Advantages And Disadvantages Of Contract Labour

Employer perspective:

There is a wide disparity of views among the employers whether contract labour is engaged for flexibility or as cost saving mechanism.

 One of the main benefits, next to cost savings, for hiring contract labor involves the ease of separation.

 They can engage these labour without having to extend fringe benefits, such as leave wages, employees state insurance or provident fund contribution and bonus

 The contract labour need not be considered as bargaining unit, thereby minimizing the problems of industrial relations.

 Through contract system, employers seek to make the employment relationship between the principal employer and contract worker indirect.

They thereby evade the responsibility and extract bigger

In the early days, employers used to employ contract workers mainly in peripheral and low-skill work in their enterprises. Though many of these works were of a permanent and continual nature, while operational jobs were generally manned by regular workers. Today contract workers are doing the most sophisticated, hazardous, sensitive and skilled jobs. In the post-liberalization period there occurred a sea change in the contract labour system, where the regular operational and production jobs are also being increasingly assigned to contract workers. Thus this increase in engaging contract labour in the core operational and technically sophisticated jobs has posed a serious challenge to industrial relations at workplaces.

Here are some challenges in different perspectives-

To Industrial Unit:

 The cost of employing contract labour is infact dearer beside the service charges payable to the labour contractor.

 The industry works with thin profit margins cannot afford to spend extra percent more towards the service charge payable to the labour contractor.

 Due to Government’s policy of abolition of Contract Labour from one operation to the other, industry is finding it difficult to engage extra hands to discharge short-term contract including export commitments; as a result, employment generation is also

 They often feel exploited since they receive lesser pay and are generally deprived of other benefits.

 They are also generally deprived of protection under labour laws.

 Every job seeker prefers to work in the roles of a reputed company as a regular employee that gives him job security, social status and career growth, none of which can be expected in any contract employment (Marie Greene, 2010).

 There is no guarantee of steady, working hours and their income may fluctuate wildly.

 They may not be offered such ordinary entitlements as vacation pay, benefits, training allowances and pension contributions by the employer

To contractor:

 Even though having the freedom of contract work there will be no job security in being an independent contractor.

 They are responsible for damages caused during work and they should consider the possibility of being sued for anything.

 There will be no severance pay offered to them at the end of their contract (unless they have negotiated a provision for this in their terms of