Contract workers: Govt to resolve tug of war between employers and unions

The Union government’s move to allow industries to hire contract workers in ancillary businesses and non-core activity has not found takers among both employers and trade unions.

The labour and employment ministry held a discussion on January 19 with businesses and unions on its proposals to amend the Contract Labour (Regulation and Abolition) Act, 1970. In a bid to strike a balance between the contrasting demands, the government had proposed amending Section 10 of the Act that deals with abolishing of contract workers as and when demanded by the workers.

The aim of the 1970 Act is “to regulate the employment of contract labour in certain establishments and to provide for its abolition in certain circumstances.” According to Section 10, a Central Advisory Contract Labour Board recommends abolishing of this category in certain areas of an entity based on various parameters, including whether the work was of perennial nature or not. The central government, based on the Board’s recommendations, bans hiring of contract labour through an official notification.

The ministry had proposed on the one hand, discouraging hiring of contract workers in “core activity” of businesses and, on the other, allowing hiring of such workers in “non-core activity”. The present law suggests a firm cannot hire contract workers in jobs perennial in nature or round-the-clock.

“The issues arising out of the present law were that the industry was apprehensive in hiring contract workers for non-core activities such as housekeeping, gardening, security, catering and maintenance of establishment,” said a senior ministry official “And, these are activities in which an establishment requires workers throughout the year. So, trade unions argue that it’s perennial in nature in a way.”

However, all the employer bodies unanimously opposed the move in the January 19 meeting, sources said. “It is highly unlikely that the proposal will go through. Industry hires a significant proportion of contract workers in its core businesses, too. In an automobile company, nearly one-third of the workers are on its payroll and the rest are contract workers. So, for instance, in the car assembly department, there are both permanent and contract workers,” said an industry executive, on condition of anonymity.

Another executive said the biggest worry will be distinguishing core and non-core activity in an establishment in the changing business environment. “With technological advances, what is core and non-core activity is becoming fuzzy. Hence, wrong interpretation (of the definition) can lead to challenges and disputes,” said Pradeep Bhargava, president, Employers’ Federation of India.

Ten central trade unions, including the Left-affiliated Centre of Indian Trade Unions and the Congress-affiliated Indian National Trade Union Congress strongly opposed the move and said both core and non-core activities were essential in “integrated activities” of an establishment. The RSS-supporting Bharatiya Mazdoor Sangh said hiring of contract labour in work of perennial nature should be banned in both core and non-core activities in an establishment.

While unions have been demanding a prohibition on the hiring of contract labour in various categories of jobs, business has always demanded flexibility in hiring of labour.

The government’s proposal was based on the recommendations of the Second National Commission on Labour in 2002. “Contract labour shall not be engaged for core production, services or activities. However, for sporadic seasonal demand, the employer may engage temporary labour for core production or service activity,” it had said.

However, both unions and the staffing industry cheered the government’s proposal for mandating contractors to obtain a one-time national licence, valid for three years, from the central government, to work anywhere in the country. Under Section 13 of the present contract labour law, contractors are required to obtain a licence for undertaking each project from different state governments.

“Local contractors often exploit workers and monitoring them becomes an issue for the government. A three-year national licence for contractors will lead to transparency, avoid duplication of efforts and will ensure staffing organisations are cautious about conducting its business,” Rituparna Chakraborty, co-founder and executive vice-president at TeamLease Services said. Adding the move was in line with the International Labour Organisation’s Convention 181 on private employment agencies.

“The move will ensure contractors with a good track record and highest level of compliance is able to obtain a licence from the central government,” she added.

Contract Labour (Regulation and Abolition) Act, 1970

Objective: To regulate the employment of contract labour in certain establishments and to provide for its abolition in certain circumstances

Criterion for abolishing contract labour: Based on whether work in an establishment is of perennial nature or not. Law discourages contract labour hiring in perennial nature of work

What the govt wants:  

• To change the criterion based on core and non-core activity in an establishment
• Allow contract labour in non-core activity and discourage contract labour in core activity in an establishment

Why business is opposing this:

• Difficult to distinguish between core and non-core activity in changing business environment
• The move will tie its hands in employing contract labour in core areas of work. Will impact automobile firms the most

How trade unions see it:

• Contract labour should continue to be abolished in perennial nature of work, irrespective of whether it is in core or non-core area in an establishment
• Contract labour should be made permanent if employed continuously for more than two years

Where govt and unions do not see eye-to-eye:

• Former thinks business should get a free hand to hire contract workers for activities such as housekeeping, gardening, security, catering and maintenance of establishment
• As these activities are carried out throughout the year, unions are making a case for permanency in these areas