Who Is the Principal Employer for Outsourced Workers in Our Factory? Seeking Clarity

Dear All,

I am working in a manufacturing unit in Maharashtra. In this unit, we have outsourced the work of providing manpower (non-executives) to a third party, under whose rolls all non-executives (including workers) are employed.

Principal Employer Under the Factories Act or CLRA Act

My query is, who shall be the principal employer under the Factories Act or CLRA Act for the non-executives working in our factory premises under the rolls of the third party?

Certificate of Principal Employer for Multiple Employers

My second query is whether a certificate of principal employer can be given to two employers who are working in the same premises?

I kindly request answers to my questions.

Best Regards,
Arunabh Mukherjee
Assistant Manager - HR

Definition of a Worker under the Factories Act

The definition of a worker in the Factories Act includes workers employed through contractors. Hence, you are the principal employer under the Factories Act and CLRA Act.

Regards,
Varghese Mathew
Labor/HR Consultant
TVM
[Phone Number Removed For Privacy Reasons]

If the number of workmen working under the contractor is more than 20, the CLRA is applicable, and your company will be the principal employer in that case. I wish to specify here that the definition of a workman under the Factories Act includes workmen employed directly or indirectly. This is relevant only when there is a question about who the workmen of the factory are. You need to apply for registration with the authorities.

Definition of Establishment

Establishment means any place where any industry, trade, business, manufacture, or occupation is carried on. Therefore, if two separate persons are engaging contract labor in the same premises, then two separate registrations will have to be taken.

Regards

Thank you for your reply. You are correct when you say that if contract workers exceed 20, we become the principal employer rather than the contractor. However, in this case, the contractor is providing services to a third party whom we have engaged on our premises to provide the services. Therefore, shouldn't the third party be the principal employer for its contract workers? If so, the question arises about our legal obligations towards those contract workers since they are working on our premises.

You are also correct in mentioning that two separate registrations should be obtained since two different individuals are engaging contract labor in the same premises. However, is this permissible under the law?

Thank you,

Arunabh

Dear Arunabh, your initial query did not convey proper facts. Do you mean that your contractor has subcontracted the work? Please elaborate on the nature of work performed by all three of you so that proper advice can be rendered.

Dear Sir/Madam, Sorry for the late reply as I was not able to access the internet. Coming to your questions, please find my reply:

1. Our contractor is an organization that is a joint venture between a PSU and a private company. Its main work is providing services (manpower as well as civil contracts) at power projects across the country.

2. This contractor has employed the following:

a) Non-executives directly under its role on an annual contract basis. The contract is renewed each year after the completion of the contract period. These non-executives are deployed in our plant premises. Their wages are paid by the contractor, and it claims the same from us after loading its commission.

b) It has further subcontracted mainly civil nature work to other agencies under whose roles there are workers performing work. The compensation for the same is claimed by the subcontractor from the contractor, who claims the same from us after charging its commission.

c) We, as a company, have employed only executives whose salaries are paid by us directly.

In light of the above, please render your advice as to the status of the principal employer in the plant premises.

Thanks,

Arunabh