Is It Legal for Companies to Hire Without Issuing Appointment Letters? Seeking Guidance on Long-standing Practice

Respected Sir and Madam,

In my organization, workers were given a monthly appointment letter. For another six months, they were put on a voucher basis. However, now the management is reluctant to provide six-month appointment letters and is stating that they will only receive a voucher salary without any accompanying letter. Is it acceptable to make such a decision, or is there a law regarding the issuance of appointment letters? We have been following this practice for the last 4 to 5 years. Please provide us with guidance.

How can an administration hire a worker without issuing an appointment letter?

Hi, To evade statutory obligations, your employer wants to keep all the employees on regular rolls. How big is your organization? You cannot keep the whole staff on regular rolls. Even employees serving for long years without an appointment letter have the right to claim benefits. Therefore, the issuance of an appointment letter with defined terms and conditions will be beneficial for both the employer and employee.

In the absence of any appointment terms, either party can terminate the employment without notice. You cannot question an employee if he/she abruptly leaves after receiving the voucher payment.

The importance of appointment letters

An appointment letter or offer letter duly accepted by the employee is a basic document that regulates the service conditions attached to the employment. It is a contract between the employer and the employee. Since no employer can engage any person without a contract, employing persons without any proof of employment or contract of employment is bad in law. The Shops and Commercial Establishments Acts of some states, like Kerala, have mandated that every employee should be given an appointment letter in a prescribed form with particulars of wages, etc., in it.

Misconceptions about appointment orders

Many employers consider that giving appointment orders would make them covered by various labor laws or that the employees would get a lien on employment. Yes, even if you don't issue appointment orders, the lien on employment is there with the employees. Similarly, the non-issue of an appointment order will not make the employer free from coverage of labor laws. For coverage of labor laws, what is material is whether a person is engaged as a worker or not. At the same time, in the absence of an appointment order, it will be difficult for the employer to defend against an employee who demands a wage higher than what was promised. In various industrial disputes, it will be the appointment orders that will prove against the employee. Therefore, never think that not giving appointment orders is good for the employer.

The procedure adopted by your employer is nothing but an illegal and unfair practice. They are exploiting the unemployment conditions of the country and the helpless economic conditions. All the employees have to take a stand against this system. All this is happening because of pseudo-political and poor governance.

Unfair labor practices in MSMEs and major corporates

This kind of 'unfair' labor practice is prevalent not only in MSMEs but also in major corporates, where 'contract' employees are engaged using registered 'contractors' for regular work such as housekeeping, security, loading & unloading, canteen services, and so on, under the guise of 'off-loading or outsourcing.' Principal Employers resort to this to avoid carrying a considerable workforce on their 'Muster/Payroll,' thereby keeping employee costs at minimum levels. Under this pattern, there is no possibility of evolving into 'continuous employment' for the same person, as no one gets employed continuously throughout the month, and there is no assurance of 'continuity.' For example, person 'A' might work only 20 days in a month, meaning he is not employed permanently.

The rise of gig workers

Another form of such practices spreading fast is 'gig workers,' under which there exists no 'employer-employee' relationship. They are paid for the work assigned or carried out against job-to-job invoices.

Regarding the present query, issuing an appointment order on a daily basis is very strange and should be dispensed with immediately.