Umakanthan53
Labour Law & Hr Consultant
Bijay_majumdar
Freelancer In Hr &indirect Taxes For
+4 Others

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What is the main difference between workers through contractor & workers through outsourcing ? Which one is more beneficial for the principal employer.
From France, Courbevoie
Your question does not actually reveal your doubt.However in my view, both essentially mean the same.In legal terms it is called getting the work done through workers hired by a contractor.In common parlance, it is called outsourcing activities to a third party or agency because you can outsource your own activities.in both cases there will be a contract with the third party or agency.So there is no difference in legal implications and degree of benefits between the two.In either case, the contract workers will be remain as employees of teh contractor/third party but not of principal employer
There is another class of employees called fixed tenure employees who are appointed for a fixed term by means of contract.They are direct employees of the principal employer but for a fixed term on the expiry of which they cease to be in employment of principal employer.
B.Saikumar
HR & Labour Relations Adviser
Navi Mumbai

From India, Mumbai
I agree with Mr.Saikumar to the extent that both the engagement of contract labor for the works of the establishment and outsourcing the works of the establishment arise from a contract for service only. However, while the objective and the purpose for the adoption of the two by an establishment is the same,
- contract labor reflects primarily the man power supplied by the contractor in the work zone of the contractee whereas
outsourcing reflects the job or activity carried out by the contractor in his own premises elsewhere.
- contract labor enables the contractee who is called as the Principal employer cocurrent supervision and control over the
operations contracted out whereas it is limited to the quality check of the end product or services outsourced.
- contract labor enjoins vicarious liability of certain important conditions of employment of the labor on the part of the PE as
per the provisions of the CLRA Act,1970 in India or any other similar Law if in force elsewhere whereas no such statutory liability on the contractee in the
case of outsourcing his activities or job.
- While contract labor system involves only the local indirect labor, outsourcing activities may be off-shore and as such it may be despicable to the locals.
Thus the preference of the one to the other from the points of economy and convenience of a PE/Contractee is dependent on various factors such as the nature of the activity, time and space and so on.

From India, Salem
Contractual or out sourcing is almost similar activity.In the sense that applicability of labour laws is going to be same and involves appropriate liability of Principal employer and vendor or contractor both.
From India, Vadodara
From a legal stand point, there is a huge difference between the two. Getting the work done through the contractor in the establishment of the Principal Employer attracts a host of legal provisions, which are not attracted in the case of outsourcing. But the disadvantage of outsourcing is that the control over the work or the raw materials used, etc. is absent.
From India, Vellore
@Mr. LawBadri sir.Agreed your point of view.Legislatory norms apply in both cases,but in case if you outsource everything to other party then other party becomes equally responsible for abiding by the legal provisions.It is however to be understood that when it is human resource in question,Labour law applies in any case manpower used in outsorced activity or contract.Eg- A company as a client outsources its project to a Facility management company,where in a FM company does not act as contractor but what it does sub lect the activities under contract to other vendors,FM company there becomes The PE,and has to ensure complete abidence to compliance.However Client Pays and remains indemnified.Advantage of outsourcing is therefore No hassles for the main Client.The FM company does everything on behalf.
From India, Vadodara
Dear Shri Bijay Majumdar, there is a difference: the principal employer remains liable if the contractor works in the establishment of the principal employer. But this is not the case in which the Principal Employer outsources the work as the work is performed in the outsourced entity, which is another establishment for the purposes of labour laws, especially PF, ESI, Employees compensation, etc.
From India, Vellore
Dear Lawbadri
It is a mistaken notion that it is the location where the work of PE is done that determines the applicability of Contract Labour Act. It is not so.It is also not correct to say if the work is done in PE's premises, it presupposes the existence of supervision and control by the PE who thus is required to regularize the contract worker. There are no such inferences provided by the provisions of the CLRA.
So long as the PE engages a third party/contractor/agency under a contract to procure labour to get his work done either at PE's premises or at his own premises under the supervision and control of the contractor, the CLRA is attracted irrespective whether you call it outsourcing or by any other name.
B.Saikumar
HR & Labour Relations Adviser
Navi Mumbai

From India, Mumbai
Shri B Saikumar,
I disagree. The labour laws in India maintain a difference. The position as regards PF and ESI laws are quite clear. As regards the contract labour laws, the various definitions make it quite clear the centrality of the concept of establishment. Besides, when a particular thing, say, manufacture of goods, is outsourced, the contract with the contractor becomes a contract for a particular thing, clearly coming within the exemption provided in S 2(1)(c) of the 1970 Act. There are settled precedents on this issue. Let me know if you are interested in looking at those precedents.
Best regards.

From India, Vellore
Thank you for all positive comments from all experts. However, I would like to share the issue with you - we are global manufacturing Company and have currently 200+ headcounts on permanent roll & about 60 on contact roll engaged in various departments such as production, labs, Tech Support in Sales, Office boys, horticulture etc. These 60 workers are under 3-4 contractors and most of them are working for many years. If someone leave from these contract workers, every time we need to take approval for replacement from the global management (as we do same for permanent employees). But the global management now want that we should look for a arrangement with some third party/outsourcing company under which we could put these 60 workers and if there is any exit, that Company fill up the replacement by themselves. Hence, please suggest accordingly.
From France, Courbevoie

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