Survey of Contract Labour in Karnataka
A survey of employment and conditions of life of contract labour in Karnataka was undertaken as part of the comprehensive study on contract labour in the state. The purpose of the study was to map the occupational pattern of contract labour in the state; look at the conditions of employment and work; understand the conditions of living of the contract workers; understand the actual conformity to the Contract Labour Act in terms of employment of contract labour in various circumstances; and try to determine any pattern in the incidence of the system of contract employment in the state.
One objective of the study was also to understand the impact if any of globalisation on the whole process of contract of labour. The new forms of contract labour in the Information Technology industry, including call centres and outsourced work; in the financial sector; and in other sectors characterising the ‘new economy’ were also discussed in the context. However, it was decided that these sectors would be kept out of the study, as they represented a totally different section of workers in terms of education, wages, living conditions, and bargaining power.
The study was essentially developed in the course of a consultative process between a group consisting of academics at the National Law School of India University, University of Dharwad, ISEC, and IIM Calcutta; officers of the Labour Department, Government of Karnataka; trade union researchers from Centre for Workers’ Management, lawyers and trade unionists from Karnataka, Gujarat and Mumbai. A fairly detailed survey of literature on the subject and substantial primary research and actual work in the field qualified the discussions.
A draft working paper was circulated prior to the first meeting of the consultative process. On the basis of the initial discussions it was decided to prepare separate questionnaires for collecting information at the level of the Labour Department, from contract workers, and from employers and contractors. The primary focus was to be on contract workers for the survey. Accordingly, draft questionnaires were prepared for contract workers, employers and contractors. The questionnaire to contract workers was in the form of an interview schedule, to be administered by qualified interviewers, while those to the employers and contractors were designed for the respondents to fill up the details on their own. A schedule for information collection from the Labour Department on enforcement of the Contract Labour Act was also prepared. Subsequent detailed discussions over four meetings modified the questionnaires to conform better to the ground realities and the study objectives. The Labour Department took the responsibility to modify the information schedule for collection of departmental information, and for collecting the information. They also took the responsibility for circulating the information schedule and collecting information from the neighbouring states of Tamil Nadu, Andhra Pradesh, Kerala, Maharashtra and Gujarat.
A detailed discussion took place on sample selection. A first sample list of establishments was selected to enable a process of a scientific, stratified random sample. The list suggested a sample size of around a thousand workers from twenty establishments. A sample size of around fifty workers per establishment was taken as adequate for the study to yield significant results. Subsequent discussions noted pertinently that the primary purpose of the survey was to be as extensive as possible; and that there was very little differentiation among workers in an establishment on the parameters to be studied through the questionnaires. As such, there was no need to have a large sample size of fifty workers per establishment. Accordingly, it was decided to increase the number of establishments for worker interviews from twenty to fifty, with the number of workers per establishment to be around 10-20. It was discussed that while this would give a much better understanding of the variety of practice of contract labour employment, the loss of significance in the study would not be much.
The Labour Department circulated a list of around 150 establishments in Karnataka where contract labour was in existence. Fifty establishments were chosen, most of them from the circulated list, as the sample for the study. A small pilot study showed the strong resistance from employers and contractors to participate and cooperate in the study. The Labour Department took the responsibility to circulate the questionnaires and elicit responses from the employers and contractors. It was agreed that while the survey of workers would be restricted to fifty establishments, the questionnaires to employers and contractors could cover a much larger sample of over a hundred establishments.
For the actual survey, the state was divided into four regions, Bangalore-Karnataka, coastal Karnataka, northern Karnataka, and central Karnataka. The sample selection attempted to account for the diversity of employment and employment practices in the regions. Investigators were selected from these regions, and the criteria for selection of investigators included their experience of working with the respondent set.
Limitations of the study
The Contract Labour Study, and in particular the survey was constrained by the following limitations.
First, the Study was initially designed as a Commission to enquire into the practice of contract labour in the state. Some work had also gone into the process of the working of the Commission. For various reasons the Commission could not carry on the work, and the Study was decided as an alternative. Thus the initial focus of the Study had to be changed. While the consultative process helped largely in getting to a new focus to the process and regaining the momentum, it suffered from this shift in focus.
Second, for various reasons the active duration of the survey had to be constrained to just over two months, from end June to early September. Much of the actual survey could only start in the month of July. As the actual survey in the various regions could only start at different times, and because of the budget constraints, no joint meeting of all the participants in the survey could take place before the survey. Similarly, no joint debriefing of all participants was possible before data analysis. This has affected both the extent and quality of data collection, and the analysis of data.
Third, the strong resistance from the employers and contractors to respond to the study has also affected the data collection. This could to an extent have been overcome with more investigation time. Given the constraints, the best alternative was to get the questionnaires administered by officers of the Labour Department. The responses to many of the questionnaires reflect the standard evasion of establishments filing government returns.
However, within the foregoing limitations, the survey has managed to throw some significant light to the prevalence of contract labour in the state. This has been possible primarily to the consultative process adopted from the beginning of the study, which served to inform the study-design and review the conduct of the study. This has also been possible because of the selection of field investigators with considerable experience of working in the sectors studied as part of the survey.
|Establishments and sample distribution|
|Category||No. of establishments||Sample of contract workers|
|Public sector unit/corporation||3||28|
|Public sector unit/corporation||7||109|
|Coastal & Central Karnataka|
|Public sector unit/corporation||3||67|
The sample that formed part of the study of contract workers was drawn through a random selection process from the selected establishments. A total of 669 workers from 44 establishments/ establishment groups formed part of the study sample. The establishment groups included plantations, mining enterprises, stone and granite quarries, oil mills and rice mills. If we include the number of individual establishments within each of these establishment groups, the total number of establishments covered numbers 70. These establishments were drawn from across the state, and an attempt was made to incorporate a proper regional representation in sample selection. Table1 details the types of establishments from which the sample was drawn.
Description of sample
Tables 2, 3 and 4 give a description of the sample. This is not a representative sample given that the choice of establishments and sample size in each establishment was not strictly governed by requirements of statistical significance. However, the sample demographics give some interesting insights into the pattern of employment of contract labour in Karnataka. It is important to note here that the study relies heavily on the list provided by the Labour Department for the selection of samples. To study the many hidden and illegal manifestations of the contract labour system would require more time and it must also be acknowledged that such data would have augmented the findings of this study.
Table2: Sample description by caste and gender
|Scheduled caste/ tribe||150||85|
|Non- scheduled caste/ tribe||320||47|
Table3: Sample description by caste and education pattern
|Scheduled caste/ tribe||126||56||38||13|
Table4: Sample description by gender and education pattern
Table2 indicates the much higher incidence of women workers among scheduled castes and tribes than among non-scheduled castes. It is reasonable to assume that women enter the labour market as ill paid contract workers only under the force of poverty. The economic status among scheduled caste households is so bad that women are forced into wage labour. Also, a large proportion of women contract workers are employed in menial jobs of sweeping and cleaning, that have a stigma attached to them, and have largely scheduled caste employees. Tables 3 and 4 show a significantly higher education level among non-scheduled castes and tribes, as compared to scheduled castes and tribes; and among male respondents as compared to women. This is as expected. What is of particular interest is that nearly sixty percent of men among the respondents have education levels of SSLC and above. Twelve percent of the respondents are graduates, or with technical qualifications. This indicates the growing devaluation of education, and the pressures faced in the job market.
86 percent of the respondents said that their families resided with them. Only about 11 percent said that they stayed away from their families. The average family size of respondents in the sample was above 5. The number of adults on the average was above 3. This would indicate a high incidence of joint family among this class of people. This is reasonable to expect given the economic necessity to survive on a low wage, and hence also the economic necessity for multiple earners in a family. This is borne out by the statistics on number of wage earners. 53 percent had more than a single wage earner in the family. Among the women respondents the ratio was much higher, with nearly 85 percent stating the presence of multiple wage earners.
Table 5: Family wage
|Job classification||Family wage||Worker wage|
Table5 indicates how the average family wage for the different categories of workers in the sample has a low variance across categories. The mean wage across the categories is Rs.3150. It is only among the category of unskilled workers (this includes loading and unloading workers, farm labourers in agricultural university, etc.) that the average wage is significantly lower. The wage equivalence is despite there being significant difference in average individual worker wage across these categories. This gives some sense of what the statutory minimum wage ought to be (around Rs.3200) for contract workers.
The corresponding wage figures for supervisory category workers in the sample was Rs.4765 for family wage and Rs.3557 for wages of worker.
The precarious economic condition of the workers is brought out by the incidence of debt among the respondents. 231 of the respondents, or nearly 35 percent reported being indebted. Most respondents reported interests on loans of between 2 to 10 percent per month. For the purpose of analysis, wherever only the debt amount was specified, and no amount was given for debt servicing, the debt servicing was calculated at 4 percent per month. Among the respondents who gave details of indebtedness, the average debt servicing per month worked out to Rs.1167. This was about a third of the family income for these families. Only 11 percent of the respondents said that they were able to make any savings out of the family earnings.
Table6: Incidence of indebtedness
|Reason for debt||No. of||Average payment|
|Ceremony (marriage, etc.)||52||1278|
Table6 gives a break-up of debt servicing by different reasons for debt. It is significant that the second biggest category for average debt repayment is medical expenses. The susceptibility of the families of respondents to any major illness can be disastrous.
If we exclude house construction, which is a capital expenditure, all other categories deal with consumption needs. The category of ‘others’ covers responses of “family reasons”. These are probably consumption loans for routine family expenses. We see therefore that nearly a third of the families had to take loans to meet contingencies of running expenses. This indicates the vulnerability of the families to any crisis situation, like temporary loss of an income, or any unforeseen expenditure.
The vulnerability of families is particularly stark in the case of households with women as single earning members. The sample had 21 such households. Every one of the households had contracted debt for some purpose or other.
Wages and benefits
The average wages of all respondents for the year 1995-96 was Rs.1023, and Rs.1954 for 2002-03. This average is skewed as only 218 workers responded to the question on wages for 1995-96, as against 659 for 2002-03. Table7 gives trend in average wages for the same set of respondents across the years.
Table7: Wage trends
|(218 responses)||(458 responses)|
We see that for the eight-year period 1995-2003, the average wages of 218 respondents increased by only around 80 percent. This works out to a compounded annual rate of wage growth of around 7.5 percent. This was not significantly more than the average inflation rate for that period. The inflation rate based on consumer price index for the period 1996-97 to 2001-02 was 5.1 percent. This implies a real wage for contract workers in the sample of only around 2 percent.
Table5 gives average wages per worker for different categories of workers. The average minimum wages for workers for scheduled employment in Karnataka as on April 2002 was around Rs.2100. From the table we see that the average wage was less than the minimum wage in six out of ten categories of work. These include clerical “white collar” work. The only category of work for which the wage was significantly higher than the minimum wage was drivers. In most cases the working day for drivers was more than eight hours.
Interestingly, there was no significant correlation between wages of contract workers and parameters of education, caste, gender and age. There was a small positive correlation of 0.3 of wages with level of education, caste (SC/ST versus non SC/ST), and gender. The correlation coefficient between wages and age of worker was under 0.1. Wages under the contract labour system was a great leveller!
The overall response with regard to benefits was negative. Table8 gives percentage of respondents who received benefits under different heads. 48 percent of the respondents said that they received PF. Many of these respondents said that did not know their PF numbers, and had no details of the PF amount deducted or their PF balance. Only 9% of the respondents were covered by gratuity. While 32% said that they received overtime payment, details regarding quantum of overtime payment could not be ascertained. Many specified that they were only paid overtime at single rate. The percentage of positive response to payment of PF and access to ESI benefits is still higher than what would be the norm for the state. This is probably indicative of the lacunae in the sample selection that concentrated on a large number established industries/sectors in the metro regions.
Twenty percent of the respondents said that while they were made to work beyond official hours, they were not compensated with any overtime payment. 13 percent said that they had to give part of their monthly wages to the contractor or his agent.
The impact of being covered by retirement and medical benefits is brought out strikingly in the case of Mysore Paper Mills. The contract workers employed here are covered by PF and ESI and gratuity. Sixteen out of the 20 workers in the sample were servicing loans taken for education of children. This is just under 50 percent of the total incidence of loans taken for education in the sample. Evidently the workers being relatively better off in terms of benefits were able to concentrate their resources to better education for their children.
Legality of contract employment
It is evident from the survey that in a large majority of the cases, the employment of contract labour contradicts the law. 67 percent of the respondents worked with the same principle employer. 59 percent had worked for more than 240 days in the previous year with the same principle employer. Evidently the nature of work in a large majority of the cases is of a perennial nature. 35 percent of the respondents said that permanent workers were also employed in the establishment to do the same work.
The illegality of the system is further evident in the manner of regulation of contract work in the establishments. A majority of workers were paid less than the prescribed minimum wage for the category of work performed. For the year 2003, of the total respondents, 429 (64 percent) received wages less than Rs.2100 per month, which was roughly the average statutory minimum wage for that year. 315 respondents (47 percent) received less than Rs.1800 per month, which was the interim minimum wage notified in August 2002 by the Karnataka Government for all categories of unskilled work not covered under the Minimum Wage schedule. The wages to contract workers was far less than wages for regular workers doing the same job. The average wages for regular workers in the year 2003, engaged in similar occupation, from 175 respondents, was Rs.6126 per month. This was more than thrice the average wage of Rs.1787 for all contract workers in the same establishments. Less than 40 percent of the respondents were covered by PF and less than 30 percent by ESI or any other medical benefits. 174 respondents (26 percent) said that they were made to work overtime without any overtime payment.
Table9: Formal recognition of contract labour
|Representative of principal||179||27%|
|Pay slip with wages||140||21%|
|Signing of register||349||52%|
There was very little formal recognition of contract labour in the establishments. Table9 gives details of the incidence of formal procedures to record payment of wages. In only 27 percent of the cases was a representative of the principal employer present to ensure payment of wages. Only 21 percent of the respondents received a payslip with details of wages and deductions.
Intensity of work
207 of the respondents (78 percent) said that the normal workday was for 8 hours. However, of these, over sixty percent said that they had to work overtime. Almost half the overtime work was unpaid.
A significant number of security personnel regularly worked 12 hour shifts. Drivers in a number of instances also had to work long hours. In the case of contract truck drivers with a private establishment, they were paid Rs.1000 per month plus Rs.32 per hundred kilometres. The drivers averaged ten thousand kilometres per month. This is an average of about 350 kilometers per day, assuming that the drivers worked every day of the month. One can imagine the strenuous nature of the work and the duration of the workday. Many powrakarmikas of the Bangalore Mahanagara Pallike said that they swept around 1.5 – 2 kilometers of main and side roads. The area of road swept would work out to around 60000 square feet. This is the equivalent of sweeping around 80 mid-size houses. They had to simultaneously push a cart with four containers laden with garbage, weighing approximately 30 – 35 kilograms.
Women workers and contract work
We have seen in the foregoing that wages to women were not significantly lower than wages to men among the respondents. Despite this, the participation of women was significantly lower than of men for non-scheduled caste and tribe workers.
Table10: Harassment at work
Some of the reason for the low participation of women in work may be found in the high incidence of harassment faced by women contract workers. Workers interviewed listed harassment at workplace as mainly verbal abuse by supervisors and “maistris” (representatives of contractors). The verbal abuse ranged from sharp scolding to use of abusive, including sexually abusive language. In a few instances workers said that the abuse included physical abuse (slaps etc.).
Table10 gives some details of harassment at workplace. 50 percent of women contract workers experienced harassment, as against only 17 percent of men.
Table11: Incidence of payment by worker to contractor
Table11 gives numbers of respondents forced to hand over part of their wages to the contractor. Here again, nearly twice the proportion of women as men were coerced to pay back to the contractor part of their wages.
Table12: Participation of women
|Job classification||Sample||Women in|
There is also a gender divide in employment, with women employed mainly in housekeeping and unskilled work. Table12 gives details of sample size by job classification, and participation of women in each category. The gender divide is evident, with women being overwhelmingly represented in the housekeeping and mine work categories. The sample is more or less representative of women’s participation in the industry, except for quarry work and plantation work, which would have a higher percentage of women workers than shown in the sample.
Given the foregoing context, it is not surprising that the participation of women in contract work is low. It was less than 13 percent among all non-scheduled caste and tribe respondents. The participation among scheduled caste and tribe women respondents was much higher at over 36 percent. It is among the most disadvantaged sections of the society that women are forced to go out and work under such adverse conditions. It is in unskilled and “degraded” categories of work like sweeping and housekeeping, quarry work, mine work and plantations that women find employment. These are work categories that generally get only workers from the “lower” castes. If he general participation of women in labour has to increase, their entry into other categories will have to be facilitated. This can only come about with an increase in education level of women, and a general change in attitude at the workplace, where women find it safer and dignified to work.
Less than 30 percent of workers in the sample reported some degree of unionisation in their enterprises/ industry. This appears to be fairly high, considering that the general level of unionisation in the Indian workforce is low. This is probably again indicative of the lacunae in the sample that concentrated on established industries/sectors in the metro regions. In many cases in the sample the unionising efforts are fairly recent. Among both KPTCL workers in Hubli and railway yard workers in Mandya the unionisation effort had just begun. The membership coverage of the unions are also not high in many cases. Among the contract powrakarmikas working with the Bangalore Mahanagara Pallike, only around 20 percent of the nearly 8000 workers are members of unions. Not surprisingly, the correlation between union membership and access to PF facilities was under 0.1.
Forty five responses on the contract labour questionnaire to companies were received, of which 37 were considered valid for the study. The following were the significant findings from the responses.
Table13 gives details of responses on financial indicators, for the eight-year period 1995-2003.
Table13: Financial indicators
|Labour cost increased||14||86%|
A number of establishments did not respondent to the queries under this section, as they were non-commercial establishments, or the information was only available at the head-office. All respondents reported increase in sales. 73 percent reported increase in profits. Excluding the data for one company, Mysore Sugar Company Ltd (which had a negative ratio of profit change of (-)7 between 1995-2003 and (-)72 between 2000-03), the overall average ratio for profit increase was 1.47 for 1995-2003, and 2 for the period 2000-03.
What is significant is that the overall financial working for most of the companies was not negative. The pressure to rationalise labour is normally justified by companies on account of declining profits. This has been the argument for greater rationalisation of labour under globalisation. We see that at least for the establishments in the sample, the argument does not hold.
Trends in regular and contract labour employment
The respondents were required to give information on employment of regular and contract labour for the past ten years. The trends are summarised in Table14.
Table14: Employment trends
|Increase in regular workers||10||60%|
|Increase in contract workers||7||57%|
|Increase in regular workers||24||29%|
|Increase in contract workers||25||68%|
What is significant is the increasing trend in employment of contract workers during the period 2000-03. 68 percent of the respondents reported increase in contract labour in their establishments, while 71 percent reported a decline in the employment of regular workers. It is significant to note that for the same sample and the same period under consideration (2000-03), the average profitability doubled. Interestingly, there was no correlation between profitability of establishments and number of contract workers.
The average employment of regular workers per establishment declined from 709 to 605 for the period 1995-2003, while the average employment of contract workers increased from 281 to 307 in the same period. This excludes the data for one establishment, Navin Mechanised Construction Co. Pvt. Ltd., Hubli, which shows very large swings in employment of contract workers, and would tend to bias the results. Twelve of the establishments, or a third of the respondents reduced the number of regular employees through a VRS. This is a fairly large proportion of establishments that had an active programme for rationalisation of the workforce. Over fifty percent of the establishments reported no recruitment of regular workers in the past ten years.
Wages and benefits
Table15 gives a summary of the comparative wages of regular and contract workers. The figures are revealing. What is of significance is the increasing trend of the ratio of wages of regular to contract workers. During the period 1995-2003, the ratio increased from 2.57 to 3.60, an increase of 40 percent. Coupled with the increasing trend towards employing contract labour, this definitely implies a declining share of labour in the economic output of companies.
Table15: Comparative wages
|Ratio of salaries –||2.57||3.58||3.60|
If we take the average minimum wage as Rs.2500 per month in the year 2003 (considering a mix of skilled, semi-skilled and unskilled workers), 43 percent of the respondent establishments paid their contract workers wages less than the minimum wage. This is a matter of considerable concern, as the conclusion is based on information provided by the establishments themselves. The data for some of the establishments included wages for contract supervisory persons, and that would skew the average wage for those establishments up. If we also consider underpayment at the level of the contractor, the situation could be much worse. This is borne out from the survey result of contract workers that gave an average wage of Rs.1954 for 2002-03, as against the figure of Rs.2874 from the information provided by the companies.
Table16: Benefits to contract workers
Table16 gives details of the number of establishments extending benefits stipulated under the Act to contract workers. The compliance levels, particularly for PF and ESI are extremely high. It is totally at odds with the response from workers in the sample, and with norms for contract labour in the state. The response highlights the evasive and dismissive attitude of the companies towards the study. It is also probably indicative of the attitude of industry towards contract work, where they feel their responsibility ends with payment to the contractor, and it is the business of the contractor and the contract worker to ensure a fair distribution of the payment made to the contractor. There were examples of companies like the NWKRTC where the concerned official stated that “wages of contract worker is the sole concern of contractor and KSRTC is not concerned”. If the public sector can take that attitude, the regulation of contract work is a matter of grave concern.
Reasons for employment of contract work
Economy is definitely one major reason for the employment of contract labour. The section on wages and benefits clearly brings out the economic logic for employers to shift to “contractual” employment. The term “contractual” has been put within quotes as it is quite evident that there is very little that contractually binds the employer to the contract worker. The growing disparity between the terms of employment of the regular and contract worker is also a reflection of this lack of a strong contractual bond that curtails the worker and makes him/ her vulnerable.
Table17 gives responses to the query on the main advantages of employing contract workers. Interestingly many respondents did not give economy and efficiency (“greater productivity”, “longer hours” or “cheaper”) as a reason for employing contract work. Nearly half the respondents said that the main advantage was less disputes. This probably to an extent reflects the antipathy of employers to unionisation and reluctance to countenance a strong workforce.
Table17: Reasons for contract employment
|Reason for contract work|
Another reason given for contractual employment is that they can be more easily deployed in work situations that are more hazardous. The cost to the company and its liability in case of accidents is lower if a contract worker is involved.
Table18: Accidents at workplace
Table18 gives details of accidents at workplace in establishments over the past ten years. Here again, the much lower incidence of accidents among contract workers is surprising. The response probably again highlights the evasive and dismissive attitude of the companies towards the study. It also probably indicates a very high level of under-reporting of accidents among contract workers. In particular where workers are not covered by ESI, and where contractors are themselves unlicensed, they would probably coerce workers and pay them off a small amount to ensure that accidents went unreported. What is of interest however is the higher average compensation to contract workers. This might be because it is only in case of very major accidents that contract workers get any compensation under law at all.
Compliance with the law
The Contract Labour Act is very elaborate, and states clearly the circumstances under which employment of labour on contract is permissible. However, we see in practice that the employers often ignore the constraints placed by law.
We saw in the section on wages and benefits how contract workers were in a number of instances paid wages below the statutory minimum wage, and did not have access to benefits due to them. It is worth repeating the statement of the official from NWKRTC that that “wages of contract worker is the sole concern of contractor and KSRTC is not concerned”. The employer finds it convenient to pass on the responsibility to the contractor.
The case of contract powrakarmikas is illustrative of this attitude. The Bangalore Mahanagara Pallike up till the year 2002 allowed its contractors to pay nearly 7000 contract powrakarmikas wages of Rs.900-1000 per month. These were less than half the statutory minimum wages for comparable occupations. They conveniently took shelter under the fact that the job of powrakarmikas was not included in the schedule of employment for minimum wages, which only mentioned sweeping and cleaning work inside establishments. Even to this date the work is not included in the schedule, and the only safeguard that workers have is the minimum wages of Rs.1800 per month for the whole state of Karnataka, notified by the Labour Commissioner. This notification covering all unskilled work not included in the schedule for minimum wage came into force through a Gazette Notification of August 2002. The Notification was finally enforced by BMP only in April 2004. Even today the contract powrakarmikas employed by contractors of the Hubli-Dharwar Municipal Corporation are paid Rs.900-1000 per month. This is in blatant contradiction of the August 2002 Notification.
The skirting of the law with respect to contract workers is prevalent even among the better known multinational companies. The officer at Hindustan Lever Ltd. responding to the questionnaire proposed that the Contract Labour Act should be modified to remove the criterion of 240 days for perennial employment. However the clause has not prevented the company from employing contract labour on a perennial basis. The company had 61 contract workers as against 73 regular employees at its Brookefelds establishment. At Nestle, as per the field investigator, often the company supervisor got workers to the shop floor whenever there was a requirement of unskilled work. Both Hindustan Lever and Nestle paid contract workers the minimum wage of Rs.2400 per month, while the average wage to its permanent workers was 5.4 times this wage.
The multinational GE also typifies the attitude of large multinationals towards work of a perennial nature. The wholly owned subsidiary of the company, GE Power Controls India Ltd. forced a VRS at its unit at Bommasandra and emptied the plant of all permanent workers in January 2004. Before VRS the permanent workers were paid wages of Rs.6000-13500 per month. The company continues production operations at its plant with contract workers designated as “technical casuals”. Around fifty of the regular workers who took VRS are also employed as “technical casuals”. The workers are paid Rs.3500 per month. They get no other benefit except PF.
The attitude towards work of a perennial nature is not restricted to multinationals. The Karnataka Power Transmission Corporation Ltd. (KPTCL) has the anomalous situation of technical staff at its sub-stations falling into three categories. There are regular employees of KPTCL who get salaries on an average upward of Rs.10000 per month, plus all benefits. There are contract technical staff employed through contractors, who do the same job, and are employed through the year. They are paid wages of around Rs.2200 per month. The Corporation recently introduced a third category of direct contract employees, who again do the same job through the year. KPTCL is the contractor for these employees. They are paid wages of Rs.5000 per month.
The respondents were asked if they were registered with the Labour Department for each contract, and if they submitted regular annual returns. About 22 percent of the respondents had not registered with the Department, while 35 percent did not submit annual returns. This is a fairly high level on non-compliance.
Issues of concern
Some of the issues of concern highlighted by the survey are given below:
- Wages: A large proportion of contract workers are not even covered by a statutory minimum wage. In the survey, in four out of eight categories of non-supervisory contract work considered, the average wage was below statutory minimum wage. This needs both legislative and regulatory attention.
- Benefits: The Contract Labour Act prescribes benefits applicable to contract workers. In particular, retirement benefits like PF and gratuity and medical coverage through ESI should be made compulsory. The survey indicates coverage by PF as less than 40 percent, ESI under 30 percent, and gratuity coverage under 10 percent. This itself is probably an overstatement, because of the composition of the sample.
- Intensity of work: About 60 percent of contract workers reported working overtime beyond the stipulated eight hours per day. Half of these workers said that they were not paid overtime compensation. Many categories of workers were not entitled to leave, or even a weekly off. These included contract powrakarmikas, drivers and security personnel. A weekly off should be a compulsory benefit.
- Limiting contract work: The survey clearly indicates how contract work is becoming ubiquitous. We have the incidence of contract work in categories of technical, clerical and even supervisory tasks. This trend should be curtailed. The definition of perennial and core activities should be clarified and should be strictly implemented.
- Wage disparity between regular and contract work: This is another trend brought out by the survey. Steps need to be taken to reduce the disparity and bring in equal pay for equal work.
- Compensation for education, experience: The survey indicates that there is hardly any compensation for experience or education under the contract labour system.
- Harassment at workplace: We see harassment at workplace as a particularly intense problem for women contract workers. There should be urgent steps to address this situation. The law recognises harassment at workplace as an issue and there are corrective measures under law. Obviously these are not effective.
- Collective bargaining: The access of contract workers to any system of collective bargaining is almost non-existent. The level of unionisation among them is low. A system of effective collective bargaining is essential to force the regulatory process to become more effective and improve their condition at work.
- Compliance with the law: The compliance with the law is not very high, as evident from the responses of establishments to the survey. Ensuring compliance is difficult under conditions where the regulatory mechanism is stretched and not adequate to handle the extent of the problem. The difficulty is compounded by inadequate disincentive for non-compliance.
The buzzword in labour legislation in this period of globalisation is ‘flexibility’. The basic reason for capital and production moving to less developed countries is the search of cheap labour. Cheap labour is viewed by the industry and government alike as the main locomotive for economic growth. The Second National Labour Commission very clearly echoes these concerns in its recommendations on labour laws. The recommendations include easier exit for capital from commitment to continue operations through changes in Chapter VB of the ID Act; liberalization in the norms for hours of work per day and per week; linking Minimum Wages in an industry/ sector to the ability to pay. All these have a direct impact on the nature of employment relations. We already see a movement in sectors that largely employed tenured employees towards contractual employment. The effect would be to further reduce regulation for even contract workers – weather in terms of minimum wages, or hours of work, or benefits.
The pronouncements of the judiciary on contract labour, particularly the SAIL judgment on the relationship between the principle employer and the contract worker also reflect this mindset towards flexibility in an era of globalisation. With reduced regulation of employment relations, workers feel insecure to struggle for their rights. This directly impacts the trade union movement.
Labour flexibility in India has been practiced by several large enterprises from long before the period of active globalisation. The Contract Labour (Regulation and Abolishment) Act in the early seventies was a result of the acknowledgement of the large-scale prevalence of casual employment in Indian industry. One of the first, and probably the most successful examples of moving from tenured to contractual employment in the manufacturing industry was in the case of the multi-national Hindustan Lever Limited. The company used the opportunity of a protracted labour dispute at the Siwri plant in Mumbai to declare a lockout, and to move production of its soaps and detergents to greenfield sites, many of them under the control of contractors to Levers. It did not matter to the company when the lockout was held as illegal and the company was forced to reinstate the workers with back wages in 1989. By then it had achieved its objective of moving most of its production outside the Siwri plant, and of dispersing the new workforce to far-flung plants in remote sites.
The tactic of dispersing and pressurizing organized workforce through lockouts and transfers is being increasingly used in Indian industry. It does not matter to the enterprise that the tactics used to disrupt work are without any legal basis. The delay in the adjudication process is in favour of the management, and the workers can be coerced into accepting a settlement and leaving the company.
The increased competition faced by sectors of industry because of opening of the economy also had its impact on employment. The eighties and nineties saw large-scale closure of the textiles, engineering and metal industries. The organised trade union movement did not have any answer to this changed economic scenario. In Bangalore, which had one of the fastest growing engineering sectors, built on the back of a strong public sector infrastructure, the decline in engineering industry lead to large scale closure in the industrial belts around Peenya and Mysore Road. The skilled and organised workforce in the city was replaced by employment in garments and the service sectors. These sectors are much less capital intensive, allowing management easier exit from operations. The employment came at a time when workers were already facing the brunt of industrial closure. Hence their ability to organise in the new industries was much less.
One good example of the impact of globalisation is in the plantation sector. The coffee plantations, witnessed under globalisation large increase in coffee prices, followed by an equally dramatic slump in the nineties. The slump was with large production of coffee from Brazil and Cuba leading to sharp price decline. In tea, the competition from Sri Lanka and China, and the stranglehold of a cartel of buyers on buying tea in India lead to steep decline in price of tea from plantations. This did not in any way reflect on consumer prices for tea and coffee, which continued to remain high. The impact on plantations was disastrous, with a number of them being forced to reduce operations or close down.
In the survey, a number of coffee plantations in Chickamagalur were covered. The plantations covered included medium and large coffee estates. The workers interviewed included contract workers in one estate belonging to the Tata Group. The dramatic increase in the price of coffee in the early part of the nineties, followed by the equally dramatic fall in price has played havoc with the fortunes of the plantations, leading to declining employment and reduced wages. The wages of contract workers in the sector are a good indication of this.
Table18: Wages in plantations
Table 18 shows that wages of contract workers in the sector in nominal terms remained almost stagnant through the eight year period 1995-96 to 2002-03. In real terms, given an annual inflation rate of around 5 percent for the period, the wages in 2002-03 declined by around a quarter of the purchasing value as in 1995-96. The investigators also reported that in a number of estates the employment had declined to less than half the level eight years ago.
Globalisation has increased the entry of global capital, and the competition from multinational enterprises. The effects are probably more evident among tenured employees. With increased competitive pressure from global production, Indian enterprises in many sectors have cut down local production. The public sector Bharat Electronics Limited is a good example. In the beginning of the decade of the nineties the company had a bought-out component from abroad that in value terms was 25 percent of its total sales. By the second half of the decade the bought-out component had increased to 40 percent. The immediate consequence can be seen in its largest production facility at Bangalore, where tenured employment has declined by over 50 percent. We have given instances earlier in the report of the manner in which multinational companies like GE, Hindustan Lever and Nestles have used contract labour in Bangalore to circumvent the restraints placed by labour laws. The experience internationally has been of a decline in tenured employment, and increase in contractual employment. The effect in general has been a decline in the bargaining power of labour, diluting of legislation safeguarding rights of workers, and reduction in the share of labour in the fruits of economic development. We can see signs of this with the expansion of globalisation in India. The present survey brings out the impact of a low bargaining power on contract workers in some of the major sectors of their employment in Bangalore.
We can also see the impact of globalisation on the government sector, particularly on departmental undertakings. The municipal corporations starkly bring out this impact on employment practices. In the Bangalore Municipal Corporation, a struggle through the seventies resulted in powrakarmikas being made permanent, and getting benefits of permanent government employees. The nineties saw a return of contractual employment. The corporation used the plea of inability to oversee cleaning across the city to resort to contractual cleaning. The result was the large growth of contractual employment among powrakarmikas. They had to struggle to even get a notification of minimum wages. For the past two years they have been struggling to get the notification implemented. The Corporation clearly states that it does not have the budgetary resources to accord contract powrakarmikas the same wages and benefits as the permanent employees. Liberalisation has placed limits to the access to funds of government departments. The easy way out for governments to cut cost is to pass on more and more of their work to contractors, and to then turn a blind eye on how the contractors achieve cost reductions.
Case Study1: Karnataka Milk Food (KMF) Cooperative – unit Cattle Feed Plant, Rajapur, Dharwad District.
The KMF cattle feed plant was established in Rajapur, District Dharwad in 1990. The plant is a profitable unit. For the year 2002-03 it had a turnover of Rs.12.71 crores, and a profit of Rs.32.69 lakhs. Significantly the unit reduced its labour cost from Rs.74 lakhs in the year 1999-2000 to Rs.68 lakhs for 2002-03.
The plant operates with 23 contract workers and 30 regular workers in its various operating departments. The work categories include plant and boiler house operation; plant and boiler house maintenance; laboratory testing and accounts and office work.
Apart from these work categories, there are contract workers employed in loading and unloading operations. There are no regular workers in this work category. The plant also employs security guards on contract.
The issue of contract labour employed in the operating departments is significant. The contract workers do the same type of work as regular employees. They have been working at the plant for between 11-14 years without any break in service. The work done by them is definitely part of the core occupation of the unit. The work is of a perennial nature. All the workers had been employed for more than 300 days each year for the past three years (2000-01, 2001-02, 2002-03). There are regular employees doing the same work in the unit. Table C1 gives a comparison of the salaries given to regular and contract workers at the unit at different work categories.
Table C1: Comparison of wages – regular and contract workers
As is evident from the Table, the regular worker gets wages of between 2.5 to 4 times the wages of the contract worker for the same occupation. The actual difference is even more, as the contract workers pay a commission from their wages to the contractor each month.
The employment of contract labour in dairies in Karnataka is prohibited as per the Karnataka Government notification No.KAE 202 KABASE 93 dated 11-12-2001. The notification specifically prohibits the following operations for contract employment:
- Running the plant and boiler house;
- Maintenance of plant and machinery;
- Laboratory and testing;
- Accounts and office work.
The KMF management has challenges the notification, and the case is pending before the Karnataka High Court.
The contract workers are employed by the same contractor, B. Peera Naik. The contractor has remained unchanged for the past five years. The workers interviewed claimed that the contractor had no license. They claimed that they had to pay a part of the wages back to the contractor as commission.
The loading and unloading workers are paid Rs.42.50 per day. This is less than the interim minimum wage as per the Gazette Notification (No.CLA/CR-34/2001-02) of the Karnataka Government issued on August 29, 2002, declaring minimum wages of Rs.1800 per month for all categories of work that did not get covered in earlier categories for minimum wages. The workers remain unchanged since the last over six years. The work itself is very strenuous, with the workers having to load and unload a minimum of 10 to 15 trucks per day.
As per the survey there had been a number of accidents at the workplace. The management was silent on the matter. The workers claimed that when they approached the management or contractor for compensation, they were threatened by the contractor with dismissal.
Case Study2: Telcon Construction Equipment Company Ltd., Dharwad
The Telcon Construction Equipment Company Limited (Telcon) is a subsidiary of Tata Motors Limited. The company manufactures earth-moving equipment. It had a sales turnover of Rs.195 crores in the year 2002-03. One unit of the company is located at Mummigatti, 10 km away from Dharwad city. It commenced operations in 1999. The unit carries out assembly and painting operations for the earth-moving equipment.
TableC2: Regular/ contract employment
|No. of employees|
TableC2 gives details of regular and contract employment at the Telcon unit, as in the year 2003. The unit has a significant presence of contract workers on the shop floor The issue of interest is the presence of skilled contract employment on the shop floor.
The company had five contractors in 2003. Of these, one contractor, Haden International Group India Pvt. Ltd. provides all the skilled contract employees. This company Haden International is based in Chennai. Its area of work is contract labour supply for operations and maintenance. The company commenced operations in 1998. It lists among its important clients Ford India Ltd., Chennai, CIPLA Pharmaceuticals, Goa and Dr. Reddy’s Laboratory, Hyderabad. For the year 2002-03, the company had a turnover of Rs.17.4 crores. This is hence a sizeable scale of operations.
The skilled employees supplied to the Telcon unit included one supervisor, one chemist and two machine operators. All were technically qualified. They were employed full time with Telcon for the past 2 to 3 years. By contract labour standards they were fairly well compensated. The supervisor received a salary of Rs.4200 per month; the chemist Rs.5000 per month; and the two machine operators Rs.3600 per month. In addition, they were eligible for annual increment, PF and paid leave. However, this would still not compare with the wages and benefits of regular employees in a Tata subsidiary.
The issue is of employment of contract employees for jobs that are clearly core functions, and of a perennial nature. The chemist and supervisor had been employed at Telcon for the past two years, while the machine operators had been employed for the past three years. The unit having commenced operations in 1999-00 had been in full production for only around four years. We see therefore that the company had employed contract workers in clearly perennial employment categories almost from the inception. This does not seem to be a temporary, stopgap arrangement. Given the client list of Haden International, and the size of its turnover, it would appear that employment of technically skilled workers to core shop floor functions is a standard practice in many reputed companies.
Case study3: GE Thermometrics Ltd.
The giant American multinational GE entered Indian markets in a big way in the nineties. This was done primarily through acquisition of existing manufacturing facilities in the country. The company then went on to push its own labour management practices in these companies. One primary strategy has been the replacement of tenured with contractual employment.
GE Thermometrics is a GE Group company in Bangalore. The unit manufactures thermostat devices. The investigators for the survey were unable to meet shop floor contract workers, as the HRD Manager at the plant did not allow that. There was an apprehension on the part of the Management that information collected from contract workers at the shop floor could be used against them. The investigators were able to gather however that there were around 150 contract workers on the shop floor, downsized from an earlier total of 300 workers. The investigators could only meet contract workers employed in packing, canteen, garden and driving. The canteen services had been outsourced two years ago. The workers employed in the canteen were given a settlement of Rs.10000 each, and taken on as contract workers through the contractor.
The instance of tenured employees being made to leave employment and absorbed as contract workers has happened in other GE concerns also. GE Power Controls India Limited was formed in 1988 by taking over manufacturing units of two companies AEG-NGEF at Bangalore, and GEC-Alsthom at Hosur and Pondicherry. Presently the Bangalore unit has no tenured workers. All employees were forced to leave the company under VRS schemes. At Hosur, the management has declared a lockout, and has asked the workers to leave on VRS.
GE Power Controls India Limited (GE) took over the operations of AEG Alsthom in Bangalore in November 1998. At the time of takeover it assured the around 400 workers that there would be no downsizing. However, in March 1999, the company announced its first VRS. It resorted to suspension and charge-sheeting workers before the VRS in order to intimidate them. 175 employees including some managers left the company. In October 2001 the company forced another 150 workers to leave on VRS. This time prior to the VRS it announced the transfer of 55 workers out of Bangalore, and further charge sheeted some more workers. The management at this stage recruited around 50 contract workers on the shop floor through Subbulakshmy Enterprises, No.118, 1st Floor, 4th Cross, Papanna Block, Ganganagar, Bangalore 560 032. The contract workers were employed at the factory premises in Electronic City Phase II, on a consolidated wage of Rs.2500 per month. At that stage the minimum salary of tenured employees at the factory was Rs.5500, and the average wage of workers (12 years experience) was around Rs.9000.
Finally in January 2004 the management under the threat of transfer of another 30 workers to locations outside Karnataka (even though the Standing Orders for the workers clearly stated that transfers were only allowed within the state) forced the remaining 109 workers to leave the company on VRS. Thus in just over 5 years the company had managed to rid its manufacturing facilities at Bangalore of all tenured workers. Presently the same operations of manufacturing control panels is carried out by, among others, around 150 contract workers (termed by GE as technical-casuals) working on the same factory premises. Their work is directly supervised by four managers of the company. Out of the 150 technical-casuals, around 50 are ex tenured employees of the company. The technical-casuals are paid a consolidated wage of Rs.3500-4000 per month.
The management at GE used the same tactics of charge sheeting active union office bearers, and large scale transfer of workers to force workers to go on VRS at its Hosur plant. The plant has now been closed under lockout by the management for over a year. The latest situation is that the management has asked all workers to proceed on transfer to interior Gujarat or leave the company on VRS. The intent of the management is clear. It does not want either tenured employees or union activity on its premises. This is in consonance with GE management practice worldwide, where it clearly has an anti-trade union stance. During negotiations on the Charter of Demands at GE Hosur, the corporate HRD Director told the President of the union that while the company prefers to deal in situations without any unions, it tolerates unions where they are present. This could well be the international motto for GE labour management practices.
Case study 4: Contract municipal workers at Bangalore Mahanagara Pallike
The Bangalore Municipal Corporation started the practice of contracting out municipal cleaning operations in 1991. The reason given was that the Corporation did not have enough resources to directly employ workers to keep the city clean.
The Contract Labour (Regulation & Abolishment) Act clearly states that work may be contracted out by an organization only if it is not of a perennial nature, and is not a core activity of the organization. Keeping the city clean cannot be anything other than the core activity of the Corporation. It is also of a perennial nature, recognizing no holidays through the year. Therefore the act of contracting out the work was itself is against the law. Even within the context of contract work the law had been repeatedly transgressed. The Act states that for work carried on by a contract worker identical in nature to work by a permanent employee, the contract worker should be given the same wages and benefits. While the nearly five thousand permanent workers of the Corporation employed in cleaning get wages of around Rs.5000 – 6000 per month, and benefits as available to other government employees of health care, leave, retirement benefits, the nearly eight thousand contract powrakarmikas get wages of between Rs.1800 per month with no other benefits – not even a weekly off. Even this wage has come after a long and bitter struggle by the workers and their union, the Bangalore Mahanagara Pallike Guttige Powrakarmika Sangha.
Till mid 2002, there was not even a notified minimum wage for the contract powrakarmikas, and they were at the mercy of the contractors for the quantum of wages and conditions of employment. The union held a number of protest demonstrations, discussions with the Corporation officials and with officials of the Labour Department and public meetings to highlight the demands of the workers. The media was very active in supporting the cause. Despite all this, the reaction of the administration was to stall the matter and to issue notices that did not result in any action. This was not surprising, given the strong connections that the contractors have with the political establishment. A succession of Corporation Commissioners expressed helplessness and inability to remedy the situation.
At long last, as a response to persistent struggles, at the initiative of the then Labour Commissioner, the Karnataka Government issued a Gazette Notification (No.CLA/CR-34/2001-02) on August 29, 2002, declaring minimum wages for all categories of work that did not get covered in earlier categories for minimum wages. Accordingly, as an interim measure, the minimum wage for powrakarmikas was fixed as Rs.1800 per month, for both men and women workers. This notification covered all workers in Karnataka, including contract powrakarmikas employed in other district municipal bodies.
Following the minimum wages notification, the Corporation scrapped the existing contracts and issued fresh tenders for municipal cleaning. The fresh tender document clearly stated that the minimum wages payable to all workers was Rs.1800 per month. In addition, it stipulated that other facilities, as specified under the law for contract workers should be made available to the powrakarmikas. The facilities specified included: medical aid to workers who may suffer bodily injury as a result of an accident; compensation to workers under the Workmens’ Compensation Act; provision of all necessary personal safety equipment, gloves, gumboots, masks, etc; provision of toilet, office and dress facilities to the workers. Fresh tenders were issued to contractors based on the new tender documents, in November 2002. The existing contractors then went to court to stay the new tenders, taking the plea that they had not been given adequate opportunity, and the new tender conditions were unfair. The High Court at Bangalore rejected the plea of the contractors, and ruled on May 19, 2003 that the fresh tenders were fair. Following this, a Government order was signed in June 2003, giving force to the new tender conditions, including to payment of Rs.1800 as interim minimum wages.
The new tenders thus came into force from July 2003, and the powrakarmikas expected to be paid according to the fresh tenders from that month. However, when the payments were made in the month of August, they found that the payments were far less than the stipulated Rs.1800 minimum wage. None of the facilities as specified under the tender conditions were given, save for one green overcoat. At the same time, the workload had increased considerably from before, and the duration and intensity of work was much more. An estimated thousand powrakarmikas were dismissed from their jobs after the new contract. Many more were forced to work in other wards, some at considerable distance from their original place of work. The contractors particularly targeted workers in pockets where the union is strong.
A ‘Janata Nyayalaya’ (people’s court) was organised by the union and had its hearing on January 10th 2004. A public meeting was organized on February 10th with the Minister in the Karnataka government in charge for the Bangalore Corporation. The report of the Janata Nyayalaya was released on that day. The Minister gave a public assurance that minimum wages would be paid immediately.
Following on this, the minimum wages of Rs.1800 were paid in fifteen wards in the month of February, under the supervision of a team of officers of the Corporation. This was a major victory for the struggle. However, in all the wards the contractors coerced workers to return Rs.200-400 to them on the next day. They held out the threat that unless the workers returned that amount, they would be removed from their jobs. Given their vulnerability, most workers gave in to the threat. This situation continues to date.
The situation of contract powrakarmikas outside Bangalore is even worse. In Belgaum and Hubli-Dharwad the powrakarmikas continue to be paid Rs.900-1000 for women and Rs.1000-1200 for men for working 7 to 8 hours per day.