27767954

Contract Workers in India: Emerging Economic and Social Issues
Author(s): Ashis Das and Dhananjay Pandey

Source: Indian Journal of Industrial Relations, Vol. 40, No. 2 (Oct., 2004), pp. 242-265
Published by: Shri Ram Centre for Industrial Relations and Human Resources
Stable URL: http://www.jstor.org/stable/27767954
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MR, Vol. 40, No. 2, October 2004
CONTRACT WORKERS IN INDIA: EMERGING

ECONOMIC AND SOCIAL ISSUES
Ashis Das and Dhananjay Pandey
This paper's focus is a study of the economic and social issues

relating to contract workers engaged in the industries producing
steel, cement and white goods in India. The contract workers in
the sectors/geographial locations fall in the economically weaker
group. This group continues to perform unskilled to skilled jobs
in industries, but do not enjoy the wage/pay structure, benefits
and social security available to regular workers of the industries.
The findings indicate that the Contract Workers (CWs) get
minimum statutory wages with few instances where they receive
higher wages for skilled work. Incidents of contractors deducting
token money from CW's wages were reported from the cement
and white goods companies. However, they get better deals if
they have collective bargaining strength. Illiteracy, unscrupulous
contractors and hazardous working conditions impose serious
safety concerns for them. Longer working hours and job
insecurity are other factors that such workers face. There is no
social security for them except ESI. A majority of them live in
slums or rented hutments with poor civic amenities. Employers
and contractors to some extent fulfill their economic and social
needs.
INTRODUCTION
India is a country of more than a billion people (1027 million

as in 2001). A major part of this population is mainly dependent
Mr. Ashis Das is Director (Personnel) and Mr. Dhananjay Pandey is Senior Deputy
Director (Personnel) at Steel Authority of India Limited, New Delhi.
Contract Workers in India: Emerging Economic & Social Issues 243
on agriculture, while the total labour force is estimated to be around

340 million (as per 2001 census). Further, out of the total labour
force, only 29 million or 8.5 per cent are employed in the organised
sector, rural areas account for about 270 million (79 per cent),
whereas almost 93 million (27 per cent) are engaged in industries
as contract workers. About 92 per cent of the workforce is employed
in the unorganised sector that contributes 65 per cent value to the
country's economy.
This paper's focus is a study of the economic and social issues

relating to contract workers engaged in the industries producing
steel, cement and white goods, geographically situated in central/
western, eastern and southern parts of India. As per the study, the
contract workers in the sectors/geographical locations mentioned
above fall in the economically weaker group. This group continues
to perform unskilled to skilled jobs in industries, but do not enjoy
the wage/pay structure, benefits and social security available to
regular workers of the industries. A major part of this group is
seasonally or periodically deployed depending on industries'
requirement. Though they might be working in similar jobs or similar
industries/organisations for several years (perhaps with interruptions
and gaps), there has been no significant increase in benefits as
compared to regular employees. Their seasonal nature of engagement
and low earnings have continued to add to social stress.
Who is a Contract Worker?
The term contract labour or worker is generally used when an

enterprise engages workers on contract basis. The engagement of
contract workers is distinctly different from normal employment of
regular employees in an organisation. In India, contractual
employment occurs through "job contracting" where the enterprise
enters into contract agreement with an established firm for the supply
of goods and services. The contractor performs assigned task at his
own risk and uses his own finances, materials and labour to complete
the contract. He also controls and supervises the said workers and
is responsible for paying the workers' wages in order to fulfill his
obligations as an employer. The user firm, in line with the contract
agreement, makes payment to the contractor on the basis of the
work performed and services provided. The user firm confines its
244 Indian Journal of Industrial Relations
interest with the final product or service and generally does not
concern itself with the number of contract workers engaged by the
contractor for the job or how the job was done and by whom.
Reasons for Engaging Contract Workers in Industry
When compared to a regular worker in the steel or cement

units, a contract worker (CW) gets low wages and lower benefits.
The CWs are to be statutorily paid minimum wages that are
determined by the respective states in which they work. There are
instances where some skilled CWs have been earning more than
statutory minimum ? but such cases are not too many in
comparison with the total number of CWs. The contract workers
are also entitled to statutory benefits like PF and ESI (the
contractor's and worker's contribution is deposited every month
with the Employees' State Insurance office). Organisations engage
contract workers under job contracts to carry out jobs like cleaning,
sweeping, loading, unloading and several other unskilled or semi
skilled assignments, for which regular workers are not available.
Jobs of fluctuating workload, one time jobs, project/capital repair
based jobs are also contracted out and the cost of out sourcing
including contractor's overhead/profits is lower than that earned
by regular workers. The principal employer (organisation)
therefore, tends to get non-core jobs done at cheaper rates. The
data presented in Table 1 amply explain the large gap between the
regular and CWs as far as the wages and other benefits are
concerned.
Of course, the core activities and jobs of regular or permanent

nature are performed by organisation's own manpower. Further,
considering the high cost of manpower, organisations are looking
for areas where regular manpower can be reduced by capital
investments, mechanization, etc. thus increasing labour
productivity. As a result, the recent trend in India has been to reduce
regular manpower and if required, to outsource non-core, non
critical activities. This trend is in line with recent studies which
have revealed that globalisation of various industrial activities is
increasingly thriving on outsourcing. The studies have also
indicated that in many cases the outsourcing not only leads to cost
saving, but also increases efficiency in the outsourced activity. Thus,
contractualisation of activities and outsourcing are inevitable, irreversible

trends, and are likely to continue in future with increased vigour.
However, the user enterprise is also statutorily obliged to fulfill

its role as a principal employer and ensure that the various labour
laws governing working conditions, welfare and payment of
specified minimum wages and benefits are adhered to for the period
the contractor's workers are engaged within his premises.
The contractor is also obliged under law to pay over time pay,
provide leave, leave pay, provident fund, gratuity and ESI contribution
for extending medical coverage to each worker under his roll.
Statutes Governing Contract Workers
The objective of the Contract Labour (Regulation & Abolition)

Act legislated by the Government of India is to regulate the
employment of contract labour in certain establishments and to
provide for its abolition in certain circumstances and for matters
connected therewith. The Act provides for various provisions to
protect the contract workers from exploitation Section-10 of the
Act is the most important from the point of view of the business
and the workers themselves. Section-10 (1) authorizes the
Appropriate Government, which in consultation with the Central
and States Advisory Board on contract labour, can prohibit by
notification, employment of contract labour in any establishment
in any process, operation or other work. Section-10 (2) lays down
guidelines for deciding upon the abolition of contract labour in
any establishment in any process, operation or other work.
Several litigations have occurred after the commencement of

this Act with reference to the provisions under Section-10 with
contract workers seeking absorption as permanent employees. The
public sector has generally ended up at the loser's end, absorbing
contract labour as directed by the courts. Several employees in the
process have been affected in a global market which is highly
competitive and, which till recently was also reeling under severe
economic crises. However, in August 2001 the Indian Supreme
Court, while delivering its judgment in a case relating to abolition
of contract, held that neither Section-10 of the Act nor any other
provision in the Act whether expressly or by necessary implication

provides for automatic absorption of contract labour on issuing of
notification by the appropriate Government under sub-section (1)
of the Section prohibiting employment of contract labour in any
process or operations or other work in any establishment.
Consequently, the Principal Employer cannot be required to order
absorption of contract labour working in the concerned
establishment. The employers' associations, in fact, are of the view
that the contract labour system, which is cost effective, should be
allowed to continue so that industries can go in for technological
restructuring with less number of regular workers leading to
reduction in regular employment.
In this context, it has to be kept in mind that much emphasis

on abolition of contract labour in industry may also be counter
productive as the industries may go for mechanization/job
shrinkage /deploying own manpower, thus reducing the job
employment opportunity for contract labour.
Growth of Contracting Out ? A Boon for the Economy
During the last two decades, on the one hand, the rate of
employment in the formal sector has steadily come down and, on
the other hand, there has been simultaneous increase in
employment in the unorganised sector. One of the reasons for
decline in employment or slowdown of employment growth in
the formal sector is due to the fact that jobs were moved out to the
informal sector. The informal sector grew primarily on account of
this outflux from the formal sector - logically therefore,
downgrading the existing formal jobs. As mentioned earlier,
economic gains through reduced regular labour cost have been a
major consideration for the employers to improve their business
performance and also to avoid the compulsions under various
labour laws of the land.
It is possible to generate more employment in the informal

sector, especially with introduction of appropriate technology.
Several studies show that some of the technology used in
decentralized informal sector could be the same as used in the
organised or formal sector. In financial terms, capital costs for such
technologies in the informal sector are lower. Further, with the

skill and knowledge available with the contract labour - acquired
through long experience in a particular job - there are many
instances where the efficiency of performance through contract
labour is quit high (compared even to regular manpower). These
two factors added with lower operating costs, should give enough
scope for higher rate of employment in decentralized contract
labour sector.
Post liberalisation (that is, after 1991), growth in the

unorganised sector continues to be rapid. Table 2 shows the trend
in casualisation and decease in regular wage employment over
the years. It indicates a shift in the figures for the self-employed in
the all India category, that is, decrease of 6.6 per cent points during
the last 20 years. It appears, both in rural and urban markets, many
self-employed persons or even regular workers have become casual
workers with passage of time. Table 3 indicates that the annual
growth in the informal workforce has recorded a 2.77 per cent
increase that is, 6.16 million per annum on an average, which is
16.22 times more than the workers in the formal sector. Outsourcing
of employment 1991 onwards indicates a growth of 8.07 million
casual workers in the informal sector compared to increase of .020
million workers in the organised sector.
One camp of researchers have maintained that labour intensive

industries or cheap labour without high labour standards may not
ensure a secure market position in export markets or attract foreign
investments. It is therefore important to have a farsighted alternative
strategy involving technological upgrading to increase productivity
and produce superior products with support from an adequately
paid, educated and skilled workforce. With this, the "Contract
System will be a boon for the economy", especially when the
informal sector is by far the most important source of employment
in India, as it is in other developing economies and contribute
significantly to GDP of the country.
THE PRESENT STUDY
With the above background, a study was conducted by the

authors to bring out the economic and social conditions related
to contract labour situation. The sheer scope and magnitude of

contract labour situation in India is so vast that it was impossible
to capture in the study all the industries, locations and sectors
where contract workers are engaged. Thus the study covered a
sample consisting of steel industry, cement industry and white
goods industry, located in Eastern, Southern and North/Western
India; and covers both private and public sectors. It is hoped
that the study findings will be generally representative of the
overall socio-economic situation of contract workers in India.
The study examined stated issues in Table 4 through a

structured questionnaire in the public sector steel manufacturing
companies situated in the States of Chattisgarh in Central India,
Orissa in Eastern India and Salem and Bhadravati situated in
Southern India In the cement sector, the study involved collection
of data with similar parameters as used for workers in the steel
units in Eastern India in the States of Jharkhand and Orissa.
Both the units have licenses to manufacture cement in the private
sector. It may be mentioned that in India, more than 80 per cent
cement manufacturing units are in the private sector. The white
goods manufacturing industry that produces air conditioners,
ovens, refrigerators, televisions, etc. is basically technology driven
and does not engage many regular workers (who have to be
technical operators, duly qualified for their jobs). Contract
labour is deployed for mostly unskilled jobs such as cleaning,
gardening, security, canteen, loading/unloading, plumbing and
some electrical jobs. A total of 600 CWs were interviewed - 300
in the steel sector, 200 in the cement units and the remaining
100 in the white goods units. The wage structure for all sectors
is shown in Table 5.
FINDINGS OF THE STUDY

Economic Conditions
Earlier research by other agencies have indicated that when

measured on the basis of consumption, 43 per cent informal sector
participants are poor or below the poverty line compared to only 6
per cent in the formal sector. However, in our study, the following
points emerged.
All CWs are being paid minimum statutory wages.
There are instances where some of the CWs (like skilled/

highly skilled) get higher wages than state stipulated
minimum.
It was also seen that in the cement industry in Orissa, the

CWs get similar wages as regular employees.
Wherever the CWs are unionized and have collective

bargaining strength, they get a better deal than otherwise
available.
It may also be noted that the economic condition of CWs in

general is lower than that of regular workers. Not only are their
earning lower, but due to factors such as large/joint families,
living habits etc., the surplus money available with the CWs is
limited and therefore they fall in the poor section of the society.
It is also mention worthy that in several parts of the country

especially in the construction and smaller manufacturing units
as well as some public sector companies, the contractors' men
take away part of the workers' wages as token money for giving
them jobs and continuity in assignment. This problem exists even
in the cement and WG units. However, during the study we
came across a new arrangement that can minimize such
exploitation. A beginning has been made in the Orissa cement
unit, where the company demands proof that wage for each
contract worker has been credited in his savings bank account
in the respective bank before the contractors' bill to that extent
is cleared for payment. Legally and morally the principal
employer is safe and also ensures that the illiterate workers are
not exploited as far as possible.
Working Conditions
There is serious concern for safe working in difficult and

hazardous conditions in the steel and cement-manufacturing
units. Most accidents occur due to failure to keep up with the
Standing Operating Practices (SOP), essential for maintenance
jobs in hazardous work areas. Records and statistics show that

50 per cent accidents have happened when SOPs were
circumvented, leading to mishaps while working at height or
underground sewerage tanks or gaseous zones or relining large
vessels and furnaces required for handling hot metal, packing
cement in jute or nylon bags, etc.
In case of difficult or hazardous nature of jobs, while the WGs

industry is the best, the steel industry is comparatively more
complex, difficult and accident-prone. Statutorily the Principal
Employer (PE) pays to the contractor for providing the required
PPEs to the CWs. However, the actual usage of PPEs was found to
be low during the study. It was also revealed that the main reasons
for low usage of PPEs are:
Unscrupulous contractor who tends to save money by

giving limited and inferior PPEs.
Even when PPEs are fully provided, neither PE nor

contractors enforce use of the same by the CWs.
Since majority CWs are illiterage, they do not appreciate the

importance of using PPEs and tend not to utilize the same.
In some of the cases, the working conditions are so hot,

humid, dusty and difficult, that CWs avoid using the PPEs that
give temporary comfort, though the work remains hazardous.
It was also noted that wherever PPEs are not provided, the
CWs shy away from approaching the PE or the Labour Enforcing
Authorities due to fear of losing their jobs.
Working Hours
During interviews with departmental heads and CWs it was

noted that the contract workers are subjected to longer working
hours. Whether overtime for such additional working hours is paid
or not could not be conclusively established. By enforcing working
hours of not less than 12 hours the contractors manage to hire less
number of CWs at a lower cost. The CWs again do not demand
their rightful dues for such long hours of working due to non
awareness of their rights and fear of job loss.
Job Security
A majority of workers have uncertain future. If we take the

India average, 15 per cent workers are skilled and the same
percentage is actually able to make ends meet through other sources
of income. Almost 70 per cent live under the burden of loan and
rarely any of them come out of it. There is limited job security, few
get retrenchment benefits and almost 50 per cent workers are
uncertain if the existing income will continue given the nature of
temporary employment.
Unlike the steel sector, 74 per cent cement contract workers

feel secure in the jobs. 50 per cent workers in the Orissa unit are
insecure and do not have choice of alternative employment.
Workers in this part of the State have meagre employment
opportunities due to slow industrial growth and rising
unemployment. The locals in this region also face competition
from population that has migrated from the flood-affected districts
of Orissa near the south-eastern coastline of the country.
Skill Factor
An important reason for the poor income capacity of such

workers is their overall skill level. An average of 64 per cent are
absolutely unskilled, although engaged in major manufacturing
units in the country. This average is even higher in Central India
steel unit where 78 per cent do not posses any skill and are therefore
engaged in cleaning, sweeping and loading/unloading jobs.
Among the 4000 plus contract workers in this steel unit 90 per
cent are deputed for housekeeping and handle various kinds of
materials. Then, due to lower rate of earnings, the workers are
forced to depend on loans from local moneylenders, who charge
exorbitant rates of interest. More often than not, these workers
never come out of the clutches of the moneylenders. The deplorable
condition of these workers therefore hardly allows them to move
out from slums/hutments (65 per cent reside in slums or one room
rented hutments), where they live without basic civic amenities.
In the Orissa cement unit and Maharashtra WG unit the unskilled

percentages are 86 and 81, respectively. In fact, the WG units have
more unskilled workforce than all the other units. In the cement
units CWs also acquire specific skill based on experience when on
occasions they are called upon to work on skilled jobs, viz. Chute
Operator, Deep Belt Chute Operator, etc. which are usually manned
by regular workers, who may be on leave or absent due to other
reasons. However, it was found that these CWs are paid unskilled
wages for skilled work done. Employer representatives did not
hesitate to mention that contract workers were much more
productive, cheaper to hire and disciplined than direct workers.
Although jobs like painting, cleaning etc. are contracted out,
workers are required to work as painter, packer or mason, and get
minimum wages as defined by State Government. Incidentally, the
CWs in Jharkhand get insurance coverage which the principal
employer ensures through the contractor.
Social Conditions and Welfare Issues
Education
It was encouraging to discover that a large majority of workers

(71 per cent) have attended primary schools for 4-5 years. However,
the percentage of CWs who have completed high school is very
low. Out of this group of literate men and women workers, the
highest level of literacy exists in the southern steel unit where 96
per cent are educated. In the central steel unit, the percentage is
much lower at 46 per cent as the tribal composition of contract
workers is very high and such workers hail from far flung villages,
where educational facilities are either meager or none at all. Some
of the workers interviewed were also found to be either graduates
or undergraduates, but due to acute unemployment problem, they
were forced to work as unskilled workers.
It appears that the overall educational development scenario

is better, as can be seen at Table 4 (b). CWs send their children to
school, that is 73 per cent of them who have children. However, a
striking feature is the awareness among these workers that they
do not differentiate between girls and boys and want both to be
educated.
Medical Facilities and Social Security
So far the Government has not come up with any social security
package for the unorganized sector. Except for a nominal
contribution that a contractor makes in favour of Employees' State
Insurance, which sponsors medical treatment to workmen and
his family, there is nothing that secures the workmen's future. A
small group of 23 per cent in the steel sector is provided proper
medical facilities for self only, whereas more than 65 per cent of
the total CWs covered by the study depend on ESI. Better facilities
can only be obtained in other hospitals at very high costs. On the
other hand, a large number of contract workers expressed the need
for Government efforts in this direction (66 per cent). They also
felt that the contractor and principal employer should run a social
security fund with contributions from workers, contractors and
the principal employer. This could be managed by an independent
society or trust for the benefit of such contract workers who need
financial help from time to time partly compensate for loss of
earning capacity. Another suggestion received was that the fund
could give money on loan, based on a proper system designed for
the purpose.
Living Conditions
As far as the contract steel workers are concerned, a large

number of them live in slums or in rented accommodations. The
rented accommodations are not much better than the slums. More
than 60 per cent lie in hygienically difficult environment, with
inadequate water facility or basic amenities like toilets/washrooms
or proper electricity. The general hygienic condition is poor. Over
50 per cent (India average) reside in slum areas that are generally
neglected even by the municipal authorities.
It may be noted that with the average earning that a CW

gets, economically he is not able to afford a better living condition.
After meeting basic requirements like food, clothing, and
education of children, expenditure on personal undesirable
habits, life style, and medical for family members, etc. there is
hardly any money left to spend on accommodation. The
Government also does not provide any succour to such CWs. In
fact, the CWs are in constant struggle to make both ends meet to
obtain the essential requirements of life.
Child Labour
It is important to mention here that child literacy rate is as

high as 73 per cent among the CWs if we consider the India average.
Taken individually area-wise, instances of child labour were found
mainly in the adjoining regions of the central steel unit and WG
units in Maharashtra, xhey are mainly employed at poor per day
monetary rates of Rs. 3/- to Rs. 10/- along with one or two meals
on working days in way side tea stalls, restaurants or highway
meal joints, better known as "Dhabas'. Several CWs also admitted
that their children worked in tea shops and restaurants to help the
household earn some additional money.
Women Contract Workers
Casualisation of work has increased for women in India from

35.5 per cent to 41 per cent and from 24.4 per cent to 29 per
cent in the rural and urban areas respectively during the period
1887-88 and 1997-98 (National Sample Survey Reports 409 &
442). The data also depict that index of casualisation increased
for both males and females during the same period, but the
increase was higher for females in both rural and urban areas.
However, no disparity in monetary benefit was observed in

any of the units covered by the study. Wages and every other facility
enjoyed by male workers was equally given to the female workers,
who are in the ratio of 1:9 or 10 as far as their employment in these
units is concerned. This is marked improvement from the condition
of women workers employed more than a decade ago, when their
wage rate was lower by as much as 25 per cent than the male
workers. It would not be out of place to mention that even now in
the construction and agriculture sectors, women are paid less than
the male workers.
During our study, departmental heads without exception

expressed their satisfaction at the commitment and hard work
demonstrated by the unskilled women contract labour deployed for
cleaning, loading/unloading, carrying loads over their heads and

also serving tea and water in offices. These women put in quality
work time, and were far more productive than their male
counterparts. Some managers could not explain, if given the facility
of training, would they deploy women contract workers to perform
tasks like welding, packing, marking and other less hazardous jobs,
which men are able to do with some training and experience. Even
Adam Smith, the Father of Economics, recognized the contribution
women made towards economic development by being the controller
of home. Smith has also compared a woman's household
contribution to be much higher than the ones endured by a paid
lady.
SUGGESTIONS
Based on the study findings, the basic philosophy/principle

as regards CWs is to provide them a comparatively better
economic, social and working environment. Towards this end,
certain suggestions as given below may merit consideration:
Reviews of the minimum wages prescribed by the State/

Central Governments so that the basic needs are fulfilled.
The Central Government should assess the productivity
factor along with other economic realities to fix a real
minimum wage for the informal workers in the different
economic sectors so they get wages commensurate with
the work they do to end the wide gap in wages in different
states. The state governments can then fix their own wage
rates but cannot reduce the Central government's fixed
minimum.
Principal Employer, contractor and Government should

ensure better adherence to all statutory provisions. A suitable
mechanism should be evolved and established so that there
is no violation of the statutory provisions. In addition, there
should be a mechanism by which the CWs can privately
put forth their grievances to the PE/Labour Authorities
without fear of reprisal.
Organisations can have a separate bill for wages paid after

the contractor has finished his work on a contract, rather
than composite bill including the total value of the contract.
The firm should insist on submission of bank deposit receipts
for clearing the wage bill after the contractor has credited
the wages of each of his workers in their respective bank
accounts. As mentioned earlier, this system is being practised
in the Orissa cement unit, which ensures that the workers
get their due wages. This experience was also shared with
one of the steel units covered by the study and they have
now decided to implement CWs payment in bank accounts.
The Employees' State Insurance coverage being provided to

most of the employees, which is statutory and covers family
members also, does not cover major ailments in any of the
ESI hospitals. It is important that the Government improves
the condition of ESI hospitals, increase the number of beds
and improve the treatment facilities by adding modern
equipments and research facilities. In some regions, the ESI
hospitals are not reachable due to long distance. Hence, the
workers have to rely on costly medical treatment provided
by private hospitals. Financially, the workers do not recover
from such drain and continue to be burdened by loans.
Another suggestion is to standardize insurance policies for

the CWs, that can take care of eventualities that are
unforeseen. In fact, this has already been extended to
workers in some industries like the Chandrapur WG unit,
Beedi (local smoking tobacco) manufacturing industry.
Creation of income sustaining welfare funds would be more

practical. In this, the principal employer, contractor and the
concerned individual can play an important role. The fund
can be managed by a society or trust and can be highly
successful in meeting emergency requirement of workers in
distress. Such funds already exist for Beedi workers, Limestone
& Dolomit workers, Iron Ore, Manganese Ore & Chrome Ore
workers, Mica Mine workers' funds etc. The move could
immensely help 75 per cent workers covered by this study,
who have to fall back on loan providers and family for financial
help and 53 per cent of those who have no alternative source

of income, including family, if retrenched from existing jobs.
Safety training to CWs is a must. A certificate of such

training may be issued to CWs and surprise checks
conducted to find out if all CWs possess required
certificate. The PE and contractor should ensure that the
required PPEs are made available and keep records of the
same.
With nominal investment from organisations,

associations, social contributions and efforts of N
forums of education and health can be establis
strengthened for the benefit of women and unedu
adults as well as for their health and hygiene. The
also be trained to take up self-employment opportuni
an important economic zone that has largely been ig
by organisations, the governments and socially a
groups, especially in the absence of a viable mark
network. We need to urge local governments to enco
such activities for socio-economic development
economic freedom that cannot be provided by employ
alone.
CONCLUSION
Given the current scenario that business and investments
are on the rise and so is business restructuring to deal with
changing market forces and competition, proactive and pro
development governance is called for. On the one hand is the
dilemma in the minds of public sector managers that given the
PSU status as states within the Indian Constitution, it has to
take care the restrictive provisions under Section-10 of the
Contract Labour (Regulation & Abolition) Act, 1970 and reduce
the strength of contract labour within it's premises to avoid their
absorption as regular workers if the job they are doing is
permanent and perennial in nature. On the other hand is the
growing essentiality of contracting out several services and some
core jobs in order to reduce costs and become more competitive.
The concept of contracting out is now a fast emerging practice
being adopted by all employers including those in the public

sector. Thanks to the Apex Court's August 2001 judgment,
public sector companies can now utilize contract labour in jobs
of cleaning, sweeping, dusting & watching as these were
considered perennial jobs prior to August 2001. Private sector
is already riding the 'contract out' band wagon, which has given
a shot in the arm to growing employment opportunities in the
unorganised sector, as opportunities also open out to small and
medium businesses that can provide ancillary or contract
services to the capital intensive industries. Since competition is
sure to increase even small businesses will bring in advanced
and similar technology used by bigger players and become huge
support base for the same big players.
As mentioned earlier, the unorganised sector will continue

to add higher value to the economic gain of the country in the
future. And the relief provided by the Apex Court on deployment
of contract workers should encourage the public sector
companies to move ahead and opt for contracting out. They
only need to ensure that contracts are not sham, that is, the
relationship of contractor as employer and contract workers as
their employees must exist.
Such economic development necessitates complimentary role

performance by Government, organisations /employees, unions,
social opinion makers and NGOs to widen their scope of activities
and contribute to a more comprehensive development of
environment dominated by the unorganised labour and their
quality of life strengthened through life sustaining social security
network. We believe, globalisation has struck a positive note
not only for economic growth but has also set off a chain reaction
for social development in our country. The key issue for any
sustainable development for us lies in the prophetic words of
Noble Prof. Amartya Sen "Curing of unemployment is not
treated as a reason for doing away with reasonable conditions
of work of those already employed; protection of the already
employed workers is not used as an excuse to keep the jobless
in a state of social exclusion".
REFERENCES
Blunch, Niels-Hugo, Canarajah, Sudarshan, Raju, Dushyant (2001), The Informal

Sector Revisited: A Synthesis Across Space and Time.
Hensman, Rohini (2001), The Impact of Globalisation on Employment in India and Responses
from the Formal and Informal Sectors, CLARA Working Paper, No. 15, HAS/
IISG, Amsterdam.
ILO Report VI(I), ILC 85th Session, 1997, Definition of Contract Labour.
Rao, P Mahava (2001), Social Security for the Unorganised in India ? An Approach
Paper.
Summary of Findings, Chapter - V, Report of the Working Conditions of Contract

Labour in Cement Manufacturing Industry, Cement related Mines, Food
Corporation of India and National Thermal Power Corporation, (2000-01), Labour
Bureau, Ministry of Labour, Government of India, Chandigarh/Shimla.
The Contract Labour (Regulation & Abolition) Act, 1970.
Venkata Ratnam, CS. (2001), Globalisation and Labour-Management Relations- Dynamics

of Change, Response Books, New Delhi.
Table 1 : Comparative Table of Pay/Benefits to Regular/Contract Worker
Pay/Benefits Regular Worker Contract Worker

Basic + DA 190.00 per day 117.00 per day*
Incentive Yes, as per scheme Yes, on adhoc basis
Transport Yes No
Allowance
Canteen Allowance Yes No, subsidized
Ex-gratia/Annual Bonus Yes Yes
Washing Allowance
Night Shift Yes Yes, on adhoc basis

Allowance
Workmen's Yes Yes

Compensation
PF Yes Yes
Gratuity Yes No
Leave Travel Yes No

Concession
Housing Yes No
Medical Free Free thro' ESI
Union support Yes Negligible

(*) This pay is per agreement between contractor and factory recognized union,
which is paid to about 20 per cent of workers under contract. Others get much less.
All 65.3 58.0 9.3 6.4 25.4 35.6 100.0 100.0
All 41.2 42.3 46.3 39.4 12.5 18.3 100.0 100.0

Female 48.4 45.4 27.9 28.6 23.7 26.0 100.00 100.0 Total 61.4 54.8 15.4 13.2 23.2 32.0 100.0 100.0
Female 64.5 58.5 4.1 2.8 31.4 38.7 100.0 100.0 Female 63.1 56.8 6.3 6.2 30.6 37.0 100.0 100.0
Areas Gender 1972-3 1993-4 1972-3 1993-4 1972-3 1993-4 1972-3 1993-4 Urban Male 39.2 41.7 50.7 42.1 10.1 16.2 100.0 100.0 Total Male 60.5 53.7 19.8 16.7 19.7 29.6 100.0 100.0
Self employed Regular wage Casual workers All workers
Source : R Visaria (1996) Structure of the Indian workforce, 1961-1994, in the Indian Journal of Labour Economics, New Delhi,
workers
Rural Male 65.9 57.9 12.1 8.3 22.0 33.8 100.0 100.0
Table 2 : Employment Status of Workforce, 1972-3 to 1993-4 (in percentage)
October, pp. 737-8.
Country
_Workers_% Growth_Workers % Growth_Workers_% Growth
Year Organised Unorganised Total
1978 21.24 13.39 249.46 14.70 270.70 7.85 1983 24.01 13.04 278.69 11.71 302.70 7.93 1988 25.71 7.08 296.29 6.31 322.00 7.99 1991 26.73 3.96 315.17 6.37 341.90 7.82 1994 27.38 2.43 344.72 9.37 372.10 7.36 1998 28.37 3.61 371.63 7.80 400.00 7.09
1973 18.82 7.61 217.48 7.74 236.30 7.96
Source : P. Madhava Rao, Social Security for the Unorganised in India-An Approach Paper
Table 3 Composition of the Unorganized in the Working Population (in millions)
95 98 73 82 8556 16 402949 64 103041 1521 64
(Figures in percentage)
100 100 100 00 100100 18 26 3043 72 20 46 1316 70
(Cement) (WhiteGoods) (WhiteGoods) (WhiteGoods) Average

100 100 100
101
100
100 14 29 2755 65 2251 1723 60
Average Maharashtra Chandrapur Average Study
100 100 100 100 100100 23 243331 80 18 42 9 10 81
100 100 100 100 10012 10 272174 79 4944 1330 57
100 100
100
100 100
14 342055 65 6534 14 86
100 100 100 100 10011 19 192293 93 3254 26 45 28

(Steel) (Cement) (Cement)
Table 4 (a) : Results of Study of Economic Parameters with Regard to CWs in Steel, Cement & White Goods
Average Jharkhand Orissa
84 93 18 45 5656 20 663631 41 292234 1916 64
80 100
30 60 8054 18 721136 49 4 1541 2310 66
Central Eastern Southern

(Steel) (Steel) (Steel)
86 83 7 30 3082 37 554151 63 281355 1337 49
87 97 18 46 60 32 7252 12 11 5737 6 20 2 78
wages received Money support

Awareness of
Incentive/Bonus
Existing income
Other income
Job security Residence(b)a) Slum
Own/family b) Semi-skilled
Parameter Whether full Receipt of PF& Whether leave uncertain (b) Family employment
Aware of retrenchment (c) Rented (c) Unskilled
wage content
Gratuity
h'day paid (a) Loan alternate benefits Skill level
(a) Skilled
to as
71 13 7313 3732 45 66 48 49 65 20 8 2 479 87 46
WhiteGoods Average
Average Study
67 19 81 4035 62 80 41 50 100 100 100

42
73 21 79 37 65 71 66 70 100 100 100

39
17
Average Maharashtra Chandrapur
62 83 4034 59 90 16 30 100 100 100 45
(Cement) (WG) (WG)
75 11 81 73322 35 78 45 62 50 43 6 93 100 48
Table 4 (b) : Result of Study of Social & Welfare Parameters with Regard to CWs in Ste l, Cement & White Goods (Figures in 62 14 86 4521 62 7 96 100 86 100
89 76152222 69 93 82 28 87 13 100 100 95
_(Steel) (Steel) (Steel) (Steel) (Cement) (Cement)

70 10 1
56323933 38 39 57 35 451823 11345 60 48
Parameter Central Eastern Southern Average Jharkhand Orissa

96 52461011 39 57 59 42 3853 5 36 89 55
69 20 57225032 43 55 41 55 97 2 1 1
50 82 42
46 4592957
57 31 5 71 7 62 23679 9 46
percentage)
Welfare -Employer
(e) No facility
Education of Union support Social Security (c)hos
(b) Outside Co. hospital
(d) Dispensary
(d) No kids Importance social
of security
Govt's role on
Hazardous
Literacy rate Medical role
Contractor in safety
Children (b) Girls Income from Welfare
contractor
equipment working
(a) Boys
(c) Both family
(a) ESI Safety
Central Eastern Southern Jharkhand Orissa / Chandrapur Maharashtra
110.32 110.32
Skilled 90.07 80.00 121.00 82.77 200.00(80/-) 157.77 127.12
Unskilled 81.69 50.00 77.00 66.13 175.00(50/-) 94.96 94.96

India (Steel) India (Steel) India (Steel) (Cement) (Cement)1 (White Goods) (White Goods)
Note : In the Orissa cement column, figures in bracket indicate wages to contract worker
units in the region including Construction sector. Unbracketed amount is paid under agreement with union.
(**) In Steel, payment of annual bonus depends on the contractor's profit. A contractor covered under Agreement has to pay as per
PF*** Yes Yes Yes Yes Yes Yes Yes ESI* Yes Yes Yes No Yes Yes Yes
Bonus** Yes Yes Yes Yes Yes Yes Yes
(*) Employees' State Insurance ?Meant for medical treatment of worker and his family. (***)In the Central India unit, workers not covered under any agreement do not get PF benefit
Table 5 : Wage Packet as on 319t October 2003 (Steel) (Amount in Rupees per day)_
(l)Rupee 0.50 per day is paid under agreement with the recognized
the terms agreed upon.
As per agreement 116.59 - - 274.00

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Contract Workers in India: Emerging Economic and Social Issues

Author(s): Ashis Das and Dhananjay Pandey

CONTRACT WORKERS IN INDIA: EMERGING

Ashis Das and Dhananjay Pandey

This paper's focus is a study of the economic and social issues

India is a country of more than a billion people (1027 million

on agriculture, while the total labour force is estimated to be around

This paper's focus is a study of the economic and social issues

Who is a Contract Worker?

The term contract labour or worker is generally used when an

Reasons for Engaging Contract Workers in Industry

When compared to a regular worker in the steel or cement

Of course, the core activities and jobs of regular or permanent

contractualisation of activities and outsourcing are inevitable, irreversible

However, the user enterprise is also statutorily obliged to fulfill

Statutes Governing Contract Workers

The objective of the Contract Labour (Regulation & Abolition)

Several litigations have occurred after the commencement of

provision in the Act whether expressly or by necessary implication

In this context, it has to be kept in mind that much emphasis

Growth of Contracting Out ? A Boon for the Economy

It is possible to generate more employment in the informal

technologies in the informal sector are lower. Further, with the

Post liberalisation (that is, after 1991), growth in the

One camp of researchers have maintained that labour intensive

THE PRESENT STUDY

With the above background, a study was conducted by the

to contract labour situation. The sheer scope and magnitude of

The study examined stated issues in Table 4 through a

FINDINGS OF THE STUDY

Earlier research by other agencies have indicated that when

All CWs are being paid minimum statutory wages.

There are instances where some of the CWs (like skilled/

It was also seen that in the cement industry in Orissa, the

Wherever the CWs are unionized and have collective

It may also be noted that the economic condition of CWs in

It is also mention worthy that in several parts of the country

There is serious concern for safe working in difficult and

jobs in hazardous work areas. Records and statistics show that

In case of difficult or hazardous nature of jobs, while the WGs

Unscrupulous contractor who tends to save money by

Even when PPEs are fully provided, neither PE nor

Since majority CWs are illiterage, they do not appreciate the

In some of the cases, the working conditions are so hot,

During interviews with departmental heads and CWs it was

A majority of workers have uncertain future. If we take the

Unlike the steel sector, 74 per cent cement contract workers

An important reason for the poor income capacity of such

In the Orissa cement unit and Maharashtra WG unit the unskilled

Social Conditions and Welfare Issues

It was encouraging to discover that a large majority of workers

It appears that the overall educational development scenario

Medical Facilities and Social Security

As far as the contract steel workers are concerned, a large

It may be noted that with the average earning that a CW

It is important to mention here that child literacy rate is as

Women Contract Workers

Casualisation of work has increased for women in India from

However, no disparity in monetary benefit was observed in

During our study, departmental heads without exception

cleaning, loading/unloading, carrying loads over their heads and

Based on the study findings, the basic philosophy/principle

Reviews of the minimum wages prescribed by the State/

Principal Employer, contractor and Government should