Reducing risks related to engaging contract labour

With the changing economic scenario, Indian employers are looking for options that provide flexibility in engaging personnel, to cut operational costs, facilitate downsizing during an economic downturn and for various other reasons. Deploying contract labour to meet contingencies or for projects where a unique skill set is necessary gives employers such flexibility. This is also preferred from a human resources perspective, since the payroll obligations of contract labour are managed by the contractor. While there are clear benefits in engaging contract labour, it is important to also be aware of the risks.

The Contract Labour (Regulation and Abolition) Act, 1970 (CLRA), is the primary legislation governing contract labour. The CLRA regulates the working conditions of contract labour and aims to gradually abolish contract labour under certain circumstances.

When contract labour and regular workforce are employed in the same establishment there is often a disconnect between the two categories in terms of expectations pertaining to benefits and conditions of service that is inevitably more favourable to the regular workforce.

Cyril Amarchand Mangaldas is India’s largest full-service law firm. Rashmi Pradeep is a partner at the firm.