The importance of contract workers throughout Indian industries has been paramount. With the contractual workers forming more than 50% of the workforce in certain industries it is often debated, whether this high share may lead to a bad health situation of Indian industry.
The report which has been referred here presents the figures collected from the large firms. However, it also points to the fact that the situation in the unorganised sector and MSMEs could be worse. Making contract workers backbone of the economic activity of most if not all organisations, especially in the manufacturing sector.
The report can be seen here, “Contract workers make up 46% of workforce…”
Liability Towards Contractors
Hiring and using contractual workers may be more cost effective for the firm, but that still makes them liable for their safety and health. Injury to a contract employee at the workplace will make the employer liable for damages.
Also, it is the employer’s responsibility to provide a physically and financially safe working environment to all their workers whether contractual or otherwise. As the competition for talented and skilled workers grows, employers who offer more competitive packages in the form of financial compensation and work environment will be able to attract better talent.
“The Workmen Compensation Act (now Employees Compensation Act) defines the employers’ responsibility for compensating the contract worker equal to the employed worker.”
Why Do You Need Better Bargaining Position?
The high ratio of contract workers in Indian workforce indicates two things very clearly:
Large number of organisations (mostly manufacturing) employ contract workers
It’s easier for large number of skilled workforce to switch jobs
While, contractors are hired in lieu of the full-time employee, for various reasons, vendors also offer multiple critical services to the firms apart from supplying goods and material.
For Example: The success of Android operating system (OS) depends on the app developers. Availability of numerous apps has made the Android one of the most used mobile platforms in the world, while Windows stands at the bottom of the pyramid due to the lack of it.
However, it is also important for Android developers to maintain bargaining power over vendors, lest they erode the business value for the OS.
How to Gain Competitive Advantage Over Contractors & Vendors?
1: Payment Processes
This is the part of basic hygiene factors, and perhaps the easiest to achieve. Timely payment to the vendors is the most satisfactory thing a business can offer. It does not mean you will need to offer the best remuneration in the industry, it may just be average.
Timely payment helps the vendors plan better, and reduce their risks related to payment, that may even allow them to work for you at lower rates, just in case your competition is struggling on this front.
2: Cover Their Risks with Group & Liability Insurance
Liability insurance policies, like commercial general liability, workmen compensation insurance, professional indemnity, etc. give a sense of security to the contractors and vendors. As more firms are starting to offer these covers, it’s expected to become one of the hygiene factors as well.
But the advantage will still lie with the early movers as they can bring in practices to reduce the cost of such insurance, not to mention the name they can build for themselves in the job market for skilled workers.
Commercial General Liability policy, covers your liability arising towards any third party (vendors). The liability may arise due to the vendor getting injured while visiting your premises or any damage to his/her property.
Workmen compensation insurance can look after your contract workers, by offering to pay or share your liability arising under Workmen Compensation (Employee Compensation) Act.
3: Create a Support System
After the first two hygiene factors, this is one of the value adds.
Vendors and contract workers are also one of the stakeholders to your business, and just like the consumers of your final product and services, your offering to them affects your demand among these stakeholders.
And it’s anybody’s guess, “Higher your demand better the price you can command.”
Support system for vendors and contract workers can be seen as a parallel to the support system offered to your customers. The only difference would be of the issues and questions coming from the vendors and contractors.
4: Clear Engagement Policies
Clear engagement policies help set the expectations for the vendors and contractors. They also serve as the conflict breakers by providing a common platform to resolve disputes. A written agreement is the basic requirement for engagement of third party workmen like vendors and contractors.
But often, the agreement is superficial and does not account for conflict management and future issues. This may work for small businesses and short engagements, but for a longer relationship more detailed agreement and negotiation is important to set the momentum in a relationship. Something which is appreciated by everyone, regardless of the level of work.
5: Maintain High-Quality Standards
This is something which caters to the inherent and natural human need to progress. Improving quality of your product and services not only wins you, loyal customers, but it also brings you more talent and better vendors, to work with.
Though important, it may take little longer to do and is a continuous process. Therefore, it pays to start early by putting in place the hygiene factors. Like any journey, building a business worth billions is not a one-day achievement. Instead, it is a combination of such steps which create value among the stakeholders over a long time.
At the same time, you maintain the last mile cushion to safeguard your financial health with the help of various liability and group insurance policies. Online insurance advisors like SecureNow offer their services to businesses like yours in understanding and managing various risks through insurance. These consultants can provide quick and diverse solutions from more than 20 insurers present in India along with their expert analysis of the offering.