In India, the reasons for engagement of contract labour are due to the restrictive conditions of Chapter VB of the Industrial Disputes Act. This Act mandates that any factory employing more than 100 workmen would require prior permission for lay-off, retrenchment and closure. Contract labour is on the rolls of the contractor and does not figure in the headcount of the permanent employees working in the company.
(This story appears in the 14 September, 2012 issue of Forbes India. To visit our Archives, click here.)
Main issue is, whether the contract labour employment practice is for saving on cost of labour or difficulty in managing errent permanent worker. If errant workers go scotfree, the virus of indiscipline creeps in other workers also. Some of the disturbing practices are \"Work to Rule\" , \"stay-in\" , Mass Medical Leave\". To my understanding, main reason for employeeing contract labours and use trainees in production, is due to cumbersome and time taking procedure in getting rid of unde suitable elements and deal with project related variable need of workers for short periods. However, all this does not justify huge difference in compensation package between contract worker and permanent worker. A small difference can be understood as contractor\'s reasonable payment for their eenses and profit. The efficiency of Raw Workers in comparison to experienced workers may be another reason for non wage parity.
on Sep 10, 2012