Making Contract Labour Act More Worker Friendly in India

By M.L. Dhar
PIB Features

New Delhi, April 13, 2011 (Washington Bangla Radio / PIB-India) Contract labour has become the order of the day given the compulsions of remaining afloat in a highly competitive environment due to globalisation.  The employment structures are undergoing changes across the world with emphasis on flexibility in labour markets.

To meet the changing scenario many countries have embarked on amending labour laws to liberalize their respective labour markets.  India too has been in it. The subject of contract labour figured prominently during the 43rd Indian Labour Conference where the Prime Minister Dr. Manmohan Singh said that  this might be the time to ponder the wider issues.  He said, ‘’We need to  consider the role of some of our labour laws in contributing to rigidities in  the labour market, which hurt the growth of employment on a large scale.  Is it  possible that our best intentions for labour are not actually met by laws that  sound progressive on paper but end up hurting the very workers they are meant to  protect?’’

The Contract Labour Regulation and Abolition Act, 1970 defines a contract labourer as a worker hired by principal employer of an establishment through a contractor for execution of a specific job. The Act makes certain welfare provisions like payment of minimum wages, certain health and sanitation facilities at the working place, provident fund benefits etc. for the benefit of contract labourers.

The Act applies to any establishment employing 20 or more workers on a contract basis on any day during the last one year. All contractors who employ or have employed 20 or more workers on any day of the preceding twelve months come within the purview of the Act. It is mandatory for such establishments to get registered as principal employers. Besides these regulatory provisions, government may prohibit employment of contract labour in any establishment or in any process/operation depending upon whether the work is perennial in nature or the work is incidental for an establishment. The Central Government on the recommendations of the Central Advisory Board has abolished contract labour system in a number of jobs in different industries and so far over 70 notifications have been issued. The Act provides for government inspections to detect violations.

Despite all these provisions, it has often been found that the law is under-protective for various reasons.   First, as the contract labour is mostly in unorganised sector, it is hard for contract labourers to prove their identity as workers because the employer-employee relationship under the Act is blurred.

Secondly, to circumvent labour laws various kinds of employment structures have been created since globalisation reducing   permanent  jobs  into non-traditional part-time, casual and contractual forms of employment.  This has weakened job security and collective bargaining of workers.

According to the D.G., Labour Welfare “Contract Labour, by and large, is neither borne on pay roll or muster roll nor is paid wages directly. The establishments, which outsource work to contractors, do not own any direct responsibility in regard to their labourers. Generally, the wage rates to be paid and observance of working conditions are stipulated in agreements but in practice they are not strictly adhered to.”

It has also been observed in some developing countries that with contractualization of labour, social security of workers has suffered and workers are often terminated without benefits. Even the 2nd National Labour Commission said that at several of the  centres it visited, it was found that in many cases contractors absconded after deducting social security contributions from the wages of contract workers leaving them high and dry.

Keeping in view the pressures of globalisation on establishments and the poor working conditions of the contract labour, the 2nd National Commission on Labour in its Report said that organisations must have the flexibility to adjust the number of workforce based on economic efficiency.  It, however, recommended that contract labour should not be engaged for core production\services activities.  The Commission further said that there have to be provisions prohibiting transfer of perennial core services to other agencies or establishments. It further recommended that the contract labour will have same remuneration as of a regular worker doing work of a comparable nature and the principal employer will ensure that the prescribed social security and other benefits are extended to the contract worker.

The Central Government has decided to amend the Contract Labour Act and has appointed a Task Force to make suggestions in this regard. Labour and Employment Minister M Mallikarjun Kharge said that the Act is being amended to ensure job security to workers and to check their exploitation.  Conceding that outsourcing of labour has severely affected the workforce, Kharge said, “With employers resorting to outsourcing methods to a larger extent, the practice has dealt a severe blow to employees as they get lower wages.”

Before suggesting any amendments it would be incumbent upon the Task Force to examine that whatever little is ensured by the law is adhered to in practice.  It has to bear in mind that contract labour and outsourcing have emerged as the prominent forms of employment. Therefore, the Task Force would have to balance between the flexibility in labour markets necessary in a competitive world, employment generation and job protection and social security benefits to workers.

(PIB Features)

Disclaimer: The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of PIB or WBRi.