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Contract Labour System In India: Issues and Challenges Need For Social Work
Intervention

Article · January 2018

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Contract Labour System In India: Issues and Challenges Need For Social Work Intervention
Karibasamma N, Dr. Pavitra R Alur

Contract Labour System In India:

Issues and Challenges Need For Social Work Intervention

Karibasamma N, Dr. Pavitra R Alur

Research Scholar, Asstt. Prof.,
Deptt. of Social Work, Deptt. of Social Work,
Vijayanagara Sri Krishnadevaraya Uni. Vijayanagara Sri Krishnadevaraya Uni.,
P.G.Centre, Nandihalli-Karnataka P.G.Centre, Nandihalli-Karnataka

Reference to this paper

Abstract should be made as
Contract Labour is a significant and growing form of follows:
employment in various types of industries. The exploitation of contract Karibasamma N,
labour is now biggest issue in the era of globalisation and liberalisation.
Dr. Pavitra R Alur,
The aim of this Paper is to focus on the overview of the contract labour
system in India, Evolution, the analysis of the present law and various
loopholes under the Act. This Paper also analyses the history of the Contract Labour
contract labour Act and how the existing law Evolved in India by referring System In India:
various committees’ recommendations. This paper also explains judicial
interpretation on some important issues of contract labour Prohibition Issues and Challenges
and Abolition Act, 1970. Need For Social Work
Key Words: Contract Labour, Issues and Challenges, Social Work Intervention,
Intervention

Journal Global Values,

Vol. IX, No.2,
Article No. 5,
pp.26-33
http://anubooks.com/
?page_id=285

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 Journal Global Values, Vol. IX, No. 2, 2018, ISSN: (P) 0976-9447, (e) 2454-8391, Impact Factor 6.482 (SJIF)

Introduction
In the present world Liberalisation and globalisation are increasing at a very
high space and it presented change of business environment; profit oriented economics
and increased competition among industries for survival. Many MNC S, representing
the best brand in the world, started investment in India because of Potential market
capability and availability of workforce. They started setting up their offices in India,
giving a tough competition to their counterparts. To compete in this customer driven
market economy, industries requires flexibilities in managing manpower to address
occasional upsurge or slowdown in demand. But the ancient and rigid Indian Labour
Laws which were enacted8-4 decade’s back, restricting right size of manpower, are
creating hurdles in smooth functioning of industries. These factors are tending industries
to hire more and more numbers of contract labours to have greater flexibility to
adjust the number of workforce based on economic efficiency, better utilisation of
resources, optimisation of profit and bringing cost effectiveness despite the risk of
lower worker loyalties and lousy pay. But primarily we need to know who is contract
Labour, Contract Labour can be distinguished from direct labour in terms of
employment relationship.
Historical Background
The historical aspect of the contract labours in India would definitely give a
clear view of how the system of employing contract labour came into being. Contract
labour has its root from time immemorial. During the early period of industrialisation,
the industrial establishments were always faced with the problems of labour
recruitment. British employers or their representatives were not accustomed with
some basic problems of the employees like
Low status of factory workers, lack of labour mobility, caste and religious
Taboo, language etc. They were unable to solve these problems. Therefore, they
had to depend on middle man who helped them in recruitment and control of labour.
These middleman and contractors were known by different names in various parts
of the country.
Contract labourers were considered as exploited section of the working class
mainly due to lack of organisation on their part. Due to this, the Whitely Commission
(1860) recommended the abolition of contract labour by implication. Before 1860, in
addition to the many disadvantages suffered by the contract labour, the Workmen s
Breach of Contract Act 1959 operated in holding them criminally responsible in the
vent of breach of a contract service. 4
Subsequent to this, Many Committees were formed by the Government to
study the socioeconomic conditions of contract labour like Bombay Textile Labour
Enquiry Committee, The Bihar Labour Enquiry Committee, the Rega Committee
etc. As a result of these findings, the scope of the definition of “workers” in the

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Contract Labour System In India: Issues and Challenges Need For Social Work Intervention
Karibasamma N, Dr. Pavitra R Alur
Factories Act, 1948, The Mines Act, 1952 and The Plantations Labour Act, 1951
was enlarged to include contract labour. In the case of Standard Vacuum Refinery
Company Vs. Their Workmen, the Supreme Court observed that the contract
Labour should not be employed where:
a) The work is perennial and must go on from day to day
b) The work is incidental to and necessary for the work of the Factory
c) The work is sufficient to employ considerable number of whole time workman
d) The work is being done in most concerns through regular workmen
In the second five year plan, the planning commission stressed the need of
improvement in the working conditions of contract labour and thus, recommended
for a special treatment to the contract labour so as to ensure them continuous
employment where it was not possible to abolish such type of labour.
Overview of Contract Labour Regulation & Abolition Act:
Before the enactment of this act there was no specific legislation which
dealt in detail with the problem of contract labour. Although there were legislation
like Industrial Disputes Act, 1947, Payment of Wages Act, 1936 etc. But these
enactments were not specifically designed to solve the problem of contract labour.
Therefore, there was a need to for a specific legislation to stop exploitation of contract
labourers by Contractors and Establishments. The main object of the Act is to provide
for regulation of the employment of contract labour and its abolition under certain
circumstances.
Registration
This Act made it obligatory for the establishment and industries to register
before the concerned authority (Asst. Commissioner of Labour or Labour Officer)
in a period as fixed by the government before employment of contract labour. The
Establishments which deploy or have deployed more than 20 contract labours are
required to register the Establishment under the Enactment with the concerned
Authority. The application for registration by the principal employer must contain
various particulars in relation to the establishment and it shall be made in triplicate in
Form-I to the registering officer of the area with appropriate fees as fixed by the
government. The certificate of registration shall be granted mentioning the name
and type of the establishment, type of business, maximum no. workmen to be employed
as contract labour and other particulars in relation with the contract labour in Form-
II. If there is any change in the particulars of the establishment, it must be informed
to the authority within reasonable time.
Rights of labour
The act determines the rights of the contract labour so as to make them
secure from any exploitation. These rights ensure equal status of them as of the

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 Journal Global Values, Vol. IX, No. 2, 2018, ISSN: (P) 0976-9447, (e) 2454-8391, Impact Factor 6.482 (SJIF)

workmen and the violation of which is enforceable in court of law. In terms of

wages, hours of work, welfare, health and social security contract labourer’s interests
are protected. Any Agreement entered between the Parties and if any clauses in the
agreement is inconsistent with the benefits provided under the Act and are not
favourable for the labourers will be treated as invalid.
· The contract labours are entitled for the wages including overtime wages and
allowances as stipulated for their work at the establishment. It must be paid without
delay whenever the wage period is over. It must be in accordance with the Minimum
Wages Act.
· The contract labours have also the right to be provided the safety measures at the
establishment and immediate health service in case of any injury to the labour. They
are entitled for facilities like rest rooms, canteens, washing facility, first aid facilities
and many more. The women labours are entitled for the separate washrooms,
restrooms.
· They are entitled not to be employed in any work which is prohibited under any law
Issues of Contract Labour Regulation and Abolition Act, 1970:
According to the Contract Labour Act, the organisations are supposed to
adhere to the Minimum Wages norms. However it can be seen that there are workers
earning less than 100 per month which does not comply with the minimum wages
criteria. In general it has been found that there are three categories of firms as far as
wage payment is concerned. The large private firms that pay more that market
wages as efficiency wage. The efficiency wage hypothesis in economics states that
if the work effort depends positively on the wage level, a profit maximising firm
would find it profitable to pay above the market cleaning level.
The second category firms are those which strictly adhere to the prescribed minimum
wage Norms. The third category comprises the large number of small private firms
which prefer to employ uneducated worker who can be paid less than the prescribed
minimum wages.
Though contract workers enjoy provident fund benefit, the provident fund is
often a burden to them rather than a benefit. It is a burden in the sense that every
month some fixed amount is deducted from their meagre salary for provident fund
contribution. However, these workers often change their contractors they work for
and the account need to be transferred.
Unfortunately once a worker leaves a contractor, he/she never get any co-
operation from the previous contractor in this regard. It is the duty of the principle
employer also to verify the PF details, which is however, not often done. In order to
recover the PF amount, a contract worker has to have bank account in which the
sum due should be deposited by cheque.

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Contract Labour System In India: Issues and Challenges Need For Social Work Intervention
Karibasamma N, Dr. Pavitra R Alur
Contract workers often cannot maintain accounts because of minimum deposit
requirements by banks. This makes recovering their PF dues even more difficult. In
addition, there are a number of un-registered contract agencies that deduct provident
fund contributions from the workers but never deposit the same in the provident fund
office and after a few years change the location and start the new business in different
name. There are obvious advantages of being un-registered as it enables an agency
to evade taxes, in addition to avoid paying PF, ESI Benefits etc. to a worker and
thereby increase one’s profit margin. Therefore when a registered company tries to
compete with an unregistered one, the only possibility appears to be to exploit the
labour as they are in excess supply. Due to high level of competition, profit margin
measured through commission has gone down drastically. Usually small and medium
contract agencies do not enjoy scale economics and if volume of business goes
down, they cannot operate in a very low margin. This often leads them to collude
with the principle Employer and sometimes with Labour Inspector and compete
effective in the market.
In the context of globalisation, privatisation and liberalisation in March 2000
a GOM was constituted to examine the proposal of the ministry to suitably amend
the provisions of the Act with a view to facilitating outsourcing of activities to
specialised firms having professional experience and expertise in the relevant area
and at the same time to provide for a safety net to contract labour in such outsourced
activities. Such a measure, it was felt,would generate employment growth.
The Contract Labour (Regulation and Abolition) Act 1970 was enacted to
regulate the practice of contract labour to avoid exploitation of laborers. Section 10
of this act empowers the government to prohibit contract labour in certain situations
at the discretion of the government.
Contract Labour refers to the laborers who do not work directly for a firm
but are employed by another firm which has a contract to do particular work. This
type of labour allows flexibility for the firm and permits outsourcing the work. The
issues with this act are as follows:
· A Supreme Court Judgement said that if the factory employs contract labour for a
work, which also happens to be its main activity, then contract labour should be
abolished. This simply means that if you want to do your main activity via contract
labour, it’s illegal; and you need to employ regular labour.
· This further implies that the act requires abolishing of contract labour for all services
that are of ‘regular nature’. A further Supreme Court judgement made an employer
using contract labour to perform regular services on the factory premises liable to
absorb such labour permanently.
· Employers are always apprehensive about contract labour
They frequently change the personnel / services of contract labour so that

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 Journal Global Values, Vol. IX, No. 2, 2018, ISSN: (P) 0976-9447, (e) 2454-8391, Impact Factor 6.482 (SJIF)

nobody claims for permanent absorption Although no firm would like to use contract
labour for its regular work but the legal tangle is such that some services which are
not related to the core activities but are of regular nature (such as canteen, gardening,
loading-unloading etc.) may be treated as contract labour and firms may be forced
to keep such labourers on permanent roll. Due to these issues, the industry expresses
disappointment with this act because its provision defeats the purpose of employing
contract labour. The implications are as follows:
· Companies use the outside labour to do core/ regular work but don’t do any paper
work to avoid hassle of their getting a contract worker status. Such workers are
low-paid and get no benefits of employment in organized sector.
Challenges of contract labours:
India is ranked at 61st position in the employee-employer relationship, which
is far behind other countries like Thailand, Mexico and the Philippines. The
Globalisation turns into profit-oriented economies which result in the increasing rate
of contract labours all over the world. Every time, the Contract labours are paid
almost one-fourth of what permanent employee gets in the same organisation for the
same work. Companies pay them only minimum wages for which they are bound by
the statutory obligations, the scene is very different when it comes to permanent
employee, he enjoys greater packages and benefits sitting on the same seat and
doing the same work. In many cases, contract labour is acting as one of the chief
solutions to increased problems in industries but because of some loopholes, it has
become a problem too. When you look at the history of labour law, a mostly problem
arose either because of non-compliance of labour laws effectively or because of
wrong implementation and interpretation by the organisations for their own benefits.
The Government is also keen to amend the Contract Labour (Regulation and Abolition)
Act, 1970 and the proposed changes not only focus on providing equal salaries but it
also suggests providing them with all facilities which we are providing to permanent
workers. In addition to the improvement, the government should ensure that these
laws should be revised after an adequate interval of time and awareness should be
spread for the proper implementation of the Act. The fines anyone violates the law.
laws are not sufficiently deterrent and rather, it should impose huge fines in case
laws are not sufficiently deterrent and rather, it should impose huge fines in case of
labour under Indian which anyone posted.
Social Work Intervention:
Social workers, historically, have been and continue to be involved in work
to address issues of contract labourers. Social workers are in a unique position to
work on the issue of contract workers because of the diversity of practice settings
and expertise in clinical practice, group work, policy development and analysis, and
community organizing. The profession‘s commitment to social change calls on the

31
Contract Labour System In India: Issues and Challenges Need For Social Work Intervention
Karibasamma N, Dr. Pavitra R Alur
social work profession to take a leadership role in addressing all public problems.
Awareness and Education:
The social work professional is often the first ¯point of contact for the contract
labours. Because social workers constitute the largest professional group providing
all secured services.
Prevention and Intervention:
To better ensure appropriate prevention and early intervention efforts, the
social work profession must strive to develop and incorporate a comprehensive
Expand research effort, including those sponsored by schools of social work, to
better define what kinds of prevention–in
Work in communities to define effective prevention–intervention efforts.
Ensure that culturally competent practice is a core component of all prevention and
intervention efforts in industrial settings
Include a focus on contract employees in prevention and intervention efforts.
Screening Initiatives/Assessment Issues22
Screening and assessment conducted by social work professionals and ensures
autonomy, self-determination, respect, and safety.
Challenge organizations to develop assessment processes and tools grounded in social
work values, including culturally competent practice.
Collect, compile, evaluate, and adapt screening and assessment tools, protocols, and
processes that incorporate social work knowledge and values and promote effective
services competence.
Public Policy and Social Work Agency Policy
Social workers are often the ¯gatekeepers for clients‘gaining access to the
legal and social service systems. Policies of the criminal justice system, as well as
legislation at the local, state, and national levels, have direct bearing on victims of
violence and family members, as well as assailants
Support public policy and laws that focus on empowerment.
Educate policymakers about the link between youth development programming and
prevention and early intervention of domestic and sexual violence.
Strive to bring the disciplines together to build on the diversity of the social work
profession and enhance collaborations.
Ensure policy that works to strengthen social and independent living skills.
Ensure that both social workers and community-based or grassroots advocates are
¯at the table when policies are being developed.
Conclusion:
Although employment of contract labour in India has attracted debates and
raised conflict of interest among the social partners, it has become a significant and
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 Journal Global Values, Vol. IX, No. 2, 2018, ISSN: (P) 0976-9447, (e) 2454-8391, Impact Factor 6.482 (SJIF)

growing form of employment, engaged in different occupations including skilled,

semiskilled and unskilled jobs. The system of employing contract labour is prevalent
almost in all sectors, in agriculture, manufacturing, and high GDP yielding service
sector.11 Liberalisation of market economy in early nineties has necessitated greater
flexibility of employment of for the industries to compete in the global perspectives
and antediluvian labour laws has forced industries to hire contract labour to address
the cyclical demands and creating business friendly compliance mechanism to survive
and compete in the globalised economy. Concomitant changes in the Industrial Disputes
Act, 1947 would be necessary to reduce reliance on contract labour system.
The contract labour (regulation and abolition) act 1970 provides protection
and security to the workers employed on contract. On the one hand, it seeks to
provide contract workers minimum wages through licensing of contractors and by
holding principal employers accountable for enforcement of the law. On the other
hand, it empowers state and central governments to prohibit the conduct of certain
kinds of work through contract labour should also help in moving closer to a uniform
labour policy on common issues like welfare laws, employee, establishment, minimum
wages, appropriate government, protecting labour policy on common issues like
welfare laws, employee, establishment, minimum wages, appropriate government,
protecting multiplicity. position comes up, while another said no such guarantee can
be given by a company because the terms of employment itself talk about a fixed
contract
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Labour.pdf
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3. Jain,P, The Contract Labour (Regulation & Abolition) Act, 1970 retrieved
fromhttp://www.legalserviceindia.com/articles/labour_contract.htm
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