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India – Labour law amendments proposed to better protect contract workers

29 September 2014

The government is planning to bring about changes in labour laws to make it easier to hire temporary workers by industrial units, especially in special economic zones, while giving them greater protection in the form of mandatory social benefits; such as group insurance and medical coverage, reports The Telegraph India.

The revisions will be part of the package of reforms in Prime Minister Narendra Modi’s “Make In India” programme. Several ministries, including industry, textiles and finance, are supportive of labour reforms that bring some flexibility for industry, while promoting good practices in service terms and conditions.

Top industry ministry officials said the government started toying with the idea after research reports revealed that certain organised industries; such as automobile and heavy engineering, were using temporary workers hired through labour contractors, who were not giving statutory benefits to them.

An unnamed official commented: “Firms are skirting the law by using labour contractors who hire temps without giving them any benefits. We feel it makes more sense to recognise the dynamics of the labour market and allow firms to directly hire temporary workers who will work for a fixed period and get normal benefits, which its other workers get medical, insurance cover, leave etc.”

A survey of 82 companies by social workers showed that companies hired 2.12 million regular employees and used the services of another 1.08 million through labour contractors. Just under half (46%) of the workforce in industrial units comprise recruits provided by labour contractors. In the services sector, the number is quite low at 8.8%.

An Associated Chambers of Commerce and Industry (Assocham) survey titled “Steep Rise of Permanently Temporary Workers — India’s workforce goes casual” revealed that in 2013, the number of contract workers grew by +39%.

The telecoms sector recruited the highest number of temps, with recruitment through contractors rising by +60%. Automobile industry saw a +56% increase in contract workers, while Education grew by +54%, Fast-Moving-Consumer-Goods (FMCG) by +51%, Hospitality & Travel by +35%, and Pharmaceuticals and Healthcare by +32%.

The survey found: “Contract labour is increasingly being used in smaller and larger Indian companies, as well as multinationals.”