The Role of Labour Contractors in the Auto Industry: Evidence from India's National Capital Region

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The Role of Labour Contractors in the Auto Industry: Evidence from India’s National Capital Region

Abstract. Auto production represents a sunrise industry in India. But there are serious questions about the employment relations practices pursued in this sector. One point of debate involves the role of labour contractors in the recruitment, placement and supervision of employees. This paper uses evidence from recent fieldwork in industrial zones near New Delhi. It shows that this auto cluster now relies upon a well-entrenched regional labour contracting system in order to lower labour costs and minimise the impact of collective bargaining and trade unions. Most workers in medium-to-large auto assembly and components firms are hired by labour contractors. Interestingly, labour contractors are largely absent in small enterprises. This paper explains the types of labour contractors hired by firms, why firms choose to hire them and why some prefer to avoid them, and outlines the different functions performed by labour contractors. In outlining the features of this regional labour contracting system, and its centrality to HRM and employment relations in the local industry, this paper questions whether this system is sustainable over the longer-term.