Lessons from the controversy over unpaid workers
The vandalism inflicted by workers on the factory of Wistron, Apple Inc’s Taiwanese supplier, located 65 km from Bengaluru, earlier this month is a cautionary tale both for companies looking to relocate their manufacturing bases in India and for the state labour departments that oversee them. The incident represents an all-round failure — of the adequacy of the company’s HR establishment, the efficiency of the state labour inspection apparatus, and the redress mechanisms for worker complaints. It could also be regarded as a test case for the manufacturing expansion expected via the government’s signature production-linked incentive (PLI) schemes.
The problems for Wistron, which makes iPhones for Apple Inc under the PLI scheme, began with its Cupertino-headquartered client’s focus on expansion in India, the world’s fastest-growing smartphone market. To feed this rapid expansion, Wistron ramped up its production lines and started hiring workers on a contractual basis. As a result, at the time of the clashes, the plant had 1,343 full-time employees against over 8,400 contract workers hired via six manpower agencies. But this enlargement of the workforce was not backed by an expansion of the HR function, with the result that just three professionals were dealing with an almost five-fold expansion of the workforce in eight months. Inevitably, records were incomplete and workers went for months without payment, as a subsequent enquiry by the state labour department revealed. The disturbances of December 12 were provoked by demands for payment, which were rebuffed. It is worth noting that the aggrieved workers did not appeal the state labour inspectors, according to a statement by the Karnataka labour minister, nor did the latter catch these rampant violations that allegedly went on for months, a reflection of the poor regulatory mechanism that is designed to protect workers’ rights.
The incident is an embarrassing setback for the so-called investment-friendly policies of the government in the state, though Wistron also has a lot to answer for. A probe by Apple, which has read the riot act by stopping new business to the Taiwanese firm, found glaring lapses in Wistron’s treatment of its staffers. It is now setting up an “employee assistance facility” at the plant to sort out the confusion over wage and overtime payments, a move that could easily have pre-empted the incident in the first place. But the larger concerns remain. If such failures occur in states such as Karnataka with a fairly advanced manufacturing base, it is worth wondering about the robustness of such mechanisms in states making an aggressive attempt to woo manufacturing investment but are scarcely renowned for governmental efficiency. Contract employment accounts for almost 90 per cent of employment in India, a structure that implicitly makes for antagonistic labour relations, as the chronic labour problems at Maruti-Suzuki’s factories till 2012 had shown.
But the new Central laws have also made it easier for companies to hire and fire, a move that is designed to encourage the hiring of contract workers. While this flexibility is required, companies must set up a mechanism to create an organisational cohesion between HR executives and the workforce, allowing for congenial industrial relations. This is specially so because there is no direct relationship between the principal employer and the contract worker; it is the contractor who hires the worker and is responsible for conditions of employment. But the principal employer can’t stop monitoring the way the contract workers are being treated. Rising violence on factory floors across India over the past few years is evidence of the fact that corporations need to focus on better HR management.