There are companies who do not follow laws but claims to be perfect in legal side and employ contract labour even in permanent or regular nature of operations. The CLRA Act is an Act which is not properly enforced and therefore, even if you engage contract labours in core functions no body is going to question unless and until something happens similar to what happened in Maruti. That will also get wiped out in a month or two once the TV and media get something else hot.
If you require additional manpower temporarily, you can employ temporary employees and once the work is over ask them to go. There is no law which says that employment is permanent and you should regularise all casual labours. You need not regularise any casually employed labour. Casual employment is some thing that is given when there is additional work for a limited period or when there is a leave by a regular employee. Therefore, please do not think of running the show with only casual labours. Another important thing is that these casual employees are also eligible for statutory rights like PF/ESI etc.
Can you please elaborate on Maruti Case, you are referring to.
Also, would like to know, what legal action can be taken by Labour Department, if we do not take CLRA regsitration and continue to work with our regular workmen and casual labour.
Over and above what Madhu Sir has shared, I would like to share few points as a part of value addition to the subject.
It is important to understand the legal concepts, utilization mode of workmen, statutory obligations, statutory consequences in case of emergencies for both of these categories. Because generally speaking, there is no wide difference between Casual and Contractual workmen. But when there is any emergency situation or fatal incidents at workplace then problems arise. In such case, it leads to lot of confusion and dilemma to comply with the statutory requirements. Hence, considering gravity of extreme situation, we must set our manpower as per requirements of business operations.
As per legal provision, Casual Workmen means a workmen who is employed for any work which is not incidental to, or connected with main work of manufacturing process carried on in the establishment and which is essentially of casual nature.
As per Contract Labour Act, contract workmen means any person employed in or in connection with the work of any establishment to do any skill, semi skilled or unskilled manual, supervisory, technical or clerical work for hire or rewards, whether the term of employment be expressed or implied, but does not include employee mainly managerial and administrative capacity or employee who are in supervisory capacity drawing wages exceeding 500 per month or performing their duties by nature of supervisory or who is an out worker..........
With this background and explanation, following points may be noted as take aways.
1. In both the cases, we have to pay minimum wages.
2. Both categories are entitled for PF, ESIC etc..
3. Both the categories will have limitations of being engaged in main manufacturing process.
4. One of the very important point that there is no limitation on period for contractual workmen, whereas casual workmen can be employed only for specific period of time.
5. In both the cases, we have to maintain records
6. In case of any emergency or fatal accident, we have to submit accident report under The Factories Act. In such situation, we can have scope to present accident scenario based on legal requirement and by doing so we just will be responsible for compliance. But responsibility of other settlement will be share with the Contract Agency.
7. Last but not the least, both categories can not claim for permanent employment.
In nutshell, if we thoroughly understand the scope for above 2 types of workmen, it is always better to go with Contractual Workmen. Because, these labors are engaged through registered contract agencies and their ultimate responsibility is shared.
It is true that in a genuine contract there will not be any risk but you have risk when the workers are engaged in core activities and when they are supervised by the officers of the principal employer. As already told there are even large organisations who are managing the show with contract labour. They are also engaging these contract labour in core activities. It is unfortunate that the Labour Department is not enforcing their rights under section 10 of the CLRA Act which has given them powers to abolish the engagement in core activities.
In most of the cases the principal employer only interview the candidates and give the list to contractors and they will give offers from their end. When an issue like wage hike demand comes, it should be the principal employer who will direct the contractor what to do. Then what is the need of such arrangements? Just paying service charges or finding way for some contractors?
Now regarding permanency, contract workers have all the rights to get regularised if they are doing the work similar to that of regular workers and if the contract is sham or just for a name.
The thread has already elaborate almost all points (legal, statutory, practical, cost optimized, preferance almost all aspects). The more important point is Madhu sir and Umakanth sir have share their practical, legal and logical views on the subject. Mr Ghorpade has also suggested his views in depth.
Now it is your choice which option you choose. I would just like to add, in case of casual labours issue proper appointment letter (specific format for Casual Labour) which claim that the appointment is casual in nature for a certain period of time. Also check if there is any notice required at time of completion of period. If so, issue the notice letter well in time.
In case of Contractual labour, you have to negotiate/instruct the contractor to comply all legal and statutory obligations. You have to check the authenticity of records time to time.
In case you deploy 20 or more contractual labour, you have to apply for Registration Certificate and the contractor has to apply for Labour Licence from the DLC Office of the area. After obtaining the RC and Labour Licence the PE and the contractor required to submit Labour Returns (Half yearly / Annual) as well.
For an academic interest please go through a verdict from the Supreme Court of India.
employee, where as you can engaged contractual labors for loading un-loading, gardening etc. or as per contractual license approved by the labor department.