Contractual Employee: Economic Importance, rights they are deprived of, and how it leads to unionism.

Bangladesh's ranking as the seventh-fastest-growing economy in the world recently grabbed news. Bangladesh is currently the world's second-largest exporter of clothing, following China. It advanced with a traditional strategy for growth known as plain export-oriented industrialization (EOI), an economic strategy that was put into action successfully. What specifically did they do differently, or instead, what was the essential component? You were right to guess "labour." They focused on the country's conventional light manufacturing sector, which requires a lot of labour. The textile, apparel, and footwear industries in Bangladesh, which depend heavily on labour and employ both unskilled and semi-skilled workers, account for the majority of the country's exports. This demonstrates how important a country's labour force is. 

Indian context

I just conducted research for a macroeconomics assignment on "India's North and South Economic Divide and How to Bridge the Gap." I discovered that there is a wage payment difference between north and south India. The average daily wage rate in north India is 341.9 Rs, whereas it is Rs. 504 in south India, and as a result, we see labour force migration from the northern part of the country to the southern part of the country for employment. But what's troubling is that the same workforce, which is crucial to the nation's economic development, is deprived of its working rights. We saw this at COVID'19 when these workers were returning to their homes, and none of their contractors offered them support.

Organizational Context

Even the manufacturing industry, which is one of the biggest employers of semi-skilled and unskilled workers, has shifted toward contractual/temporary workers to reduce costs. These temporary workers are also the first to go out whenever there is a slowdown.

When the auto industry experienced a slowdown in 2019, its initial line of defence was to fire contractual employees. Here is some background information from Business Standard.

This is not just the case in the manufacturing sector; to increase profits, corporations are now putting more of a focus on contract workers in the IT industry as well.

Let us see why these organizations are moving to contractual/temporary workers.

1. Entitlement to lower employee benefits: While contract employees are eligible for employment benefits, they might not have as many as permanent employees. For instance, a permanent employee's complete family might be covered by medical insurance, whereas a contractual employee might only be covered or might not be covered at all.
2. Leaves entitlement: Permanent employees are entitled to more vacation days than their contractual counterparts.
3. Time-bound: Following their contracts, contractual employees are time-bound. For instance, contracts for 6, 9, or 11 months as longer employment starts to regard the temporary worker as a regular employee who is entitled to benefits.
4. No overtime: No overtime pays, or the amount is lowered. As they are bound by the contract.
5. Not allowed to work with competitors: Contractual workers are frequently required under their contracts to refrain from working for a competitor company for a predetermined amount of time.
6. Not entitled to guarantee a permanent position: There is a very low chance that a contractual employee/worker will be given a permanent job role in an organization.
7. Rehiring limits: You are only eligible for two consecutive years of rehiring to work as a temporary employee for the same employer.
8. Save time in the Hiring Process: Before starting work or throughout their employment, temporary employees might not require as much training.

Now that we have seen why companies hire contractual/temporary employees, during our human resource classes, we have discussed cases that show why these contractual employees form unions. As per the Trade Union Act 1926, Union in India is legal.

Why Unionism

Unionism comes from Marxism, the bourgeoisie, also known as the owners of capital (for example, land, equipment, finance, knowledge, and associations), creates goods with the effort of a proletariat (can refer to employee/workforce).

The bourgeoisie (owner) sets the norms and the narrative throughout the production of the product for the customer, and if the proletariat feels alienated, commodified, or experiences injustice such as

1. Not getting minimum wage: A part of their salary is taken as a commission by the contractor. Thus, not guaranteeing them minimum wage payment. 
2. No Gratuity: As their tenure is not more than 1 year and there is a limit to rehire, they are deprived of gratuity
3. Inflexible and long working hours
4.  Not entitled to leave benefits
5. Reporting late to the workplace, results in pay loss
6. Not treated equally as compared to a permanent employee
7. No health/medical benefits
8. Not allowed to work freely outside the organisation as they are bound by the contract

when these contractual employees are deprived of their rights at this time, it acts as a catalyst for them to organize a union.

When an employee's rights are not upheld, a union is nothing more than a political outrage. These unions sometimes have disastrous results for both the organization and the union.

We have seen the case of Maruti Suzuki, the dispute started when the Worker's Union defended a worker who had been suspended for physically assaulting a company supervisor, the long-lasting employee dissatisfaction was triggered by this incident and the results were horrifying.

We had also seen the case of the Urban company when their women beauticians went on strike against the organization for low wages, charging a higher commission, and poor working conditions. Etc. This incident painted a bad image of the company, and soon we saw the #boycot urban company app trend on social media. 

So, what can be done to avoid all this?

1.     Freedom of association: Includes both a person's right to join or quit organisations at their discretion, the group's right to work in concert to further the interests of its members, and an association's ability to accept or reject membership.

2.     Elimination of all forms of compulsory labour

3.     Elimination of discrimination in respect of employment & occupation

4.     Guarantee minimum wage

5.     Equal opportunity for both genders

6.     Right of security to all workers in all situations

Final Thoughts

Contract employees and short-term employment provide different advantages for the company than long-term employees. The gig economy is a new concept that has gained popularity since the pandemic.

Employing contract workers has advantages for your business, including greater workforce flexibility, cost savings, time savings, and the ability to delegate most employee-related tasks to outside contractors. But at the same time organizations should also make sure that basic human rights in the workplace are met for these contractual employees.

Reference:

1. Business standard: https://www.business-standard.com/article/companies/auto-manufacturers-let-go-of-contractual-workers-as-slowdown-bites-120080601532_1.html
2. Maruti Suzuki - https://www.ndtv.com/india-news/verdict-today-for-maruti-workers-in-deadly-haryana-riot-10-facts-1668232
3. Urban company https://economictimes.indiatimes.com/tech/startups/urban-company-hit-by-protests-promises-to-enhance-partners-earnings/articleshow/86925941.cms
4. Labour code for New India https://labour.gov.in/sites/default/files/Labour_Code_Eng.pdf
5. The Essence Of Marxism - https://www.hoover.org/research/essence-marxism#:~:text=The%20essence%20of%20Marxism%20was,and%20a%20property%2Dless%20proletariat.
6. India's wage rate data from - https://www.rbi.org.in/Scripts/AnnualPublications.aspx?head=Handbook%20of%20Statistics%20on%20Indian%20States#