1. outsourcing
rules& regulations

2. 

outsourcing- “a tool”
 1. Minimize cost
 2. Maximize Efficiency
 3. Save Time
 4. Enthuse Accountability
 5. To take the pain of staffing
 6. To insulate the employer- employee
relationship from client

 The law does not prohibit or restrict any sector
whether Govt. or private to take services through
Outsourcing Mechanism.

3.  rules and regulations

1. Contract labour ( Regulation and Abolition) act, 1970
2. Minimum wages act, 1948
3. Industrial dispute act, 1947
4. EPF act, 1952
5. ESI act, 1948
6. Workmen’s compensation act, 1923
7. Service Tax
 There is a provision that if a Outsourced labour performing the same or
similar kind of work as directly appointed by the Principal Employer then
they shall be entitled to the same wages, Holidays and social security
provisions.
 Further there should be a clear Agreement between the Principal
Employer and the Contractor about the Wages and contribution towards
social security scheme and other benefits to be paid by the contractor.

4. 
 contract labour- not the employees of principal employer

 The contract labour shall be the employees of the contractor and not of principal
employer.
 “Control and Supervision” main Factors for Determining Genuineness of
Control

 High Court not to Interference when the Contract between Principal Employer
and the Contractor is Genuine

 Maintaining of Register of Contractor’s Workers- Not a Factor for Absorption

 Merely Working 240 Days in a Year would not Entitle Contractual
 Workers to Claim Regularization

 Except if the record of the contract system is a farce and in fact the principal
employer exercises real control over such employees.

 The Contract Employee has to Prove that he was Working under the Direct
Control and Supervision and was also Paid Wages Directly by the Principal
Employer

5. 
 ContraCt of serviCe vs. ContraCt for
serviCes
 A contract for service differs from a contract of Service.
 A contract of service is an agreement where one person agrees to employ
another as an employee and the other agrees to serve his employer as an
employee. Under a contract of service, the employer must contribute to
CPF and provide relevant statutory benefits such as annual leave, sick
leave etc. for his employees.

 A contract for services, however, is an agreement where a person is
engaged as an independent contractor, such as a self-employed person or
vendor engaged for a fee to carry out an assignment or a project for the
company. Under such a work arrangement, there is no employer-employee

6. THE CONTRACT LABOUR (Regulations and Abolition)THE CONTRACT LABOUR (Regulations and Abolition)
Prohibition of employment of contract labour.-

Notwithstanding anything contained in this Act , the appropriate
Government may, after consultation with the Central Board or, as
the case may be ,a State Board ,prohibit , by notification in the
Official Gazette , employment of contract labour in any process,
operation or other work in any establishment.
Before issuing any notification under sub-section(1)in relation to
an establishment , the appropriate Government shall have regard
to the conditions of work and benefits provided for the contract
labour in that establishment and other relevant factors, such as –

7.  Whether the process, operation or other work is incidental to,
or necessary for the industry, trade, business, manufacture or
occupation that is carried on in the establishment;
 Whether it is of perennial nature, that is to say, it is of sufficient
duration having regard to the nature of industry, trade, business,
manufacture or occupation that is carried on in that
establishment;
 Whether it is done ordininarily through regular workmen in that
establishment or an establishment similar thereto;
 Whether it is sufficient to employ considerable number of
whole-time workmen.

8. 
 relationship of employer and employee- faCtors for
determination
 In determination the relationship of employer and employee ‘control’ is one of the
important tests but is not to be taken as sole test.

 When there was no contract and also the contractor himself working with the
principal employer.

 Appreciate Government and not the Courts can Abolish the Contract
Labour System
 Industrial Tribunal cannot Direct the Government for Abolition of
Contract Labour System

 Stay against Retrenchment of contract Worker by the High Court-
Cannot be Granted

 Direction to Abolish Control Labour- Cannot be given by the High
 Court

 Workers Employed by Agencies come within the Definition of ‘workman’
 If overall control and supervision by the respective establishments.

 Claim for Regularization by Control Labour- Cannot be Enforced by the
relationship between employer and employee-
faCtors for determination
In determination the relationship of employer and employee ‘control’ is one of the important
tests but is not to be taken as sole test.
 When there was no contract and also the contractor himself working with the
principal employer.
 Appropriate Government and not the Courts can Abolish the Contract
Labour System
Industrial Tribunal cannot Direct the Government for Abolition of
Contract Labour System
 Stay against Retrenchment of contract Worker by the High Court-
Cannot be Granted
 Direction to Abolish Contract Labour- Cannot be given by the High
Court
 Workers Employed by Agencies come within the Definition of ‘workman’
except
if overall control and supervision by the respective principal employer.
 Claim for Regularization by Contract Labour- Cannot be Enforced by the

9. No AutomAtic AbsorptioN of coNtrAct LAbour oN AboLitioN
of coNtrAct
 On Abolition of contract labour system in an establishment
the contract labour nonetheless remains as the workforce
of the contractors who get contracts in various
establishment where the contract labour could be engaged
and where the would be extended the same statutory
benefits as they were enjoying before.
 No power vests in the principal employer either to make
the appointment or to take disciplinary action against the
erring outsourced workers and their dismissal or removal
from service. It cannot be construed that the
contractor was nothing but an agent or mangers of the
principal employer working completely under the

10.  Merely because the principal employer has been doing the test,
interview or assess or determine the quality, skill,
knowledge, proficiency, capability etc. outsourced employees shall
have no right to be absorbed by the principal employer.

11.  If the contract is found to be not genuine but a mere camouflage,
the so-called contract labour will have to be treated as employees
of the principal employer who shall be directed to regularize the
service of the contract labour in the establishment concerned.
 Even if the contract has been engaged for a long time- No
Ground for Regularization of its Employees

12.  DoNt’s

 The Principal Employer should not regulate or govern the service conditions of
the outsourced employees

 Viz.
 i. Attendance certification
 ii. Grant of leave
 iii. Decision of fine

 However the Principal Employer can ask for the desired services from the
outsourced employee by the agency.
 The Principal Employer can not intervene the recruitment process of the
outsourced Employee.

 Avoid personal Hob Nob with the Outsourced Employees.
 Avoid taking the Outsourced Employees as regular employment without the NOC
of the contractor.

 Here it is pertinent to note the payment of wages to the Outsourced Employees

13.  DO’S

 1. Support in recruitment of competent Employees to the contractor as a
suggestive body.
 2.Timely payment of services to pay wages to the outsourced employees on
time including social security statutory deposits.
 3. Continuous feedback to the contactor regarding the performance of the
Outsourced Employees.

14. 
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