Engagement of contract labour
Aditya Mudgal
(Querist) 09 December 2008
This query is : Resolved
Dear All,
What are the various guidelines to be followed when one wants to engage contract labour? What all labour laws are to be complied with? Are there any risks involved? Does anyone have any checklist for the various documents required etc?
We are in the process of increasing output but cannot afford to take full time employees.. Please advise.. Much appreciated..
Thank you
Manish Singh
(Expert) 09 December 2008
you will have to give them all facilities etc. like canteen etc. and if the contractor doecnt pay their wages, epf, esi etc, you shall be bound to pay them the same but you can easily recover the said amount from the contractor.
H. S. Thukral
(Expert) 09 December 2008
Usually contract labour is being employed in selected jobs such as security, peons, cleaning jobs etc. For providing these services many agencies have cropped up. These agencies are to comply with various statutory requirements such as ESI, PF, Minimum Wages etc but it is the responsibility of the Principal employer to see that the agency is complying with these provisions. Principal employer becomes liable when any dispute arises on the same. If the number of contract labour increases a limit, a license to employ contract labour is needed. A good drafted contract with the agency in this regard shall help the employer to dispel any direct employer-employee relationship with contractor's employees.
Aditya Mudgal
(Querist) 09 December 2008
Thank you very much...
What might you say would be the standard operating clauses in such an agreement with the contractors/agencies?
From what I have been able to understand till now, the following would be necessary. Please correct me if i am wrong:
1. Provision of all the amenities mentioned under Chapter V of the CL (RA) Act
2. The provision of rotating labour to avoid engagement for a long period.
3. The provision that there will be no supervision from us, and the contractor will convey our instructions.
4. Payments to be made by the contractor in the presence of management representative.
5. Ensuring licence and renewal of the same with the appropriate authority.
6. Ensure that contractor issues service cards, ID cards, wage slips etc. to the workers.
7. Ensure that the labourers are covered under the ESI Act and Workmen's Compensation Act.
8. Ensure that the contractor files half yearly reports to the authority.
9. Ensure that the liability in case of any violation labour laws shall be borne by the contractor
10. Terms for the termination of the contract.
11. Terms of security and confidentiality.
12. Liability for negligence/accident by the labourers and indemnification of the PE.
13. Applicable law and jurisdiction.
14.
These are the provisions that I have come across yet, are there any other complainces or contractual terms that you can suggest to include in the contract?
Can i include any clauses related to productivity in the contract itself?
How can I ensure that there the management may inspect the work without it being called supervision.
Is it possible to train the contract labouers in safety procedures without it being considered to be supervision?
Thank You very much.. I have many many more questions but I guess these are enough at the moment.. :)
H. S. Thukral
(Expert) 09 December 2008
You have quite effectively dealt with all the points and seems to be well aware of would be complications. For example avoidance of control and supervision which is essential to establish employer-employee relationship. I shall add that in the terms for termination, you add duration of the contract for a fixed period with provision to terminate the contract during the validity of that period. Since you seem to be aware of of labour laws, I will draw your attention to section 2(OO)b of the ID Act. Even if you employ workers directly for fixed term, you can discharge them at the end of that period without inviting any compensation or illegalities. Only difference would be that in that case you yourself has to ensure all the formalities regarding ESI etc. etc.
Aditya Mudgal
(Querist) 10 December 2008
But wouldn't that apply only in cases where there is a contract of employment? Wouldn't this be a matter between the contractor and his employees?
Aditya Mudgal
(Querist) 10 December 2008
Is such a clause possible in engagement of contract labour agreements?
"In the event that the circumstances of the Contractor or any of his employees changes so that it may be possible for the Contractor or any his employees to be considered an employee(s) of the Company, the Contractor must inform the Company immediately in order that the Company may take appropriate action. The Contractor will indemnify and keep indemnified the Company in respect of any claims which may be made in relation to the Contractor’s failure to inform the Company of his or her changed circumstances."
H. S. Thukral
(Expert) 10 December 2008
You have to distinguish between the contract of service and contract for services. With a contractor you are entering into an agreement to provide you services.
You can in a contract also include a provision of a supervisor to supervise the contract labour.
Aditya Mudgal
(Querist) 10 December 2008
Yes, that would be a good strategy.. But the question that emerges is that if there is need to train the contractor's employees in the safety requirements, company policies, and/or any other required training etc. should this be passed on to them through the contractor (a manpower agency etc.) or can we train them ourselves. I feel that the problem with the latter is that it might amount to interference with the service or even supervision. How can these be reconciled???
Either depend on the manpower agency to pass on the training (which might not be done at all) and train supervisors OR do it yourself and risk permanency claims on this ground (supervision and control)
H. S. Thukral
(Expert) 10 December 2008
engaging contract labour on long term basis is not advisable. Despite those being contractors men, a union of workmen can raise a dispute for their regularisation in service or abolition of contract labour. It is better if you hire people trained by agency.
Hiralal Das
(Expert) 08 April 2009
Thanks all of you the ld. members and the author.
I think your valuable opinions will assist everybody to solve their problem/matter in question properly.
