discussion on contract labour act 1970

Discussion on Contract Labour(Regulation & Abolition)

Act 1970

Aniruddh Shastree

Applicability

• Every industry engaging 20 or more workers on contract basis.

• Every contractor engaging 20 or more workers.

Obtaining registration & license

• Apply in form I for registration in triplicate copy along with prescribed fees.

• Apply in form IV for license in triplicate copy along with license & security fees (per worker Generally in all cases- Refundable) .

• For license form V is given by Principal employer to contractor.

Need for Contract LabourIncreasing competition, particularly competition from

imports has demanded Market uncertainty (Profit/Loss)has made it difficult

to assure permanent employment of fixed number of labourers , as each employee is a cost to company.

Focus on core tasks of the company and specialize in primary tasks of company.

Need for continuous updation of skills has led to downsizing of workforce with redundant skill sets.

Advantages of Contract Labourers

Use of contact workers provides a means of getting around the labour regulations, particularly the Industrial Disputes Act(IDA), and industrial employers have actually been adopting this means on a wide scale.

Contract labour has been one of the principal methods used by the employers to gain flexibility in the labour market.

Lower wages of informal workers and saving of expenditure on worker benefits when such workers are employed help in reducing cost and thus improving competitiveness.

These workers are brought on board for a project that is not part of the core competency of the company hence the company can hire specialized skills which are project specific.

Advantages of Contract labour to company

Availability of labour when work load is higher.No responsibility of making contract labour

permanent and still workforce becomes available when work pressure rises and discontinue their services as per agreement.

Lesser responsibility of workforce at workplace. Outsourcing leads to a greater specialisation in

the production of these services, with resulting gains in efficiency and reduced costs.

Disadvantages of Contract Labour to Labourers and society.

Creation of Joblessness and growth in economy at the same time. Decline in loyalty from workers towards company. Worker is taken only as machine/commodity to get work done. Frequent rise of unemployment index of the state/country . Unstable life of worker. Rise in small scale businesses of contract labourers themselves in the places for

economic purpose they delve hence difficulty in getting them when needed may happen.

Rise in theft/robbery, crime , as income related problems lead them to act in that manner.

Labour exploitation can rise as there is absence of unionised organization to fulfill demand .

Gradual decline in consumption of products because of lower wages. High gap between rich and poor class. The wages of casual workers were found to be significantly lower than that of

permanent workers.@@

Disadvantage of contract labour for Company

No direct connect between Principal employer and Contracted worker.

Contractor can influence work process of workers on site of principal employer.

Impersonal outlook of workers towards principal employer. Quality of labourers may reduce. Limitations of time period of contract. Principal employer is statutorily responsible for payment of wages

to contract labourers in full to the workmen if contractors fails *** Authorities of CLA(1970) can order a prohibition on contract

labour. Additional compliances required to be done by principal employer. Contractor may or may not comply with all regulations, that can

create legal complications.

Disadvantages of Contract Labour to company.

Machines can be handled by several workers, that may lead to wear & tear of machines faster.(Chances of improper handling increase).

Legal sanction for hiring contract labourers can be a complicated process at times.

If the work can be done by regular workmen then contract labourers cannot be employed on that processes.

Cost factor is reduced by judgment. Contractor to pay equal wages as paid by principal employee to his worker doing similar works. &&&.

Safety of workplace can reduce as workers may change and stealing of items can happen more than what permanent workers do.

Registration of Principal Employer

Every employer covered under this Act, shall obtain registration of the establishment by applying to the Registering Officer in a prescribed application form and by paying the fee prescribed.

License by the Contractor

Every Contractor covered under this Act shall obtain license from the Licensing Officer by applying in a prescribed application and by paying the fee prescribed.

THE CONTRACT LABOUR (REGULATION & ABOLITION) ACT, 1970 AND THE RULES

Renewal of the License

The license obtained will be valid for one year from the date of issuance. The contractor should obtain renewal of the license by applying before one month in advance of the expiry of the license duly paying fee in a prescribed form.

Changes in Registration / License

Changes should be incorporated from time to time in the registration / license by the principal employer / contractor.


Wages to the Contractor’s workmen

• The Payment of Wages Act and the Minimum wages Act are applicable to the Contractor’s workmen.

• Where the establishment is not covered under any scheduled employment under the Minimum Wages Act, the wages prescribed by the Commissioner of Labour under the Contract Labour Act are applicable to the contractor’s workmen.

• Where agreements or awards or contract specifies the wages payable to the workmen, such specified wages are applicable to the contractor’s workmen

• The Contractor’s workmen performing the same and similar nature of duties of the regular workmen, the wages of regular workmen are payable to the contractor’s workmen.


Obligation of Principal employer

• Register of contractors Form XII

• Annual return Form XXV (on or before 15th Feb-

consolidated return)• Notice of Commencement/ Form VI B

Completion

Obligation of Contractor

• Renewal of license Form VII• Register of workman Form XIII• Employment Card Form XIV• Service Certificate Form XV• Muster Roll Form XVI• Wages register Form XVII• Wage slip Form XIX

Conditions of Service• Employment Card• Hours of Work• Bar on employment of females• Bar on employment of child labour• Rest intervals• Spread-over• Extra wages for over time• Weekly rest• National Festival Holidays• Leave with wages• Maintenance of Registers• Payment of Wages• Lay off• Procedure of termination of service


Process of engaging contractor

Process of engaging Contract labour contd…

1) Considering purchase requisition for procurement of contract labour(Prerequisites for hiring contract labour.)

2) Checking directives of Central Vigilance Commission& Laws/Rules.3) Risk Analysis and needed measures to reduce it.4) Invitation , acceptance and Opening of Bids from applicants supply of Contract Labour.5) Selection of multiple/single contractor & conducting pre-Bid negotiations.6) Verifications of Licenses & permits of Contract labour , Principal Employer.7) Cost benefit Analysis of the project and offered schemes of Contractors.8) Checking & Release of contract documents.9) Getting agreements & acceptance from Principal employer over terms of contract.10) Entering into agreement .11) Handing over of Work order to contractor.12) Distribution of Copies of contract to all related department ; (i) Contractor, (ii)

Vigilance & Legal dept. (iii) Intending Dept. (iv) finance ,department (v) administration department.

Responsibilities of Principal employer

In case of accidents causing disability or death , Principal employer is liable to compensate with insurance.

Sec 20 , CLA(1970) , if contractor fails to give any of facilities , including facilities in Ch 5. to workers , then after 60 days of time given to contractor , principal employer should provide with those facilities and later demand the expenses from contractor. Both these tasks create additional burden on principal employer.

If the contract turns out to be sham, bogus, camouflage then legal proceedings may turn in favour of workers and they can demand regularization.

Responsibilities of ContractorTo be transparent , honest in terms of contract with

company.To pay workers at statutory rates and not to do any

illegal deductions from payments .To maintain skills in workers and bring out the best in them for the Principal employer.

To facilitate workers with all necessary health ,safety, welfare provisions .

To conduct training sessions in all needful aspects as and when necessary.

Welfare and Health of Contract Labour

•Canteen•Rest Rooms•Drinking water•Latrines and Urinals•Washing facilities•First-aid facilities

If the contractor fails to provide the above facilities, the principal employer shall provide the facilities and the expenses incurred can be recovered from the contractor.


Forms used for contract labour(for Principal employer & contractor)

Form No. Description

I Application for registration of establishment;

IV Application for licenseV Certificate by Principal Employer

VIA Notice of commencement / completion of contract work (for contractor);

VIB Notice of commencement / completion of contract work (for principal employer);

VII Application for renewal of licenseVIII Application for temporary registration of

establishment

Forms continue….

Form No. Description

X Application for Temporary License

XIII Register of workmen employed by the contractor

XIV Employment Card

XV Service Certificate

XVI Muster Roll

XVII Register of Wages

XVIII Register of Wages-cum-Muster Roll

Forms continued…Form No. Description

XIX Wages SlipXX Register for deduction for damages or lossXXI Register of FinesXXII Register of Advances

XXIII Register of OvertimeXXIV Half Yearly return to be submitted by

contractor to the Licensing Authority

XXV Annual Return to be submitted by Principal Employer to the Registering authority.

PenaltiesOffence Penalty

Obstruction of Inspector Imprisonment – 3 months, Fine Rs. 500/- or with both

Refusal or non-production of registers / records

Imprisonment – 3months, Fine, Rs. 500.- or with both

Contravention of any provision of the Act

Imprisonment – 3 months, Fine Rs. 1000/- or with bothRs. 100/- per day for continuing offence

Contravention of any provision where penalty is not provided elsewhere

Imprisonment – 3 months, Fine Rs 1000/- or with both

In case of offences, by the Companies, the person in-charge are responsible shall be liable to be proceeded against and punished accordingly.


Applicability of other Act• Persons cover under this act will be covered under:

• I) Factory Act, 1948• II) Employees’ Provident Fund & Miscellaneous Provisions Act, 1952• III) Employees’ State Insurance Act, 1948 / Workmen Compensation Act, 1923

• IV) Payment of Bonus Act, 1965

• V) Minimum Wages Act, 1948

• VI) Payment of Wages Act, 1936

-:SUMMARY OF REGSITERS & RECORDS TO BE MAINTAINED:-Sr.No.

Act Documents to be maintained

1 Factories Act a. Accident Register with Formsb. Inspection Bookc. Muster Roll & Wage Registerd. Muster Roll for Exempted workerse. Register of Adult Workersf. Register of Compensatory holidays & Overtimeg. Register of Leaves with wages

2 EPF & MP Act, 1952 a. Register of Contributionb. Inspection book

3 ESI Act a. Accident Registerb. Register of Contributionc. Inspection Book

4 Payment of Wages Act,1936 a. Register of Fines, Deduction & Advances

5 Minimum Wages Act,1948 a. Wage Slip

6 Payment of bonus Act,1965 a. Register A,B & C

7 Equal Remuneration Act,1976 a. Register in Form D

8 Contract Labour (R&A) Act,1970 a. Register in Form 13

Conclusion:

The contingent workforce is an increasingly importantcomponent of an integrated workforce strategy. In terms of both spend and headcount as a percentage of the

total workforce, this category continues to grow under business and talent market pressure.

With increased regulatory pressure and enforcement, leading organizations are moving quickly to get ahead of this trend by managing the inherent risks in bringing nonemployee talent into the organization.

References• Paper by: Informalization of Industrial Labour in India: Are labour market

rigidities and growing import competition to blame?• Bishwanath Goldar* and Suresh Chand Aggarwal$• * Professor, Institute of Economic Growth, Delhi [email: [email protected]]• $ Professor, Department of Business Economics, University of Delhi, South

Campus, New Delhi@@ -Sen and Dasgupta (2009) have undertaken a survey of

industrial units in a large number of clusters indifferent parts of India (during 2004-05). • *** Food Corporation of India ,Calcutta V/S Tulsi Das Bauri 1997 II LLJ

747(SC).• &&& Hindustan Steel Works Construction V/S Commissioner of

Labour ,1997,I LL J 656:1996(74)FLR 2151.