Desire for fixed-term staff can enhance trade relations

Damaged home windows at a facility run by Wistron Corp, a Taiwanese contract producer for Apple, in Narsapura close to Bengaluru, India. (Reuters)

As the federal government makes an attempt to woo traders within the electronics manufacturing sector, the violence at Wistron’s iPhone manufacturing manufacturing unit couldn’t have been extra ill-timed. The iPhone manufacturing plant got here below assault from hundreds of contract employees over alleged non-payment of wages. Wistron asserts it had deposited the cash within the account of the contractor (staffing corporations). Stories recommend that the staffing corporations who equipped the labour could also be fined and even blacklisted. This incident is simply the tip of the iceberg.

Contract employees, who’re employed by way of an middleman (contractor) and should not on the payrolls of the corporate on whose store flooring they work, have been on the centre of a lot dispute over the past decade. Such third-party contracts which entail a division of obligations whereby the contractor is liable for the cost of wages and the principal employer is liable for welfare services deserve scrutiny.

The growing reliance of trade on contract employees is well-established. Based on the Annual Survey of Industries (2017-18), contract employees accounted for 36.four per cent of complete manufacturing employees within the registered manufacturing unit sector. Contract employees typically discover themselves doing the identical duties as common employed employees however obtain decrease wages, have restricted social safety advantages and function below poor working situations. In a bid to discourage the usage of contract employees, given the discrimination in opposition to them compared to common staff, the federal government launched the choice of fixed-term employment within the Code on Industrial Relations (2020).

Mounted-term staff might be instantly employed by employers with out mediation by a intermediary. They’re ensured of the identical work hours, wages, allowances and statutory advantages that everlasting employees within the institution are entitled to. Nonetheless, fixed-term staff should not entitled to any termination discover or cost in lieu of companies terminated because of non-renewal of the contract of employment. Employers should not required to offer retrenchment advantages. This imparts flexibility to the enterprises to regulate their workforce as per their necessities and on the identical time, presents employees some quantity of job safety.

Regardless of the introduction of fixed-term employment, corporations proceed to depend on contract employees. The query that then arises is: Why do corporations proceed to take action after they have different choices? It’s price noting that fixed-term employment in India is certainly fairly open-ended. The Code doesn’t specify a minimal or most tenure for hiring fixed-term staff. Nor does it specify the variety of instances the contract might be renewed. The absence of such safeguards can, in reality, result in an erosion of everlasting jobs. Employees could discover themselves transferring from one fixed-term contract to a different, with none assurance of being absorbed as everlasting employees by their employer. Whereas this doesn’t bode properly for labour market safety, it’s clearly a really versatile association for corporations.

It’s certainly odd that regardless of such a liberal fixed-term employment regime, corporations proceed to rent contract employees. One doable rationalization is that the price of hiring contract employees continues to stay decrease than the price of hiring fixed-term staff, who’re required to be paid pro-rata wages and social safety together with gratuity. Along with the truth that hiring contract employees is cheaper than fixed-term employees, within the case of the previous, the monitoring, authorized compliance and litigation prices are shifted onto the contractor, thereby lowering the transaction prices of recruitment to corporations. The fast development of staffing firms which provide contract labour is probably unsurprising on this context.

Ideally, to encourage a shift away from contract employees to fixed-term staff, the federal government ought to have utterly prohibited the usage of contract labour in core actions, that’s, these actions for which the institution is about up and contains any exercise which is important or essential to the core exercise, however doesn’t embody companies reminiscent of safety, catering and sanitation. Mockingly, it has performed the other. The Labour Code on Occupational Security and Well being has allowed to be used of contract employees in core actions below sure situations reminiscent of a sudden improve of quantity of labor within the core exercise which must be achieved in a specified time. Such a provision encourages the usage of contract employees, undermining the initiative of introducing fixed-term employment. Resolving the underlying conflicts within the labour codes pertaining to those two classes of employees is important if they’re to be efficient in arresting the growing development of contractualisation.

Lastly, it’s price drawing consideration to the truth that Wistron employed a lot of contract employees this summer season after the federal government notified the Manufacturing Linked Incentive (PLI) Scheme for the cellular manufacturing sector. The scheme presents authorities subsidies for a restricted interval (5 years for cellular handsets) at charges ranging from 6 per cent and declining to four per cent on incremental gross sales over a specified base yr degree. Whereas there was a lot debate round PLIs, it’s related to notice that given the target of the scheme is to create “good jobs”, it could have been extra helpful to hyperlink these incentives (for which a monetary outlay of Rs 1.45 lakh crore has been accredited over 5 years for 10 sectors) explicitly to job creation, specifically, these jobs which might be instantly on the corporations’ payroll and never the contractors’. Considerably, below the Atmanirbhar Bharat Rozgar Yojana, the federal government is providing provident fund subsidies to employers for hiring new formal employees. Each these programmes might collectively be leveraged to offer an enormous enhance to formal job creation within the manufacturing sector.

This text first appeared within the print version on December 24, 2020 below the title “The insecure employee”. The author is senior fellow at ICRIER

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