Minimum Wage for Contract Workers: Can It Really Solve Labor Market Issues?

Dear Seniors,

As you know, the Labour Ministry has proposed a minimum monthly income of Rs. 10,000 for contract workers. Please give your views on - Will fixing a minimum wage for contract labor resolve labor market issues?

Regards,
Gaurav

In the first place, yours is a thought-provoking question as it presupposes a firm conviction that the fixation of minimum wages exclusively for contract labour and its periodical revision alone would neither solve the problems of contract labour as a less-privileged class of labour nor eradicate the menace of contract labour as a system of indirect employment.

If any activity of business, trade, commerce, manufacture, or analogous thereto is perennial in nature, it requires a labour force for hire that has the feature of regularity in terms of attendance, working hours, leave and holidays, payment of wages, methods of work, control and supervision by the employer, tenure of employment, etc., thus creating a direct and implicit nexus or a long-lasting relationship between the employer and the persons employed, which is otherwise called the contract of service. In short, this is what is called the system of direct labour that is employed on the core activity of the establishment. Still, there may be certain other activities which are incidental to the main activity and last for a limited duration of time involving no skill or altogether different types of skill and hence no supervision of the employer. When some people are engaged in such activities, that is called casual employment, which is only ad hoc. However, when such incidental activities require more people and considerably last longer, in order to ensure their timely mobilization and supervision, the assignment is given to a third person simply in terms of the results to be produced by means of a time-bound agreement or contract, and the labour engaged therein is called contract labour, which is nothing but a form of indirect employment just because of the presence of an intermediary. Thus, the contract labour have two employers, i.e., the immediate employer who is the contractor and the principal employer for whom the contract labour have to work. So far so good.

But the real problem arises when the contract labour is shifted to the core activities of the establishment purely for reasons of economy, higher bargaining power of the regular workforce because of their unionization, flexibility of employment in tune with market conditions, etc. Though the Contract Labour (Regulation and Abolition) Act, 1970 has stringent provisions, the lack of political will has resulted in its diluted enforcement. The difference between core and incidental activities is practically not taken into consideration nowadays in the engagement of contract labour. Engaging contract labour in any activity other than those prohibited under section 10 of the Act has become the normal practice.

In this context, whether the proposal to raise the minimum wages of the contract labour to Rs.10,000 will serve any useful purpose seems to me doubtful. Already, minimum wages are fixed for scheduled employment-cum-post wise without any distinction as to the nature of employment such as permanent, temporary, etc. Therefore, contract labour are also entitled to the minimum wages in force. If the minimum wages are fixed exclusively for contract labour as a distinct class without reference to the job done by them, it may be lesser than the rate fixed for a particular job in the establishment or industry. So, let's wait and see the notification.

Regards

Minimum Wages for Contract Labour

Minimum wages are fixed for each kind of work and each scheduled employment. There is no scheduled employment called contract labour. Suppose that all contract workers are brought under one scheduled employment, viz., contract labour, and the minimum wages for that employment are fixed at Rs. 10,000 per month. That would be the wages payable to all who are hired through agencies or contractors.

Currently, we have separate minimum wages based on work, such as minimum wages for security guards, minimum wages for housekeeping staff, etc. If the proposed amendment to the CLRA Act is enforced, there is a chance that the housekeeping staff engaged through a contractor will receive wages of Rs. 10,000, while those doing the same work but employed directly by the principal employer will receive, say, Rs. 7,000, being the minimum wages applicable to housekeeping staff. I don't think this is fair.

Regards,
Madhu.T.K

I agree with the comments of both Shri Umakanthan and TK Madhu Sirs. In fact, if the government were to fix the minimum wages at Rs. 10,000 for casual labor engaged through contractors, there are hundreds of direct employees in several companies who would be drawing less than Rs. 10,000, and there would be heartburn. Even with periodical increments or revisions, there are many unskilled to skilled employees drawing Rs. 5,000-7,000. A thorough scrutiny of wages, salaries, and benefits given to all types of employees has to be reviewed before fixing wages only for contract workers.

Regards, C. Neyimkhan

Kindly, can anyone confirm if any objections have been raised against the said contract labor minimum wage notification?

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This paragraph seems to be a direct inquiry seeking confirmation regarding objections raised against a specific contract labor minimum wage notification. It is clear and concise, and the grammar and spelling are now corrected.

Dear Friends,

Mr. T.K. Madhu and Mr. Umakanthan have well-explained the fixation of wages for contractor labor at a minimum of Rs. 10,000/-. In fact, the wages in some job categories mentioned in the notification are higher. The amount of ten thousand rupees is specifically for unskilled (Central Labor) workers only. Up to now, no objections have been raised by any of the trade unions. However, the state government may face issues if the trade unions demand to extend the same to State-level Contract Labor.

Regards, PBS KUMAR

My understanding is that the proposal is not to make it applicable to central-level employees but to amend the CLRA (Central) Rules so that the same will cover all the states.

Madhu.T.K

Enforcement of statutory wages rather than fixing wages for contract labor is more necessary. The online payment method should be strictly enforced in place of direct payment so that contract labor receives the same amount as the principal employer is paying to the contractors.

Government Revisions on Wages and Implementation Challenges

The government is revising wages, bonuses, PF, and ESI, as well as minimum wages for the working class from time to time. However, many organizations are not following these revisions, which is a well-known fact. The government seems to show a lack of concern for the strict implementation of these measures. Resorting to courts and authorities is a cumbersome process, often resulting in delayed justice. Then, one wonders why the government is making these revisions if their enforcement is lacking.

The government should ensure that wages, bonuses, and minimum wages are paid through banks, with payments checked by officials every month. Dispute resolution processes should be expedited (within 3 months).

If sincere efforts are made, it would greatly benefit the working class by improving productivity, reducing disputes, and boosting the economy. This would lead to industrial peace and prosperity, making the working class happier. Otherwise, it would all be in vain.

I agree, Gurumurthi. It is not just an amendment that is required, but we need effective implementation of these laws. I should say that Kerala should be the sole state where you can see effective implementation of labor laws. Still, there are employees who say that they are not given whatever they deserve as per the law. That means in Kerala also the implementation is just 80%.

The Reaction of Investors

The other side of the situation is the reaction of investors. For them, Kerala is the least interested place because it is known for more hartals and strikes, and there are a lot of trade unions in Kerala. However, they will never accept that we need a place where we can do our business with a free hire and fire policy, where we need not pay even the wages calculated as per the old Economic theory of wages, viz., Subsistence Theory of wages, where we need not provide anything else like bonus, PF, ESI, and nothing!

But in reality, the companies that have gained profits are those who have recognized the importance of these labor laws and applied industrial relations theories in practice.

Regards, Madhu.T.K

Concerns About Wage Discrepancies in Management

Today, some managements are only giving the minimum wage to contract laborers, and even to regular workers. However, in the case of middle management, like officers and those below the AGM level, there seems to be a lack of concern for their salary. Qualifications, experience, and job responsibilities hold no value for them. They only seem to focus on pleasing the top boss by periodically revising their salary and providing all facilities.

In Odisha's Joda-Barbil-Keonjhar area, due to the closure of mines, managements are exploiting the middle management. The salary of middle management is 10-15 times less than that of top management, with no facilities similar to what the top bosses receive. Why shouldn't the government take action or make amendments to the salary system in the private sector industry or mining belt areas? The government could consider implementing a minimum and maximum salary for all categories, from laborers to top bosses, in a proportionate manner to minimize the differences. Facilities should also be provided based on responsibility or designation, with all payments made online.

Why is there a discrepancy between private sector employees and government employees?