Historically, Indian factories have been working with fleets of informal workers, organized around a leader, the contractor. In order to regulate this activity and protect vulnerable workers the Contract Law granted them an official status in 1970. While contractors seem generally satisfied with their conditions and bring positive outcomes to the industry, some deviations in the implementation of the law can also fuel workers’ precarity and production instability.
Contracting: a win-win system for both workers and factories?
Very often, workers chose to be contractors for the relative freedom it provides. When they come from far-away provinces, the contracted status enables them to go back to their hometown for the various festivals or for family emergencies as they wish.
“I want to keep my freedom and be able not to comply with factory stringent conditions. I manage the communication with my people and I am the one who talks to the management in the factory.”- 45 y.o contractor in Jodhpur
On factory side, the requirement for skilled labor in sectors such as furniture (carving), garment (embroidery) or jewelry is not always easy to fulfill. The arrival of contractors and their teams greatly help them overcome the difficulty of sourcing talents and managing them. As contracted workers are under the sole responsibility of their contractor, this significantly reduces the administrative hassle for them.
“I prefer to work with contractors. They come with 3 to 5 workers, who sometimes don’t speak well the language, and manage them. We don’t check their conditions; we don’t have the time. It is simple: if they are not paid by their contractor, they won’t come to work.”- Factory owner, Boranada, Jodhpur
On the top of that contracted workers are seen as being more productive, notably in link with the “per piece” retribution system. Not impacted by official working hours, they are available for work every day and can accumulate long overtimes in order to secure a salary above the average.
But if contractors and contracted workers were originally meant to be for punctual needs and satellite activities, the use was largely diverted by less considerate owners and leading to a degradation of the labor conditions overall.
When contractors are dragging all workers conditions down
Whereas most states in India are aiming at better regulating contractors to protect employed workers by forbidding them from taking part of the core activities. In 2014, the state of Rajasthan amended 3 major labor laws, including the Contract law, to loosen factories’ obligations. In short, it removes the need for entities with less than 90 workers, up to 39 employed and 50 contracted, to officially register and thus to abide by the Factory Act (compared to 30 workers in the rest of the country).
This is leading to a major degradation of the situation of all workers in small entities. One of the major consequences being the loss of responsibility over ensuring the health and safety of the workers within the facility. It also considerably weakens the possibility for workers to assert their rights in case of closure or dispute.
For less considerate employers, the temptation is great to try to escape their obligations towards workers.
The owner of a factory we visited lately had 2 production units of 15 workers each and was planning to open a new one, limited to 20 workers also. His workforce was also 90% contracted. In this very case, remaining under the government radar was winning over setting up a strong and consistent production base.
In this paradigm contracted workers we usually have the same responsibilities as employed workers. They will be working on core strategic position and employed for several years, but they will not benefit from the same rights.
“The factory is open on Sundays for contractors to come. As employees we do not work on Sundays” Factory's employee in Boranada, Jodhpur
However, the situation is not black and white some factory owners are starting to weight the pro and cons of using contractors.
Towards a hybrid system to balance rights and obligations
For those factories which have a more long-term vision and want to bring their business to the next level, especially in terms of quality, they are starting to understand the limit of the system. Mercenary spirit, the very thing that makes contractors a hardworking and low maintenance workforce, is also what make them unstable and difficult to manage.
Thus, some are expecting to get rid of the contracted workforce completely:
“We have decided to work only with in-house workers to be able to better manage and develop our people. Contractors are handy but they are short-term workers, moving from one factory to another and not integrating with the rest of the workers. It Is hard for production planning” - Factory owner, Tamil Nadu
While others are trying to integrate workers more strategically. A factory owner, who counted 90% of contracted workforce in 2016, the remaining 10% being in-house followed our recommendations to gradually integrate 50% of in-house workers, and develop them on strategic positions:
“It has not been an easy move but we are very happy with the result: we have trained our workers to do more added-value work and improved overall communication in the workshops, which before was very fragmented. We will keep contracted workers for very specific work in our factory but we also have got them to follow our in-house rules (Sundays off, access to training, free food and medical, etc.).”- Factory owner, Tamil Nadu.
Contractors working in the above factory shared with us “they were glad to be better considered” by the factory management. As a consequence, they were more involved with the quality and more incline to stay.
Thus, whereas contractors can be a real strength for the Indian Industry, bringing their expertise and hard work, remember that you should never put all your eggs in one basket. Traditional workers remain the pillar of the industry and dependency of the business to contractors, a highly volatile workforce, should always be carefully assessed to ensure long-term stability.