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C H A P T E R - 5


5.1 Introduction.

5.2 M e a n i n g a n d O b j e c t s of C o n t r a c t
Labour System

5.3 A pplication of C o n t r a c t L a b o u r

5.4 Origin of L a b o u r C o n t r a c t S y s t e m

5.5 A d v a n t a g e s a n d D i s a d v a n t a g e s of
L a b o u r Contract S y s t e m
C H A P TE R 5


Globalisation have increased the competition all over the world

each and every organisation is now aware of cost, and quality of production.

The modern techniques are used and attempts are made to minimise the

cost of production. But for inserting new technology, there is need of more

capital investment extra space, more workers to perform the work. Therefore

all over the world there is a tendency of all the employers to assign the

more and more work to the Contractors, instead of assigning the work to

the existing em ployees or appointing new workers for it.

The contract labours are not perm anent em ployees, they can be

removed when the work is over or after the period of appointment is over

or as and when the employers feels so. The contract workers are young

staff, m ore intellectual, and highly skilled persons available at very low

wages, and do not requires to make available the fringe benefits and

other amenities to them and also shows more efficiency. Hence contract

labour enables the employers to have effect on economy and improve their

competitive positions. The contract labour system also helps the employers

to transfer the responsibility, in part to the contractors. T he contract labour

system is broadly divided into two types. One is “job contracting and only

labour contracting”,

i) Job Contracting:-
In the job contracting the principal em ployer assigns the work of

supplying the goods and services to the contractor. W here the contractor

appoints his employees gives them training, controls them, by supervision

and gets the work done from them. For which he pays to them, on piece

rate system so that those who are more efficient will earn more and those

who are less efficient, will earn less.

ii) L a b o u r o n ly C o n tra c tin g

In this method the contractors supplies the labour to the principal

em ployer and do not pays to them. The contractor also supervises, the

labour provided, on behalf of the employer and the real economic control

remains with, the principal employer. The principal establishments pays to

the contractor on the basis of number of workers supplied.

In the modern age the contract labours have got world wide

importance, because of changes in the technology, like computer software,

Information and Technology Biotechnology etc. The concepts of outsourcing

and ‘offshoring’ has been arised in the contract labour system. The work

from one nations company is outsourced to another nations company and

get done within the same day Everything is possible because of the rapid

developm ent in the computer software and Information and technology

The work is outsourced to the developing nations where, the cheap labour

force is available and the labour cost can be minimised. At present the

concept of contract farming is also under consideration of the Indian

Government, so that by using modern techniques and improving the

irrigation systems of the growth in the agricultural production is also



M e a n in g Contract Labour is a universal phenomenon, which are mostly

working in unorganised sector, which are temporary and are given very

low wages and required to work hard for long hours, without providing the

basic amenities and welfare facilities to them.

The Contract Labours are not paid fixed salaries, their services are

terminated automatically after the contract period, or as and when the

employer finds it suitable and beneficial. In order to avoid such malpractices

the Contract Labour Act has been passed in 1970. This Act received the

assent of the president on 5*^ Septem ber 1970, and cam e in to force on

10*^ February, 1971.

“W orkm an” has been defined under section 2(i) to mean any person

employed in or in connection with, the work of any establishment to do

any skilled, semi skilled or unskilled, manual, supervisory, technical or

clerical work for hire or reward, whether the terms of em ployment be

express or implied, but does not include any such person-

a) W ho is employed mainly in managerial or administrative capacity


b) W ho is being employed in a supervisory capacity draws wages

exceeding five hundred rupees per mensum or exercises, either

by the nature of the duties attached to the office or by reason

of the powers vested in him functions mainly of a managerial

nature or

c) W ho is an outworker that is to say a person to whom any

articles and materials are given out by or on behalf of the

principal employer to be made up, cleaned, washed, otherwise

processed for sale for the purpose of the trade or business of

the principal employer and the process is to be carried out

either in the home of the outworker or in some other premises

not being premises under the control and m anagem ent of the

principal employer.

Contract L a b o u r A workman shall be deem ed to be employed as

“ Contract Labour” in or in connection with the work of an establishment

when he is hired in or in connection with such work by or through a

contractor, with or without the knowledge of the principal employer;

W h ere a person undertook to collect and m anufacture quarry

products for an on behalf of railways by engaging workmen to carry out

his contract works under the railway establishment the workmen employed

by him are to be deem ed as ‘ contract labour’.

Appropriate Government means,

1. i) in relation to an establishment in respect of which the appropriate

Government under the Industrial Disputes Act, 1947(14 of 194 7), is

the Central Government;

ii) in relation to any establishment, the Government of the State in

which that other establishment is situated - ( inserted by Contract

Labour Regulation and Abolition Am endm ent Ordinance, 1 98 6).

2. In relation to any other establishment, the Government of the State

in which that other establishment is situated.

In relation to an establishment means a person who undertakes to

produce a given result for the establishment, other than a mere supply of

goods or articles of manufacture to such establishment through contract

labour or who supplies contract labour for any work of the establishment

and includes a subcontractor.

The essential ingredients of the definition of a contractor are asfollows:-

i) Product of a given result.

ii) Employment or supply of a contract labour.

iii) Contractor to include subcontractor.

i) any office or department of the Governm ent or local authority or

ii) any place where any industry, trade, business, manufacture or

occupation is carried on..

Principal Employer:- m eans

a) G overnm ent or local authority head office or departm ent or any

other officer specified.

b) Factory- O wner or occupier or person nam ed as m anager under

Factories Act.

c) M ine-O w ner, agent or person named as manager.

d) Other establishment- Persons responsible for super\/ision and control

of management.

Objects of the Act:-

The objects of the Act are as follows:-

i) To regulate the contract labour and to provide for its abolition.

II) To regulate the provisions for working conditions.

iii) To ensure the payment of wages and essential amenities.

iv) Prohibit the employment of contract labour.

v) Do aw ay the abuses of the system of em ploym ent of contract



The Contract Labour (Regulation and Abolition) Act, 1970 was

passed in 1970, This Act regulates the employment of Contract Labour in

certain establishments and provides for the abolition in certain circumstances

and for matters concerned therewith.

The Act cam e in to force on 10’^ February, 1971. The Act extends

to whole India. It applies-

a) Every establishment where 20 or more workmen are employed or

were employed on any day proceeding twelve months as contract


b) To every contractor who employs or have employed on any day of

the preceding 12 months twenty or more workmen.

The Act empowers the Central Govemment and the State Government

to apply the provisions by notification in the official gazette to any

establishment or contractor employing less than twenty workmen, Section


Non Applicability
As per Section 1(5)(a) the act shall not apply to the establishments

in which work only of an intermittent or casual nature is performed.

As per section 1 (5)(b) the work performed in an establishm ent is of an

intermittent or casual nature, the appropriate Government shall decide that

question for consultation with the Central Board or as the case m ay be a

State Board, and its decision shall be final.

Work of intermittent n a t u r e means

The work is deem ed to be of an intermittent nature;-

i) If it is of a seasonal character and is performed for not more than

60 days in a year or

ii) In other cases if it was performed for not m ore than 120 days in

the preceding 12 months.


Contract labour system is already in existence since long back, not

only in India but all over the world. Sometimes the manufacturers do not

gets the time to perform the non core activities, in this situation he

assigns the work, to a person known as contractor. Contractor appoints

his own labours supervises & controls them and gets work done from

them. Because of such assignment of the work, the m anufacturer can

concentrate on manufacturing function.

The contract labours are also required in the agricultural sector, as

well as in both the Central and State Governments. Both the public and

Private sector organisations are appointing the contract labours. The state

governments are appointing such labours for construction of bridges,

roads, dams and buildings on piece work system etc. In the manufacturing

organisations mostly the non core activities are allotted to contract labours.

Due to globalization there is a free entry for Multinational Corporations, to

open there branches any where in the world and such M NCs are preferring

the contract labours. On the other hand due to outsourcing the work of

non core activities is transferred from one nation to other. Therefore the

contract labour is now very popular and growing form of employment

because almost all the Industries are preferring such contract labours.

The second labour commission have made some observations that

contract labour is a part of unorganised sector, they are paid low v\/ages

in which there is high percentage of women, family labour. Piece rate

payments, to home based work or contractual work, seasonal or intermittent

employment, the Commission noted that 60% of total work force is the

unorganised labour force.

The commission also noted that the piece rate system of payment

is adopted for home workers, contract workers, earth- diggers, brick

workers etc. The commission have made the comments that the Minimum

wages Act has the provisions of piece- rate wages, but the mechanism of

fixing the piece rate is not clearly spelt out. The piece rate are fixed even

too below that of minimum wage rates and hence even by working hard

the workers are not getting the minimum daily wages also. However piece

rate system is old form and gets the incentive bonus & can earn more.

Also this form is also suggested by the father of the m anagem ent, Taylor

and Fayol and Halsey and Rowan etc.

Second national commission on labours recommendation

By passing the resolution on October 15, 1999 the Government of

India, Ministry of Labour (Shram Mantralaya) setup the (Second) National

Comission on Labour and following term of reference to it.

a) To suggest rationalization of existing laws relating to the labour in

the organised sector.

b) To suggest ‘Umbrella Legislation’ to minimum level of protection to

the workers in the unorganised sector.

Recommendations made by second labour commissions:-

T he recommendations made by the national labour commissions

are as follows;-

1. The contract labours shall not be engaged for production or service

activities and for seasonal dem ands the em ployer may employ

temporary work force, the perennial or non core services has taken

c a re of th re e a sp e c ts.

2) It shall be ensured that the perennial core services should not be

transferred to other establishments or agencies.

3) If the services are performed by the em ployees on the pay role of

the enterprise, should not be transferred to other agencies without

consulting, bargaining agents.

4) W here transfer of such services do not involve, any who is currently

in service of the enterprises the managem ent will be free to entrust

the services to outside agencies.

The contract labour will be remunerated at the rate of regular

worker engaged by the same organisation doing the same type of work or

if such worker does not exist in the organisation, at the lowest salary of

the worker will be paid. The principal employer will ensure that the social

security measures and other benefits are extended to the contract labour.

The governm ent have reviewed the Act and kept in view the

employers associations and trade unions and the recommendations of

second labour commissions and the changes to be m ade are to be

worked out in the law.

5.4.1 Contract Labour System at International Leveh-

Interfirm Cooperation:-
The medium sized firms in many countries are competing efficiently

with big firms and corporations like ‘Multinational Corporations’, by creating

a network of small firms offering services or products from a single

source to potential customers. The small firms may co-operate each other

in m any different ways like they may share ‘Research and Developm ent’,

they may share their marketing or training facilities. They may even share

information and ideas, combine their complementary skills and technologies,

to produce or manufacture some innovative products or range of products

or production processes. They may specialise in different stages, of

production process of each others. Specialisation which may include a

complete package of services regarding a particular stage in overall

production process.

The significance of cooperation amongst different firms with regard

to different stages in the whole production process which enhances

competitiveness, both by cutting costs, as well as improving quality by


There are many small sized and medium sized firm in different

countries like Italy, Denmark, Egypt, Germany, G hana, Indonesia, Japan

and United States, who have been able to m eet the challenges brought

about by globalization. By adopting strategies of interfirm cooperation the

small firms industrial sector have been developed. Even though there is

competition about the products, amongst the small firms producing same

product, but there will be cooperation for each stage of production, it can

also be done in case of firms manufacturing the sam e products and are

from different segments also, because they might have observed the

cooperation instead of competing with each other. Therefore firms may

decide to combine their productive firms, which they could meet alone. On

the other hand they could engage in periodic subcontracting for one

another or helps to each other as a long term insurance. This type of

understanding of cooperation is always occurring in small firms in ‘Sakaki

of Japan’, which are specialists in engineering and metal manufacturing

sector. In 1982 there were 330 manufacturing firms out of which 41% had

three or less employees. All the factories except 11 factories, there were

99 em ployees. Because of the cooperation of the firms in Sakaki are

world leaders, in the global market for blood pressure testers, and manual

and electronic typewriters. For expanding the business a firm can bid

even though it is not having a bidding capacity or the technical ability, by

relying on neighboring firm can accept the foreign orders or the firm can

satisfy the contractual obligations, by purchasing neighbors machinery or

technology. This cooperation of small firms have created a confidence

amongst the large organization, that if the order is placed to the firms in

Sakaki will be promptly completed. But for this the local or regional

institutions, centralised assistance is needed, in the areas of designing

market information, administration and finance which the small organisation

will not afford by their own.

In the process of globalization not only the small firms but the large

firms are also making an attempt to achieve in the global competition by

way of cutting their costs and improving the quality of their products or

services. For achieving this large firms are restructuring their organisation

and production methods. For this the core and peripheral or non core

activities are separated from each other. The core activities are performed

by the regular employees in the organisation and the peripheral activities

like, security, cleaning, or canteen facilities, these organisations are

engaging the outside source such as an independent contractor, who

provides such services by his own employees or contract labours, so that

the firm can concentrate on core activities. In some cases the firms may

even outsource their core operations also, either partly or fully. If some

times due to urgent orders, or if the existing em ployees are not ready to

cooperate at that time. This trend is catching the w ave fastly including

India all over the world. The large firms are decentralising their production

and outsourcing their requirements from small firm suppliers, and insisting

them about quality norms and standards.

There was a concept of mass production in U.S.A. and other

countries about 1950-1960 but now the concept of decentralised production

is taking place all over the world.

Foreign Collaborations:-
The various forms of collaborations, arrangem ents, agreements,

associations, are either inter firm cooperation or big and small firms

relationships are nothing but a variety of contract labour arrangements.

Such arrangements are affected by the flexibility in the labour markets. In

order to face the competition of M NCs and Global giants, the Indian

employers are more interested in flexibility in the relationships of the

employees, for which they are demanding the provisions of contract labour

which is more stringent and more flexible and should be given a free

hand to hire contractors to perform their jobs, which do not form the part

of their core operation. W hile thinking about the flexibility for efficient

funning of the organisation the stability, incomes and working conditions

are also equally important, for lowering on incomes of workers, here the

contract labour system will not show the desirable results to the society

and to the enterprise.

The subcontracting or ( contracting) that who are not be employees

and are not independent finns, employs higher skilled labours and Superior

technology. India and other developing countries, like Argentina, Brazil,

Mexico and Republic Korea already having the subcontracting system and

having the relationship of large firms/small firms. Such intervention of

relationship aims that to expand the customers and supply choice through

technological up gradation, by development of small firms cooperation is

necessary through the intervention and support of regulatory agencies,

information network and collective institutions.

New Trend:-
Contract Labour is not a new phenomenon and was used in India

alone. Now the trend has been arrived to use the sam e concept again,

and this trend has been noticed all over the world. T h e recourse of

contract labour is there in the areas like agriculture sector, construction,

retail trade and plantations. The contract labour system has been spread

all over the world i.e. in the developing as well developed countries, public

and private sectors, manufacturing and service sectors like textile, clothing,

forestry, canteens, and restaurants, offshore petroleum, installation and

inland transport and in the high technology industries. In the United

Kingdom the Contract System has perm eated even “highly skilled

operations like accountancy, architectural and administrative occupations”.

The Governm ent policies are also encouraging to introduce the Contract

Labour System in the Public Sector in order to reduce the expenditure.

Insecurity of the Contract Labour at International Level

The Economic Times have published an article on 6^ August 1999,

that William Echikson in ‘Business W e e k ’ have described the condition of

the workers at El Salvador. The product manufactured is sports wear giant

Adidas Salomon where the young girls up to 14 years age are employed

and are compelled to work for 70 hours in a week, not allowed to go for

toilet more than twice a day and not more than 2 minutes, if they stayed

more than three minutes in the toilet, then one day salary was deducted.

The worst condition is published in ‘ Marmik’ of IS ”’ January 2004, by Mr.

Walson Tham pu under the heading “Valvantatil Mrugajal”- “Madhyapurvetil

Kantrati Kamgaranchi Durdasha” they have mentioned the bad conditions

of the contract labours in the Middle East countries. O ne Miss. Raj. Josef

amongst the workers who was working as housewife, her owner was

beating her every day, harassing mentally and physically, keeping her in a

locked up condition in a room for many weeks, and the starvation of many

days, was heating the skin. In such a unbearable condition she complained

against him, but it was of no use the owner kept som e blames against

her, and she punished the imprisonment of 3 years.

Another fact of one Moham eddian girl from Kerala, who was

working as housewife, her owner kept her in a locked up condition for

nine months. O ne day a Malyali worker who went there for repair work of

the house, he saw her worst condition there, then he planned to escape

her from there and sent her directly to Kerala. Such situation is not only

in that country. But when Mr. Walson Thampu who visited other countries

he heard very worst stories of the Indian w om en’s, who were working as

h o u s e w iv e s, th e ir co n d itio n w a s to o b a d .

Afterwards he visited to a labour camp in a city w here 600 such

labour camps were there in which about 35 to 650 peoples were residing

those who were visiting such labour camps, they are watched in a doubtful

manner and are not allowed to visit without the permission of the head of

that labour camp. One supervisor told that the contract labour were on

strike for increasing the wages, they were terminated and sent to their

countries & those who were not terminated, for them the conditions and

obligations about the work were increased.

The contract labours from Kerala has to pay Rs 7 00 00 to 80000

to the agents for getting them selected to work in middle east nations.

After they are selected, the salary is decided up to Rs 7000/- but majority

labours are getting hardly Rs 3500/- to 40 0 0 p.m. They has to work in

severe heat having a temperature up to 50degree Celsius. The payment

which they are getting is not paid for a period up to six months. Around

30 to 60 persons stays in a single room. The room is having one fan.

Then what should be their condition in the summer season, that we cannot

imagine even. After working for eight hours, they are accepting additional

part time jobs to satisfy their basic needs in addition to their salary. Out

of them 75% persons were married, their wives w ere not getting any

information of their husbands even. The labours who were suffering were

not informing in India, because they were feeling that their family will feel

uneasy and will get the trouble.

Trade unions at world wide have expressed serious concern at the

proliferation of the contract labour. These unions have shown many reasons

that even though there are permanent workers appointed in the organisation

the contract workers are appointed in order to deny the workmen their

rights and benefits. The contract labours in the developing countries are

abused. They are given less salaries than the perm anent workers in the

sam e organisation. They are deprived of social security benefits like

gratuity, provident fund, sickness benefits, holidays and leave including

maternity leave, compensation for accident and required health and welfare

m easures. Such adverse conditions are coupled with lack of sense of

security, which creates negative emotional psychological symptoms and

caused stress and strain upon them. The contract labours are constituted

as Vulnerable class and therefore can be exploited more easily as

compared to the regular workers. According to the ILO report in many

cases “High work pressure, unclear responsibilities with the conditions of

work safety and health regulations, general lack of training, exposes the

contract workers to higher risks of occupational accidents and diseases.

Chinese Labour Contract System:-

The government of China have allowed the foreign investment and

allowed the contract labour system but while appointing the contract

labours the foreign investors should appoint them as per the Article I! of

the Central Labour law and its contents should include clearly the conditions-

i) Quantity and quality of assigned work and the task to be performed.

ii) Duration of the labour contract.

iii) Conditions of work and its duration.

iv) Paym ent insurance and other welfare amenities.

v) Dismissal, reward and punishment, resignation & discipline of work

vi) The circumstances under which contract labours are terminated.

vii) Liabilities for those who are breaking the contract.

viii) Other terms, as think necessary to put in the contract.

Other Conditions:*
a) The labour contract shall be in Chinese Language or m ay be in

foreign language but should have Chinese version.

b) After completion of contract the documents are binding upon both

the parties. If they wants to revise it then such revision should be

by the consent of both the parties.

c) The standard text of labour contract should be filed with the

relevant labour departments, personal, administration and Shanghai

Confederation of trade unions, so that these departm ents should

supervise and exam ine its implementation.

d) The trade unions in foreign invested enterprises includes the

m em bers from staff and workers and the negotiations will include

the terms of payments, working time, off days and holidays, insurance

and welfare, protection to the workers. The representatives of staff

and workers should be choosed in the union.

e) Article 1 3 & 1 4 deals with the conditions by which the employee

should be terminated According to Article 13’’ the foreign invested

enterprises may dissolve the labour contract and fire the employees

upon one of the following conditions-

i) W hen the employee is proved unqualified during the probation


ii) W hen the Doctor’s certificate due to sickness unable to do

the work or non working related injury may cause, that he

cannot continue the reassigned work also.

iii) W hen the employee is in serious violation of labour disciplines

or relevant regulations of the enterprise.

iv) W hen em ployee seriously neglects his duties which causes

serious loss to the enterprise.

v) W hen due to particular circumstances if the contract is


vi) W hen there are other particular terms defined in the labour


A rticle 14:- says, that the labour contract is dissolved in one of the

following circumstances.

i) W hen the em ployee is charged criminal suit and sentenced to


ii) W hen the foreign invested enterprise is dissolved or terminated.

Article 18:- Says, the Chinese em ployee when disnriissed by the foreign

invested enterprise, shall get economic compensation from the enterprise

in the light of the employees service length in the enterprise. Those whose

service length is less than one year then he will get the compensation

equivalent to one months salary for each year of balance service, but the

maximum amount should not be more than 12 months salary.

Article 15:- talks, of codes under which the labour contract cannot be

dissolved the foreign invested enterprise shall neither terminate, nor disslove

the labour contract nor dismiss the em ployees upon one of the following


i) Employee suffers from sickness or non working related injury but it

is in the designated medical care period.

ii) W hen the em ployee suffers from occupational disease or work

related injury.

iii) W hen the fem ale employee is in pregnancy, maternity and breast

feeding period.

iv) W hen the labour contract has not expired.

Conditions Imposed on foreign enterprlses:-

Due to the work related injury or occupational diseases the employers

of the foreign invested enterprise after the medical care period are

identified by Assessm ent Commission as losing working capacity to

different extent. The termination and dissolution of their contract must be

implemented according to following terms.

i) The foreign invested enterprise must not dissolve the labour contract

of those who have lost the working capacity.

ii) The foreign enterprise must not terminate or dissolve the labour

contract of those who have lost the working capacity greately but

may terminate the labour contract by agreement with the employee.

iii) The foreign enterprise should not terminate the labour contract if

there is partially loss of working capacity.

The other articles;-
Talks about the compensation on retrenchment or lay off, medical

allowances, residential facilities, payment of wages, insurance, provisions

of overtime wages for extra working hours etc. Any party which violates the

labour contract shall bear the responsibilities of violation and compensation.

Resolution of Labour Dispute in China:-

The disputes among the enterprise and em ployees are consulted

between the parties, if consultation fails the parties m ay apply to dispute

mediation committee if it fails then the parties can apply to the dispute

arbitration committee, if the parties are not satisfied then the arbitration

may bring case to the peoples court of district or the country.

Attitudes of Unions & Employers & their policies at International

There is rapid grov\rth of contract labor and the unions all over the

world, demanding the regulation of prohibition of contract labour system.

The contract labours are always exploited, their abuses should be prevented.

There should be direct relationship with the employers. The contract

labour system should be allowed in exceptional cases. The security,

stability and service conditions available to the regular employees should

be extended to the contract workers.

The unions have dem anded that there should be registration of

contractors and principal employers. W hile granting the license after

registration, it should be observed that the contractor is doing lawful

business, and has the capacity to fulfill the obligation and legal formalities

has been fulfilled. If the contractor fails to fulfill the contract then the

principal em ployer is held liable to discharge the obligation of contract


The employers are having different attitude about contract labour

that the contract labour promotes labours market flexibility and increases

competitiveness of enterprises. More possibility of exploitation of contract

labour should not be considered. The present age is the age of competition

in this competition the production work is performed by the existing

em ployees and peripheral work is outsourced.

Policies of Contract Labour of Different Countries:-

Different countries have different policies on contract labour and

are influenced by economic and social philosophies, level of economic

development, socio-economic conditions etc. Som e countries may prohibit

labour only contracting, permitting job contracting or genuine contracting

arrangem ents and recognizing as commercial transactions. But the

countries those who do not support a regulatory burden on business, but

the law offers the protection to the contract labours in occupational safety,

wages, social security, benefits, unfair labour practices etc. In Canada and

USA by inserting a provision of collective bargaining legislation are made

applicable to the contract labour. In this concept two or more separate

employers are termed as ‘Single em ployer’ for collective agreem ent.

The unions have criticized the policies of encouraging the policies

of contract labour system in T h e Report on Asia- Pacific Regional

Seminar for Trade Union Organisations on Contract Labour conducted by

ILO in New Delhi in April 1997 says with reference to the Governments

of the Asia- Pacific region. “Government policy makers who are concerned

about reducing unemployment, have tended to either remove or modify

restrictions on the use of contract labour with a view to making labour

markets responsive and flexible". One of the participants representing

Bureau for workers activities commented “There is growing apprehension

among workers that globalization is encouraging Governm ents to lower

labour standards. Very often the desire of the Governm ents to attract

investment has m ade them dilute or fail to enact m easures intended to

protect the welfare of contract workers or to turn a blind eye to infringements

of legislations.

R e c o m m e n d a tio n s o f IL O :-

For furthering the aims and objectives, the ILO has m ade certain

recommendations and conventions on contract labour. The employers

association took the objection on the definition of Contract Labour. Finally

ILO recom m ended definition of contract labour even a persons who

directly and personally render services, to enterprises (primary employers)

may not fulfill all the requisite services directly and personally to enterprises

may not fulfill all the requisite attributes of formal employment relationship,

but may still be so dependent on the enterprises that, without adequate

protection they would become prone to various abuses.

The ILO is focusing it’s attention, on the rapid proliferation of the

phenomenon of Contract Labour and expressing labour working conditions

of contract workers in different economic sectors all over the world, e g .

In 1955-56 at the fifth session (C aracas in April - May 1955 and Geneva

in April 1956 ) the Petroleum Comm ittee of the Intonation Labour

Organisation adopted a resolution (No. 44) about contract labours conditions

in petroleum industry. The petroleum Committee recognised the following

circumstances for the existence of contract labour system,

i) It was a practice of all undertakings in all the countries to assign

the work on contract basis which is not a part of regular work and

who undertakes such work is known as contractors and persons

appointed by him are contract labours.

11) Som e undertakings have contracted the work of permanent nature.

iii) The general tendency of increasing the am ount of work finally Is

given to contractors.

iv) Contract labour and workers appointed in the oil undertakings are

performing the sam e type of work.

v) Som e times the less industrialised countries contract labours were

employed unnecessarily.

vi) Disparity in standards of work between perm anent workers and

contract labour will create a serious problem.

Providing good conditions, is a job of principal employer, as well

contract undertakings, but the oil undertakings were responsible for making

available it. The petrol committee have adopted the following resolution.

Actions by public authorities;-

i) The government should ensure that there is adequate legislation for

projecting of the contract labour e g , licenses.

ii) In the absence of trade union collective agreem ents should be

m ade between contractors and workers.

iii) The government should ensure that, minimum legal standards are

applied or not.

iv) There should be effective application of penalties for violation of

legal provisions.

Action by undertakings:-
I) The work should be associated with technical process, in oil

undertakings where the work which is not related can be contracted.

ii) The contractor should provide good wages and working condition

to the contract labours.

iii) The contractor should provide or arrange the medical facilities in

remote and undeveloped areas.

iv) To provide recreational facilities, where the workers are working in

remote and undeveloped areas.

v) To see whether, the working conditions are provided by the

contractors or not.

vi) To encourage the contractors, to stabilize the employment of

em ployee if there is unemployment area.

Even seventeen years after passing the resolution there is non­

implementation of provisions suggested. By the petroleum committee. The

Committee also have strongly advocated that the contract workers employed

on the construction of new installations , should have ever appropriate after a

permanent employment, after suitable," Vocational training, further training and

retraining to them and the own employees so that they could fill up “ Specialized

personnel requirements by promotion or transfer of suitable workers, to avoid

the contract labour systems.

Clothing Industry: -
At the second tripartiate technical meetings for the clothing Industry held

in G eneva from 23"'^ Sept, to 2"'^ October, 1980, the following conclusion were

drawn: -

i) T h e contract labour should offered the advantages. T h e small

organisation will generate the employment without any special difficulties.

ii) Their m ay be inferior remuneration in many cases due to pressure on

productivity and delivery dates, especially on fem ale workers.

iii) The advantages of contracting out should not be, at the expense of the

workers, either to the contractors or principal employers.

iv) Labour only contracting should be avoided.

v) The system of industrial homework, or use of child labour will create the

health and safety problems as well as they can be abused; therefore

there systems should be abolished.

Construction Industry: -
For focusing attention on construction industry the ILO at its twelth session

of the building Civil Engineering and Public works Com m ittee (at Geneva,

December 2-10-1992) passes a specific resolution ( No 102) regarding contract

labours in construction.

In its resolution Committee requested to the m em ber states of the ILO

to ensure compliance with appropriate labour legislation in the line with their

working conditions.

On 28'" April, 1993 the Tripartite meeting on safety and related issues

pertaining to work on offshore petroleum Installations ( G eneva, April 20-28,

1993 ) ensures by calling a meeting of contractors for upgrading the safety

measures and assures to the governments by the safety m anagement system

that how the safety m easures should be adopted and divided amongst other


5.4.2 Origin of Contract Labour System in India -

The contract Labour system is in existence sine long back, it was in

existence in the agricultural sector, in the form of contractors who were taking

the work of cultivation, excavations of well, constructions of dams, roads, bridges,

buildings, w ere also given on contract basis. The contractors were getting the

work from principal employers , appointing his workforce and was getting the

work done. Such workforce appointed by contractors m eans nothing but the

contract labours.

The contract labours were also appointed on mines, quarries, bricks

making, and other agro based industries.

There w ere expert artist in India before British period like weavers,

sculptors, gold smiths, carpenters, who were giving their services to the other

part of the society. As well as they were also exporting their products on order

basis in the foreign countries also eg:- The production of Shaloos (Saries) and

were popular by the name of the cities eg:- Banaras, Paithan, Yevala, Baroda,

Dhaka, Kashmir such cities were famous for saries. This type of system is in

existence in the modern age by the name “Job Contracting”.

There w ere self sufficient villages before British cam e to India. The work

were done by the peoples in the villages by their inherent professions, everybody

was co-operating each other. Therefore what ever was needed to whom so

ever was getting in the village only. So there was a village econom y and the

villages were self sufficient i.e. farmers were producing food grains, vegetables,

milk, fruits, etc. the farmers were taking the help of the other peoples, known as

Sonar for jewellary, chambhar for footwear, Kumbhar for clay made items,

barbers for cutting the hairs, the others were, washer man, fisherman, etc. In all

such persons were called as Bara Balutedars, were giving services to farmers

in exchange of fooodgrains and vegetables. It was a part of contract labour

system of providing the services or collaborations at village level or the co­

operation of different peoples in the villages.

T h e sam e contracting system is in existence in the 21®* century, i.e. In

order to face the global competition, the small firms are co-operating each

other and for to face the competition of giant corporations or multinational in

the world trade. Another example is that small firms in Sakaki Japan are few in

number but leading the whole world’s automobile industries due to they are co­

operating each other.

But when British peoples captured the Hindustan and in addition to this

there was ‘Industrial Revolution’ around 1862. the huge production was possible,

and quality was super. The British peoples started contract labour system which

was in existence in India since ancient period.

The peoples who were working in British industries w ere unorganized,

were allocated the large volume of work were paid low wages, were not

provided the health, safety and welfare measures, and also they were no

perm anent workers too. The first trade union started by Mr. Lokhande and

formed the Mill Mazdoor Sangh at Bombay.

The Royal Commission:-

On labour was appointed by British G overnm ent in 1928 and the

first National Commission on labour headed by Justice Gajendragadkar,

the Commission said that this shows “a high degree of similarity, as far

as core area of enquiry is concerned”. The Royal Commission was also

known as whitely commission and asked to report and m ake the

recommendations on “existing conditions of labour in industrial undertakings

and plantations in British - India, on health, efficiency and standards of

workers and on the relations between employers and em ployees”. The

first National Commission is also known as G ajendragadkar commission

had more comprehensive and different areas were specifically mentioned.

The legislative and other provisions were intended to protect the interest

on labour.

The Gajendregadkar commission was asked to review the changes

in the conditions on labour since independence and to report the existing

condition of labour. The commission was asked to study and report on

workers earning, the standard of living and health efficiency of workers,

both at the central and states level. The report of Gajendragadkar

commission in the section on the condition on labour, levels of earnings

standard of living and other question related to these subjects.

History of contract labor system:-

The contract labour is in existence since long back is in existence

in public and private organisations. The State G overnm ent and Central

Government are also making the use of contract labour. The system itself

tended the abuses of contract labour. Therefore the government planning

commission was appointed in the second five year plan, the commission

have m ade certain recommendations about improvement of service

conditions. If in some cases the abolition is not possible, then the system

is kept continued.

The Contract Labour (Regulation and Abolition) Act, 1970;-

The contract labour Act has received the assent on 5/09/1970 and

was passed on 5/09/1970.

Title of the Act:- The title of the Act is “Contract Labour (Regulation and

A bolition) Act, 1970.

The Act extends to whole India, and the Act cam e in to force after

central governm ent may by notification in the official G azette appoints

different provisions of the Act.

The Act is very small containing very few sections. The provisions

about canteen are very important in the contract labour act.

Registration of the Establishments:-

The principal employer means who is the owner and exercises

ultimate control and supervises and controls the employer.

Section 7(1) rule 17:- The application is m ade in triplicate in the

registering office in that area Sec 7 (2). The changes due to registration

o ffic e s h o u l d b e m a d e w ith in 1 5 d a y s .

Sec ( 8 ) - Revocation of Registration:- in certain cases revocation is

made if the certificate is obtained by misrepresentation, suppression of material

facts, but the opportunity of hearing is required to be given by the appropriate


According to section G, if the establishment is not registered by the

principal employer, he is not allowed to employ the contract labour.

Licensing of Contractors: -
T he contractor will not be able to appoint contract labour or cannot

undertake the contract work unless, he is having th e license certificate . such

licenses are issued by licensing officer.

The application should be made to the licensing officer in triplicate along

with the required documents or certificates section 1 3 (1 ) Rule 21 (1)

The principal employer should give the declaration about the engagement

ofcontract labour rule 21 (2-A)

Eligibility :-
According to the section 2 Rule 22 - the licensing officer investigates in

the application w hether the applicant who has applied is minor, of unsound

mind, insolvent or no, and the license is granted after investigation.

As per Rule 23 the eligibility of the applicant is taken into consideration.

Security Deposit
The R ule-24 states that the security deposit of Rs. 100 per workman

should be deposited by the contractor.

The license is granted or can be renewed under the Rule-29 of the section

13(2) of the contract labour Act.

Validity :-
As per rule 27 , the license remains valid by to 31®* December, every

year. •

Renewal of License :-
An Application should be made in triplicate m ade within 60 days, before

e x p iry o f t h e lic e n s e .

R e v o c a tio n , S u s p e n s io n a n d A m e n d m e n ts o f L ic e n se

Section 14(1) (a) & (b) states that if the licensing officer satisfies that

license is obtained by misrepresentation, suppression of material facts, may

revoke the license or forfeit the amount of deposit.

Amendment of License
As per the Rule 28 the contractors shall apply to the labour officer, with

the receipt of a treasury receipt for am endment of license.

Prohibition of Contract labour - Section 10(1) and (2)

If the appropriate government satisfies that the conditions of the work

and other factors whether

a) Operation or process is incidental to or necessary for trade and industry.

b) It is perennial in nature, with regard to trade and industry.

c) The work can be done by the regular workman in the sam e or similar


d) The work is sufficient to employ considerable num ber of whole time


The appropriate government may offer consolation with Advisory Boards

and by notification in the official Gazette, prohibit the employment of contract

labour in any operation or process or other work in the establishment.

Appeal and Procedures Section 15 (1) & (2)

A person aggrieved from order m ade u/s 7,8,12, or 14 may prefer

to appeal to appellate officer within 30 days.

Every person shall be in the memorandum form signed appellant or

his authorised agent or by regered post and a certified copy of appealed


If the application is not complied with Rule 32 then it is rejected or

returned or dismissed on non appearance of appecant on fixed date.

Re-admissions of Appeals:-The appeals dismissed under rule 34, if the

re-appeal is m ade within 30 days, after dismissed and proved certain

c a u s e s t h e n it is r e a d m i t t e d .

Table No. 5.1 : Enforcement of Contract Labour (Regulation & Abolition)

Act, 1970
Sr. P articu lars Y ears

No. 1996 1997 1998 1999 2000 2 0 0 1 -0 2

1, No.of registration 375 425 639 670 658 516

Certificates issued to

principal employees

cases received during

2. No.of Licences issued 3613 4660 5471 6632 7734 6827

to contractors.

3. No.of Inspections 4653 3956 4263 5281 5479 6052


4. No.of Irregularities 72541 70709 65509 85936 83414 94685


5. No.of prosecutions 3705 3330 3147 3805 3857 3671


6. No.of convictions. 2770 2240 2060 2019 2126 2071

7. No.of contract labourers 489776 588678 664216 762425 773849 709030

covered by licences.

8. No.of licences 757 1371 1669 1099 3562 3904


9. No.of registration 23 Nil Nil Nil Nil

certificates revoked

(Source; Annual Report 2002-03, Ministry of Labour, Govt, of India, New Delhi)

From the above table, it is cleared that the registration certificate issued

to the principle employer were 375 in the year 1996 increased upto 670 in the

year 1999 and again reduced upto 658 in the year 20 0 0 and upto 516 in the

year 2001-02.

The licences issued to the contractor w ere 3613 in the year 1996

Increased upto 663 2 in the year 1999, the highest licenses issued were 7734

in the year 200 0 and reduced to 6827 in 2001-02.

The inspection conducted were 465 3 in 1996. These inspection were

raph 5 : No. of Registration certificates issued to the Principle Employers and Licenses
issued to Contractors for the period








5281 in 2000 and 6052 in the year 2001-02.
T he number of contract labour covered by the licences were 489776 in

the year 1996 increased at its highest 76 2 4 2 5 in 1999 and again increased

77 3 8 4 9 in the year 200 0 and 709 030 in the year 200 1-02. W hich means the

contract labour system is increasingly adopted in the industrial sector for the

working of non core activities.

Absorption of Contract Labour

It has been settled by the various judgments of Apex courts and

high courts. The employees of the contractors cannot become the employees

of the principal employer even though the principal employer or contractor

are not having licenses or not registered. Even if the contract of the

contractor is terminated and employees of the contractor becomes surplus,

it is not obligatory on the principal employers to absorb the employees of

the contractor.

No Automatic Absorption of Contract Labour on Prohibition

The latest judgment given by the Supreme court is that on abolition

or prohibition of contract labour the em ployees or workers engaged

through contractors will not become the employees of the principal employer

Steel Authority of India Ltd. Vs National Union, W ater Front Workers,

2001 LLR 961 (Sc).

Other Acts Applicable to Contract Labour:-

1) Factories Act, 1948:- The Act do not makes any difference between

the persons directly employed & by contractors the contract labour

can enjoy the sam e benefits as like workers in a factory like leave,

holiday, overtime, extra wages etc.

2) The Em ployees Provident fund Act 1952.

3) Em ployees state Insurance Act 1948.

4) The Paym ent of W ages Act 1936.

5) The minimum wages Act, 1948.

6) The Industrial Disputes Act, 1947.

7) The W orkm en’s Compensation Act 1923 are applicable to the

contract labour system.

Health and welfare of contract labour canteen section 16, rule 40:-
This provision is applicable to those establishment where 100 more

contract labours are employed for last 6 months. The canteen should be

m ade available to the contract labours within 60 days either by the

contractors or by the principal employer.

Rest rooms - section 17, rule 39:-

If the contract labours are required to halt at night and work is to

continue for 3 months or more.

T he rest room should be provided by the contractor or principal

employer within 60 days of com m encem ent of work.

Other Facilities section 18-Rule 41,42 and 43:-

It shall be a duty of the contractor to provide and maximum

facilities like.

Latrines and Urinals - Should be provided by c la u s e (l) to (9) of rule 41.

W ashing facilities - should be provided adequately as per rule 42.

Other facilities - within 60 days of the commencement of the rules and 30

days after in case of new establishments as prescribed in this rule.

Payment of Wages - Section 21 (1), (2), (3) & (4) :-

The contractor shall be responsible for payment before prescribed

period of time

The representatives of principal employer should be nominated.

The disbursement of wages should be in the presence of


If the contractor is not paying full wages then principal employer is

liable for making such payment of wages.

As per rule 5 4 - T h e entries of payment of wages should m ade in

the register.

The w age period should not exceed more then one month.

Mode of Payment of wages:-

If th e p erio d o f w a g e s is a weel< or fo rt night th e n th e w a g e s

sh o u ld b e m a d e w ith in 3 d ay s.

In o th e r c a s e s if th e w o rk ers a re less th a n 1 0 0 0 th e n th e p a y m e n t

o f w a g e s should b e b e fo re 7*'^ d a y o f th e m onth. If th e w o rkers a re a b o v e

1 0 0 0 th e n th e p a y m e n t o f w a g e s should b e m a d e b e fo re 10*'' d a y o f th e


T h e p a y m e n t o f w a g e s on te rm in a tio n sh o u ld b e m a d e o n e d a y

a fte r such te rm in a tio n .

T h e p a y m e n t o f w a g e s should m a d e on th e w o rkin g d a y a n d th e

p e rs o n a u th o ris e d to m a k e it.

T h e p a y m e n t sh o u ld b e m a d e in coin or c u rre n c y o r both.

The w ages sh o u ld be m ade w ith o u t d e d u c tio n except th o s e

d e d u c tio n s w h ic h a re p e rm is s ib le by th e p a y m e n t o f w a g e d A ct.

T h e n o tice should b e d isp layed show ing th e w o rk p la c e an d th e period of


Liability of the principal employer In certain cases

If th e c o n tra c to r d o e s not p rovid e u/s 16 & 17 th e principal e m p lo y e r is

o b lig ed to p ro vid e & th e e x p e n s e s m a y be re c o v e re d fro m co n tracto r eith e r by

d e d u c tio n or a s d e b t p a y a b le .

Registers and other Records to be Maintained (sec 29) (1) & (2)

E v e ry p rin cip le e m p lo y e r & c o n tra c to r sh o u ld m a in ta in reg isters an d

re co rd s w ith p a rtic u la rs like n u m b e r o f c o n tracto rs e m p lo y e d , n a tu re o f w ork

an d ra te s o f w a g e s .

Register of Contracts

S h o u ld in c lu d e th e p articu lars o f co n tract, h o u rs o f w o rk & n a tu re of

w o rk e t c . th e p rin cip le e m p lo y e r shall m ain tain th e register.

Muster rolls , Wages Registers, Discounts Register and Overtime

Registers etc Rule 59:-

T h e e s ta b lis h m e n ts w h ich a re g o v e rn e d by p a y m e n t of w a g e s A c t

re q u ire d to m a in ta in , T h e m u s te r roll, re g is te r o f w a g e s , re g is te r o f w a g e

d ed u ctio n , o v e rtim e , fin e s & a d v a n c e .

A c c o rd in g to rule 5 9 (1 ) th e co n tra c to r sh all m a in ta in m u s te r roll- cum

w a g e register & issue a tte n d a n c e card -cu m slip a s p rescribed by m a h arash tra .

M in im u m w a g e s rules 1 9 6 3 , alo n g with s ig n a tu re or th u m b im p ressio n .

Display of the act and rules:-

A s p e r ru le 6 0 , e v e ry c o n tra c to r sh o u ld d is p la y th e ac ts a n d rules in

English , Hindi and M arath i or in th e form ap p ro ved by th e labour com m issioner.

Register to be kept handy:-

A ll re g is te rs a n d reco rd s should b e k e p t in th e o ffic e o r 3 km s from th e

w o rk p la c e , m a in ta in e d in Hindi, English an d M a ra th i shall be p re s e rv e d for 3

ye ars from th e d a te o f last entry and should be produced on d e m a n d by inspector

on a n y o th er authority.

Penalties and offences Section 22(1),(2),(23),&(24)

Obstructions - To th e in s p e c to r w h ile d isch arg in g his d u ty im p ris o n m e n t up

to 3 m o n th s or fin e up to R s 5 0 0 or both.

In c a s e refusal to produce the registers and d o cu m en ts an im prisonm ent

up to 3 m o n th s or fin e up to R s 5 0 0 or both

Contravention of provisions

R e g a rd in g e m p lo y m e n t of c o n tra c t labour, p rohibition, restriction or

re g u la tio n o f c o n tra c t la b o u r e tc . Im p ris o n m e n t o f 3 m o n th s or fin e up to Rs

1 0 0 0 or both.

Contravention if continued a d d itio n al fin e of R s 1 0 0 /- fo r e v e ry continuing


Offences of the Company - Section 25(1 ),(2),(27)&(30)

Offences by the Companies

T h e c o m p a n y o r a p e rs o n In c h a rg e w h o is guilty is p u n is h e d unless

proved to th e contrary.

If p ro v ed a n d th e o ffe n c e is co m m itte d th e n th e n e g lig e n c e by director

o r m a n a g e r sh all b e p u n ish e d .

L im it a t io n o f p r o s e c u t io n

3 M o n th s from th e d ate on w hich alleg ed com m ission c a m e to inspectors

k n o w le d g e .

F o r o ffe n c e o f diso b eyin g o rd er o f in sp ecto r 6 m o n th s from th e d a te of


5.4.3 C o n tract Labour System at M aharashtra level:-

M a h a ra s h tra is industrially a d v a n c e d state in India. T h e lab o u r laws

in M a h a ra s h tra a re sim plified an d th e d o m e s tic indu stries a re getting th e

b e n e fits o f sim p lifie d la b o u r law s.

T h e contract labours a re allowed for peripheral services like canteens,

tra n s p o rt, g a rd e n in g , secu rity an d h o u s e k e e p in g etc. T h e c o n tra c t will be

p e rm itte d in d ire c t m a n u fa c tu rin g also to ta k e c a re o f s e a s o n a l p e a k s .

T h e re is in efficien cy, a m o n g s t th e w o rk e r d u e to th e y have o ffered

p e rm a n e n t jo b s and life tim e jo b security, to th e w o rk e rs w ho have

b e c o m e in efficien t, h aving low productivity a n d p o o r q u ality o f w ork.

D u e to g lo b alizatio n th e co m p etitio n o f th e d o m e s tic industries has

b e e n in c re a s e d , an d th e in d u stries a re in g re a t difficulty in M a h a ra s h tra .

T h e e m p lo y m e n t in M a h a ra s h tra is declining d u e to dow n sizing m e a s u re s

a d o p te d a n d m o d e rn is a tio n o f th e industries.

High-tech IVIaharashtra a good scope for contract labour

M a h a ra s h tra s ta te h a v e s tresse d on IT in d u stries. The p erfect

p olicy m a k in g a n d its e ffe c tiv e im p le m e n ta tio n is th e m a in re a s o n w h y

M a h a ra s h tra ra n k s n u m b e r o n e s ta te in IT in d u stries in India.

T h e s ta te g o v e rn m e n t is providing th e infrastructural facilities to the

IT an d S o ftw a re industries, like roads, co m m unications, electricity, transport


The M a h a ra s h tra g o v e rn m e n t have d e v e lo p e d th e IT p arks at

B o m b ay, P u n e , N a g p u r an d at Kolhapur, as w ell as th e B P O cen ters and

th e call cen te rs. T h e s e industries a re providing e m p lo y m e n t an d th e higher

s a la rie s a n d a m e n itie s to th e w o rk e rs , th e w o rk e rs e m p lo y e d in th e s e

in d u stries a re m o stly on c o n tra ct b asis only.

Contract labour system in Pune and Pimpri Chinchwad areas:-

T h e e ffe c t o f g lo b a lis a tio n h a v e a ffe c te d th e in d u stries in p u n e

a re a . P im p ri C h in c h w a d is th e p ro s p e ro u s industrial a re a , in p u n e city.

D u e to w o rld c o m p e titio n m o st o f th e sm all in d u stries a re c lo sed , s o m e

h a v e re tre n c h e d th e w o rk e rs an d s o m e h a v e d e c la re d V R S in this a re a .

But o n e m o re added a d v a n ta g e is th a t th e IT in d u stries an d

s o ftw a re p a rk s , call c e n te rs a n d B P O c e n te rs a re s ta rte d in p u n e a re a

w h ic h recru its th e w o rk e rs on c o n tra c t b asis o n ly a n d giving a ttractive

s a la rie s a n d a m e n itie s .

T h e IT in d u stries an d s o ftw a re p a rk s a re d e v e lo p e d at H injaw di,

T a la w a d e , K h a ra d i a re a s an d p ro p o sed a t W a g h o li a re a is also , u n d e r

c o n sid eratio n .

T h e M u ltin a tio n a l C o m p a n ie s a re lo cated a t R a n ja n g a o n G a n a p a ti

in 2 0 0 0 a c re s a n d m o stly p referrin g th e c o n tra c t lab o u rs only.

THE MAHARASHTRA CONTRACT LABOUR (Regulation and abolition)

Rules 1971 :

In d u s trie s a n d la b o u r D e p a r tm e n t, S a ch iva la ya B o m b a y -3 2 d a te d

O c to b e r 1971

N o C L A , 1 1 7 0 /1 5 4 5 /-L A B -IV In e x e rc is e o f th e p o w e rs c o n firm e d by

su b sectio n (1 ) an d c la u s es (a) to (p) (both inclusive) o f section (2 ) of section 35

o f th e c o n tra c t la b o u r (R e g u la tio n an d ab o litio n ) A c t 19 7 1 (3 7 o f 1 9 7 0 ) an d all

o th e r p o w e rs e n a b lin g it in th a t b e h a lf , th a t th e g o v e rn m e n t o f m a h a ra s h tra

h e rb y m a k e s th e follo w in g r u le s , th e s a m e having b e e n p revio u sly published

a s re q u ire d by su b se ctio n (1 ) o f th e said sectio n 3 5 n a m e ly -

Short Title - “M a h a ra s h tra c o n trac t la b o u r (R e g u la tio n a n d A b o litio n ) rules,


Definitions -

(i) T h e a c t m e a n s co n trac t la b o u r act 1 9 7 0

(ii) A p p e lla te o fficer - M e a n s a p p o in te d by th e g o v e rn m e n t u n d e r section

(1 ) o f s ec tio n 15.

(Hi) B o ard m e a n s s ta te ad viso ry co n tract la b o u r b o ard

(IV) C h a ir m a n -M e a n s c h a irm a n of th e board

(V ) G o v e rn m e n t m e a n s g o v ern m en t o f m a h a ra s h tra .


T h e board consists o f chairm an appointed by th e g o v e rn m e n t, the labour

c o m m is s io n e r, e x -o ffic io o r a n y o th e r o fficer a p p o in te d by g o v e r n m e n t, five

p e rs o n s in w h ic h (3 fro m e m p lo y e rs 2 fro m c o n tra c to rs ) fiv e p e rs o n s

re p re s e n ta tiv e s o f th e w o rk ers a p p o in ted by th e g o v e rn m e n t

Terms of office

i) C h a irm a n will hold th e office fo r 3 y e a rs

ii) T h e m e m b e rs o f th e board as per th e p le a s u re of th e g o v e rn m e n t

iii) T h e o th e r m e m b e rs will hold office for S years.


i) M e m b e r excluding ex-officio resigns his office a d d re s s e d to g o vern m en t

ii) A fte r re sig n atio n th e office will fall v a c a n t or 3 0 d a y s o f intim ation by th e

g overn m en t.

Cessation of membership

i) If th e m e m b e r exclu d in g ex-o fficio fails to a tte n d th re e c o n s e c u tiv e

m e e tin g w ith o u t o b ta in in g a le a v e fro m c h a irm a n w ill c e a s e th e

m e m b e rs h ip .

ii) If th e g o v e rn m e n t s atis fie s th a t his a b s e n c e fo r 3 m e e tin g s m a y direct

such cess a tio n .

Disqualification ;-

i) A p erso n of un so u n d m ind d e c la re d by th e c o u r t , or in s o lv e n t, or m oral

tu rp itu d e c a n n o t b e a m e m b e r o f th e bo ard .

ii) A b o u t a b o v e condition th e g o v e rn m e n t shall d e c id e th e s a m e .

Removal from membership

If a m e m b e r o f board if c e a s e d to re p re s e n t in terest a g o v e rn m e n t m a y

re m o v e him from th e board, but he should be given th e opportunity to rep resen t

his o p in io n .


A fte r v a c a n c y o c c u rs o r d u e to d e a th th e c h a irm a n in fo rm s th e

g o v e rn m en t, th en th e g o v e rn m e n t o f feeling th e vacancy.


O n e s e c re ta ry and o th er staffs a re ap p o in ted by th e board, their salaries

a n d a llo w a n c e s a re d e c id e d by th e g o v e rn m e n t.

Allowances of members

T h e traveling allov\/ances a re paid to th e official and non official m em b ers

a re o b s e rv e d b y th e s e c re ta ry o f th e b o ard ,

Disposal of business

E ac h q u estio n is d ecid ed in th e board m eetin g by majority, th e ch airm an

h a v e a s e c o n d o r castin g v o te p o w e r in c a s e o f equality.

Notice of the meeting

A t le a s t s e v e n d a y s n o tice b e fo re m e e tin g & in c a s e o f e m e rg e n c y 3

d a ys n o tice will b e g iven & for th e b u sin ess w h ich is not in a g e n d a , no notice is

req u ired .


A t le a s t o n e third m e m b e r exclu d in g c h a irm e n sh o u ld be p re s e n t for

o rd in ary b u sin ess.

If m e m b e r is not sufficient th en th e m e e tin g is p o s tp o n ed an d next tim e

th e b u s in e s s is a d jo u rn e d irresp ective o f n u m b e r o f m e m b e r atten d in g .

Committee of the board

T h e c o m m itte e o f th e b o ard is also fo rm e d o n e p e rs o n is s e le c te d as

c h a irm e n , for m ee tin g fifteen days notice is given, for e m e rg e n c y issue at least

7 d ay s notice is given. T h e ch a irm en will be th e p re s id e n t o f th e m eetin g an d in

his a b s e n c e th e m e m b e r will e le c t a m o n g s t th e m o n e as p resid en t.

Registration and licensing

Application for registration

T h e a p p lic a tio n m a d e in triplicate with tre a s u ry ce rtific a te .

O n re c e ip t o f th e ap p licatio n, th e registering o fficer reco rd s th e re in th e

d a te o f re c e ip t a n d a c k n o w le d g e s th e receipt.

Grant of certificate

T h e re g is te rin g o ffic e r g ra n ts th e c e rtific a te in th e fo rm no II a n d he

m ain tain s th e records in th e form no III ,& if th e re a re a n y c h a n g e s in certificate

should inform w ithin 15 d ay s to th e principal em p lo yer.

Rejection of registration

a) If th e a p p lica tio n fo r registration is not c o m p le te .

b) O r if th e re g is te rin g o ffic e r re q u ire s th e c h a n g e in th e ap p lic a tio n &

w ithin 15 d ays. S u ch c h a n g e is not m a d e by principal e m p lo y e r then his

re g istratio n is re je c te d .

Application for license

T h e co n tracto r should m a k e his application in triplicate in th e form n o .IV

and should b e ac co m p an ie d with th e certificate of th e principal em ployer, should

b e s e n t b y re g is te re d post. T h e registering o ffic e r re c o rd s th e d a te o f re c e ip t

th e re on. E v e ry a p p lic a tio n should be a c c o m p a n ie d by tre a s u ry re c e ip t &

p a y m e n t o f fe e s at th e rates s p e c ifie d .

Matter to be considered while granting license

a) W h e t h e r th e a p p lic a n t is a m in o r o f u n so u n d m ind d e c la re d by c o u r t ;

u n d e rc h a rg e d inso lven t, h as c o n victed a n o ffe n c e , o r m o ra l tu rp itu d e

d e c la re d by o f th e g o v ern m en t.

b) A b o litio n o f th e contract.

Grant of license

A fte r re c e ip t o f ap p licatio n , th e licensing o fficer m a k e s th e en q u iry and

g ran ts th e licen se.

Security:- T h e con tracto r is an individual or c o -o p e ra tiv e society has to d eposit

Rs. 1 0 0 . p e r w o rk m a n as a secu rity d epo sit.

Fees:- T h e fe e s o f registration for n e w contractors a re R s .2 0 0 for 2 0 w o rk m e n

a n d R s .5 0 0 0 fo r w o rk m e n e x c e e d s 4 0 0 . T lie fe e s v a rie s w ith n u m b e r of

w o rk m e n , fo r 1 0 0 w o rk m e n R s .1 6 0 0 , fo r 2 0 0 w o rk m e n R s .2 0 0 0 , fo r 4 0 0

R s .4 0 0 0 .

T h e c o n tra c t re n e w a l fe e s a re fo r 2 0 w o rk m e n it is R s .lO O m in im u m

a n d fo r e x c e e d in g 4 0 0 w o rk m e n it is R s .2 5 0 0 m a x im u m .

' T h e lic e n s e re m a in s valid up to 31®' D e c e m b e r e v e ry year. T h e license

sh o u ld b e re n e w e d 6 0 d a y s b e fo re th e lic e n s e e x p ire s . If th e lic e n s e is lost or

d e s tro y e d d u e to a c c id e n t th e n d u p lic a te c e rtific a te is issu ed by p a y m e n t o f

th e fe e s .

Welfare and health of contract labour and wages:-

In th e w e lfa re & health facilities, rest room s, c a n te e n s , latrines & urinals,

w a s h in g fa c ilitie s & o th e r facilities. First aid s & w a g e s etc. a re sim ila r to th e

p rovisions w h ic h a re m e n tio n e d in th e c o n tract la b o u r(R e g u la tio n & A bolition)

A c t 1 9 7 0 a t all In d ia leve l a re sim ilarly a p p lic a b le to th e M a h a ra s tra c o n tact

la b o u r (re g u la tio n & ab o litio n ) Act, 1 9 7 0 .

Register and records

T h e re g is te r o f c o n tra c to r a re m a in ta in e d by th e p rincipal e m p lo y e rs .

E v e ry c o n tra c to r shall issue an identity card to th e w o rk e r in th e form n u m b e r

X. T h e id e n tity card sh o u ld b e m a in ta in e d up to d a te . T h e c o n tra c to r shall

e n s u re th a t (Id e n ty c a rd s ) a re carried by th e w o rk e rs with th e m or no.

T h e m u s te r roll, w a g e registers, deduction register an d o vertim e register

should b e m a in ta in e d by th e contractor. T h e c h a n g e s in th e a c t or rules should

be d is p la y e d on th e n o tice b o ard . T h e reg isters, re c o rd s a n d n o tices should

b e k e p t h an d y. T h e n o tice a b o u t c h a n g e s in th e ra te s o f w a g e s should be

d is p la y e d on th e n o tice b o ard .

E ve ry principal e m p lo ye r o f the register estab lish m en t shall send annually

a return in fo rm X X I in d u p lic a te b e fo re 1 S"" F e b ru a ry to th e registering o fficer

th e e n d o f th e y e a r to w h ich it relates.

T h e B o a rd , c o m m itte e , c o m m is s io n e r o f la b o u r o r th e in s p e c to r o r

a n y o th e r a u th o rity o f th e ac t h as th e p o w e r o f in fo rm a tio n o f statistics,

a b o u t c o n tra c t la b o u r or p rincipal e m p lo y e r a t a n y tim e by an o rd e r in

writing. A n y perso n called upon to furnish th e inform ation un d er sub rule(1)

shall b e le g a lly b o u n d to do so.



T h e contract labour system is beneficial to th e em ployers, em p lo yees

an d th e natio n s.

Advantages to the nation:-

i) C o n tra c t la b o u r sys te m red u ces th e u n e m p lo y m e n t pro b lem ,

il) It h e lp s to in c re a s e th e s ta n d a rd o f living o f th e p e o p le s b e c a u s e

a fte r getting e m p lo y m e n t stan d ard o f living In c re a s e s a u to m a tic a lly

iii) T h e lab o u r intensive nations can ta k e th e a d v a n ta g e of outsourcing.

iv) T h e w o rkers of developing countries can s e e k th e job s in developed


v) T h e c o n tra c t lab o u r system will e a rn th e fo reig n e x c h a n g e . S o th at

th e b a la n c e o f p a y m e n t situation o f th e d e v e lo p in g co u n try will

im p ro ve.

Advantages to the employers:-

i) T h is s y s te m h elp s to re d u c e th e cost o f p ro d u ctio n .

ii) Im p ro v e s th e productivity an d serv ic e c o m p e titiv e n e s s .

iii) T h e n o n co re activities can b e o u ts o u rc e d a n d a tte n tio n only on

c o re activ ities is p o ssib le.

iv) T h e h ighly skilled, e d u c a te d an d yo u n g p e rs o n s a re a v a ila b le at

lo w ra te th a n th e re g u la r e m p lo y e e s .

v) Im p ro v e s th e productivity, d u e to young lab o u rs efficiency.

vi) A s th e w o rk is a s s ig n e d to co n tracto rs no s u p ervisio n is required.

vii) T h e c o n tra c t la b o u rs c a n n o t b e a p e rm a n e n t w o rk e rs h e n c e no

b u rd e n on th e o rg a n is atio n in fu tu re.

viii) T h e frin g e b e n e fits a re not given to th e c o n tra c t labour.

ix) N o p ro b le m o f tra d e unions.

x) T h e a u to m a tio n m e a s u re s or tech n o lo g ical up g rad atio n is possible

b y re m o v in g c o n tra c t la b o u rs a t a n y tim e.

Advantages to the employees:-

i) U n e m p lo y e d p ers o n s will g e t th e e m p lo y m e n t.

ii) T h e e m p lo y e e s ca n g e t good jo b s in o th e r o rg a n is a tio n s .

iii) T h e y c a n im p ro v e th e ir skills a n d s e e k b e tte r jo b s .

iv) In th e m o d e rn a g e , th e re a re bright o p p o rtu n itie s to th e skilled

la b o u rs in th e a d v a n c e d nation.

Disadvantages of contract labour system:- a re as fo llo w s-

Disadvantages to the employers:-

I) T h e possibility o f fo rm in g tra d e u nions by c o n tra c t lab o u rs.

ii) P ro d u c t q u ality c a n n o t b e m a in ta in e d .

iii) T h e r e is no a tta c h m e n t to th e o rg a n is a tio n o f th e c o n tract labors.

iv) A s th e w o rke rs a re ch anging frequently, it will req u ire to incur m o re

e x p e n s e s on training.

v) T h e c o n tra c t lab o u rs will affe c t th e productivity.

vi) O n ly non core activities a re a s s ig n e d to c o n tra c t la b o u r

Disadvantages to the employees ( Contract Labour)

i) T h e y will b e g iv e n w a g e s at low rate.

ii) T h e y a re te rm in a te d at an y tim e.

iii) N o re w a rd fo r e x tra w o rk, or m o re e ffic ie n t w o rk .

iv) N o stab ility in th e life, so c re a te s te n s io n .

v) T h e b a s ic a m e n itie s also a re not p ro v id e d .

vi) T h e w o rk in g hours a re not fixed.

vii) T h e c o n tra c t lab o u rs a re h a ra s s e d by th e co n tra c to rs o r principal

em p lo yer.

viii) T h e w o m e n a n d child w o rk e rs will b e m o re s u ffe re rs .

ix) T h e m u ltin a tio n a l c o m p a n ie s will not o ffe r th e jo b s to th e In d ian

w o rk e rs d u e to th e re q u ire m e n t o f highly in te lle c tu a l a n d training

re la te d jo b s .

x) T h e so cia l s e c u ritie s a re n o t p ro vid ed to th e c o n tra c t labou rs.

xi) T h e r e will b e reduction in th e re g u la r e m p lo y m e n t.