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Engagement of contracted labour governed by Contract Labour (Regulation and Abolition) Act, 1971 (CLRA), ensures that the organisations have ample resources when required, and mitigates fixed costs for the principal employers. The advantages contracted labour brings to table are endless, but with great power comes great responsibilities. The organisations employing contracted labour are always under the pressure of mitigating principal employer liability; therefore advised to implement contract labour management system in accordance with the points below:

1. Licences

The contractor abridges contracted labour and principal employer. The CLRA mentions it as duty of principal employer to ensure that the contractor has license/ registration under the Act, and has not been involved in default of payment to labour. A defaulter contractor is added liability on principal employer. Thus, the principal employer shall ensure the authenticity of the contractors employed.

What To Do:

The Principal Employer should verify all the licenses and documents before entering into a contract. They shall also maintain records of the validity of such licenses. When operating at various locations, maintenance of centralised database for better control and clarity, is advised.

2. Control and Supervision

The Principal Employer shall not have any direct control or supervision on contracted labour. They may direct the work to be done by the contracted labour, after the labour has been assigned to them. Only the contractor as an employer of the contracted labour, can allocate the contracted labour to principal employer.

What To Do:

The principal employer shall maintain records of contract labour allocation done by contractor. This can also help in ensuring a substitute on the day a contracted labour is on leave.

3. Minimum Wages

Contract labour shall be paid salaries and remunerations equal to, if not greater than minimum wages. Even after releasing the payments as per prescribed minimum wage slab, it is essential for Principal Employers to ensure that the same has been received by contracted labour. In order to do so, the principal employer is advised to maintain a list/register of the remunerations being paid to contractor and collect the proof of contracted labour getting remunerations.

What To Do:

As per the CLRA, the principal employer shall monitor the wage disbursement. The principal employer shall have access to payslips as well as other records, such as bank's transaction numbers, ensuring wage distribution to contracted labour.

4. Sham Contract

If the contract between principal employer and contractor is not genuine, it is said to be a sham contract. If declared sham, the contracted labour is deemed to be a direct employee of principal employer.

What To Do:

The principal employer shall have a well defined contract, with details such as place of work, remunerations, no of days of work, number of contracted labour required. A well drafted contract can also help organisations with transparency.

5. Hiring

An extension to direct control and supervision, the principal employer cannot be directly involved in hiring contracted labour. Though, the principal employer may have an urge to be involved in hiring, as it is paying contractor for contracted labour which might involve a particular skill set, the principal employer cannot directly involve themselves in hiring process.

What To Do:

The principal employer pays to the contractor for its service of providing contracted labour according to the required skill-set. In order to get afore hand information of the person on board, the principal employer shall ask its contractor to share employee records portraying the employee background. This can also help with security issues within organisation’s premises.

6. Engagement of Contract labour

As per the CLRA the contracted labour shall not be employed where:

• The work is perennial and must go on from day to day
• The work is incidental to and necessary for the work of the factory
• The work is sufficient to employ considerable number of whole time workmen
• The work is being done in most concerns through regular workmen

What To Do:

The principal employer shall maintain records of contracted labour portraying use of contracted labour as per the signed contract, mentioning place of work and nature of work.

7. Record Keeping

The principal employer is expected to ensure that the statutory obligations have been met with and in order to do so, the principal employer is obliged to maintain records. Contracted labours are external workers, working for an organisations without any direct control from organisation.Thus, their records shall be maintained by contractor and not principal employer.

What To Do:

The principal employer shall encourage contractors to maintain records and shall have a system in place which ensures sharing of records and database. The centralised database ensures transparent sharing of records helping with principal employer liability mitigation, besides assisting management in decision making.

Saralweb’s WFM assists principal employers in mitigating principal employer liability through distributed compliance automation.