Contractual labour on rise in 9 major non-farm sectors, shows govt data

This report has been updated.


Nearly every one in five workers employed in the organised non—farm establishments in the first half of FY23 was a contractual hire, according to the latest Quarterly Employment Survey (QES) results released by the Labour Bureau.

According to the report released earlier this year, the share of contractual employees in the nine major non—farm sectors of the economy more than doubled to nearly 18 per cent in the first half (April- September) of FY23 from nearly 8.5 per cent in H2 of FY22.

The results for the fifth and sixth rounds of the QES — pertaining to Q1 and Q2 of FY23 were released after a gap of nearly 20 months.

The nine non—farm sectors covered under the survey are manufacturing, construction, trade, transport, education, health, accommodation & restaurants, information technology (IT)/business process outsourcing (BPO) and financial services.

In the latest sixth round of the survey, the manufacturing sector employed every one in four employees as contract workers (26.88 per cent share), up from 10.4 per cent share recorded in the first round (Q1 FY22) of the survey. This was followed by the health sector (21.34 per cent share), transport sector (20.8 per cent share) and construction (13.5 per cent share). This shows an increasing trend of contractualisation of the labour force in the wake of the pandemic in the organised establishments as well.

On the other hand, Information technology (IT) & Business Process Outsourcing (BPO) establishments had the least share (3.34 per cent) of contractual workers, followed by financial services (6.43 per cent).

Meanwhile, the share of regular employees in these organised establishments declined to nearly 75 per cent in the H1 FY23 from nearly 85 per cent in the previous H2 FY22. Apart from this, the share of workers employed in these establishments through alternate ways like fixed-term employees and casual workers have also grown during this period.

The share of fixed term employees stood at nearly 2 per cent in H1 FY23 and those of casual employees stood at nearly 3 per cent.

Contract workers are employed by an establishment through contractual agreements with a third party for a specified period or task. These workers are distinct from regular employees who have permanent or long-term employment status with the establishment with social security benefits.

Lohit Bhatia, president, Indian Staffing Federation (ISF) says that companies often use contractual employees during peaks as seen in e-commerce, logistics, retail, manufacturing and industrial segments, as they provide immediate employment to millions of informal personnel who work in small and medium industries or other informal segments.

“Contractual employment aids faster job creation, transition from informal to formal employment, support for employment that provides skilling and social security coverage at entry level and experience to such employees at large corporations,” he added.

Last year, another report by the Labour Bureau that analysed the Annual Survey of Industries (ASI) data for the year 2019-20 had shown that almost all factories in the organised sector employ contract workers in one or the other way.

The report had shown that of the 198,628 organised factories surveyed, 98.4 per cent of them employed contract workers in 2019-20.

Labour economist KR Shyam Sundar says that the new labour codes allow contractualisation in not only peripheral, but core activities as well.

“Though not implemented, the labour codes have given a clear policy signal to the labour markets to create a flexible workforce, with minimum costs accruing to the firms. The future workforce will primarily consist of a contract-based informal workforce, which will be low in training and will be a hugely flexible and a precarious workforce,” he added.

The Labour Bureau had launched the QES in April 2021 to capture employment data from the units that were enumerated in the nine non-farm sectors in the Sixth Economic Census.

It is part of the All-India Quarterly Establishment-based Employment Survey (AQEES) and covers those units which employ 10 or more workers. The latest results have shown that these nine sectors employed nearly 32 million people in Q2 FY23 across the country.