Balancing Two Roles: Is It Okay for an HR Manager to Run a Contract Labor Business?

Dear All,

Greetings! One of my team HR managers has resigned from his job and started a business supplying contract labor to manufacturing companies. He has now secured a job in a reputed organization while still continuing with the contract labor supply business. Additionally, he is attempting to supply labor to his former company.

My questions are:

1. Is it acceptable to have two jobs simultaneously?
2. If so, can we refer to him as an HR Manager cum Manpower Contract Owner?

Thank you.

Dear John,

The facts you stated may be true, but it appears to me that the answers to your questions cannot be simply given merely on the strength of the facts you presented only.

The HR Manager's Right to Start a Business

First and foremost, the erstwhile HR manager started the manpower supply agency on his own only after resigning from his previous job. It is his fundamental right, and as such, it is beyond the criticism of a third party like us.

Dual Employment and Consent

Secondly, for whatever reasons best known to the new employer and to himself, he has resumed his job as a full-time HR manager. It is not certain whether the employer has given him consent to run the manpower agency simultaneously without any conditions or if the person has formally transferred the ownership of the agency to someone like his wife, son, or some other close relative, subject to his informal control and supervision. If it is so, it cannot be termed as illegal. Even his present employer cannot raise the issue of dual employment against him under the above context.

Approval from the Company CEO

Thirdly, if his attempt to push his de facto agency to supply labor to the company where he is working as an HR manager now has the tacit approval of the CEO of the same company for obvious reasons of economy, effective control, and supervision, who are we to question it? Only a trade union of the affected workmen, if any, can raise the issue in a conflict situation, and even then, not very successfully, as clandestine deals would always have the cloak of legality that cannot be pierced so easily.

Of course, his adversaries may label him as "HR manager cum Labor Supply Contractor," so what? After all, when the lust for money sets in, ethics take to wings.

Dear John,

As deeply explained by Umakanthan sir, there should be no objection to Point 1 & 2 (because these are normal phases through which many of us have faced).

Regarding Point No. 03

1. In what capacity are you raising the query? Are you a beneficiary of the company, a well-wisher of the HR Manager cum Labor Supply Contractor, or a common person who just wants to know what could be the subsequent effects? Or are you hiding behind the "Friend" tag (my assumption)?

2. You said "he is trying," which means it is not yet finalized. Since it is a reputed organization, there must be some pre-approval processes (which have multi-level validations/hierarchy) through which such contracts/jobs are awarded. In my opinion, even if he runs the business under other names, such practices should be rejected at the first instance.

3. Under audit terms, it is said "the approving authority should have no connection with the beneficiary (vendor)." Here, there is a direct link with both. How can a person be authorized to approve his own bills/cost/profit margins, etc.? (HR Managers are generally involved in approving labor supply bills/cost).

4. If somehow he is able to get the job, it will not only be difficult to control but could also lead to financial losses (increased cost). He may show himself as L1 (by reducing service charges or other factors), but later he can manipulate the costing and other factors as well (being the HR Manager).

5. Sooner or later, the management will catch the gaps. In that situation, he may lose both the job and the business as well. Moreover, it can affect his future career as well.

In my opinion, it is not advisable to choose such a risky option.

The rest of the decision is with the "Reputed Organization" and the "HR Manager cum Labor Supply Contractor."

Manpower Services and Employment Policy

A person owning a manpower services agency acts as the owner or proprietor. They may take contracts and render services, adhering to the terms and conditions outlined in agreements and within the framework of regulatory norms and applicable acts.

Now, considering this person is also employed in a managerial capacity, the first consideration is the company's policy regarding such dual roles. Does the policy permit this scenario? Secondly, the company is attempting to hire his services under a separate contract. Does the company policy allow this?

Legal Implications and Obligations

What are the legal implications or obligations? If the company's policy permits all of the above, it is the company's responsibility to ensure that legal implications are addressed and complied with for the hired services. In this context, the company cannot authorize the same person to control and manage the contract. Auditing is required at all stages of service provision. Regarding hiring and employment, no authority can challenge his employment as long as he performs due diligence and fulfills his duties.

I wish to add a little to the above after going through the seniors' comments or suggestions.

Conflict of Interest in Manpower Agencies

Running a manpower agency and providing manpower to a company where we are working is normally not permitted. Even if done clandestinely, it will result in a conflict of interest. There could be tacit approval from top management; otherwise, if it comes out, the HR Manager will be in trouble. He may face many issues in case of any misconduct, violation, etc., as he cannot sit as a judge for his own wrongdoings.

Legal and Moral Implications

However, as seniors said, had he transferred ownership to others before joining, he can be saved legally, but not morally. Anyway, lust for money will not allow one to think of others.