Can a Principal Employer Adjust Outsourced Employees' Salaries? Let's Discuss the Implications

Can the principal employer change the salary for outsourced employees?

As the principal employer, you may have the authority to adjust the salary of outsourced employees, either increasing or decreasing it. However, it is crucial to consider the implications of such changes. Any alterations in salary should be made in accordance with the terms of the employment contract and comply with applicable labor laws and regulations. It is essential to communicate openly and transparently with the outsourced employees about any changes to their compensation to maintain a positive working relationship and avoid potential legal issues.

It is better that the principal employer (PE) should not have direct control over outsourced employees. It will be better if the PE discusses with the outsourced agent and implements it through them. This will maintain a proper employer-employee relationship.

Regards, S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons]

Sourabh, can you clarify the above matter? What exactly has the PE done (or plans to do)?

Salary adjustments by the principal employer

Generally, contractors will pay the salary agreed upon with the PE. So, if the PE wants higher pay to be given, they will increase the amount they pay to the contractor. Or do you mean the PE is directly telling contract workers that the salary is to be increased?

Challenges in decreasing salary

As for decreasing salary, that is rarely done and difficult. Besides, the employees will mostly leave or raise an Industrial Dispute, both of which are problems.

Salary Changes for Outsourced Employees

The principal employer cannot change the salary, i.e., increase or decrease, for employees outsourced through others. At the same time, the principal employer can increase the salary for outsourced employees directly and decrease the salary for those who do not meet the requisite skills or expertise for which they were hired. There are cases where outsourced employees are being paid less than the amount paid to the contractor by the principal employer.

Principal Employer's Role in Salary Adjustments

The principal employer (PE) has the right to ensure that minimum wages are paid as scheduled, or as per contract terms, whichever is higher. Practically, they may not interfere beyond this, but there are instances where a limited number of contract employees are involved. Sometimes, the PE might insist on enhancing the salary of some contract employees directly working under them. On the other hand, when a large number of employees is involved, it is not practical to single out a few contract employees.

The principal employer can renegotiate the contract terms with the service-providing agency, ensuring there is no statutory violation by the service-providing agency in terms of wage payment and other associated obligations.

Regards,

I may add, while there is no possibility of the principal employer's insistence on decreasing the existing emoluments even in the case of average performers, there is no reason why they should ask you to implement an increase unless the present wage is lower than the applicable minimum wages. I don't think the principal employer asks you en masse to increase wages, but there is a possibility that for hand-picked outstanding performers, they may suggest considering increases. This may not be at corporate levels but at the floor manager's level only.