India : India-Growing contract workforce needs legal protection
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View All NewsThe size of the contract labour force in India’s largest carmaker
Maruti Suzuki is reflective of how the corporate world is responding to the changed dynamics of the labour market. The share of contract workers in the automobile company’s total workforce has grown from 32% in 2013-14 to 42% in 2015-16.
Around 55% of the 537 million tonnes of coal mined by public sector behemoth Coal India during 2015-16 was done by 65,000 contractual workers. This ratio is poised to increase to at least 58% in the current financial year.
The growing demand for contract workers is in line with the global trend of seeking employment flexibility. Over the past 25 years unionisation has fallen across the world. Job outsourcing and dispersal of the workforce in multiple countries have become commonplace even for medium-sized companies in developed countries. As developing countries like China, Bangladesh, Egypt, Brazil and Colombia are changing their labour laws to permit flexible hiring, developed nations with strong trade unions have been forced to make regulations favouring temporary hiring.
In India, companies, particularly those in labour-intensive sectors like automobiles, construction and mining, usually refrain from hiring permanent workers for project-based requirements, as termination requires issuing a notice, payment of compensation, and intimation to the government.
India’s temporary workforce is governed by the Contract Labour (Regulation & Abolition) Act, 1970. Under the Act, an establishment that employs 20 or more workmen on any day of the preceding 12 months can employ temporary workers upon obtaining a valid certificate of registration.
Trade unions say companies prefer the use of contract workers because of the cost arbitrage. Contract workers are paid much less than regular workers. Nevertheless, this year’s Economic Survey estimates wages are on an average 20 times higher in the formal sector (contract and regular workers) than in the informal sector.
“When the work in an automobile factory is of perennial nature, why should a company be allowed to hire contract workers?” asks D L Sachdeva, general secretary, All India Trade Union Congress. Sachdeva says there should be no difference between a permanent employee and a contract worker who is equally experienced and does the same job with equal efficiency.
Industry executives point out that the presence of the word “abolition” in the Act sends a wrong message. “We employ people in ground-handling services according to our need. You can’t expect pay parity between workers with experience of 12 years and those with one year,” says an executive with an airline company.
Legal experts point out omissions in the law and the fact that the judiciary has interpreted the law in various ways. The Supreme Court in its judgment in the RK Panda vs Steel Authority of India case said workers continuing in employment for 10 years should be absorbed as regular employees. But in a separate case, Steel Authority of India vs National Water Front Workers, the court ruled there was no provision in the law implying absorption of contract workers.
Experts say the archaic law forces many companies to subvert it, denying adequate legal protection to contract workers. “When this law was made, only the bipartisan nature of negotiation was kept in mind. It has to change in the current scenario,” says Rituparna Chakraborty, senior vice-president of staffing company TeamLease.
Moreover, the process of hiring contract workers is a tedious one. An organisation with offices across the country has to seek registration by declaring the number of vendors who supply contract workers in each office, based on which forms are issued by separate states. Every vendor in every premise has to seek a licence on that basis. Many companies find ways to subvert the law by hiring contract workers through third-party agents. “The government should make licensing for staffing firms compulsory to weed out fly-by-night operators,” says Chakraborty.
The government is waking up to the reality of flexi-staffing. It recently allowed temporary workers in the garment industry. The decision to set the minimum wage of ~10,000 a month for contract workers is another step in that direction. “Contract work is now a reality; the government understands that, and is working towards facilitating it,” noted Shankar Agarwal, secretary in the labour and employment ministry.