[The author of this article is Mr Sharad Patil, the former Director General of The Employers Federation of India. HR Managers and CEOs alike listen to his views because he is known to take a balanced and dispassionate view on various labour matters. I was fortunate that he chose my website to publish his views which deserve serious thought.]
I admire Vivek for his lucid style of writing and his live portrayal of realities. I am inspired to write this rejoinder on the subject of “Contract Labour and the like”.
If one were to carefully study the Contract Labour Act, dispassionately and objectively, one cannot fail to get an impression that it is a fair piece of legislation. The difficulty is in appreciation of its context, provisions and their implementation.
One of the main provisions is Equal Pay for Equal Work. Most employers pay these faceless workers bare minimum wages- below which an employer cannot pay if he has to continue his business. Some pay a bit more, perhaps to ward of their guilt feelings.
Who are the key contributors to this situation? Almost all connected with engagement of contract labour for their own reasons and logic. One cannot exclude even the Trade union leaders and the HR professionals. Each ones’ reasons and justification may vary. Governments, both the Central and the States are in the same boat for their reasons and unreasons. There are a few exceptions like- an oasis in the desert.
The Planning Commission, Government of India, under the leadership of Mr. Arun Maira, a former senior Tata executive, commissioned a study titled “Human Asset Strategies in the Manufacturing Sector” along with the Bain and Co, a leading consulting firm. Before I proceed, I must note that I strongly feel the study is a “must read ” for all those who have anything to do with the engagement of contract labour, whether they be the students, teachers, practicing managers, trade union leaders, Government officers or the judiciary dealing with the subject. Since the manufacturing sector has a significant employment potential, the study aimed at what could be the potential factors adversely impacting implementation of the manufacturing policy of the Government.
The Report studied four sectors viz., Auto-oem, Auto comp., Engineering, and the Textiles. The Report noted that the “Human Resource” is the only “appreciating resource ” that has the motivation and ability to increase its value if suitable conditions are provided, whereas, all other resources, machines, building, materials etc depreciate in value with time. The report further noted, that the best enterprises view their people as their prime asset and the source of their competitive advantage.
The Report however, noted that there are indications of stress within the labour eco-system, that could have significant implications on the Manufacturing Sector. These indicators include:
1. Increased use of non-permanent labour and relatively high disparity in their remuneration compared to the permanent workforce.
2. Existing and emerging skill gaps across key sectors.
3. Ongoing signs of discontent across the workforce.
It is significant to note that this Report came in close to the incidents of violence at Maruti, Pricol, and the Everest Industries.
According to the Report, providing more equitable compensation and benefits to non-permanent labour has a relatively low negative impact of less than o.5% on profit after tax and less than 1.5% on return on capital across most sectors except e.g some of the Textiles. Importantly, many companies surveyed, believe potentially significant benefits in terms of labour productivity, better industrial relations, quality improvement and technology absorption that will result from better human asset management.
Without a significant and widespread improvement in Human Asset strategies and practices, potential scenarios for future of India’s manufacturing sector and other sectors include increased incidences of industrial unrests, and an inability to realize its full potential.
I urge the HR professionals and also the CEO fraternity to give the situation a hard look and take timely corrective actions in the ‘core’ interest of the organization. Failure to do so, or delaying this process for too long, is beset with dangers. I am not for a moment, suggesting, to blindly follow what the Report has to say. Do your own calculations and see where these take you. What and to what extent, you can take corrective measures and take those without any further delay.
In the process, you may dismantle or at least blur the so called management and the non-management divide, in your thinking and actions and take a holistic approach to the management of the human resources of the organization. In doing so, you will be serving the larger interest of the organization you are working for and the country in turn your professional growth
I know of several examples from the Companies I worked with and others. To illustrate a tea-boy, a contract worker, became Payroll chief for large part of Asia of a multinational Bank. A Junior clerk became the GM-HR for a very large Indian multinational. A stenographer became of Asian Region Head of a large U.S. based Pharma multinational. A Medical Representative became Global Head of a 10 Billion dollar US based Pharma company. More examples could be added. But I stop here. The point is, human potentialities are not necessarily restrained by where you begin the journey of your career, but how you overcome the barriers and move ahead. The point is also why would you want to be roadblock to human potentials by keeping a large army of ‘faceless’ workers? Some points for us to ponder.