A contract labour is a person who is hired in connection with the work of an establishment by the principal employer through a contractor. A contractor is a person who supplies human resource to a principal employer. The issue of contractual employment is discussed in two ways in this article, firstly, hiring labourers through contractors and secondly as per the fixed term contracts for employing human resources.
With the increase in the globalization of business, there has been a gradual increase in the economic inter dependencies between several countries which has even led to increase in mutual competitions between organizations.
The rapidly changing technology and tough competition to deliver customized solutions to their customers in the least possible time demands companies to hire employees who are updated with right skill sets and can deliver output instantaneously without taking a lead time for getting accustomed to the situation.
Further, the emphasis has shifted to hire workforce as per the fluctuating demand and further to hire local workforce which not only is assumed to be affordable but also can guide to cater demands of customers in their area more efficiently than outsiders.
Although there have been initiatives to make it easier to do business and attract investment from foreign companies to invest in India, the ongoing global uncertainty due to certain political and social events still fail to give assurance about the amount of workforce they might need in the long run, which leads to hiring on contract basis.
Contractual employments have multiple benefits for corporations. They not only provide flexible hiring as per the demand of workforce based on their projects or seasonal demands but also enables employer to focus on other areas of their core competencies.
It also lets them induct new employees without actually hiring them on their rolls. In the long run, it saves money because many expenses related to salary and other benefits are managed by the staffing firms. Moreover, it also reduces contractual obligations of the employer towards their employees, such as gratuity benefits, if an employee works for less than 5 years in the same organization.
Apart from all this, it also helps corporations save their expenses related to hiring such as sourcing, advertising, interviewing, background verification to name a few. As contractors bring their own workforce to complete the job as per specifications at the designated locations, employers are partly relieved from issues related to payment of wages, attendance and issues related to compliances and inspections. As the contractual employment, is an employment relationship which is essentially temporary in nature, helps in reducing chances of workers getting organized and collectively bargaining.
It is due these numerous benefits, contractual employment has become popular right from assembly lines of factories till the Information technology sector.