What Should You Keep in Mind When Hiring Contract Labor? Let's Discuss!

Remember While Engaging Contract Labour

Please find enclosed the attachments for "Remember While Engaging Contract Labour."

Regards,
Abubakkar

1. Obtain a contractor's license as this is the proof of a legal contractor.
2. Do not continue any contract employee for more than 6 months.
3. Pay them minimum wages or fair wages. Their wages should not be much less than the MSL.
4. Ensure fair service conditions.
5. Ensure whether the contractor is covered under PF & ESI/WC Insurance.
6. Reasonable or fair treatment will help while settling any issues.

I would like to add some here. In addition to what is stated in the above posts, please make sure that there is a valid contract between the Principal Employer and the Contractor.

Essential Ingredients of a Contract Agreement with Contractor

1. The agreement should be drafted and executed on non-judicial stamp paper.

2. The agreement must disclose the names and addresses of the Contractor and the principal employer.

3. The agreement must contain the rights and obligations of both parties.

4. The agreement must disclose the place of work, time of working, rate of compensation (towards consideration), and consequences arising out of the breach of contract and the procedure for termination by either of the parties to the agreement.

5. The agreement must disclose the scope of work, deployment of manpower in number, period of validity, compensation, security deposit, and terms of payment of bills.

6. The agreement should be between the contractor and the principal employer and should be witnessed by two witnesses.

7. The agreement should disclose the name and address of the contractor.

8. The agreement should disclose the exact nature of the job to be assigned.

9. The agreement should narrate the job actually to be performed.

10. The agreement should ensure and disclose the obligations to pay the minimum wages as applicable.

Regards,
Swapnil

The theoretical and legal points on the deployment of contract labor are very well discussed and elaborated above. In real business, companies do deploy contract labor in perennial types of jobs, and in certain cases, contract labor is deployed in positions where permanent employees are also engaged in the same or similar jobs, which may attract litigation under Article 14 of the Indian Constitution. Such deployment increases the possibility of future IR disturbances and legal complications.

One of the most important reasons to take such apparent risks is probably low-cost labor, the availability of such labor in the market, poor control in the government machinery, and the reluctance of unionized labor to deliver proper work to the employer.

In business, risk and return are positively correlated. Contract labor will continue to be deployed, despite industry/factory-specific IR and legal setbacks, as seen in Air India, SAIL, many other companies, and recently in the Mehsana Factory of Maruti. I seek the contribution and comments of experts in this field from different parts of India on the following points.

1. What happens if we deploy contract labor in perennial types of jobs: Legally, contract labor cannot raise disputes against the principal employer and seek permanency, even if they are deployed in perennial types of jobs unless the company/industry has been prohibited by the labor department to deploy contract labor in such a category of job. As such, there will be no cognizance of such disputes.

2. In the landmark award in the case of SAIL: I find that even if a dispute is settled through adjudication/court in favor of contract labor, the judiciary, at most, may prohibit the deployment of contract labor in such cases but cannot impose/pass an award on the principal employer to regularize such contract labor.

3. Criticism of the recent Maruti case: I saw criticism of the recent Maruti case (where one of our colleagues, who also happens to be one of my classmates in XISS, died out of labor outrage) that the HR Department was responsible for such outrage. I wish the HR community could give a befitting reply to such criticism.

Please find the Andhra Pradesh CLRA Amendment for your reference.

With regards,
Chithiravel V.

Sir,

My name is Naveen. I want to inquire whether it is necessary for a contractor to have ESIC and EPF numbers for registration under the CLRA act. If the compliance of ESIC and EPF is done by the principal employer, as the contractor works on a small scale or with a single company, but wishes to register under CLRA as the principal employer has taken his licenses. Please guide me on whether he needs to obtain his EPF and ESIC numbers for this registration or if he can proceed without them.

Thank you.