Industrial Relations And Labour Laws
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We have outsourced job contract to one company, if they deploys their own employees (direct) at our premises then they do not fall under the coverage of CL(R&A) act. In such case as they they are not contract labours so what are the documental procedure & compliances is required to be ensured by us (our company).

Why don't they be covered by CLRA Act? If the contractor is doing a work for you, that will come under Contract Labour Regulations even if they undertake the work outside your factory premises. Now the situation is that the contractor is engaging his workers in your factory premises . Then why shouldn't they be under coverage?

Sir, we have engaged a big house for the job of networking and maintenance. They have deployed 9 personnel for the work. They are designated as Service Engineers/Customer Engineers. 2 of them are their direct employees who's salaries are bit high (eg 20000) and other 7 are hired for this job on contractual basis who's salaries are low (eg 5000-6000). Those are not getting all benefits and the contractor which is a very big house claiming that as they are engineers so they are not CL and they are receiving consolidated pay.
Please suggest.

Dear All,

Please be informed that if the contractual workers are the employees of Outsourcing Company which is a registered Company under Companies Act, then these workers are not contractual workers. There is an Order by Hon'ble Supreme Court in this regard. Reference is not available with me right now. However, to be employees of Company to which the work has been outsourced, the workers should be :-

1. On the roll of Outsourced Company, having appointed as per rules/regulations of that Company. Their terms of employment should be defined in the appointment letter viz. designation, grade, pay scale, other terms & conditions of employment/non-employment.

2. Such workers must have been issued with Identity Cards as a token of proof that they are employees of Outsourced Company.

3. The Company should have its own certified Standing Order or should follow the Model Standing Order as defined in the Standing Orders Act.

4. The Outsourced Company must record / enroll their names in Form 'B' or any such bounded register which contains details of the workman engaged by them like - name, father's name, Date of Birth/Age, Qualification, nature of employment (Surface/UG), Permanent Home Address, Mark of identification, photograph duly attested by Gazetted Officer or Company Official duly authorized.

5. The Outsourced Company must deduct Provident Fund after completion of 30 days of employment.

6. Other social security provisions like - Medical facility, gratuity after superannuation, Leave with wages etc. are implemented by the OS Company.

If the above provisions are being followed by the OS Company, then the workers engaged by the OS Company are to be treated as the employees of that Company and not the Contractual workers. Thus the Sec. 10(i) of CL(R&A) Act does not attract which deals with the prohibition of work of perennial nature to be carried out by Contractor.

Hope this will help you.

Good luck.

AK Jain

HR Personnel


My friend,

You and your company are being taken for a ride.

1. Check the definition of worker under factory act. It covers everyone in the factory except factory manager and occupier. Yes, it includes contract workers.

2. Check definition of contractor and contract labour under Contract labour act. There is no distinction on ground of salary, qualification or nature of work. Anyone who is working inside your premises because you have a contract with his direct employer to do certain work or deliver a result, is a contract worker. Only exception is where the contract is for PURE SALE OF GOODS AND NOTHING ELSE. (Which again does not apply in your case)

3. All companies are required to be registered under PF if they have more than 19 employees. So your large contracting / outsourcing company is covered. PF rules do not differentiate on salary levels either. Only exception is those who joined at a STARTING basic + DA salary of more than 6500 and did not have any existing pf account on joining, would be exempt if they have filed a form 11 (sorry, can't remember the exact form number).

4. If the company is under a esic covered area, or the factory is covered in an esic zone, then payment of esic dues, and registering the employees for esic is compulsory for everyone whose salary is below 15000 per month (gross). If esic coverage is not there, the practice is to make the employer take a workman compensation policy to protect in case of an accident.

In case the statutory benefits are not given, you as the principal employer will be liable and responsible. Your contract with the outsourcing company should have specified this. If they are not willing to follow the law, then you need to convince the management of your factory to change the vendor immediately. Irrespective of what the contract says, failure to pay statutory dues is a ground to terminate the contract, probably without notice.

More than one cadre of Employees can be engaged in a similar work activities.
If both of your workers are engaged in a similar job, nothing wrong.
You should take care of your workers according to the guidelines of CLRA. You will not be lible for the Employees engaged by the Principal Employer directly. But the Principal Employer will be lible for all as the Occupier of the premises.

I think you read the situation wrong
The post was about outsourced contract and the poster is from the principal employer (the factory/ office where they are deployed)
The contractor has his own employee and temp/ sub contractor employees working.
He claims that : a. They are not workers but engineers. B, the are paid consolidated salary so pf esic is not applicable / included in salary c. As it is a job contract clra act does not apply

Here we have to draw the difference between contract employee/labour and contractual employee. The former, of course, is the one who is engaged through an intermediary/ contractor and is covered by CLRA any how. In the latter case, it is just like a regular employee but with the difference that he is employed for a certain period or for a certain work. It is called Fixed Term Contract. In your case, your contractor has employed a few Engineers and some persons for a fixed period, may be till the work in your plant is over. Still as long as he is engaged, the employer employee relationship exists and as such he should be given all statutory coverage like ESI, PF etc. Only thing is that if he is employed to do a specific work his employment will come to an end automatically once the work is completed. Similarly, if he is employed for a certain period, say one year, he should go out of the employment on the expiry of the period for which he is employed.

In the instant case, as far as the Principal employer is concerned, who ever engaged by the contractor in his plant is a contract labour irrespective of whether he is a regular employee or fixed term employee or temporary employee for the contractor. Therefore, all benefits as per statute, like minimum wages, ESI, PF etc should be given to those 7 employees engaged by the contractor also. Being the Principal employer it is your duty to ensure that they get the benefits failing which it will become your burden to pay it. It is not on the statements from the contractor about the status of the employees engaged by him that you should work, but you should only see if these 7 are working for you or not. If they are working for you, then in the next stage you can ask what is their remuneration and find if it is not less than minimum wages and if they are covered by ESI and PF. You need not accept the statements that they are temporary or FTC etc etc. That is the head ache of the contractor who has appointed them.

Consolidated pay does not make him free from his obligations. If they are paid consolidated pay, naturally, it will be on that whole amount that he should contribute ESI, PF etc



For your information our company is a PSU under Govt. of India and follows Rate of Minimum Wages as per Central Notification. As per current rate for skilled category it comes around Rs. 9802/- and for High skilled category it comes around Rs. 10660/-. The company which is been given job contract follows state rate (West Bengal) of minimum wages and accordingly designs the salary of their employees. Few Service Engineers who are on roll employees of that company and deployed at our premises for the project gets gross salary ranging around Rs. 8000/- - to Rs. 9000/- out of which Basic constitutes @ 80% of gross i.e. around 6500-7500 ( no DA as it’s a pvt. co.) and rest are allowances. Company is giving PF on Basic (max on Rs. 6500/-) and ESI on gross. For us the problem is non compliance with minimum wages as per central rate. The company’s argument is that the person deployed are their on roll employees and getting salary as per co.s present salary structure (following the min wages as per state rate) and it is not possible for them to increase/decrease the salaries of their on roll employees on project to project basis.



The rate and amount of salary payable depends upon the applicability of the relevant Act on the principal employer. Therefore, if the principal employer is under Central notification, the contractor has to follow the central notification. As far as contractor is concerned, even if he pays as per central minimum wages, it will not cost anything for him because he can shift the burden on the principal employer. If he cannot have two types of salary structure, one for those who are deployed in companies which come under state minimum wages notification and another for those who come under central notification, you have to think of changing the contract itself. I don't think that contractor will hesitate to pay as per principal employer's policy. If the principal employer is ready to bear the cost, why should not the contractor?

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