for the big company.
2. Get an opportunity to learn.

Disadvantages For Contract Employee: -

1. It is very hard for the employee to come on the company payroll in the parent and other organisation too.
2. The person works under the mercy of Permanent employee weather to appoint him/her on payroll or not.
3. Extended working hours.

Advantage For Company: -

1. On of the biggest advantage is that they get the manpower on a very reasonable cost.

Disadvantage For Company: -

1. Contract employee can leave any time which can effect the work of organisation.


The basic and social purpose of Contract Labour R&A Act, with specific Rules & notification from the respective State Government, is to ensure that exploitation of the contract labour is avoided. That is why, although it is the primary responsibility of the Contractor to ensure compliance with the Acts like Payment of Wages, Payment of Minimum Wages Act, Payment of Bonus Act, EPF Act, ESI Act, Workmens Compensation Act. However, in the event of the failure of the contractor to complay with these, it is advisable that the Principal Employer pays off these statutory amounts to the concerned authorities and deducts these amounts from the Contractors dues. Similarly, for the persistent failure of the contractor to fulfill these basic minimum requirements, it is advisable to terminate the contract with him.

Before deciding on hiring staff either on permanent or contractual basis, companies do need to conduct a thorough research on the compliances that they need to adhere to. These compliances differ from city to city, region to region and state to state.

Companies often overlook this fact and end up paying fines / high taxes to government officials.

Company should definitely go in for contract staffing. However, do not overlook the contract labour compliances that company would need to adhere to. LWF, ESI, Maintainence of Registers, Attendence & Leave Monitoring, Payroll Management, etc would be a regular affair. Company may need to hire an executive to do this job.
Further for compliances, they may need to hire an external agency depending on company's location.

A very good practice that most companies follow that works well both in terms of effeciency and cost, is outsource requirements to a third party vendor.

In this way all legal, compliance, hiring, etc issues would be the obligations that the vendor would need to adhere to.

Contract employees are engaged by two methods
a] An agreement provided under sec 2 [oo]bb] of the I D act. The period is predetermined and at the end this stands concluded. The benefits and conditions are clearly spelt out here and need not be the same as the regulars.
The purpose/motive being important, it is the job necessity that has to be determined. Mainly considered are high profile/high technical which could be an offshoot case and may not be repetitive on a daily basis

b] The other method adopted is for the non core areas,i e. other than the main activity of the organization. The areas presently accepted are housekeeping/security/loading unloading/canteen/office utility area[photocopying/coffee-tea supply].The long and short term here best followed is below 240 days.

The principal employer can terminate the contract but not the contract labour it is the prerogative of the contractor to terminate his employee.

Since contract worker rendering servicer through contract agency (Labour contractor), you cann't terminate the said worker, instead you can ask your labour contractor to replace somebody in place of him or her.

There is minimal paper work at the beginning of the contract and no further accounting services are required throughout.

Availability of the option to terminate employment in case of permanent disability. Here, the employee has the option to terminate the contract in the event the employee became “permanently disabled.” Employer must therefore give prior notice to the employee through registered mail.

Confidentiality agreement relating to business. An employee will not be allowed to disclose, divulge or communicate to any person, firm or company in any manner. Any information, issues concerning the company and employer, manner of operation, processes and plans should be confidential and important. Thus, when an employee violated this section it means he/she simply violated the agreement.

Closure of business will result to termination of employment. In the event that the employee will discontinue his work or service to the company for the abovementioned reason, this agreement will end and terminate as of the given date.

Employee’s commitments binding on employer only on written consent. The employee has no right to make any commitments or contracts on behalf of his/ her employer without any written consent
9th June 2009 From India, Mumbai
Tell me.. because of contract labours, is there any additional Tax charges are there to Govt.?
21st April 2010 From India, Madras
In India till today there is no-reservation in Private Sector hence no reservation applicable for appointment of Contract Labourers.
12th June 2010 From India
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