Contract workers are individuals who are hired on a temporary basis by an
employer to perform specific tasks under the terms of a contract. Contract
labour is one of the most severe types of unorganised labour. Workers can be
hired on a temporary basis through contractors under the contract labour system.
In this category of work, contractors hire men (contract labour) who work on the
premises of the principal employer but are not considered employees of the
Here a Principal Employer is someone who owns or controls a
business or facility where if its:
- A factory, it is the owner or occupier or manager of the factory;
- A Mine: it is the owner or the manager of that mine;
- The Government: The head of the office or department or an officer notified by
the government or local authority.
Contractual Employment in India is governed by the Contractual Labour
(Regulation and Abolition) Act of 1970. Section 1 of this Act states that it
applies to any establishment that employs or has employed more than 20
individuals on a contractual basis, as well as any contractor who employs or has
hired twenty or more workers on any day in the previous twelve months.
Advantages Of Contract Labour In India
Numerous factors affect how much work is needed in various businesses. Sometimes
it's due to the business cycle, and other times it's because of an unexpected
spike in demand for the product. Additionally, firms wishing to effectively
manage the transition time or expand their organisation in new areas might
benefit from using temporary workers as a solution. There are big projects
planned that could need more work, or important team members might not be
accessible for a variety of reasons. Contract staffing is the best solution in
all of these cases.
Some of the benefits of contract labour can be as follows:
- Cost-effectiveness: Employing contract workers can save firms money since they are not required to cover perks like health insurance, bonuses, and pensions.
- Flexibility: By hiring contract workers for a certain period of time, employers can change their staff in response to demand or project requirements.
- Ability to access a varied pool of talented employees who may be authorities in their professions thanks to contract workforce.
- Simple Termination: If a worker's performance is subpar, employers may quickly and without repercussions terminate the employee's contract.
- Reduced Liability: Because contract employees are engaged through a third party contractor who is responsible for providing proper safety equipment and training, contract labour lessens the legal liability of employers for accidents or injuries suffered by the workers.
Overall, contract labour can provide many benefits to businesses, allowing them
to remain competitive and respond to changing market needs.
Disadvantages Of Contract Labour
Lack of job security: Contract workers have no guarantees regarding their employment and frequently have no idea what their future career prospects will be, which can cause stress and worry.
Exploitation: Contract workers are frequently taken advantage of by companies that provide them cheap pay, few or no benefits, no job security, and unsafe working conditions.
Lower job satisfaction and motivation may result from contract workers not receiving the same opportunities and perks as permanent employees.
Lack of legal protection: Because contract workers are not covered by labour laws and regulations, they are at risk of being taken advantage of and mistreated.
Limited career advancement: Because contract workers are frequently recruited for specific tasks or projects, they may not have the same prospects for career advancement as regular employees.
In general, contract labour can result in exploitation, a lack of benefits and
job security, as well as a reduction in productivity and career advancement.
Employers must make sure that contract workers receive equitable treatment,
proper benefits, and development opportunities.
Indian Statutes And Some Judicial Interpretations
The Contract Labour Regulation and Abolition Act, 1970 provides protection for
contract workers in India. According to the Act, a contract labourer is someone
who is employed by a major employer via a contractor in connection with the work
of an enterprise. The provision of all amenities to the workers as specified in
the Act is primarily the duty of the contractors. Contract employees must be
paid in accordance with the minimum wage statute. The Contract Labour Act has
made a number of requirements for the health and wellbeing of contract workers
obligatory, including safe drinking water, canteen amenities, first aid
facilities, etc. Contract workers must also be provided with social security
protections in the form of medical facilities and provident fund benefits.
The government is permitted to eliminate contract labour under Section 10 of the
CLRA 1970. However, if contractual employment is eliminated, the employer is not
compelled to directly recruit the worker as a permanent employee. The contract
workers won't be made permanent employees of the company or facility if the
employment agreement is legitimate; but, if the arrangement is a "sham," the
contract workers will be made permanent employees. A policy like this suggests
that, unlike a direct employee, there is little to no link between the worker's
primary company and them without the contractor.
If we see the judicial interpretation in case of State of Karnataka v. Uma Devi,
to decide against unclear employment, the court was petitioned. The court had
dismissed the claim, concluding that if ambiguous employment was outlawed, those
who could at least be employed on a contractual, temporary, or casual basis
would lose their chance to acquire employment rather than going without any job
at all. Such vague or ephemeral labour would at least provide them some solace.
The court, however, stressed that the equality principle, "equal pay for equal
work," has been specifically expressed in the Directive Principle of State
Policy. Consequently, the court rejected to award long-term employees permanent
There are both advantages and disadvantages to the discussion of contract labour
in India. Contract labour has benefits including affordability, adaptability,
and access to skilled employees. However, it also has a number of drawbacks,
including diminished productivity, exploitation, and a lack of job security.
Appropriate legislation is required to safeguard the rights of contract workers
and make sure they receive just compensation, benefits, and working conditions.
Employers must take accountability for the fair and respectable treatment of
their contract workers.
Overall, there should be a balance between the necessity for good labour and the
usage of contract labour in India. Government, business, and labour leaders
should work together to develop laws and regulations that support ethical
employment practises and safeguard the rights of contract employees.
- Steel Authority of India v National Union Water Front, AIR 2001 SC 3527
- State of Karnataka v. Uma Devi (2006) 4 SCC 1