In a departure from the current practice of making the principal employer finally liable for contract workers’ wages and other benefits, the government is proposing to vest all their statutory liabilities with the staffing company.
The proposed shift, envisioned as part of the ongoing labour reforms, will enhance the ease of doing business. The move will also weed out unscrupulous elements operating in the space of manpower contracting.
The Contract Labour (Regulation and Abolition) Act, 1970, stipulates the contractor to pay wages. In case of failure on part of the contractor to pay wages, either in part or in full, the principal employer is liable to pay the same. This legal provision has led to the unintended outcome of a section of unscrupulous contractors tending to not pass on workers’ legal entitlements to them.
The fact that all statutory liabilities of contract staff is vested with the principal employer has also allowed staffing companies to get away with non-compliance and, in many cases, fraud. Contract workers end up blaming destiny after running from pillar to post to get their dues. They account for roughly 55% of public sector jobs and 45% of private sector jobs in the country.
Another beneficiary will be serious and professional staffing companies that have the intent and wherewithal to stay fully compliant with the law of the land and yet meet the workforce’s supplementation needs. Contract workers, of course, will benefit the most from the proposed policy change.
“The move shall clear up the space for serious staffing communities. It will also enable corporates to focus on their core strength and create more jobs, driven by peaks in demands, seasonality or projects,” said Rituparna Chakraborty, senior vice-president and co-founder, TeamLease Services.