Navigating HR in Manufacturing: How to Manage Casual Workers and Transition to Permanent Roles?

I recently joined a manufacturing company where nobody has knowledge of HR rules and regulations. I want to know, is it an issue if the company has casual workers, and how can we avoid the issues that may arise from casual workers seeking permanent employment? How many months or days are required to transition a casual worker to permanent status? Any suggestions for managing breaks in service to prevent the aforementioned issues?

Registers for Casual Workers

Additionally, I would like to know what type of registers we should maintain if the manufacturing company employs casual workers. Do these registers fall under the Factories Act or the Contract Labour Act? What registers are mandatory under the Factories Act? What are the key rules that I need to be aware of?

Salary Structure of Casual Employees

Regarding the salary structure of casual employees, does it come under the Factories Act or the Contract Labour Act? What are the salary components and their percentage in the salary structure? Should we include HRA as a salary component?

Please provide guidance on how to excel in my role in the manufacturing industry.

Casual Workers in Manufacturing Companies

Q) I want to know if there is any issue with the company having casual workers, and how to avoid issues arising from casual workers seeking permanent jobs?

Ans: There is no issue in having casual labor, but you must place them under a contractor who has a contract labor license. The contractor should pay PF, ESI, statutory bonus, and gratuity. Additionally, you should have a principal employer contract labor license.

Q) How many months/days are required to treat a casual worker as permanent? Suggestions for a break in service to avoid the above issue?

Ans: Recently, fixed-term employment was introduced for all manufacturing sectors. Even if you issue fixed-term employment, you need to fulfill all statutory benefits applicable to regular employees, including PF, ESI, bonus, and gratuity.

Q) Sir, I would also like to know if the manufacturing company has casual workers, what type of registers should we maintain? Do they come under the Factories Act or the Contract Labour Act?

Ans: You have to maintain separate registers for on-roll employees and contract workmen.

Q) What registers should we maintain under the Factories Act?

Ans: You must maintain all registers in the prescribed format of the particular state where your factory is situated, such as the Muster Roll, Wages Register, Advance Register, Leave Register, Deduction of Fines, White Wash Register, PF Inspection Book, ESI Inspection Book, Accident Register, etc. You should display the local labor inspector's name and contact details on the notice board. Additionally, you must display the abstracts of all labor acts in the factory premises (Factories Act, Industrial Dispute Act, Standing Orders, Equal Remuneration, Minimum Wages, Payment of Wages, Gratuity Act, Payment of Bonus, Maternity Benefit Act, etc.).

Q) What are the important rules that I should know? Does the salary structure of casual employees come under the Factories Act or the Contract Labour Act? What are the salary components and the percentage of the components in their salary structure?

Ans: While fixing the salary structure, you need to consider the following:

1) Minimum Wages (Your salary slab should be above the minimum wages).
2) Don’t include too many components; keep only Basic & HRA.
3) As per the recent Supreme Court judgment on PF components, all fixed components except HRA will attract PF. Variable pays will not attract PF (VDA, OT, variable pays, etc.).
4) If the salary bracket is higher, keep the basic above 15K; remaining components can be kept as per your company policy.
5) If the salary bracket is low, keep 60% of the salary in Basic and the remaining 40% in HRA.

Q) Should we take HRA as a salary component?

Ans: Yes.

With Regards,
Jayendra