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Govt. Slow on Contract Labour Bill, Inspections Also Down

Blame it on industrial slowdown or corporate lobbying, the government appears to go slow on the plan to ensure temporary workers get the same benefit as permanent staffers as it fears that tightening labour laws could increase unemployment. The plan required an amendment to the Contract Labour (Regulation & Abolition) Act of 1970.

Labour ministry officials deny that there is a deliberate delay in reforming contract labour laws but they also decline to give a time frame. ‘‘Going slow (on amending the Contract Labour Act) is not the official stance,’’ an official told FE but declined to give a valid reason for the delay.

Another official said the ministry is yet to get a consensus view from industry and trade unions. ‘‘While trade unions are pressing for similar salaries, social benefits, facilities and working conditions, the industry is not totally agreeable to that as it would hike costs,’’ the official said requesting not to be named.

While the chances of amendment of the Act looks bleak this year, even the enforcement of existing legislation have slackened going by the declining number of inspection and prosecutions on companies violating the law.

In a recent written reply to Parliament, labour minister Mallikarjun Kharge said the number of inspection conducted at factories to check violation of Contract Labour Act came down to 7,327 in 2010-11 from 9,428 in the previous year while the number of prosecutions declined to 4,908 from 5,181. According to the provisional figures, the number of inspections were 3,886 while prosecutions were at 2,451 in 2011-12.

Since 2010, labour minister promised to amend the Contract Labour (Regulation & Abolition) Act of 1970, but the ministry has failed to come up with any bold proposal.

Labour law rigidities have limited growth in job creation in factories and growth. While aggressive hiring in times of boom helps companies ratchet up output, companies with over 100 workers have to seek government approval for retrenching excess staff in difficult times. Moreover, companies are barred from engaging contract labour in core functions and those involving hazardous work.

In 2001, the BJP-led NDA government had proposed labour reforms by way of amending the Industrial Disputes Act and Contract Labour Act. NDA’s finance minister Yashwant Sinha proposed that provisions of ID Act should be applied companies employing not less than 1,000 workers instead of 100. But the NDA could not amend the Act during the remaining part of their tenure.

After coming to power in 2004, the UPA government ruled out the amendment in ID Act but agreed to amend the Contract Labour Act after a consensus.

A section in the government now fear that tightening contract labour laws may hinder employment generation as companies may not want to increase wage costs at a time when the industrial growth is waning and profit margins are squeezed. Hence, there is dilly-dally on the changes in labour laws like those for contract labour.

Interestingly, while the industry lobbies have been vocal on reforms like FDI in retail, insurance and pension, they maintain an unusual silence on the need to amend the contract labour laws.

In fact, big private and public sector firms have taken advantage of cheaper contract labours to grow their profits in recent years. In sectors like automobiles and textiles, contract labours helped companies scale up production in peak periods and yet stay slim in lean periods.

"Today, contract labour comprise about 29% of the total work force. A temporary job is better than no employment," said Manish Sabharwal, CEO of hiring firm TeamLease.

While advocating that contract labours should be allowed in core and perennial sectors, he said temporary workers should get the same benefits, minimum wages, safety in workplace, leave and working conditions as permanent workers. "The problem is not with labour laws but with enforcement. Increasing the formal employment is more important," he said adding the existing labour laws are breeding corruption and leading to capital substitution.

Confederation of Indian Industry says contract labour "has become necessity for flexibility". While companies are eager to pay higher wages, they are against wage parity with regular workers, it admits.

"Industry should look at paying higher wages as per their paying capacity as a flexibility premium. It can be linked as percentage of starting wages of a regular worker for same job or certain percentage over and above minimum wages. Contract labour should also be allowed in core areas," CII said in a recent presentation to government.

Trade unions' views are that contract labourers are "exploited" as they are not paid the same social security benefits as provided to permanent staffers, and there is a vast differential of wages. Trade unions also demand that contract labourers should to be taken on regular rolls. CITU president AK Padmanabhan said all trade unions are demanding "equal pay for equal work." The unions are holding a convention in the capital on Tuesday where they will flag the concerns over contract labour and other issues.

Financial Express, New Delhi, 05-09-2012