Centre hikes minimum wage for contract workers
The Minister of State for Labour and Employment, Bandaru Dattatreya, stated that the minimum wage for contract workers in India is increased to Rs.10,000 per month. During the Question Hour, Dattatreya informed the lower house that the wage was hiked based on a decision given by the Supreme Court. He added that the hike in the minimum wage was linked to pension and bonus.
- Contract workers: Who, what, why?
- 3.6 crore contract workers in the country
- Contract workers: 46% workforce of large companies
- Rules governing minimum wage
- Contract workers to get regular pay hikes
- Contract workers may get 66% hike in monthly wages
- The move gets mixed response
- Wage hike may shift jobs to bigger cities
Contract workers: Who, what, why?
Contract workers are temporary employees who are hired by any organisation through a contractor. These workers, unlike permanent workers, are not on the payroll of the organisation but are remunerated by the contractor, who gets compensated by the organisation. This is done by the organisation so as to circumvent the stringent conditions imposed by Indian labour laws and save on costs per employee.
3.6 crore contract workers in the country
Contract workers do not receive social security benefits such as PF, insurance, etc. from the organization and are termed as informal workers. There are an estimated 3.6 crore contract workers in the country.
Contract workers: 46% workforce of large companies
Large Indian industries employed 46% of their total workforce in the form of contract-labourers. Big companies did it as a solution to the inflexible labour laws in India. In the automobile industry, the number stood at 47% and in cement it was a whooping 52%. This was high compared to global standards of 5-10% and impacted "organisation memory and employer investment in human capital."
Rules governing minimum wage
The wages of contract labourers is governed by the Contract Labour (Regulation and Abolition) Central Rules, 1971. As per these rules, the income of the labours will be decided by the Minimum Wages Act, 1948.
Contract workers to get regular pay hikes
The Labour ministry was working on a proposal to improve the working conditions of contract workers by amending the Contract Labour (Regulation and Abolition) Act, 1970. Contract workers would not only enjoy working conditions similar to regular workers but also get regular pay hikes. The workers could only be employed only through placement agencies which would help reduce exploitation of contract workers.
Contract workers may get 66% hike in monthly wages
The Union Labour Ministry has proposed to increase the minimum monthly income of contract labourers from Rs.6,000 to Rs.10,000. The Rs.6,000 income was paid to labourers for only 45 specific activities mentioned in the Minimum Wages Act, 1948, while the Rs.10,000 income will now be paid for all kinds of work. The move has drawn sharp reactions from the industry and opposition parties.
The move gets mixed response
While the RSS-affiliated Bhartiya Mazdoor Sangh has called it a "good move", the left-affiliated unions demand that contract workers be paid at par with regular workers. Experts have welcomed the move as it will increase workers' income. However, small and medium scale industries operating on thin margins may not be able to bear the additional cost, which may shift jobs to large companies.
Wage hike may shift jobs to bigger cities
"The draft rule is not well thought out and will adversely affect employment in smaller states. It will take away jobs to bigger cities where the minimum wages are at par with Rs.10,000 per month" - Rituparna Chakraborty, President, Indian Staffing Federation.
