The Insecure Worker

Context: While the government attempts to woo investors in the electronics manufacturing sector, the violence at Wistron’s manufacturing factory underlines a rift between contract workers and employers.

Significance of Contract workers in India

• Strength in the workforce: According to the Annual Survey of Industries (2017-18), contract workers accounted for 36.4 % of total production workers in the registered factory sector.
• Problems they face:
  • Lower wages: compared to regular employed workers, while they often do the same tasks as regular employed workers.
  • Limited social security benefits: Third-party contracts where the contractor is responsible for the payment of wages and the principal employer is responsible for welfare facilities, deserve scrutiny.
  • Poor working conditions.
• Preferred by employers: because of the following reasons:
  • Low cost of hiring contract workers who are required to be paid pro-rata wages and social security, including gratuity.
  • The monitoring, legal compliance and litigation costs are shifted onto the contractor, thereby reducing the transaction costs of recruitment to firms.
  • Encourage by the Government: The Labour Code on Occupational Safety and Health has allowed for the use of contract workers in core activities under certain conditions.
    • Ideally, the government should have completely prohibited the use of contract labour in core activities.

Measure taken by the government

• Fixed-term employment (FTE): Introduced by the government in the Code on Industrial Relations (2020) as an alternative to contract workers. Its benefits include:
  • No role for a middleman in hiring.
  • Enjoy the benefits of a permanent worker: same work hours, wages, allowances and statutory benefits
  • For employers: Flexibility to adjust their workforce as per their requirements.
• Production Lined Incentive Scheme (P.L.I.): The objective of the scheme is to create “good jobs”.
• Under the Atmanirbhar Bharat Rozgar Yojana: the government is offering provident fund subsidies to employers for hiring new formal workers.

Problems with the FTE:

• Open-ended: There is no minimum or maximum tenure for hiring FTE and no clarity on the number of times the contract can be renewed. 
• Erosion of permanent jobs: Due to the absence of safeguards for FTE and flexibility available to employers in hiring FTE. They differ with permanent workers in the following parameters:
  • Not entitled to the termination notice.
  • Not entitled to payment in lieu of services terminated: as a result of non-renewal of the contract of employment.
  • Not entitled for retrenchment benefits.

Conclusion: Government should leverage programmes like Production Linked Incentive (P.L.I.) Scheme and Atmanirbhar Bharat Rozgar Yojana to give a big boost to formal job creation in the manufacturing sector.