Govt to ensure firms do not convert employees into contract workers

Safeguards likely in framework for contract jobs

The Union government is planning to take measures to ensure companies do not convert their full-time workers into contract employees by misusing the proposed fixed-term contract framework.

“We will put in place safeguards for workers in the fixed-term contract system and are working on various options. One of them is to ensure that permanent employees in an establishment are protected in such a way that they are not converted into fixed-term workers after we bring in the new law,” a labour and employment ministry official said on condition of anonymity.

Officials said safeguard-related provisions would be included in the executive order on fixed-term employment, likely to be issued next month.

The move is an outcome of a consultation meeting held on February 15 by the ministry with representatives of state governments, trade unions and industry. 

All the 12 state governments represented in the meeting were in favour of fixed-term contracts. Three trade unions, the RSS-affiliated Bharatiya Mazdoor Sangh, the National Front of Indian Trade Unions, and the Trade Union Coordination Centre, also supported the move, apart from employers’ associations, according to sources.

Other trade unions, however, walked out of the meeting as a mark of protest over not holding consultations before announcing the move in the Union Budget. 

In the Budget for 2018-19, Finance Minister Arun Jaitley announced the government’s decision to allow hiring workers on fixed-term contracts for all employers. Fixed-term contracts allow industries to hire workers for short-term assignments and terminate their services once the project is completed.

The labour and employment ministry had issued the draft Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018, on January 8, inviting public comments for a period of 30 days.

Workers hired through fixed-term contracts will be entitled to all statutory benefits available to permanent workers in the same factory proportionate to the period of service, according to the draft notification. Ministry officials said these would include benefits provided by the Employees’ Provident Fund 

Organisation and the Employees’ State Insurance Corporation, apart from bonus, gratuity and other compensation in case of accidents or death while at work. 

However, employers are not mandated to provide retrenchment benefits to such workers. IN the proposed framework, employers may not give notice to fixed-term workers on non-renewal or expiry of their contracts.

The government is also contemplating putting a cap on the number of times fixed-term contracts can be renewed before workers become regular. “In some countries, the renewal of such contracts is capped. They allow one renewal, after which a fixed-term worker becomes a regular employee. However, such a move may allow industry to go for other workers rather than renewing existing contracts,” said an official.

The government has already allowed fixed-term employment for the apparel manufacturing sector. “The fixed-term contract system is working well. The move is pro-employment as it encourages the industry to hire more workers. Passing on social security benefits to workers protects them and is not any cause of worry for us as it (fixed-term employment) is cheaper than hiring workers through contractors,” said Gautam Nair, managing director at Matrix Clothing.

Both employers and employees are in favour of reforming the contract labour hiring system, in which employers have to hire contract workers through contractors.

“When an employer gets a worker through a contractor, there is a cost of the goods and services tax (GST) for the service rendered and the contractor commission or margin as well,” an industry executive said, requesting anonymity. The executive added the total cost of hiring, as a result, went up by 25 per cent. “Through the fixed-term employment route, this cost is saved and can be paid as compensation to the worker.”

There are dissenting voices as well. “If there are both contractor and fixed-term contract systems in the market, what will happen to workers’ job security?” said A K Padma.