Can Employers Directly Hire Contract Labor? Navigating Legal Steps and Benefits

Dear All, I need clarification regarding contract labor. Can an employer engage contract labor directly without a contractor? If yes, what is the procedure for engaging contract labor under the Contract Labor Regulation and Abolition Act? What are the pros and cons, and how to pay the statutory contributions (ESI, PF, etc.)? Can these contributions be paid under the regular employees' registration code?

Understanding the Application of the Contract Labour (Regulation & Abolition) Act

If you are directly employing employees, then how does it come under the Contract Labour (Regulation & Abolition) Act?

The above Act will apply when you engage workers through a contractor. If you want to say that engaging workmen directly by you for a fixed period, which is often referred to as contract workers, then your status will not be like that of a Principal employer under the CLRA Act but will be like an employer for other regular employees.

In both cases, you can give PF and ESI registration under your company registration itself.

Regards,
Madhu.T.K

For regular/direct employees, the main code is AP/PTC/62128, and for contract labor, the sub-code can be used as AP/PTC/62128/A. This is the system we follow in my company.

Regards,
Sripad.K

Rightly explained and said by Mr. Madhu. CL(R&A) Act only becomes applicable when the workers are hired through a third party/agency, i.e., contractors. The Act shall not be applicable to workers directly hired by the employer for a fixed term. The employer needs to comply with all social welfare legislation in respect of such workers as well, in their own code.

Regards

Useful Tips for Managing Contract Labor

• Do not supervise and control the workers of another employer. You have no moral or legal right to control others' workers.

• Learn to supervise the contract job, not the contract labor.

• Do not engage a contractor as a mere figurehead or a sham contractor, merely as a device to camouflage the status of contract labor.

• Do not recruit contract labor.

• Do not transfer contract labor.

• Do not send contract labor on tour.

• Do not terminate contract labor.

• Do not maintain the muster roll of contract labor.

• Do not grant leave to contract labor.

• Do not give a certificate of conduct to the contract labor.

• Do not employ contract labor on any activity mutually agreed upon with your regular workers' union under a settlement or agreement under the Industrial Dispute Act, 1947. Under Rule 22(b) of the CL(R&A) Rules, no license is to be given to contract labor.

• Do not sign a settlement with the trade union of contract labor under section 18(1) or 18(3) of the Industrial Dispute Act, 1947. Do not negotiate with such unions.

• Always preserve a copy of the Muster Roll, Wage slip, Attendance slip, or extracts from the Attendance Register.

Regards