Rise of Contract Labour and Flexible Employment in India

The Indian labour market has witnessed changes in employment patterns post-Independence. While early laws aimed to protect workers and ensure job security, recent trends show a rise in flexible and informal jobs. The government’s role as a stable employer is diminishing. Contract labour and other non-regular jobs are becoming dominant, especially in the private sector. New state laws attempt to address job security for contract workers, but challenges remain.

Historical Labour Legislation

Post-Independence India enacted key labour laws to protect workers. The Industrial Disputes Act, 1947 aimed to prevent industrial conflicts. The Minimum Wages Act, 1948 guaranteed fair pay. The Contract Labour (Regulation) Act, 1970 regulated contract workers. These laws sought industrial discipline, job security, and decent working conditions.

Shift to Flexible Employment

The Central government no longer creates many permanent jobs. Instead, it offers mostly flexible positions. Private sector jobs fall into three types – regular full-time, non-regular flexible, and scheme-based jobs. Non-regular jobs include probationary, temporary, part-time, contract, apprentices, trainees, and fixed-term employees. Many scheme jobs like ‘On Job Trainees’ and ‘National Employability Enhancement Mission’ provide temporary employment. Despite their temporary label, such employees often perform ongoing functions.

Growth of Informal and Contract Labour

Regular employment share has declined over decades. Informal jobs, especially contract labour, have surged. Contract labour in factories rose from 13% in 1993-94 to over 41% in 2023-24. Contract workers may be hired short-term or long-term, with contractors frequently changing. This trend reflects increasing labour market flexibility but raises concerns about worker rights and security.

Haryana Contractual Employees (Security of Service) Act, 2025

Haryana introduced a new law to secure contract workers’ jobs after five years of service. Eligible contract employees earning under ₹50,000 monthly can continue till retirement. They receive consolidated pay equal to regular entry-level wages, with biannual increments linked to dearness allowance. Benefits include health care under PMJAY Chirayu, gratuity, and maternity leave as per the Social Security Code, 2020. However, the Act lacks full social security coverage like EPF and Employees’ State Insurance. Grievance redressal and wage growth mechanisms are limited. This law may lead to contract workers replacing regular vacancies.

Implications for Labour Market and Social Security

The rise of contract labour signals a shift towards precarious employment. While some job security gains are made, contract workers miss many benefits of regular employees. Wage parity exists only at entry level. Lack of pay commission coverage limits future wage increases. The model may encourage private sector adoption of flexible labour without adequate protections. Aligning contractual employment terms with regular jobs remains a challenge for policymakers.

Questions for UPSC:

1. Critically analyse the impact of labour flexibility on job security and social welfare in India’s industrial sector.
2. What are the key provisions of the Contract Labour (Regulation and Abolition) Act, 1970? How does it compare with recent state-level laws like the Haryana Contractual Employees (Security of Service) Act, 2025?
3. Explain the role of government employment schemes in addressing youth unemployment. What challenges do these schemes face in ensuring sustainable employment?
4. With suitable examples, comment on the effects of informalisation of labour on economic growth and workers’ rights in developing countries.

Answer Hints:

1. Critically analyse the impact of labour flexibility on job security and social welfare in India’s industrial sector.

1. Labour flexibility increases use of contract, temporary, and part-time jobs, reducing permanent employment.
2. Decline in regular jobs leads to weakened job security and limited worker rights.
3. Flexible jobs often lack full social security benefits like EPF, ESI, and pension schemes.
4. Wage parity is limited and wage growth for contract workers is typically stagnant.
5. Flexible labour helps firms reduce costs and adapt quickly but at the expense of worker welfare.
6. Recent laws (e.g., Haryana Act, 2025) attempt partial job security but still fall short on comprehensive social welfare.

2. What are the key provisions of the Contract Labour (Regulation and Abolition) Act, 1970? How does it compare with recent state-level laws like the Haryana Contractual Employees (Security of Service) Act, 2025?

1. CLRA, 1970 regulates employment of contract labour, mandates registration of contractors and licensing of establishments.
2. It aims to prevent exploitation and ensure minimum wages and welfare facilities for contract workers.
3. CLRA does not guarantee long-term job security or parity with regular employees.
4. Haryana Act, 2025 grants job security after 5 years, allowing contract workers to continue till superannuation.
5. Haryana Act provides consolidated pay at entry-level parity, biannual DA-linked increments, and limited benefits (gratuity, maternity, PMJAY healthcare).
6. However, Haryana Act lacks full social security coverage, grievance redressal, and pay commission benefits, unlike regular employment.

3. Explain the role of government employment schemes in addressing youth unemployment. What challenges do these schemes face in ensuring sustainable employment?

1. Government schemes (e.g., NEEM, OJT, Learn While You Earn) provide skill development and temporary job opportunities.
2. They aim to enhance employability and bridge skill gaps for youth entering the labour market.
3. Most scheme jobs are non-regular, temporary, and lack long-term job security or benefits.
4. Challenges include limited scale, mismatch with industry demand, and poor transition to permanent jobs.
5. Many scheme workers perform perennial tasks but remain informal with low wages.
6. Sustaining employment requires better integration with formal sector and social security coverage.

4. With suitable examples, comment on the effects of informalisation of labour on economic growth and workers’ rights in developing countries.

1. Informalisation leads to increased labour market flexibility, often boosting short-term economic growth.
2. However, it results in precarious jobs with low wages, poor working conditions, and lack of social protection.
3. Example – India’s contract labour rising from 13% (1993-94) to over 41% (2023-24) shows growth but declining job security.
4. Workers’ rights are undermined due to absence of collective bargaining, grievance mechanisms, and legal protections.
5. Informal jobs reduce tax revenues and limit government capacity to fund social welfare programs.
6. Long-term growth may be hampered by low productivity and poor human capital development in informal sectors.