1. I have following queries in the area of contract labour management in our factory (in Kolkata):

A. We have engaged an agency (a cost accountant firm) to look after and manage the contract labour related compliances. As a part of their job their representative also oversee the wage payment made by the contractors to their labours and signs in the wage register certifying payment made in presence of them. My first question is there any problem with the present system of wage register certification. Please note that in the CLRA act it is said that principal employer should ensure presence of his authorized representative in the time of payment of wages by the contractors. Now if we authorize the agency (as per the work order issued) to be present during wage payment process and accordingly certify the wage register which is subsequently endorsed by HR dept., then is there anything wrong in the practice?

B. In case of one of our contractor, there are allegation that he has not paid minimum wages and PF to few of its workmen i.e. out of say 50 workmen he has paid PF for 35 and records furnished but for rest 15 the contractor is unable to furnish any records in terms of wage payment or PF deposition. Problem from our end is that to avoid any sorts of direct control, we as principal employer do not keep any attendance record for the contractors workmen. But when we are asking the contractor to show muster roll, wage register, PF deposition against those workmen, the contractor is unable to show the same. We have blocked the security deposit of the contractor, but what could be the way out? Any suggestion.

C. In case a contractor engages a sub contractor then we as principal employer would like to take a declaration cum undertaking from the contractor (principal contractor) stating the fact of engagement of sub contractor and taking the ultimate liability of compliance if sub contractor fails. Can you provide any sample format of such letter along with a sample indemnity bond on the same.


From India, Delhi

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Dear friend,

Regarding the first query, is the entrusting of the job of compliance is a concurrent arrangement involving the every day physical presence of the employees of the Cost Accounting Firm in your Factory? In that case, in my opinion, it is another contract for service and if so the authorisation/ nomination of a contract labour u/s 21 (2) of the Act to ensure payment of wages to the contract labour of yet another contractor may not be proper. Otherwise, there may be technical validity to the nomination since the certificate issued by him is subsequently endorsed by the HR. Anyway, though the purpose of the provision is served beyond doubt, still such an arrangement is subject to the discretion of the Inspector under the Act.

About the second one, firstly, can't you, as the Principal Employer, assess the exact requirement of man power for the contract work and insist maintanence of muster roll for all the contract labour engaged every day? The inability of the contractor to produce the records is indicative of his surreptitious practice of engaging certain no of workmen on lesser wages without proof of employment. If any employment accident occurs to such workmen by chance, the PE would be principally held responsible for such mishap under the Factories Act,1948 and the Employees Compensation Act,1923. Give strict instructions to the contractor such illegal practice in future would entail summary cancellation of hs contract and forfeiture of his deposit as well.

About the final query, sorry, I am not well conversant with such legal drafting and solicit the assistance other learned members in this regard.

From India, Salem
Thank you for your reply sir. But in my organization, the engaging authorities prefers issuing job contact and do not mention the manpower component in the order. This strange concept is followed for reasons best known to them. Though CLRA ACT do not differentiate between job contract or manpower contract. But the engaging authorities works under the impression that manpower contracts are not legally viable and results in sham contracts. Thus they do not prefer to mention the no. of manpower in the order itself which creates difficulty for us I.e. HR dept. to track the manpower and compliance accordingly.

From India, Delhi
Dear DG,
The nature of work and the no. of contract labour engaged in such work are the criteria for the existence of contract labour system in the establishment to be governed by the provisions of the CLRA Act,1970. Since the lapse,if any found on the part of the contractor can impose vicarious liability on the Principal Employer, vigilance is required on the no of contract labour actually engaged by the contractor, facilities to be provided by him, payments made by him to all such labour and upon the documents maintained by him in this regard under the Act and the Rules. In order to ensure total compliance, it is imperative on the HR Dept to prevail upon the top brass of the management to develop some system or other to make compliance total and monitoring easier.

From India, Salem
Dear DG,

What ever replied by Mr. Umakanthan. M , I totally agree with him and the reply is excellent. I just want put some practical solutions from my real life experience.

In your 1st query you may take confirmation from Cost Accounting Firm through mail or note sheet but it will create less problem if the actual signature with endorsement is done HR Dept of PE on salary/wage register of Contractor.

In your 2nd query the reply is already made is excellent.

In your 3rd query whether you take any indemnity bond or not, but the compliance of sub-contractor also to be checked & controlled by PE.

I have experienced in big industry house ( eg Steel Plant, Power Plant etc.) where many contractors are engaging sub contractors. But for entering inside the factory, gate pass is always issued in favour of contractor only as the work order has been issued in favour of Principal Contractor not in favour of sub-contractor. In those big industry house they have contract labour compliance dept (which is in your case Cost Accounting Firm) are very rigidly checking compliance including sub contractors as the ultimate liabilities will be on PE.

Thanks & regds.,

S K Bandyopadhyay

USD HR Solutions

From India, New Delhi

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