Temporary Workforce- Hiring, Contracts And Importance

Hello,

Can anybody shed light on the temporary workforce? What is the basis of contracting them? What is the relevance in today's market? Why would people opt for it? What are the attractive offers it provides? Hope to receive a reply. Take care.

Hi Neha,

As per my knowledge, the market for contract staffing is growing tremendously. In a number of IT companies, a fixed percentage of employees have to be on contract. They would largely be people in the admin department and level 1-3 cadre employees. The company benefits in terms of cost to these employees, goodwill (control on attrition), and check on performance. If the employee is not a good performer, the company can dismiss the services without bothering about the notice period.

With respect to the employees, they can get a break in top companies, and sometimes they get good salaries. But again, if they get a permanent offer in any other good company, they jump jobs, thus posing a threat to their assignment. The following is one of my opinions posted some time back for a similar question.

Contract Staffing is very much valid in India and is a hot business today. The law says that a person should not be on contract for more than 90 days. So the contract agreement is made for 90 days and renewed every 90 days. Such people will not be eligible for PF or any statutory obligations. They would be paid a consultancy fee and not a salary. The fee would attract a TDS [I think it is 5.2%]. They would not be eligible for any benefits from the company. The company would benefit in terms of cost-cutting, layoffs, and headcount for a particular department.

Let me know if this helped you.

Regards,
Soumya Shankar

Hi Neha,

Outsourcing or contracting temporary staff is currently trending in the service industry. The advantage of outsourcing is that it keeps your organization lean, providing obvious financial benefits due to its efficiency. The current trend is to outsource roles such as sales force, data entry operators, and similar positions. In such cases, contracts are often drawn up for specific jobs, for instance, scanning jobs in the telecom sector may be outsourced based on the total number of pages scanned, while the number of people employed is determined by the service provider (contractor).

It is crucial to ensure that the service provider holds a license under the CL(R&A) Act, 1970, and complies with the legal provisions outlined in the same act. As a principal employer, you must guarantee that contract staff receive the benefits entitled to them under the EPF Act, ESI Act, or the Workmen's Compensation Act, as applicable.

I hope this sheds some light on the topic.

Warm regards,
Gautam

"When the going gets tough, the tough get going"

Dear Neha,

Contract Staffing in India has taken a cue from the American industry where contracting is a regular norm. There are many thoughts about contracting, but the most prevalent one is to save costs in comparison to permanent employees, as the employer does not need to pay for PF or conduct performance appraisals, etc.

However, there is a flip side to this as well. In comparison to permanent employees, the motivation level is always lower as the employee is there for a certain period of time only.

Warm regards,
Sujeet Kumar

Hi Neha,

The temporary staffing market is here to stay. Companies opt for it because:
1. Large companies often have a freeze on recruitment due to corporate decisions made at the head office.
2. It eliminates a lot of statutory requirements like payroll, PF, ESI, etc., allowing them to focus on their core businesses.
3. If a temporary staff member goes on leave, it is the temporary staffing agency's responsibility to provide a replacement so that work does not suffer.
4. Some companies also hire staff on contract initially, which gives them a 3-month observation period rather than just a couple of hours of an interview.
5. Some organizations experience seasonal or short-term demands and can easily scale up or down operations based on business needs, such as in agriculture.

Candidates opt for temporary staffing because it:
1. Makes them more employable.
2. Provides them with the opportunity to work with multinationals where they may not otherwise have the chance to work.
3. Offers an opportunity for individuals who may not be traditionally employable, such as housewives re-entering the workforce after their children have grown, to find temporary employment.
4. May lead to permanent employment.

In India, temporary staffing is just starting to gain traction, while in most developed countries and in China, it is a mature market. Despite the drawbacks of temporary staffing, this industry is set to grow and remain prevalent.

I have covered only the fundamental points, but there is a strong case for temporary staffing across various industries, including agriculture, manufacturing, travel, IT/ITES, and many others.

Regards,
Madhujit

Hi Saumya, thank you very much for the information. It was a great help! I am looking forward to more insights as I would like to see its relevance in a particular industry. See you, take care.

Hi Gautam,

That was very useful information. That's what I wanted to know—the relevance in a particular industry. Thanks a lot! Take care.

Hi Madhujit,

Very nice insight into the topic. It will help me further study its relevance in a particular industry or sector. Thanks a lot. Take care.

For employing staff through a contract, the principal employer has to obtain a license (as per the Contract Labour (Regulation & Abolition) Act) and should issue Form V to the contractor who will supply the manpower. The contractor has to submit their application for a license along with Form V issued by the principal employer before deploying the manpower. The contractor has to pay minimum wages as per the Minimum Wages Act while complying with the PF/ESI/Professional Tax Acts applicable to Contract Labour based on the type of employment (unskilled/semi-skilled/skilled/highly skilled). If the contractor does not comply with the above statutory acts, then the principal employer is bound by the same.

However, not every position is permitted under the Contract Labour Act. For more details, refer to the Contract Labour (Regulation & Abolition) Act.

Regards, AR Sai.

It's really helpful for me. Will you be able to send me more information regarding the temporary workforce in other industries?

Pooja

I want a contractor to provide a skilled and semi-skilled workforce to the employer. Please let us know the necessary required documents from the contractor.