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Pats
My company manufactures automotive components. For this, we use outsourced manpower as helpers in our production process.
Now, we anticipate that we will not have production for almost ten days in the last week of July 2024. So, we want to go with the 'No Work, No Pay' option for these outsourced manpower.
My questions are: Can we do this, and what will be the required legal compliance or relevant section I can use?
Regards

From India, Hyderabad
nanu1953
334

First of all please check the terms and conditions between out sourced agent and PE. Normally, it is "No work no pay ".

But there is humanitarian aspect. If your permanent employees will get full salary, my suggestion to pay contractual employees a portion of their salary ( between 30 % to 50% ) . If those contractual employees continue in future, it will help to maintain better human relations.

S K Bandyopadhyay ( WB, Howrah )
CEO-USD HR Solutions

From India, New Delhi
Madhu.T.K
4198

If the contract with the Contractor, manpower supply agency, is genuine, then you can ask the contractor to withdraw them for 10 days. Then it is the call of the contractor whether to pay salary to them or not. If he is able to redeploy in other plants where he has engaged workers, then there is no need to pay any lay off compensation. But at the same time, if they are kept idle, the contractor will have to pay lay off compensation at the rate of 50% of wages.

Now, if the contract with the Contractor is not genuine but it is sham one, the workers directly report to the officers of the Principal employer for leave, wages advance etc, and the supervisors of the Principal employer only guides, directs and control the work of the contractor's workers, then it would be construed that the contract is sham, and then you, the Principal employer, will have to bear the lay off compensation.

If the total number of workers including contract workers is less than 50, then the provisions relating to layoff under the Industrial Disputes Act will not be applicable to you. Then you cannot lay off any workers, and if you declare lay off you will have to pay full salary. There is a misconception that an establishment not coming under the scope of section 25A(a), ie, an establishment wherein less than 50 workers are employed need not pay any lay off compensation. But in Workmen Vs Firestone Tyre & Rubber Co [1976(1)LLJ493 SC] the Supreme Court of India has clarified that companies employing less than fifty workers and cannot lay off the workers, and if the workers are laid off they should be paid 100 percent wages during lay off period in the absence of service conditions.

From India, Kannur
Pats
Thank you so much Mr. Bandyopadhyay and Mr. Madhu for sharing your insight. Just to elaborate my concern little more..

Our company size including the contract manpower is only 50. And when we thought of this option of No Work No Pay, we even made our employee take 2 days of leave.

I had discussed with our Contractor and he said as per section 25E of ID Act he will offer alternate employment for these 8 days. But these resource's refused to accept that and started agitating and pulled in political pressure and pushed us through the Factories Inspector to pay wages for these 8 days, while Labor Inspector did not intervene as we had kept him informed about this action.

So would like to understand, if in future we come across similar situation, is it possible and will be correct move from our side to give notice to agency and LI, & FI informing about the said shut down, so that these resources once again don't agitate.
As this time we only had a verbal discussion with LI & Agency.

Thanks a ton in advance for your support.

From India, Hyderabad
saswatabanerjee
2383

This is not a question of legal compliance, but of Industrial Relations.
Your contractor agreed to provide them work elsewhere, so legally they were required to go there.
But once political parties are involved, you rarely have a choice.
Believe me, this is only the beginning of your problems.

From India, Mumbai
Madhu.T.K
4198

If the contractor is ready to give alternative employment to the employees, there should not be any legal objection from the workers. But in practical scenario when politicians are involved, it is a matter of right and power for them. As Swastha has rightly said it may even take you to the next level of industrial dispute. Now, it is good to find some suitable way to eliminate the contract itself and have a start fresh contracts with conditions favourable to you.
From India, Kannur
Pats
Much appreciated Saswata and Madhu, will look forward at eliminating this contract itself..But again who ever the contractor the political pressure will remain is what I think, because most of the resources are from in and around our factory.
From India, Hyderabad
saswatabanerjee
2383

You missed the point Mr. Pats.

Madhu's recommendation is to eliminate the contracting system, I think. See if you can have this work done by permanent employees. If it is perinnial work, what benefit do you really get by having them on someone else's payroll?

My point is : This is a political dispute, or an IR issue, not legal.
If you are unfair, and distinguish between 2 sets of employees, and discriminate against one of them, you should be ready for a fallout of this nature. You can soon expect unions to make inroads into your company.

You have workers who are basically employed all year round in your factory.
Now suddenly you have a shutdown for 10 days (which is probably due to some maintenance activity, you have not clarified that). You as a business, can survive it. How exactly do you expect your workers to live the month with 1/3 of their salary gone?

Do you expect cooperation from workers to whom you are saying I will eliminate your 1/3rd pay this month for my benefit? Once you did something like that...

You have not explained where and what the alternate employment is, and whether they are being paid the same rate. Of course, the workers will always be worried that this is a trick to get them out of there so you can replace them with cheaper workers / helpers. Your communication ability also makes a massive difference, specially in a small company.

From India, Mumbai
Madhu.T.K
4198

Yes, Saswata is right. With a manpower of just 50 workers, is it really required that you should have a contractor in between? Certainly, for a workforce of 50, how many workers would be required to take care of non perennial work like housekeeping or security? If you are engaging them in core activities of production, then it will become a legal issue, because a principal employer is not expected to engage contract labour in work of perennial nature. Then the Authorities can ask you to consider them as regular employees or to consider them when future vacancy arises.
From India, Kannur
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