Contract employment is huge exploitation to skilled labour

Contract employment is a big threat to labour right. Must know why industry prefer contract employee and why contract employment is booming.

Contract employment is big threat to labour right

Contract employment is trending:

In recent job market, contract appointment is trending, which is propitious for employer but antagonistic to experienced employee. India’s inflexible labour laws are said to be a big hindrance for industry. On March 16, 2018, India’s federal labour department official announced an amendment to the Industrial Employment (Standing Orders) Central Rules, 1946 to formalize fixed-term employment. The amended Rules allow all types of firms in India to hire workers for a specific time period in all industries, depending on their requirements which was previously only available to employers in the apparel manufacturing sector. The amendment of the labour rules in 2017 has opened the door of solution for industry to hire contract workers in large numbers.

IT Contract Staffing:

Contract employment or fixed term employment is good initiation to engage the fresher or entry level position for skill development but a vexation when utilized in hiring proficient labours. At present there is scarcity of permanent job position for experienced candidates as most of the companies are engaged in hiring contract employee, not only in entry level but also in high demanding positions.

In IT industry, earlier the contract positions were largely outsourced at the entry level like programmers, software engineers, networking and system administrators, but the scenarios has been experiencing a shift now. From last 1-2 years, IT companies have started looking out for contract resources even for mid-level and senior consultant positions also. This shift has widened the horizon of contract staffing and narrowed the permanent job opening.

Industry Prefer Contract Employment:

Industry always prefers contract labour in order to minimize the labour cost as labour cost plays a very significant role in directly influencing the performance of the company.

1. Industry’s first choice is contract labour as it always wants to convert the labour cost as variable rather than a fixed expenditure every year.

2. Besides paying significantly low wages as compared to permanent workers, companies don’t have to offer any other benefits that it would have to give their full-time employees as stipulated by various laws.

3. It also helps companies bypass dealing with trade unions and provides them with an agile talent pool that can be used whenever required.

4. Hiring contractors also helps companies reduce legal risk (and legal costs) because most of the liability for complying with employment laws falls on the contracting back-office.

Annual Survey of Industries (ASI) on Contract employment:

Data from the Annual Survey of Industries (ASI) on employment in organized manufacturing shows that in 1997-98, directly employed workers were 5 times the number of those employed through contractors. By 2014-15, the latest year for which data is available, regular workers in manufacturing were only 1.8 times those employed through contractors.

In the manufacture of beverages, tobacco products, coke and refined petroleum products, “other non-metallic mineral products" and in “repair and installation of machinery and equipment", contract labour is more than the number of directly employed workers. Even in capital-intensive sectors such as the manufacture of basic metals, contract labour was 46.5% of total workers employed.

In contract staffing, labour rights of employees are downsized and employer takes the maximum benefit. Contract modes of employment are generally less secure in nature and subsequently converted to unemployment. Contract employees are devoid of leverages as compared to regular employees. The shifting preference of employers towards contract hiring is squeezing the employee’s right for stable permanent position and also raising many risks on labour.

Employment: To meet the short term unemployment, contract employment is better solution. But in case of experienced candidate it’s again a huge exploitation.

Benefits: Contract employees enjoy less salary and no benefits like EPF, Health Insurance and other statutory benefits as compared to permanent employee.

Legality: If the employee breaks the contract in middle of contract term, then some legal process will be taking upon the employee.

Non Disclosure Agreement: There are certain confidential agreements which have to be strictly followed by contract employee. If any confidential Information prohibited herein or any breach of the provisions herein may result in irreparable injury and damage to the company then employee must reimburse the reasonable legal fees and other costs incurred by the company in enforcing the provisions of the proposed transaction.

Non –competent Agreement: In non competent agreement, employee agrees not to directly or indirectly compete with the business of Company and its successors and assigns during the term of the agreement and following the expiration or termination of this contract.

No permanent offer: Contract employees are always looked with discrimination and very less is offered with permanent position in other companies.

Conclusion:

Now the question arises, to meet the unemployment, Government has come up with open fixed term employment or contract employment which has leverages industry to use resources. But the Government also needs to analyze that after the contract period, what will be the future of contract employees? After the termination of contract again they are coming to the mainstream of unemployment. To minimize the labour cost and high profit margin, every industry is now opting for contract employees. And also contract to hire mode in experience position is a big pestering to Indian skilled labours. So it is very necessary to maintain a clear line between contracts and regular employee ratio, bringing the contract employee into the regular stream and the contract term should only be applicable to entry label positions but not to experienced candidates.