Employment of outsourced Labour is always beneficial to the employer. However, of late such outsourced labourers are approaching the Labour / Industrial court claiming permanent employment with the Principal Employer. A recent Judgment of the Supreme Court has restricted such right to some extent in Maharashtra. The following steps may help keep issues arising out of deployment of outsourced Labour under control;
1) AGREEMENT WITH SERVICE PROVIDER ON STAMP PAPER
The Company should sign an Agreement with the Service Provider. Such Agreement with the Service Provider should not look like an Agreement to supply Labour. The Agreement should be for outsourcing of labour.
2) SEPARATE CODE No. UNDER ESI AND PROVIDENT FUND ACT FOR SERVICE PROVIDER
The Service Provider should have separate Employees State Insurance and Provident Fund Code No. In no case should the Service Provider be allowed to deposit Provident Fund contribution and Employees State Insurance contribution on the number allotted to Principal Employer. Provident Fund and Employees State Insurance Department are against giving such separate numbers to Service Providers. However, through proper paperwork and follow up with the concerned Departments, the Service Provider can obtain separate Provident Fund and Employees State Insurance numbers. At present if the Company is paying Provident Fund / Employees State Insurance contribution of the Employees of the Service Provider in their Account, the Company should take necessary steps to arrange separate Code Numbers to Service Provider at the earliest.
3) Registration under CONTRACT labour (R & A) Act
The Company as well as the Service Provider should complete the legal formalities required to be completed under Contract Labour (R & A) Act. Registration of the Company and procuring license by the Service Provider, if he is employing more than 20 workers, is a must. As per the various Judgments of Courts if there is no Registration under Contract Labour (R & A) Act by the Company and the Provider, the employees employed through such Provider should be deemed to have been employed by the Company. Non-completion of legal formalities is going to give legal right to the employees employed by the Service Provider. Therefore, completion of formalities under the Contract Labour (R & A) Act is essential.
4) EMPLOYMENT FOR A PROLONGED PERIOD SHOULD BE AVOIDED
Employees employed by the Service Provider should be not appointed for a long duration. It is not advisable to allow the Service Provider to keep the same person/s even after giving a break. Kindly note, that keeping the same person/s with one day or short break for that matter is going to go against the Management. There are many cases filed by the employees of the Service Provider claiming employment with Principal Employer on the ground that the contract is sham and bogus. Such employees claim that the Service Provider is employed to deprive Workers permanency and benefits consequent to Permanency. Such defense is taken by employees who are working with the Company for long time.
5) MONITORING THE SYSTEM
The Officer designated to look after Outsourced Labour should keep a watch on the relationship between Service Provider and his employees. The Service Provider should not be allowed to exploit the workers. The Service Provider should be forced to pay dues as per the employment laws in India. The grievances of the employees employed by the Service Provider also should be attended through the Service Provider.
6) SUPERVISION ON EMPLOYEES EMPLOYED BY SERVICE PROVIDER
The employees employed through Service Provider should be strictly under the supervision of Service Provider only. All Memos, Identity Cards, Attendance Cards, Pay Sheets, Leave Application and such other documents should be maintained by the Provider. The Company should not issue Gate Pass or any document in such a way, which will help the employee of the Provider to claim employment with the Company.
7) CHOOSE SERVICE PROVIDER WELL
If the factory is situated in a rural area, additional precautions are required to be taken. The contract should not be given to a Service Provider who is active in politics and / or social life. In case of termination of the Contract / Revision of terms, such a person always tries to influence the Management.
8) ISSUE OF LOCALS
In rural areas, particularly where industrial activities are minimum, Service Provider should be careful in employing local people as locals always create Law and Order problems. Local people particularly Sarpanch, Grampanchayat members and other politicians tries to persuade Management to make the employees permanent. Therefore the employment should be on the basis of criteria and not on the basis of whether the individuals are locals or not.
9) OTHER PRECAUTIONS
A) In case of any accident at the place of employment the Principal Employer is responsible. Therefore, if the Company is not covered under Employees State Insurance, proper Insurance Policy should be taken either by the Company or by the Service Provider
B) In case if the Company is employing many workers continuously for a long duration, the Company should prepare plans to address issues likely to arise. The Company should increase wages from time to time. The Company should provide uniforms, Dearness Allowance and consider the same criteria for providing employment on the roles of the Company or exit plan for such employees,