The Parliamentary Standing Committee on Labour under the chairmanship of Suravaram Sudhakar Reddy submitted its recommendations on the Payment of Gratuity (Amendment) Bill  2007 to the government, suggesting the inclusion of contract labour within the purview of the Bill. The report, which was tabled in Lok Sabha and Rajya Sabha on 26 February 2008, requested the government to include in the Bill, those contract workers who had completed five years of service.

The Payment of Gratuity (Amendment) Bill 2007, as introduced in the Lok Sabha on 26 November 2007, was referred to the Standing Committee on Labour by the Speaker of the Lok Sabha under Rule 331E (b) of the Rules of Procedure and Conduct of Business in the Lok Sabha for examination and reporting back within three months (from the date of publication of the reference of the Bill in the Bulletin Part-II of Lok Sabha, dated 10 December 2007).

According to the Standing Committee on Labour, the contract labour system is prevalent virtually in every organisation of the government. The Committee was of the opinion that this system might perhaps be beneficial to the organisation and the management. However, it is highly prejudicial to the workers because their basic rights, that is, minimum wages, working conditions, social security, continuity of service, etc., are systematically denied to them. Although the Payment of Gratuity Act per se does not make any discrimination among casual, contract, temporary and regular workers, who have completed five years of continuous service, it is an established fact that contract workers are seldom given any social security coverage that is available to the regular workers. It has also come to the notice of the Committee that due to the practice of ensuring a break in service, a contract labour never works continuously for five years in any organisation. Hence, the worker is deprived of the payment of gratuity under the Act.

To address this issue, the Committee strongly felt that the genuine rights and interests of the contract labour should not continue to suffer and so has recommended that these workers be brought within the purview of the Act by laying down specific provisions in the Act itself. The Committee recommended that if a contract worker has rendered five years of service, continuous or otherwise, in an organisation, he/she be made entitled to gratuity under the Act. The Committee further recommended that the government should not only make an overall assessment of the contract labour system but also review the systemic flaws and carry out possible reforms in the legislation.

If the government decides to accept the recommendations of the Standing Committee on Labour, the genuine rights and interests of the contract labour will not suffer.