Dear all
According to my knowledge no employer should use supply of manpower in the agreement with contractor. If we mention like that it shows that the employer is getting work from them by having direct supervision and then it is treated the contract is sham one. Am I Right?
But, some of the most experienced HR professionals are entering into the agreement with contractors as manpower suppliers.
Kindly clarify

From India, Hyderabad
Partner - Risk Management
Anil Kaushik
Chief Editor,businessmanager
Private Consultant On Labour Laws
Hr, Ir, Law, Disc. Matters
Hr Professional
Deputy Manager (hr)
Suganya Priya
Branch Manager
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anil kaushik

Dear Friend,
whether the contract between principal employer and contractor is sham or not does not only depend on the fact of man power supply contract. There are many factors to be considered for reaching on the conclusion of genuineness of contract. It all depends on the terms of contract of man power supply. If it sounds the arrangement of simple man power supply having no control and supervision over his labour by contractor and getting simply commission on headcount supply, then in all probabilities,it will be a sham contract and such labour can claim regular employment with principal employer.The question to be seen is whether principal employer engages labour for him through contractor or contractor engages labour for him for executing the work agreed to be done by the contractor for principal employer.

From India, Delhi

Dear Anil Sir,
Please clarify applicability to Vicarious Liability under contract labour regulation and abolition Act - contract workmen do the misconduct, who will liable to pay the damages to principle employer.
Please share to cite HR's
Rajesh Kantubhukta
Human Resources

From India, Kakinada

Dear Rajesh: The principle of Vicarious Liability has different connotation, it implies that for the acts of the servant, the master will also be liable. So while a contract labour (for eg. a driver (contract labour) has an accident while driving a company vehicle, the contractor as well as the company would also be liable to pay compensation to the victim of accident. Against such a liability a Principal Employer can seek indemnity from the contractor. KK
From India, Bhopal

Hello, I always prefer Contract Jobs to Contract labour. Contract labour policy only means that Human is considered as liability and not a resource. Issuing works contracts provides more control on output and quality of work. Also the cost is better controlled because the price is for the output and not input.
From United States, Powell

Dear M S GIRI,

Thanks for the cautionary note in your mail. But I do not agree with your contention that no employer should use supply of manpower in the agreement with contractor otherwise same will presume to have a direct supervision and then the contract will be treated as sham one.Let me reproduce the definition of the "contractor" given under the Contract Labour ( Regulation and Abolition Act,1970 for your information.

"Contractor", in relation to an establishment, means a person who undertakes to produce a given result for the establishment, other than a mere supply of goods of articles of manufacture to such establishment, through contract labour or who supplies contract labour for any work of the establishment and includes a sub- contractor;

You will appreciate that the last sentence of the definition clearly brings "the supply of contract labour for any work of the establishment" into ambit of the Contract Labour ( Regulation and Abolition Act,1970. As such your contention that such system will be treated as sham is clearly a WRONG notion.

BS Kalsi

member since Aug 2011

From India, Mumbai

Dear Mr.B.S.Kalsi,
I accept your contention but so many companies doing the same/ by nominally maintain contract but officially doing all acts doing by principle employer/ but it is wrong. Contract labour means there is no direct relation to contractor and principle employer / other wise will happen indiscipline in the future.
Rajesh Kantubhukta

From India, Kakinada
Dear All,
I agree and accept what have specified in the trailing mails. Adding to this I will like to give some more inputs;
A. Registration of employer from GLO.
B. Issuing Form 5 to the Contractor.
C. Registration by the contractor before GLO office.
D. Identifying the Job performed by the Contract, where your permanent manpower is not involved.
E. Entering into agreement with contractor.
F. Ensuring PF, ESIC code of contractor.
G. Ensurng contractor workers are paid by Bank accounts.
Please refere CLRA 1970.
Thanks and Regards

From India, Nagari


Whether the contract is a sham is not a function of how the contract is designed and whether it results in direct supervision of the employee.

It is a function of whether there is actually any contract or the agreement and contractor are just a creation of the company to avoid paying fair wages and give benefits to the contract employees. It will depend on a number of different facts considered together by the court.

The contract can be held to be a sham even if the agreement talks of a job work and not labour supply.

The contract labour act does not specifically ban use of contract labour, or even the business of labour supply.

Instead it says the government can ban the use of contract labour if it wishes.

But it discourages the use of contract labour :

a. where it involves production or core activities

b. where it is a work generally (or previously) done by permanent workers.

Andhra has, on the other hand, has defined production and core activity and specifically banned the use of contract labour in those functions. So there you would not have an excuse to think otherwise.

So the problem is when there is a complain filed by any of the workers, or the union, that the workers are being denied permanency, and that the contract is a sham or designed to deny workers their rights. The court will look at the various aspects of the case. The things that generally make the courts think that the workers should be given permanency are :

- Work being done in production related activity

- The number of workers needed is more or less standard unchanged, or the same workers are working for a long time on continious basis.

- Workers were recruited by or under supervision of the principal employer.

- Attendance, Leave, wage register, etc being maintained by principal employer and / or leave granted by employer

- The contractor doing work only for one employer and no others, doing work without margin or very little margin

(except where there is no other factory nearby needing contract labour)

- A contract not entered into (just work order given), or not renewed when completed

- Absence of contract labour license

So, when the contractor is only giving contract labour and not doing the work, or does not know what the work is, or where they are doing work in production related activity, the court will be inclined to consider that the workers should be made permanent. This is where the real danger is. Not labour supply by its self, but a combination of factors. Still it is best avoid this were possible.

From India, Mumbai
Suganya priya
Am Priya, We do contract man power and domestic transportation in Chennai location. Any Company need man power for Contract basis contact as we will full fill it. Regards, Priya-8608337465
From India, Chennai

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