Industrial and commercial outfits are making increasing use of the contract labour system instead of offering direct employment for various jobs.
The trend is likely to become stronger in the WTO era when there will be need for a flexible labour policy to stay competitive in the market.
Currently, more than one contract labour systems are operating. One, the employer hires workers through a contractor. Workers so employed remain under the supervision of the employer and not of the contractor who has engaged them.
They are, however, paid wages by the contractor, who in turn, is paid by the employer on the basis of the number of persons employed. This kind of employment is often mixed up with one through any employment exchange or a recruiting agency.
But, in case of employment through the employment exchange or any recruiting agency, persons engaged are absorbed as employees and thereafter no differences remain, between the workers employed through the employment exchange and those recruited directly.
In the case of workers employed through a contractor, they are however, not treated as regular employees although there are some rulings which treat such workers as employees of the company for the simple reason that they work under the control of the employer.
There are mainly three reasons for which such workers are not treated as regular employees. One is that the Standing Order 20 of the West Pakistan Standing Orders Ordinance, 1968.
It provides that the employer of an industrial establishment shall be personally responsible for the observance of the standing orders, whether or not the workers of such an establishment are employed through contractor.
There would have been no need for making specific reference to workers employed through contractor if such workers were the regular employees of the employer. Secondly, section 24 of the IRO, 2002 specifically authorises the Joint Works Council to provide minimum facilities to workers employed through a contractor as are not covered by the laws relating to the welfare of workers.
This, it is argued, clearly shows that workers employed through a contractor are not regular employees of the employer of the main establishment otherwise there would have been no need for such a provision. Thirdly, section 2(X) of the IRO, 2002 treats the contractor as an employer in relation to workers employed through him.
However, irrespective of the fact that workers employed through a contractor are or not regular employees of the employer of the main establishment, the employer of such an establishment is responsible for the provision of all benefits to such workers under every law that defines a worker as a person employed directly or through any other person except in the case of the IRO, 2002 which in spite of defining a worker as a person employed directly or through a contractor specifically treats the contractor through whom the workers are employed as an employer in relation to the workers employed through him.
The other system becoming more and more popular is the contract for services. Under this system, the employer instead of employing workers through a contractor, simply asks the contractor to provide various kinds of services for use in his establishment.
For example, instead of asking contractor to provide so many mechanics he simply asks him to provide mechanical services. This system is preferred to the system of employment through a contractor mainly because of a distinction generally being made between the terms "contract of service" and "contract for services".
The former being said to be indicative of employment relationship while the later being not so. But the main question that can arise in this connection could be as to whether the mere distinction between the two terms could be enough to override the concept being generally applied as the main criterion of employment relationship.
There may be cases where a person may render service to another without subjecting himself to the control of person to whom the service is rendered. In such a case it may be argued justifiably that the person rendering the service is not an employee of the person to whom the service is rendered.
For example, it is not uncommon that a municipal committee provides cleaning services to all such persons who reside within the limits of its jurisdiction on payment of a fixed monthly or yearly charge, but the persons who actually render such services are always treated as employees of the municipal committee concerned.
The provision of security services could be an another example. If persons rendering such services do so under the control of the person or agency who or which has undertaken to provide services, or of the persons specifically detailed, and in regard to the manner in which services are to be rendered, they will be employees of person or the agency who or which has undertaken to provide the services.
But who will be the employer in relation to such workers if they are rendering services to the employer of the main establishment under his direct control and supervision? In such a case, the employer of the main establishment cannot be treated as an employer in relation to such workers because section 2(X) of the IRO, 2002 specifically treats the contractor as an employer relation to such workers.
A mere principle cannot override the express provision of a law. As regards the provision of statutory benefits other than those allowed under the IRO-2002, such workers may, at the most be treated as workers employed through a contractor and the employer of the main establishment being responsible for the provision of such benefits.
The third type of contract labour system, popularly known as the job contract system, is when an employer of an industrial establishment gives a specific job on contract and for the execution of that job the contractor employs workmen.
Workers so employed remain under the control of contractor and not of employer of the establishment concerned. Workers so employed are paid wages by contractor while payment to contractor is made by employer of the establishment, on the basis of the job done and not on the basis of the number of workers employed.
Such a contractor has been specifically recognised as an employer in relation to workers employed by him under section 2 of the West Pakistan Standing Orders Ordinance, 1968. Even otherwise too such contractor was treated as an employer in relation to workers employed by him as they worked under his direct control.
The fourth type of contract labour system, not so usual, is when a person undertakes to do a job without engaging any one for his assistance. He uses his own discretion in doing the job and is not under the control and supervision of the employer of the main establishment. He is quite independent in regard to the manner in which the work is done. He is paid on the basis of work done and falls in the category of an independent contractor.
Rights and responsibilities: In the case of job contract, the office establishment of the contractor is treated as a commercial establishment, his worksite as an industrial establishment and the contractor as an employer is relation to both, under section 2 of the West Pakistan Standing Orders Ordinance, 1968.
The Ordinance will apply to his office as a commercial establishment and his work site as an industrial establishment if the number of workers employed in each is 20 or more.
The West Pakistan Shops and Establishments Ordinance, 1969 will apply to his office and work site-both, irrespective of the number of workers employed if the job given on contract does not involve any manufacturing process.
If it involves any manufacturing process, and if the number of workers is 10 or more work site will be governed by the Factories Act, 1934. Likewise, the IRO, 2002, the Employees Social Security Ordinance, 1965, the Employees Old-Age Benefits Act, 1976 and all such laws will apply to the office and work site of the contractor.
In the case of workers employed through a contractor, they will be entitled to all the benefits provided under any law applicable to the establishment which defines a worker or an employee as any person employed directly or through any other person. The employer of the main establishment will be responsible for the grant of all such benefits.
Although the West Pakistan Standing Orders Ordinance, 1968 does not define a workman as a person employed directly or through any other person, Standing Order 20 of the said Ordinance expressly holds the employer of the main establishment responsible for observance of the provisions of Standing Orders in respect of workers employed through a contractor.
They have, therefore to ensure that, among other things, workers employed through a contractor are issued appointment letters at the time of engagement and terminations are also done in accordance with the provisions of the Standing Orders.
For determining the strength of workforce for the purpose of application of a law, the total number of persons, employed directly and through the contractor, is to be taken together.
In the case of the contract for services, the contractor will be treated as an employer in relation to the workers who are engaged to render services, if such services are rendered under the direct control of the contractor.
In case such services are not rendered under the control of the contractor, the contractor will be treated as an employer in relation to such workers under the IRO, 2002 only. For the grant of benefits allowed under any other law, the responsibility will be on the employer of the main establishment.
