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Temp Staffing – Labour Laws Being Misused?

Friday February 03, 2017,

6 min Read

Temporary staffing, more aptly used as Flexi Staffing, is emerging as a big part of the economy hence affording itself the name Gig economy. Is this type of staffing expected to be very much prevalent in the coming years? Trends emerging in the industry and the need for surge employment in project based or demand based industries suggest so. In India, temporary staffing has grown significantly and is set to be serving around 10% of the formal employment sector over the last decade, which is a clear indication of what can be expected in the coming years. In its initial phase of growth, the industry was meant to fulfill the needs of hiring just in time resources for non-core functions which has eventually enlarged to include, as a practice in, hiring project based resources as well even in core functions.

As flexibility of getting just in time and ready resources was a major contributor in the growth of temporary staffing, conversion of jobs from the unorganised to the organized sector especially in sectors such as infrastructure, retail, power etc., has added a major impetus to such growth. While this movement happens, the industry is also wary of hiring people who are not ready to meet their expectations fully and are hence prefer resorting to temporary staffing as a means to determine the skill and stability of the employee.

Why is temporary staffing so appealing?

What do temporary staffers bring to the table? The two key elements that temporary staffers bring in are the willingness to work temporarily and the enthusiasm to learn on the job. They bring in ready to use manpower. With the opportunities of skilling being available in industries and the willingness of manpower to change jobs, the ability to join such a temporary force is inherent in this industry. Temporary staffers exhibit a willingness to learn. Vocational skills are a key element, especially in low end jobs.

How do organizations benefit?

This system has a serious advantage in reducing the costs of manpower while powering the enterprise with flexibility of hiring as well as replacement when needed. Though the labour laws are quite well structured to prevent labour exploitation, it is an accepted and undisputed practice in the industry of hire and fire at will without attracting prosecution or hurting employee morale within the organization. In such situations, the employer is not trying to sell the story of career growth in the company but is in fact trying to sell the fact there is an opportunity for employment for a fixed term. Immediate visibility of employment and consequential job exposure together with economic benefits certainly encourage entry level job seekers and job seekers at the bottom of the pyramid to engage through a manpower deployment agency or a Contractor as it is commonly called. While the Company engaging such manpower or principal employer as it is referred to is required to discharge the obligations of not just wages but also the associated benefits, practice suggests to the contrary and the contractor takes care of the benefits many times partially which the young workforce is neither fully aware nor insists given the abundance of temporary jobs for a quick change. This suits the enterprise in its objective of flexibility given fast paced market changes in any industry and is therefore an excellent method for testing hires and is also easier to handle temporary staffer in terms of firing than a probationer. Therefore, this system is proving to be extremely beneficial to employers.

How do employees suffer?

Temporary employees suffer due to poor working conditions. Amenities such as toilets, canteens, accommodation are rarely provided, especially to contractual labour which has a mobility as a need of the job. In addition, such temporary employees hardly receive any training in brick and mortar industries and their careers are more driven towards earnings for the day / month as opposed to a career seeking full time employee.

Another typical violation is the denial of statutory benefits. It is not unheard that a woman temporary staff when found to be pregnant is made to resign since the costs associated with maternity benefits when extended need to be borne by the contractor who operates on wafer thin margins and prefers to avoid such costs or needs the cost to be transferred back to back to an employer. For a man who is sick, insurance or ESI cards are denied to him given the low level of formal engagement procedures prevalent particularly in the brick and mortar industry. This is again a moot point for self governance than enforcement and the principal employer would be in a better position to report such information than a contractor.

The case of Uber

A landmark employment tribunal ruling in UK held that Uber drivers are not self employed and deserve the national living wage and associated benefits. In this case, a master – servant relationship was observed between the driver of the car and Uber itself. This relationship is key to demonstrate any kind of vicarious liability. The act of employee working in your premises is bound on the company, whether he is within or outside the premises. The area of employment premises depends based on type of employment. A cab driver driving in another area is still an employee of that particular company. Therefore a master – servant relationship is demonstrated and hence the court ruled against uber.

What is the recommendation to help temporary staffing?

A temporary employee is as much an asset as regular employee for project based as well as need based industries. Ultimately manpower is a key driver in any industry and the quality and delivery of manpower and assurance of employment is the responsibility of the employer. To help improve the status of temporary employees,a few steps can be taken by the employer to ensure that the temporary staffers are also treated equally. Adequate training and the opportunity to learn must be provided and the assurance of securing employment within the organization when found suitable. In other words, a temporary employee needs to be treated as an employee on probation. Such benefits will help improve the efficiency and efficacy of the employees. 

Subramanyam S, is the Founder President and CEO of Ascent. He is a Corporate Lawyer and a Fellow member of the Institute of Company Secretaries of India. He has had close to two decades of experience in Finance, Legal, Tax and Business Management, having worked in these areas in various corporates as a passionate professional before venturing to be an entrepreneur by setting up Ascent in the year 2002.