ASSIGNMENT

ON
CONTRACT LABOUR

Submitted By:
Ankita Aggarwal
(10/MBA/12)
Hina Jhamb
(10/MBA/23)
 CONTENTS

1.Introduction
2.Hypothesis
3.Analysis
4.Conclusion.
5.References and review of literature
INTRODUCTION:
The system of employing contract labour is prevalent in
most industries in different occupations including skilled
and semi skilled jobs. It is also prevalent in agricultural
and allied operations and to some extent in the services
sector. A workman is deemed to be employed as Contract
Labour when he is hired in connection with the work of an
establishment by or through a contractor. Contract
workmen are indirect employees; persons who are hired,
supervised and remunerated by a contractor who, in turn,
is compensated by the establishment. Contract labour
has to be employed for work which is
specific and for definite duration. Inferior labour status,
casual nature of employment, lack of job security and
poor economic conditions are the major characteristics of
contract labour. While economic factors like cost
effectiveness may justify system of contract labour,
considerations of social justice call for its abolition or
regulation. The condition of contract labour in India was
studied by various Commissions, Committees, and also
Labour Bureau, Ministry of Labour, before independence
and after independence. All these have found their
condition to be appalling and exploitative in nature. The
Supreme Court of India in the case of Standard Vacuum
Refinery Company Vs.
their workmen (1960-II-ILJ page 233) observed that
contract labour should not be employed where: —
(a) The work is perennial and must go on from day to
day;
(b) The work is incidental to and necessary for the work
of the factory;
(c) The work is sufficient to employ considerable number
of whole time
workmen; and
(d) The work is being done in most concerns through
regular workmen.
HYPOTHESIS

Use of contract labour in India’s manufacturing sector has

found surprisingly high levels of contract workers being
used – in some cases, as many as three times the official
estimate.

Contract workers are recruited informally to established

businesses via intermediaries. The findings suggest that
some of India’s key industries, such as cement, iron and
steel, cotton textiles and jute, rely on contract labour for
as many of four out of every five workers. The research,
conducted across two major industrial states, West
Bengal and Gujarat,
also found that that minimum wage and other contract
labour laws are widely violated. Many workers have no
specific working hours or medical benefits; have very
limited earned leave, and few safety arrangements for
hazardous work. In Gujarat, none of the contract workers
surveyed received Employee's State Insurance (ESI),
although in West Bengal up to one in four did. The study
found that contract labour regulations were not effective,
even in West Bengal, where contract workers are largely
recruited and controlled via trade unions. Workers in
West Bengal were also less likely to be paid the minimum
wage than in Gujarat.

India’s Annual Survey of Industries, the official record of

industrial statistics, puts the share of contract labour in
organised manufacturing at 15 to 26% across these
states. We found the share to be much higher 60 to 70%
in our sample states. This may be because we undertook
extensive field work in our sample states: most official
estimates of contract labour are based on secondary
data, where it is likely that contract labour is being under-
reported by employers.

Contract labour regulation exists and should be enforced

effectively. Our study suggests the establishment of a
vigilance committee, involving representatives from the
Labour Department of the Indian
Government and the workers community, to improve
governance and transparency.
ANALYSIS
THE CONTRACT LABOUR ACT, 1970 AND ITS
PURPOSES:
The concern for providing legislative protection to this
category of workers, whose conditions have been found
to be abysmal, resulted in the enactment of the Contract
Labour (Regulation and Abolition) Act, 1970. The Contract
Labour (Regulation and Abolition) Act, 1970 was brought
on the Statute Book to regulate the employment of
Contract Labour in certain establishments and to provide
for its abolition in certain circumstances and for matters
connected therewith.

APPLICATION:
The Act applies to every establishment in which 20 or
more workmen are employed or were employed on any
day on the preceding 12 months as contract labour and
to every contractor who employs or who employed on
any day of the preceding 12 months 20 or more
workmen. It does not apply to establishments where the
work performed is of intermittent or seasonal nature. An
establishment wherein work is of intermittent and
seasonal nature will be covered by the Act if the work
performed is more than 120 days and 60 days in a year
respectively. The Act also applies to establishments of
the Government and local authorities as well.
WELFARE AND HEALTH OF CONTRACT
LABOUR:
The Act has laid down certain amenities to be provided by
the contractor to the contract labour for establishment of
Canteens and rest rooms ; and arrangements for
sufficient supply of wholesome drinking water, latrines
and urinals, washing facilities and first aid facilities and
have been made obligatory. In cases of failure on the part
of the contractor to provide these facilities, the Principal
Employer is liable to provide the same.

PAYMENT OF WAGES AND PROVISIONS:

The contractor is required to pay wages and a duty is cast
on him to ensure disbursement of wages in the presence
of the authorised representative of the Principal
Employer. In case of failure on the part of the contractor
to pay wages either in part or in full, the Principal
Employer is liable to pay the same. The contract labour
who performs same or similar kind of work as regular
workmen, will be entitled to the same wages and service
conditions as regular workmen as per the
contract labour (Regulation and Abolition) Central Rules,
1971.

PANEL PROVISIONS: For contravention of the provisions of

the Act or any rules made there under, the punishment is
imprisonment for a maximum term upto 3 months and a
fine upto a maximum of Rs.1000/-

OTHER PROVISIONS: The Act makes provision for the

appointment of Inspecting staff, for maintenance of
registers and records and for making rules for carrying
out the purpose of the Act. In the central sphere, officers
of the CIRM have been appointed as Inspectors.

A number of complaints alleging violation of contract

labour Act especially the notifications prohibiting the
employment of contract labour are being received.
These complaints are being investigated and remedial
action taken in accordance with the provisions of the
law by launching prosecutions if considered necessary.
References are received for regularisation of the
contract labour or abolition of the contract labour
system on the ground of perennial nature of work/
ordinarily done through regular workmen etc. Writ
Petitions are also being filed by Union/Workers seeking
absorption where the contract labour system has been
abolished or pleading that the contract is sham. The
requests for abolition of contract labour system are
examined in consultation with the Central Advisory
Contract Labour Board and notifications abolishing
contract labour system in various establishments in
different jobs have been issued. So far as the
regularisation of the workers is concerned, no such
provision, either express or implied, exists in the Act.

In the context of globalisation, privatisation and

liberalisation, in March 2000 a GOM was constituted to
examine the proposal of the Ministry to suitably amend
the provisions of the Act with a view to facilitating
outsourcing of activities to specialized firms having
professional experience and expertise in the relevant
area and at the same time to provide for a safety net to
contract labour in such outsourced activities. Such a
measure, it was felt, would generate employment
growth. The GOM held a series of meetings in the
years 2000, 2001 and 2003. After in-depth
deliberations on the issues involved it was agreed that
certain activities which form support services of an
establishment be excluded from the application of
Section 10 of the existing Act, which provides for
prohibition of employment of contract labour in certain
circumstances. However, the same could not be
finalized.
While the trade unions have demanded that the Act
should be amended to provide for automatic absorption
of contract labour in the event of prohibition of
employment of contract labour, the employer’s
organizations are vehemently opposed to it. According to
them such a step would lead to capital-intensive
measures like mechanization, automization etc. and fall
in employment. Their view is that the employers should
be given flexibility to determine the composition of the
workforce for the industry to survive in the competitive
environment. Further, according to them, contract labour
should not be abolished in non-core activities of an
establishment and should be allowed to be parcelled out
to specialized agencies, which have grown rapidly, for
better time management, better operational efficiency
and high percentage of consumer satisfaction.

Some of the State Governments, in tune with the

changing times, have proposed measures to liberalise the
Act to spur the growth of industry, as for example, grant
of exemption to Special Economic Zones and Export
Oriented Units from the applicability of the Act to boost
exports. The Government of Andhra Pradesh have
amended the Contract Labour Act with a view to
prohibiting employment of contract labour in the core
activities of an establishment and to allow engagement of
contract labour in none-core activities of an
establishment such as watch and ward, sanitation,
cleaning works, etc. The Government of Goa has
introduced a bill in the legislature to abolish contract
labour in core activities of an establishment.

CONCLUSION
.In the wake of economic liberalization as well as the
judgments of the courts, proposals have been received
from social partners to bring about amendments in the
Contract Labour Act.

Views of Employers’ Associations

• Since 1970 when the Contract Labour (Regulation and
Abolition) Act was enacted the economy has undergone a
sea-change, from an era of
protectionism to liberalisation, from restricted domestic
competition to
international competitiveness.
• The system of contract labour offers tremendous
opportunities for employment and allows the employers
flexibility to choose what is best for them. This helps
improve productivity and service competitiveness.
• The Act should be made applicable only to the main and
core activities of the establishment in so far as abolition
of contract labour system are concerned.
• Supportive or allied activities of an establishment like
maintenance, house keeping should be out sourced and
the Act should only provide for regulating the working
conditions and wages.
• The Principal Employer should, however, have to ensure
payment of
wages to contract labour as laid down under the law in
force as also other basic amenities and social security
benefits.
• Work requiring specialised skillsunavailable within the
establishment.
• If the contract labour system, which is cost effective, is
not allowed to continue, industries may go in for
technological restructuring with less number of workers
leading to reduction in employment.

Views of the Trade Unions

• The Trade Unions are totally opposed to the idea of
contracting of services and in jobs. Out sourcing will only
lead to a type of employment founded on discrimination
and exploitation of contract labour in regard to wages
paid, working conditions, etc.
• The Second National Labour Commission has been
entrusted with the task of rationalization of labour laws
and hence its report should be
awaited. The Government, at the moment, has
undertaken a thorough review of the Act, keeping in view
the aforesaid views of the employers’ association and
that of the trade unions. The changes to be made in the
law are still being worked out.

Since Gujarat and West Bengal are both heavily

industrialized, and therefore representative of
manufacturing across India, this study has significant
implications nationwide. It also suggests that India’s
economic success is not improving the lives of contract
and informal workers, who form the largest section of the
economy and make a
major contribution to the country’s global success, and
that effective political action is needed to make sure that
economic growth is more inclusive
References
• http://labour.nic.in/annrep/files2k1/lab10
• http://www.ippg.org.uk/papers/IPPG%20contract
%20labour%20release%200709.
• www.business-humanrights.org/.../south-asia-
regional-briefing-jul-2010
• Contract labour act in india: a pragmatic approach by
Meenakshi Rajeev, Institute for Social and Economic
Change, India
• Cases on Indian labour laws volume 3 by Colin
Gonsalves, Friedrich-Ebert-Stiftung (India)
• Harriss-White, B. (1996). A Political Economy of
Agricultural Markets in South India: Masters of the
Countryside. New Delhi
• H.E.H. Nizam Dominion. (1939). The Report on the
History of Nizamsagar Project. Hyderabad, Deccan,
Public Works Department. (Andhra Pradesh Archives,
Hyderabad)