Considering Contractor Employment for Garbage Collection: What Licenses Are Needed?

We are a Trust registered under section 12AA of the Income Tax Act as a public service organization. We collect garbage from about 1,500 homes in Hyderabad for a monthly fee, segregate and remove the recyclables, and send the rest to the landfill through the municipal corporation trucks. Fifteen workers carry out this task, and, apart from these, we have a bill collector and a supervisor.

Query on Contractor Employment

My query is whether we can make a few of the garbage collection workers contractors who will employ the rest of the workers. Do we need a license for this, and does the contractor need a license? We have to keep in mind that the work we want to assign to the contractors is perennial work throughout the year. Even considering the number of workers the contractors will engage, the total workforce will be less than 20. We will, of course, deduct TDS as required from our payments to the contractor.

We would greatly appreciate the advice of the experts in this group.

Since the nature of work is perennial, your act of getting things done through some contract labor will be illegal even if the number of workers engaged is less than 20. At the same time, you can have a contract for service with a few vendors (contractors) who manage to supply garbage for you. In such an arrangement, the contractor is only a supplier of material, and you pay for the goods delivered to you. It is up to the contractor to decide where the garbage should be collected from and how many workers should be engaged in the process. By doing this, you will not become the (principal) employer of the workers, and you will not be responsible for the payment of wages, ESI/PF, etc. Since this arrangement is a contract "for" service and not a contract "of" service, the provisions of the Contract Labour (Regulation and Abolition) Act will not be applicable to you, and therefore, you need not take any registration under the Act when the workers become 20.

Under the above system, the contractor will engage a sufficient number of workers to collect garbage, supervisors to supervise them, and bill collectors to collect payments from the households or business houses from where garbage is collected. You cannot have your own supervisors and bill collectors on the scene. You will be employing workers to segregate/sort out recyclables and also workers to take out the rest for landfilling. Again, if you have another contractor who is ready to take it out for an agreed fee, that activity can also be made another contract for service.

I would expect more comments on this topic.

Regards,
Madhu.T.K