Issues of contract labor

Delhi government is in the process of building temporary shelters for an increasing population of migrant laborers, one cannot evade the larger issues of contract labor any longer.

A new study, Delegation, contracts and enforcement in post-reform India; an institutional approach, reveals that “India’s key industries, such as cement, iron, and steel, cotton textiles and jute, rely on contract labor for as many as four out of every five workers.

Conducted across two major industrial states, West Bengal and Gujarat, Dibyendu Maiti from the Institute of Economic Growth (IEG) Delhi, led the research for an international research consortium Improving Institutions for Pro-Poor Growth (IPPG), UK.

The ‘word’ contract labor, is applied to labor employed to perform some work largely through a contractor. Hence, no direct employment relationship exists between the ultimate employer and the worker and allows the contractor to derive exorbitant rent to a large extent from upstream. Migrated laborers, on the other hand, are those who are forced to migrate rural to urban or agriculture to industry in expectation of a better pay. In principle, these laborers are employees on contract.

India’s Annual Survey of Industries puts the share of contract labor on organized manufacturing at 15 to 26% across West Bengal (WB) and Gujarat. But, the research found the share to be much higher 60 to 70% in the sample states. This may be because we undertook extensive field work. Most official estimates of contract labor are based on secondary data, where it is likely that contract labor is being under reported by employers.

The research reveals that minimum wage and other contract labor laws are widely violated. Many workers have no specific working hours, medical benefits or earned leave, and few arrangements for hazardous work. The study suggests the establishments of a vigilance committee, including representatives from the Labor department of the Indian government and the workers community to improve governance and transparency.

The idea behind the existing contract labor laws was to protect workers’ interests. Surprisingly, the enforcement mechanism of the law is not clear. First, there should not be any problem for the employee of contract laborers are hired for core activities; the competitiveness between contract and permanent workers will improve skill formation of the workers, Secondly the rigidity of licensing to anyone who can provide workers, should be relaxed to avoid promoting rent seeking behavior of bureaucrats, trade union leaders and middlemen from intermediation. And these are only some of the issues.

Since Gujarat and WB are both heavily industrialized and therefore representative of manufacturing across India, this study has significant implications nationwide. It also suggests that India’s economic success is not improving the lives of contract and informal workers, who form the largest section of the economy and make a major contribution to the country’s global success, and that effective political action is needed to make sure that economic growth is more inclusive.

Contract labor can be used for jobs like estate maintenance which may include daily cleaning of offices & office toilets, up keep of gardens around the plant, loading and unloading of materials into Stores or at site into the plant and also serving food items to staff and workers from canteen. A contractor may be assigned with a contract specifying the number of manpower providing the wages and welfare measures according to the labor laws. The contractor and his or her supervisor is responsible for proper and timely implementation of the work required. In addition casual labor is taken in on daily basis where payment is made daily on prevailing casual labor rates mostly stores officer receiving and dispatching the goos.

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  • Sugun

    Dear Sirs

    Please let me know the applicability of the Payment of Bonus and other acts to the contract workmen engaged by the licensed contractor in manufacturing industry.


  • Kirti P S

    I want to know what is the difference between contract labour and contractual (Contract based employee) ? Many companies hire their office staff and put them on third party payroll. Those employees become contract based employees for original company. These employees are paid less than on roll employees. Does contract labor law gets applied to These employees?