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Alka (Director)     13 October 2011

Contract labour act

We are having a small sized manufacturing unit in Navi Mumbai. We have employed about 70 contract labours for packaging activities.


We are following the provisions of the contract labour act and ensuring that the contractor maintains the mandatory registers and makes the statutory payments ie. PF & ESIC.

Recently we were approached by our contractor with the proposition that if we change his payment terms numbers of contract employees provided to per piece basis, i.e. number of bottles filled and packed, then we are out of the purview of the Contract labour act.

ie. His invoice right mentions the number of employees he has provided and for how many hours. Instead he says we should get his services on the basis of the number of bottles he has filled and packed. This may also imply that he gets it filled with or without labour as he deems appropriate. Tthis arrangement will not leave any basis of determining whether or not we have employed contract labour at any point in time. and thus we wold be out of the purview of the contract labour act.

Is his interpretation correct?


 8 Replies

Vijayarajan (Executive Director)     13 October 2011

The position may be cleared a little more. It may be explained as to whether you are paying time rated wages or piece rated wages etc.

V. VASUDEVAN (LEGAL COUNSEL)     15 October 2011

Also you need to clarify whether you have registgered under the Contract Labour Act and the contractor has taken license - the category of service for which the license is taken etc.


K C S Kutty, Pune (Faculty )     16 October 2011

In the present system the Contractor is providing you Labourers and he is paid on the basis of number of labourers and days of work.

Pl read the definition of "Contractor" in the Contract Labour (Regulation and Abolition) Act.  The Contractor perhaps thinks that if he supplies goods or produce then he will out of the definition of "Contractor".

If the filling is not done at your premises, the Contractor becomes a supplier of products only.


Vijayarajan (Executive Director)     16 October 2011

I suppose that Mr. Alka has a different isssue which he did not clarify.

K C S Kutty, Pune (Faculty )     16 October 2011

The contractor is giving a suggestion to the Principal employer how to get out of the purview of Contract Labour Act.  

kameswarao S (Head HR)     24 October 2011

The contractor is giving a right suggestion and as rightly mentioned by Mr.Kutty the principle employer should have an alternative place for the packing activity so there is no relationship between the employer and contractor.

For all practical purposes it is a seperate entity.

Regards - kamesh

K C S Kutty, Pune (Faculty )     24 October 2011

If the filling is done at a premises owned or hired by the Principal employer, then Contract Labour Act applies.

If it is done elsewhere, then the Contractor is only a supplier. In that case the contractor may do it on piece rate basis to avoid the regulations.

SURESH GODBOLE (ADVOCATE)     27 October 2011

The Basic question is of Facts :

                             (i) If the Factory Unit has emloyed the labour , what they claim in the first instance , and PAYMENT IS DONE TO THEM DIRECTLY BY THE MANUFACTURING UNIT THRO MUSTER ROLL OR THE WAGES ARE BEING PAID BY THE UNIT ITSELF THEN THE QUESTION OF NOT COMING UNDER  LABOUR ACT DOES NOT ARISE.


                           ALSO if the Bottles are being filled up in their premises , they are liable .


                             (ii) But If they have a Seperate Contract with the Contractor of supplying Filled Up Bottles to them by the Supplier (NOT BEING FILLED UP IN THEWIR PREMISES) ; then the Supplier becomes the Employer of the Labour and not the Manufacturing Unit .

                                  If the Contractor is being kept only to maintain registers etc , the Labour is deemed to be employed by the Manufacturing Unit and not the Contractor ,.


                                  The scenareo changes WITH FACTS OF THE CASE WHICH IS BEST KNOWN TO FACTORY OWNERS.

                                 With regards ,


                                  SURESH GODBOLE , 0-9929596546


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