Can unskilled labour be treated as contractor as per labour laws in India? - CiteHR
Umakanthan53
Labour Law & Hr Consultant
Kritarth Consulting
Spl Educators Posh Programs; Hr & Ir
Nagarkar Vinayak L
Hr And Employee Relations Consultant
Plant.HR
Head Hr

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We are a start up in Bangalore and most of our work force is unskilled labour. We hire unskilled labour across India. My current challenge is to design their salary structures. I am willing to pay them as per minimum wages act, but their take home is coming less than what we want to offer. We are willing to offer them 14K+ per month as take home. However, if I go by Minimum wages act, contribute for PF &ESI, their take home is only 12K+. One more bigger challenge manpower turnover is very high.Even if i bring them under PF & ESI, after couple of months they leave our company for more take home pay offered by other companies. In such situation, can i hire them as consultants/contracts and pay them to ensure more take home and deduct 10% TDS and make their net take home as14K+ per month. What are the areas which I need to take care as per labour laws in India.
Request all the professionals to share their insights on this and help resolve this issue at the earliest.
Thanking you all in advance.
Himabindu

Dear Himabindu
As a business owner/management you should always fully comply with all labour laws obligations. Hence it is good that you do comply with PF and ESIS.
1. Ideally you should have done industry cum region compensation survey- this will provide you a base line –and it will be prudent to give your employees accordingly, so to better retain and engage them with your organization.
2. Think about- any intangibles- non monetary motivation, like recognition etc.?
3. Taking them as contractor is not a good idea – may not be much cost effective on either side as well likely to be challenged legally – if any dispute arises.
Regards
Shailesh Parikh
99 98 97 10 65

Please also refer to the Contarct Labour (Regulation & Abolition) Act 1970 plus Amendments thereto and realize theConcept and Context of "Permanent & Perennial" nature of Job.
Kritarth Team,
12.11.18

I would like to request the questioner to perceive the situation described as one of demand for labor being more than its supply. Otherwise, no necessity for quick migration of labor to other employers who offer more take away wages in the same place. Other employers offer more take home wages means two things - one is that they do not comply with the ESI and EPF Acts or simply they pay more. Similarly, the description "we hire unskilled labor across India" can lead to two presumptions - one is that you hire unskilled labor for your works at Bangalore from all over India and the other is that your works have pan-India presence. Whatever it be, the rates of wages for unskilled jobs have certain other regional implications which can not be simply brushed aside because of your willingness to comply with statutory minimum wages for the region. Statutory Minimum Wages do not include the employer's contribution to ESI,EPF etc. Moreover, at times minimum wages may be lesser than prevailing market wages. Therefore, it is apt that you embark upon a market survey and decide your wage rates inclusive of the cost of retention as suggested by Shailesh.
Dear Colleague,
You should have mentioned what business you are in using unskilled labour.
Your minimum wages should comply with the statutory rate and obviously after PF ,Esi deductions , take home will be lesser than the rate which is fine. If you are willing to pay take home of 14k+ after the deductions, it is difficult to understand why you are still facing labour turnover. Find out what prevailing take home in the Industry and try to make up by giving some attractive allowance say attendance reward etc.
Engaging unskilled labour as consultants is unheard of. Where is the need for doing this. If you are willing to match market take home then right model is engage labour through Contractor.
Regards,
Vinayak Nagarkar
HR- Consultant

Dear Himabindu,
Going through your post, one can understand that Salary is not only a criteria for leaving the job.
All the business owners/ Employer must have to carry a nature of law abiding. They must have to follow the Central/State/Regional applicability of concern labour laws under which the particular industry falls. Recent amendments in PF, ESIC, Apprenticeship Acts are really helpful for employers to generate employments for certain qualifications ( i.e. ITI, Diplomas, Graduates etc...).
Also, the categories of labours are being defined by the government to identify the individual talent at the entry level jobs in the industries in which normally an experience person is not being involved by the employers.
You need to define certain policies to develop working culture, Employee Concealing, Absenteeism Control, Incentives etc...
Engaging unskilled labours on company roll may invite future troubles too.... so let it to be handled by outside agencies only (i.e. Labour Suppliers/Labour Contractors)
Regards,
Prashant Hande
-9913299499

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