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Unrest at auto factories over contract workers being paid less than permanent employees

Unrest at auto factories over contract workers being paid less than permanent employees

Contiuous strikes at auto factories over contract workers being paid far less than permanent employees has become a common feature and unless this growing problem is speedily addressed, widespread labour unrest, which seemed to have been laid to rest, may rise again.

Workers demonstrating during the recent strike at Maruti Suzuki's Manesar plant in Haryana, Workers demonstrating during the recent strike at Maruti Suzuki's Manesar plant in Haryana,
Kamal Singh* is a contract worker at Maruti Suzuki's plant in Manesar, Haryana. He has been working on the chassis assembly line for the last two years and is paid Rs 7,200 per month. Next to him, on the same assembly line doing the same job, is Pravin Kumar*, a permanent Maruti employee. Kumar earns Rs 18,000 per month.
At the Omax Auto plant near Dharuhera, Haryana, Mohit Prasad*, a contract worker for the last 19 years, earns Rs 5,900 a month. But permanent employee Satya Tyagi*, who is on par with him, gets Rs 12,000. Omax Auto manufactures two-wheeler parts for market leader Hero Honda.

Source: Labour Bureau
The primary issue that sparked the 13-day strike at Maruti Suzuki's Manesar plant in June was the workers' insistence on starting a union. Though the factory - which manufactures around 100,000 cars per month, including all the leading Maruti models - began operations in 2004/05, it has never had a separate union. There is a union at Maruti's three-decades-old Gurgaon plant, but Manesar workers, dismissing it as a management puppet, sought one of their own.

The standoff ended only after Maruti officials agreed to recognise the second union. The strike led to a 15 per cent drop in production in June and losses of more than Rs 500 crore. But a secondary reason for the shutdown was also the discriminatory treatment of workers employed through contract agencies, though this was never openly mentioned in the list of demands. Ironically, these workers, though they fully backed the strike, will never be able to officially join the proposed union. Their employers are their agencies, not Maruti. Company executives have been maintaining that the workers would be gradually absorbed into Maruti as permanent staff at its two new factories being set up in Manesar.

Read how TVS managed a strike-free record

The contract workers, however, remain sceptical. "Though we support setting up the union, the benefits of the agreement will be reaped by the permanent workers alone," says one of them, Rohit Verma. "Whether the second union is formed or not, our situation will remain the same."

Estimates of the number of contract workers at the Manesar plant vary. The management claimed that of the 3,000 employed there, around 40 per cent were through contractors, but Business Today's own enquiries indicated that around 70 per cent comprised contracted and temporary workers. Apart from higher salaries, permanent workers get a host of company benefits such as medical and paid leave, which contract workers do not. The latter are employees of their contracting agencies and accordingly get only those benefits the agency thinks fit to provide.

All these agencies shave a standard eight per cent off the wages paid to contract workers as commission. Worse, the workers are paid not a monthly wage, but on a daily basis. Enquiries revealed that employment varies between 15 and 25 days depending on availability of work. According to sources in the contract agencies, unskilled contract workers get an average consolidated salary of around Rs 3,600 per month, which is even lower than the monthly minimum wage of Rs 4,502, determined by the Haryana labour department.

Arvind Kapur, Managing Director, Rico Auto Industries
We cannot afford to keep all the workers throughout the year. Using contract labour helps us to manage costs in the competitive market: Arvind Kapur
And Maruti is not the only one. Almost all other factories manufacturing vehicles or ancillaries in the industrial clusters around the National Capital Region follow the same practice. A number of them have seen strikes in recent years - Hero Honda, Rico Auto, Omax Auto, Sunbeam Auto and Exide Batteries - in many of which the issue of contract labour has figured prominently.

Company viewpoint

"We cannot afford to keep all the employees throughout the year," says Arvind Kapur, Managing Director of the Dharuhera-based Rico Auto Industries. "There are ups and downs in the business." Rico Auto, which also has a total workforce of around 3,000, including contract workers, makes gears and oil pumps for Maruti, and gear shift drums for two-wheeler companies. It saw a 45-day strike in October 2010, with the union insisting on limited use of contract workers and equal pay for them."The market is very competitive," adds Kapur. "Using contract labour helps us to manage costs."

Karl Slym, President & MD, General Motors India
Such disruptions could affect investor sentiment and give India's manufacturing capability a bad name internationally: Karl Slym
Karl Slym, President and Managing Director, General Motors India, agrees: "Contract workers give us some flexibility." He, however, warns that strikes like these could affect investor sentiment. "It gives India's manufacturing capability a bad name internationally," he says.

Workers allege that managements try hard to keep the number of permanent employees constant, substituting them with contract workers, as it enables them to economise. When Honda Motorcycle and Scooters India, or HMSI, started its factory in Manesar in 2001, it had around 20 per cent of its workers on contract; currently the proportion has been reversed and only 20 per cent are permanent. Most auto and auto component factories, at present, have over 50 per cent of their workforce on contract.

In 2008, when contract workers at Hero Honda's Dharuhera plant protested and sought to form a union, the company gave an assurance that they would be made permanent - in order of seniority - as vacancies arose. But that never happened. Union sources claim the company made several fresh recruitments in the past three years, but the contract workers - some of whom have been with the company since 1994 - have not been absorbed yet.

For complex accounting reasons, the expenditure on contract workers is also never shown entirely under employee cost, but is broken up and worked into the company accounts books under different heads. "Multinational corporations in India practice the low-cost model of business. Contract workers are helpless," says Debi S. Saini, professor of Human Resource Management at the Management Development Institute, Gurgaon.

It was from the late 1990s that auto companies began using contract labour for regular but non-core activities such as running the canteens, maintenance of gardens on company premises or housekeeping. In the past 10 years, they have been gradually inducted into assembly lines as well. And if contract workers have been slow to protest against their discriminatory treatment, it is because of their vulnerable position.

"Contractors bluntly tell us we can leave if we want to and take up a job that pays better," says Maruti contract worker Verma. Maruti officials refused to comment on the issue.

Growing resentment
Barred by law from joining the permanent employees' unions, contract workers seek to draw strength by supporting the periodic demands made by these unions, even though none of the benefits, if granted, would accrue to them. As a quid pro quo, the unions - as seen in the Maruti and Rico Auto strikes - have begun taking up their cause too. A. Soundararajan, Honorary President of the Hyundai Motor India Employees Union, recalls how the permanent workers went on a strike at the company's Chennai plant in April 2009 after 67 contract workers were sacked, forcing reinstatement of 35. "The irony of our legal system is that contract workers, who need the union most, cannot join it," he says.

Strikes in Indian companies have come down considerably from their heyday in the 1960s to 1980s. Labour ministry sources say since 2003, there have been barely 200 to 250 strikes every year across the country.

But with the growing resentment against the treatment of contract workers, fresh agitations seem to be afoot. "There is a resurgence of union activity among young workers," says Ashim K. Roy, General Secretary of New Trade Union Initiative, which has no political affiliation. If unions begin uniting across companies, they could cripple the entire sector. During the Maruti strike, for instance, HMSI union leader Suresh Gaur had spoken up in its support, even threatening a sympathy strike at the two-wheeler major's plant. "Wherever there are large industrial belts or special economic zones, there will be a strong temptation for unions to join hands," says S. Venkatesh of human resources firm Svanishta.

Unless this growing problem is speedily addressed, the ghost of widespread labour unrest, which seemed to have been laid to rest, may rise all over again.

*Names of all permanent and contract workers have been changed

Published on: Jul 16, 2011, 12:00 AM IST
Posted by: Navneeta N, Jul 16, 2011, 12:00 AM IST