Contract Labour Questions Answered: What Every HR Professional Needs to Know

Dear Friends,

A few days ago, one of our esteemed Cite HR members, Mr. Anshuman, requested me to address certain questions related to Contract Labour. Since all the questions appear to be quite relevant, I believe it is appropriate to share the answers to all the questions with the Cite HR community, as it could provide valuable clarification on certain Contract Labour issues that every HR professional would find useful. I look forward to your feedback.

Regards,
Anil Kaushik
Chief Editor - Business Manager - HR Magazine
B-138, Ambedkar Nagar, Alwar-301001 (Raj.) India
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The clarification provided by you in the form of questions and answers on engaging contract labor, along with the case laws, is very knowledgeable for our HR professionals. Thanks for the posting.

Regards,
ANIL KHOT

It is very informative and useful for those who employ contract labor.

Regards,
G.K. Manjunath

Excellent information clarified a lot of doubts. Could you also shed some light on "fixed-term employment" in terms of:

a. Can a whole facility consist of fixed-term contract workers?

b. Is it applicable for the employment of all workers, for example, in a cut and sew factory, or limited to some workers specialized in particular operations?

Could you please share the amendments made by the Andhra Pradesh Government in the CL Act in 2003 regarding the clarification of jobs/activities in connection with their perennial nature of work?

Regards,
Rahul Bagale

Andhra Pradesh Amendment on Contract Labour

The State amendment of Andhra Pradesh in 2003 introduced a clause restraining the employment of contract labour in core activities of any establishment if the same was prohibited by notification. However, it introduced the following exemptions:

- The normal functioning of the establishments is such that the activity is ordinarily done through contractors.
- The activities are such that they do not require full-time workers for the major portion of the working hours in a day or for longer periods, as the case may be.
- Any sudden increase in the volume of work in the core activity which needs to be accomplished in a specified time.

The Andhra Pradesh Amendment also introduced a definition clause for "core activities" of an establishment, meaning any activity for which the establishment is set up, which includes any activity essential or necessary to the core activity. It provides certain exceptions as follows:

1. Sanitation works, including sweeping, cleaning, dusting, and collection and disposal of all kinds of waste.
2. Watch and ward services, including security service.
3. Canteen and catering services.
4. Loading and unloading operations.
5. Running of hospitals, educational and training institutions, guest houses, clubs, and the like where they are in the nature of support services of an establishment.
6. Courier services which are in the nature of support services of an establishment.
7. Civil and other constructional works, including maintenance.
8. Gardening and maintenance of lawns, etc.
9. Housekeeping and laundry services, etc., where they are in the nature of support services of an establishment.
10. Transport services, including ambulance services.
11. Any activity of intermittent nature even if that constitutes a core activity of an establishment.
12. Any other activity which is incidental to the core activity.

Additionally, a rider was introduced by the Andhra Pradesh Amendment that the above 12 activities by themselves should not be the core activities of such establishment.

It is important to note that the Andhra Pradesh Amendment is enforceable only in Andhra Pradesh State and not in the rest of the country.

Regards,
Advocates & Notaries & Legal Consultants

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Thank you, Shri Kaushik, for attaching such a concise and valuable document. All HR personnel should retain a copy of this attachment for future reference.

Dear Kaushik ji, my query is, we have an RC under the Contract Labour (R&A) Act, 1970, but one of the contractors in our RC has only 7 workmen (his total company strength is 7). In this case, what is the liability of the contractor as well as the principal employer for ESI & PF compliance? If yes, how can we comply with it?

Regards,
Manoj Prasad
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Assuming that your establishment is covered under ESI and PF, the Principal Employer (PE) is liable for both ESI and PF in respect of the labor employed by the contractor, regardless of how many laborers he deploys.

Regards,
Anil Kaushik
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I understand that ESI and PF compliance are the liabilities of the Principal Employer (PE). However, in this case, can we allow the contractor to be exempt? Also, who will remit the employer's portion of the contribution? Should it be deducted from the contractor's bill or by the PE itself?

Regards,
Manoj Prasad
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Thank you, Mr. Anil, for sharing such a wonderful PDF file. Even after spending years working together with contract labor dealings, some silly doubts may arise, which have been nicely clarified. Please accept our sincere thanks.

With warm regards,

Regards

Please explain the statutory process for engaging any contractor in the company under the Contract Labor Act.

Mr. Anil, I just want to get one thing clear. Suppose I have a production unit where I have outsourced the transportation of finished goods to another agency, and the drivers work within the company premises. Although the loading and unloading are done by machinery, does the Contract Labour Act still apply to my company? Please let me know.

If the drivers so engaged are working exclusively for you, then they will be under the umbrella of CLA. However, if they are independent and also working for others during the day apart from your assignment, they will not be covered by CLA.

Regards,
Anil Kaushik