OUTSOURCING – to be or not to be??

Labour disgraces no man; Unfortunately, you occasionally find men who disgrace labour

Conflicts between employers and employees have perennially existed in our industry. To curb exploitation of labour by employers, the Indian legislators had come out with various statutory hurdles. To counter such statutory obstacles imposed by the Legislature, attempts had also been made to drift from permanency of labour to rightsizing and affinity for outsourced labour. Earlier outsourced labour were hired only for peripheral or allied activates but lately there is a rising trend to employ outsourced labour even for core activities that might be intrinsic to the business of the Employer.


Outsourcing has become an integral part of the operational matrix. There are several practical reasons for Employers having a preferential bias for outsourcing Labour. For instance, outsourcing offers flexibility to employers to choose project specific personnel, it is cost effective and termination of such employment is way easier compared to that of permanent workers. Outsourcing of labour also ensures better productivity and employers assume greater control on the activities of such outsourced contract labour.


Today, more than why one should go in for outsourcing labour, why one shouldn’t, is the pressing question. There have been innumerable instances wherein outsourced labour has made demands to be regarded as the permanent employees of the employer directly and not the contractor. Also, such outsourced employees more often than not, seek permanency of jobs and claim for the allied benefits.

Again, such contract labour often align with unions or at times with influential political leadership to exert pressure on the Employer. They resort to techniques such as strikes and lock-outs to get their demands met or even use political pressure and influence to get their demands sanctioned by the employer. They also take to vindictive legislations against employer. Cumulatively, all of these situations lead to disruption of the normal functioning of the Company and adversely affect business.

There have been several instances in the past wherein outsourced workers have become detrimental for both the Employer as well as his business. Executives of massive Multinationals such as Maruti Suzuki India Ltd., Hyundai Motors India Ltd., Bata and Honda Motors Private Limited have been harassed by workers wherein majority involvement was from outsourced contract workers.

Petitions in this regard are regularly filed under Rule 25 (2) (v) (a) and (b) of the Maharashtra Contract (Abolition and Regulation) Rules 1971 by workers. Several litigations are filed by outsourced contract employees seeking permanency of jobs. Such unwanted litigations too become a huge burden for the Employers.


A famous private bank was harassed by some politically driven members of a worker’s union, who influenced the outsourced workers working with the Bank. The Bank had recruited outsourced workers for the purpose of delivery of courier. They had been a part of the institution for a very long time. These workers were approached by the members of the workers union urging them to seek permanency from their employer. In this regard, this Union wrote to the management of the bank on behalf of these outsourced employees seeking permanency. When the Management refused to give in to their demands, these politically driven Union Members caused unrest and disrupted the work of the Bank by picketing before its head office.


To prevent such inconveniences, Employers should carefully deal with a variety of factors while appointing outsourced labour. Firstly, Outsourcing Agencies must always be hired for the purpose of delivering a particular service and not for recruiting labour force. In this regard, proper contracts must be prepared incorporating all essential terms that might be necessary to prevent unwanted disruptions as mentioned hereinabove. Also, political affiliations and engagement with unions of such workers recruited through agencies must be analyzed in detail before appointing them.

It must always be for the Outsourcing Agencies to pay wages for the workers appointed by them instead of the Employer to prevent him from any liabilities that may arise in the future. There should also be evident and identifiable difference between Contract Workers and Permanent Workers such as different Uniforms, I-cards etc.

Lastly it is very critical for Employers to understand that they must never assign work directly to the Outsourced Workers. Employers must make it a point to channelize the handover of assignment to the manager/supervisor of outsourced workers.

The Employer must also Act fairly and with parity to prevent any major dissatisfactions among the Contract Workers. Payment of Minimum Wages, leaves as per law and fair treatment are the few aspects that are indispensable for a content work force.


Though, the common perception today is that with the advent of contract labour, concepts such as strikes, unionism etc. have died a natural death. But unfortunately, this is nowhere close to what the reality is today. Outsourced labour, through strong and politically backed workers unions seek permanency and initiate litigations against the Employers. Therefore, there happens to be a pressing need for the Employers to be extremely vigilant while recruiting contract labour through Outsourcing Agencies.

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