Indian Manufacturing industries landscape changes since 2000 not only due change in the Industrial Disputes Act but also due to the increasing dependence of contract workers hired contract contractors.
The contract workers placed by contractors into their customer firms are not formally employees of the customers. This arrangement, therefore, provides customer firms with the flexibility to return the contract workers to the contractors (who then places the workers in another firm) without being in violation of the layoffs and retrenchment rules imposed by the IDA.
The rules for the deployment of contract labor has been in existence since the early 1970s, the contract labor hiring model only started booming in the early 2000s.
The relative cost of contract labor compared to permanent labor is lower at larger firms and hence the average the cost of labor goes down for larger firms as they tap more into the contract labor pool
The rise in contract labor exerted pressures on the wages of permanent workers in order to decrease it at larger firms.
We see that that a firm’s increased reliance on contract labor is related to an increase in the size of labor supply and a decrease in permanent workers and a decrease in input cost.
Industries of cities like Mumbai, Pune, Aurangabad and Nashik are increasing there strength of contract labors day by day due to its various ease and benefits.
The real challenge for these industries is to be a reliable contractor for providing manpower supply whenever the industries are in need.
We have an example VIP industry which is based in Nashik Satpur MIDC. In a decade ago, the permanent employees wherein thousands but due to the permanent employee’s cost, the company had done downsizing and make the organisation very lean and employed maximum of its employees as contract employees.
The above example was a representative example but the reality is that many of the Nashik industries had done same experiment and they become successful in decreasing the input cost and hence they increased the hiring of contract labor in various departments.