Labour Reform : Government Contemplates on Giving Legal Backing to Contract Workers

Overview : Labour Reform Government may soon provide firm legal backing for the hiring of contract workers as it is considering the introduction of labour reforms that will have far-reaching impact. Currently, the Contract Labour (Regulation & Abolition) Act is not able to provide adequate legal protection to contract workers and is observed as discouraging the formalization of the labour force. This has resulted in the deprivation of adequate safeguards for many employed in the informal sector.

It is being considered by the government to drop the word ‘abolition’ from the law as it is found to be contradicting with the regulation of the sector and to give staffing firms a national license.

Such license will be based on set criteria which will be renewed every 3 years.

This will prove to be advantageous in two ways viz. help create more jobs in the organized sector and provide better social security for contract workers.

“Contract labor is now a reality. There is a need for a legal and administrative policy framework that can provide for easy hiring and social security for a growing number of contract workers in the country,” a senior government official told ET on condition of anonymity as the proposal is still being discussed.

A large number of contract workers are employed both by the government and the corporate sector where contract labour accounts for 45 percent of the private sector jobs and 55 percent of those in public sector.

If accepted, the government will move an amendment to the Contract Labour (Regulation & Abolition) Act to rename it. “This would give contract laborers the first and much-needed recognition,” the official said.

The number of contract laborers in the country is rising primarily due to the reason that they can be paid less than permanent workers and the ease with which they can be dismissed from employment. Currently, about 2 million contract laborers are in the organized sector which is minuscule.

The statistics are alarming as out of 480 million workers in the country, just 10 percent are in the organized sector, which implies that vast majority of contract workers who are a part of unorganized sector is deprived of social security benefits to be given to them.

The formalization of such employment would be welcomed by staffing firms. “Currently, staffing firms have to go for approvals for hiring contract workers at every location/premises and for every change in number,” said Rituparna Chakraborty of the Indian Staffing Federation lobby group.

A single license would be a boon, she said. “One national license, which could be given based on the financial credibility and past record of staffing firms, will make it easier for us to operate, besides reducing informalisation,” said Chakraborty, also co-founder of Teamlease.

“Such a sweeping change in legislation will see small staffing firms either close shops or start being compliant. For big listed firms, we see this as a direct push to job creation.”

“The International Labour Organisation’s convention 181 regarding private placement agencies prescribes a tripartite relationship in contractual hiring. While India is one of the ILO’s signatories, it is not among the big 42 countries that have ratified the convention.”