Legal Obligation While Appointing Casual Labour

Friends,

We are planning to appoint a casual employee for a short period in our company. Can you all guide us on the following:
1.) What formalities do we have to adopt while appointing casuals?
2.) What are the legal obligations?
3.) Do we have to issue an appointment letter for casual employees?
4.) If the company doesn't cover for PF & ESI, what will be the implication?

I hope members will help and give me guidance.

Thanks,
Nikhil

Dear Nikhil,

Greetings.

You have raised a thought-provoking question which every organization wants to know: what is the Government policy, and what are the legal issues in appointing casual laborers? I expect some of the members with a legal background can add to my reply.

Casual laborers can be appointed for work of an intermittent nature for not more than 240 days in a year. As per the Industrial Dispute Act, any person who works more than 240 days in a year is deemed to be permanent, and termination of such an employee would amount to unfair labor practice.

There is no need to give an appointment letter, which itself could be a reason for treating them as regular employees. PF and ESI have to be recovered from the salary of casual laborers, but deducting them would not amount to regarding casual laborers as permanent employees, unlike contract laborers.

Cheers,
Trisha
HR Professional

Hi Nikhil,

Every company these days is now interested in reducing dependence on headcount and, in the process, end up hiring casual vacancies or contract labor. The difference in these two is that a casual employee is under the supervision of the employer, while under the contract labor act, the employee is on the rolls of the contractor and is governed by the terms and conditions of employment of the contractor. However, in both cases, there are certain precautions to be taken. There should not be two sets of employees doing the same job - one as casual and another as permanent. Otherwise, this would lead to Unfair Labor Practice. Similarly, a casual employee, as the name suggests, is only "casual," and as such, requisite precautions need to be taken to issue him any letter of appointment/authorization. Many employers send these casual employees for specialized training, and there it becomes difficult to disprove that the appointment is casual. Many benevolent employers grant a rise in pay/compensation to these casual employees along with the permanent employees, and that also is disastrous.

In short, it is for the employer to decide what type of work can be done through such casuals, their other terms, etc.

Thank you.

Dear Nikhil,

Casual laborers are appointed to do work which is not of a perennial nature. So, first make sure that you want to appoint a casual worker for non-perennial work.

You will have to get their ESI and PF forms filled out, even if you don't submit the ESI form to ESIC.

An appointment letter is not a necessity. If, as a matter of practice, an appointment letter is being issued, then please do so, otherwise, it is not really required. If you plan to issue one, please get in touch with a lawyer to draft it.

My suggestion would be not to appoint casual labor, if possible outsource it to a third party so that no legal hassle arises.

There are many cases when casual/temporary/badli workers claim for permanency, and then you will have to run to court to attend cases. There are a host of cases for the same.

If you want to appoint casual workers, then make sure that they don't complete 240 working days in a year, else they will demand permanency. Also, if possible, rotate them every month so that they don't work on the same activity for a long time.

For any further clarification, please ask specific questions.

Regards,

Nilendra

Dear Nilandras,

Your post appears to offer a perfect solution for you. For casuals, since you are going to appoint them for temp work, ESI coverage is a must. It's better to style it as a fixed-term contract and issue an appointment letter with a termination notice period as you will have the benefit of the ID Act for retrenchment notice. The previous regime of the fear of an employee claiming permanency, as indicated by Trisha, is now gone with the advent of globalization and the Apex Court judgment in the Steel Authority case. The risks involved now are few.

With Regards,
V. Sounder Rajan

Dear Rajan,

Greetings.

Thank you for shedding light on this vibrant subject. Could you kindly provide me with the details of the Steel Authority case so that our site HR members can be aware of the permanency of casual laborers in any industry?

Cheers,
Trisha
HR Professional

Friends,

Thanks for the huge response.

Kindly tell me, as my organization has only 3 employees on the regular roll, do we still need to deduct PF and ESI for them?

Nikhil

Dear,

No harm in appointing casual labor if the nature of work is not regular or perennial; it should be intermittent and not lasting for more than 240 days in a year. According to the Industrial Disputes (ID) Act, an employee becomes a workman if they provide services for more than 240 days in a year and is deemed permanent. The termination of such workmen would trigger Section 25F, where an employer has to pay retrenchment compensation and complete other formalities of retrenchment. Therefore, ensure that a casual worker does not work for more than 240 days in a year.

There is no harm in providing an appointment letter (contract letter) that should be for a specific period, and the job nature should not be the same as that of other regular workers engaged.

Include a specific clause stating that this contract letter shall automatically terminate after a specific time (the period should be less than 240 days).

If the nature of work is casual, there is no need to enroll them as a subscriber of the Provident Fund (P.F.), but the Employee State Insurance (E.S.I.) will be applicable to casual labor.

In my opinion, it is better to pay both E.S.I. and E.P.F. for casual employees to avoid potential issues during inspections.

By being a member of the Provident Fund and having insurance from E.S.I., a casual laborer cannot claim permanency in employment.

To claim permanency in employment, there should be a regular nature of the job, more than 240 days of work, and other permanent employees should also be doing the same work – these are the basic facts on which the Apex court normally decides cases.

Thanks,

Mohd. Arif Khan

09891497178

Hi,

Can anybody reply to me, please? We are hiring fixed-term appointees for 3 years. Is this a permanent appointment?

Instead of appointing casual labour under the Contract Labour Act, the best solution, as per my knowledge, is to think of appointing ITI Trainees (Trainee Scheme/Trade-wise) for a fixed term period of one year. The matter of PF and ESI will not be applicable to them. In the offer letter, mention the one-year term and all obligations pertaining to the end of the period (one-year term). After the completion of the trainee period, the company is not held responsible for any obligations regarding permanency.

Hope this will be very helpful to all.

Shahu Management Trainee-HR/IR

Dear Trisha,

Kindly specify the case law or any other legal obligation regarding the regulation of casual workmen on completion of 240 days as per the Industrial Dispute Act as stated by you.

Thanks in advance,

Raagadeepti.

I am newly joined in Ludhiana company as an HR Assistant. I want to get ESI, PF, EDLI, Factory Act (Forms and registers) details for my growth. Can anyone help me for my future growth.

Thanks,
Pankaj
Email: pankajangra@yahoo.com

Dear Pankaj,

Please go through The Punjab Factory Rules, 1952, and Rules on ESI & PF Act for different registers and forms.

With Regards,

R.N. Khola

"I am newly joining a Ludhiana company as an HR Assistant. I want to get details on ESI, PF, EDLI, Factory Act (Forms and registers) for my growth. Can anyone help me for my future growth?

Thanks,
Pankaj
Email: pankajangra@yahoo.com"

Can you please help me with the following points:

Formalities for Appointing an Apprentice

1. What are the formalities to appoint an apprentice?

Formalities for Appointing Diploma Trainees

2. What are the formalities to appoint Diploma trainees?

Casual Labor and Compliance

3. If we appoint casual labor, should we pay ESI and PF?

Please clarify regarding these points.

Warm regards,
Chithirai Pandi S.

Hi Nikhil,

You can hire labor for LMR Rolls (LOCAL MAZADOOR LABOUR). Provide an appointment letter stating the role as contract labor and include a clause that specifies termination of employment upon completion of the work. The company should cover PF and ESI as it is mandatory.

Hi All,

I want to understand whether in a factory only casual labor can be appointed. Can they perform the core processes of the factory? Under what law do casual employees come?

This is urgent. Please provide me with valuable answers.

Thank you.

Regards,
Smita

Taking a lead from the discussions, as many organizations are resorting to engaging employees on a third-party roll, there is a myth that if they are rotated after a certain period of time or have a break in service after a certain period of time, it will insulate the principal employer from any claims or rights of absorption into their own rolls. Can anyone shed some light on this, referring to the relevant sections of the law?