Transitioning from Contract to Casual Workers: What Legal Challenges Should We Expect?

I have the following queries. Presently, we are utilizing contract manpower (helpers) from an outside contractor on a commission basis and providing them with all statutory benefits under the labor laws. Now, management aims to employ all these contractor workers directly as casual or temporary employees.

Legal Obligations and Suitability

My query is: what types of legal obligations can we face in the future, and which practice out of the above two is more suitable and beneficial for the employer?

Please help.

Thanks and regards,
Raj

Inadequate Information!

Tell me, how many workmen do you have on your own payroll as of now? How many contract laborers (i.e., labor through contractors - collectively) do you engage presently? What is your industry?

Subject to the answers to the above questions, I state as under:

1. If the "Industrial Employment (Standing Orders) Act 1946" is applicable and the Model Standing Orders are applicable to your establishment (and even otherwise), if such "converted" contract labor is taken on your rolls as "Casuals" or "Temporaries" and remains on your rolls for more than 240 days in a span of one year, the law will require you to make them "permanent" on your rolls!

2. Are you compliant with the Contract Labor (Regulation and Abolition) Act 1972 if the same is applicable to you?

3. You will have to pay Statutory Minimum Wages applicable in your region. You may already be paying the same to your contract labor!

4. Compliance under other applicable labor legislation is mandatory anyway!

5. Downsizing at will may not be as easy as at present.

Should you need more elaborate advice, you need to provide more specific and pertinent information about your reality!

Cheers!

Regards,
samvedan

August 12, 2012

Elaborating further on what Mr. Samvedan said, your liabilities in respect of P.F, ESI, Employees' Compensation Act, and Minimum Wages Act will remain the same whether you engage them directly as temporary labor or through a contractor. However, if you employ them through a genuine contract as contract labor, you will be free from the liability of making them permanent even though they work for 240 days or more (if Standing Orders are applicable) and other termination procedures required under the law.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai