Freer hand likely in hiring contract workers for ancillary businesses

The Union government is holding a discussion on Tuesday on a change to the contract labour law, aimed at giving a freer hand in hiring such labour for ancillary businesses and non-core activities.

The proposed law also has provisions to bring information technology (IT) entities which outsource their jobs out of the ambit of the Contract Labour (Regulation and Abolition) Act. The government has proposed amending Section 10 of the Act to distinguish the nature of work performed by an establishment, based on core and non-core activities, irrespective of whether the work is season or through the year. The government has defined core business as the "main activity of an establishment", other than "ancillary" activities.

The present law empowers state or central governments to prohibit the hiring of contract labour, after considering their employment conditions in an establishment, with various other factors. The law suggests an entity cannot hire contract workers in jobs that are perennial in nature or round-the-clock.

Worker representatives have been demanding the prohibition on the hiring of contract labour in various categories of jobs from time to time.

A senior labour and employment department official says non-core activities might cover housekeeping, gardening, security, catering, maintenance and other such services where contract labour can be easily hired. For instance, airlines, whose core business is flight operations, might get to hire contract workers in ground handling subsidiaries.

"This clause will weaken trade unions' powers to demand to abolish contract labour in perennial nature of work in an establishment," said K R Shyam Sundar, professor of human resources management at XLRI, Jamshedpur.

"Successful organisations and big trading companies float subsidiary companies to look after the peripheral and non-core activities of the organisation to achieve efficiency, cost-effectiveness and optimisation of profits and productivity, to maintain a competitive edge in the global arena," says the All India Organisation of Employers in a recent report.

This change in law was first proposed by former finance minister Yashwant Sinha under the previous National Democratic Alliance government, in his 2001 Union Budget speech. He had proposed facilitating "outsourcing of activities without restriction" in non-core businesses of an establishment.

Later, a Group of Ministers, after several discussions between 2000 and 2003, had identified 10 areas "in the nature of supportive services of an establishment", that may be exempt from contract labour law. These were to include maintenance and repair of machinery, loading and unloading, IT, units established in Special Economic Zones exporting more than 75 per cent of production, and construction and maintenance of buildings, roads and bridges. However, the proposal was put on the backburner after the United Progressive Alliance government came to power in 2004.

The Andhra Pradesh government in 2003 allowed the hiring of contract workers in 10 non-core activities "in the nature of support services" to an establishment. Since labour is a concurrent subject, states can bring their own labour law amendments, with permission from the central government.

Another major change would be in IT establishments. If a work order is given to a contractor who has hired employees on his payroll, then the workers will not be treated as contract workers. Under current law, a worker is "deemed to be employed as contract labour in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor".

"Companies such as Tata Consultancy Services represented to us that even their permanent employees are treated as contract workers when they enter into contract with government or other agencies, bringing them under the ambit of the contract labour law compliance," said a senior government official. The official said this led to an "inspector raj" culture.