Is Our Direct Hiring of Contract Workers Legal? Seeking Advice on Regularization and Legal Limits

Dear Seniors,

Ours is a registered society with a total staff of 9. Out of this, 2 office attendants and one driver were taken on a contract basis and have been working with us for the last 10 months without any service break. These 3 employees were not hired through any labor contractor. They were appointed directly by us and are being paid a consolidated amount of 4000/- (NO PF, ESI).

Here my question is, can this kind of appointment be considered legal? What are the pros and cons? Now our management is saying that "they should have been given a break after completion of 96 days of service. Now they can claim for regularization. We have to regularize them through a contractor ASAP."

Kindly let me know whether we can continue with this arrangement further from a legal point of view. If not, then why and what should we do now? What is the maximum period for which the employees can be taken on contract (direct company contracts)? Is it 6 months or 96 days?

Kindly advise.

Best regards,
Priyanka

Dear Priyanka,

Under the purview of the law, these employees will be eligible for ESI and PF benefits from day one, and there are no alternatives.

Best Regards,

V. Sathyanarayanan

If your society is covered under the EPF and ESI Acts, all employees must be covered under both acts. It does not matter whether they are temporary or permanent. Additionally, the Minimum Wage Act also applies to all employees, followed by state rules.

Dear Priyanka,

If you are not in a position to take them on your direct roles, you need to put them on the roles of a contract staffing consulting firm. The consulting company will take care of ESI & PF, etc. Please let us know if you need help.

Regards,
Raghothama

Dear Priyanka,

If all staff is covered under PF & ESI, then these employees are also applicable. The maximum duration for the contract is 6 months.

Regards,
Vikas

Dear Friend,

Taking on employees on a contract basis is absolutely legal, but to avoid any misconceptions, it is better to sign an agreement with them for a fixed period so that they will not demand permanent employment. It is advisable to opt for a third-party contract arrangement as it is the safer option.

There is no maximum or minimum period for an employee to be taken on a contract; it all depends on the agreement between the two parties.

Regards,

Hello,

With the facts provided by you, it is clear that no employment law is applicable to you, except the Shops Act (interpretation-based) and the Minimum Wages Act (where for the time being you seem to be okay but not necessarily compliant).

Forget the law, do you not consider it to be totally WRONG to engage employees and not formalize "terms & conditions of employment"?

Why do we call ourselves HR practitioners?

As of now, regularize their status vis-a-vis employment by putting them on the rolls of a "contractor" who, it will appear, is providing the labor. This will add to your employment cost as the contractor's commission will also be applicable hereafter. While this be so, ask the contractor (orally) to keep changing the labor at a frequency of 6 months or so. This is not essential but advisable.

Engaging employees (required regularly for routine work and to give them breaks every now and then) is a bad practice and against HR ethics. I wonder why employers resort to this at all!

If you have more queries on this or other subjects, please do not hesitate but please function (as you are trying right now, by seeking help through the citeHR forum) to function in conformity with applicable law and professional ethics! On that, I am willing to help.

Regards,
Samvedan
July 15, 2008