COVID-19 and its Impact on the Construction Industry

Role of contractors in the lives of construction workers during a lockdown

By Chitra Rawat and Priyansha Singh

Growth in a country’s construction industry is typically a sign of overall urbanisation and modernisation. India’s construction industry, along with other key components of the industrial sector, has seen unprecedented growth in the 21st Century. The construction sector has been drastically affected by the COVID-19 crisis. India Migration Now conducted interviews with contractors to understand the impact of lockdown on the construction industry from the perspective of intermediaries. The interviews, which spanned two phases of the lockdown — 25 March-14 April 2020 and 15 April-3 May 2020 — illuminated myriad problems in the industry which have affected the intermediaries. Among these, informality of recruitment is emerging as the primary concern, since it complicates the definition of an employer between petty contractors and the subcontracting companies. Additionally, the team found that contractors are themselves in financial distress due to the halt in construction activities. The situation of petty contractors is not uniform throughout but varies according to the scale of construction activities.

Ramesh Thakur (name changed), a worker from Bihar presently in Mumbai, was unable to go home after the 21-day lockdown was announced on 24 March, 2020. He lives in a rented accommodation on the outskirts of the city, with four others who work for the same contractor. Thakur says they have collectively turned down an offer from their contractor to help with ration needs. “The contractor will deduct ration money from my monthly wage later, so what is the use? It is better if I just buy food on my own,” he says. The hiatus in construction activity means that, apart from his own subsistence, Thakur’s worries are compounded by being the sole breadwinner for six dependents. He has been working in Maharashtra for nearly a year-and-half, but is still not registered with the state’s Building and Other Construction Workers’ Board (BoOCW). When asked why, he said “I had applied, but did not get a reply. I have not received my labour card (parlance for BoCW card).”

A conversation with the labour in-charge of Thakur’s subcontracting company gives the impression that the crisis was handled effectively — with the news of a possible lockdown looming on 20 March, the labour-in-charge called a meeting with all the contractors registered with his company, asking them to give rations to workers for 20 days, without fail, and asked them to not cut the wages of workers because of the help provided. While this initiative was positive, there is no mechanism to hold the contractors accountable for providing rations or not cutting wages.

Srivastava (2016) shows that the increasing informalisation of the economy has resulted in loose structures within the construction sector, leading more and more workers outside the purview of fixed wage. Subcontracting companies give contracts to different petty contractors, who are the immediate employers of the workers, but the ultimate employer of the workers continues to be the subcontracting company, which is responsible for their wages.[1] The contractor only works as a middleman. A study conducted by the Institute of Human Development in 2016 showed that almost 85% of surveyed workers regarded the contractors as their employers, blurring the demarcation between the formal and informal construction sectors. This informal chain of recruitment allows the management to excuse itself from its responsibilities towards its workers.

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Thakur’s contractor complained that the subcontracting company has not been cooperative in this situation. The contractor has had to shoulder the entire responsibility of providing for the workers, as subcontracting companies have not even followed up on their plight, leave alone extending any monetary help to the contractors.

Worker-contractor nexus in the construction sector

A field study conducted by India Migration Now (IMN) among construction workers in Mumbai, spanning 3 months, revealed the complexities of the relations between a contractor and a worker. A survey conducted as part of the study showed that almost 93% of the workers at a particular construction site were migrants, with almost 58% securing their employment through a contractor. In around three-fourths of all cases, the workers were dependent on the contractor for their wages, and in half the cases the contractor is also responsible for providing workers with accommodation. While the major point of contact for workers is still the relative, contractors become the primary figure in providing employment to workers. From qualitative field studies, it came to our notice that the entire responsibility for the workers rests with the contractor, and seldom the labour-in-charge (alternatively, the management).

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Above findings are from a field study by India Migration Now.

The pervasive labour contracting system has led to fragmentation of the construction sector, and obfuscated the definition of an “employer”. The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, recognises a contractor as “a person who undertakes to produce a given result for any establishment, other than a mere supply of goods or articles of manufacture, by the employment of building workers or who supplies building workers for any work of the establishment”. The legal definition also includes a subcontractor, but the flexibility and informalisation of the labour force has muddled the definition of an “employer” as the petty contractor and subcontracting companies stand in tension.

In interviews conducted with 25 contractors in Mumbai, Delhi, and Hyderabad over the duration of the lockdown, the definition of an employer was still split between the contractor and the management of the subcontracting company. On March 20, 2020, an advisory by the Central Government asked employees to not reduce wages of workers due to the ongoing crisis. The advisory was followed by a government order on 29th March, 2020 stating that all employers are required to pay the full wages to their workers for the period of the lockdown.

“This is business,” says one contractor, “and like every business, you have a loss. This is why we are providing for the workers. How can we let any person die of hunger? After all, they are our people. The problem is with the subcontracting company, which should pay us to provide for the workers. They only provide workers’ wages. We provide them with workers.”

Another contractor in Delhi said, “We are taking care of them (the workers) and we will do whatever we can. But until when can we do this? The company is not releasing the payment, so we are taking care of them from our money, but we also have our family, these workers have come here through me so it is my responsibility to take care of them, but for how long can I help, if I also don’t have the money?”

This sentiment is shared by many contractors, who wish to provide help to their workers but are unable to do so because of the chasm between them and the management. Contractors are only able to pay workers their wages once the bills have been cleared by the subcontracting company, which is not timely in most cases. As a result, the contractor has to give weekly kharchi to workers from his own pocket — the amount for which can be as high as Rs 1.5 lakhs a month for a “handful” of workers.

Now that the billing has stopped, the contractors have no money left for the workers, as subcontracting companies have halted transfers.

How did workers react to the news of Lockdown

The news of a lockdown startled some workers, many of whom were concerned about being stuck in destination states with little or no security in terms of housing or food. Contractors revealed that some workers frantically left the labour camps for fear of being locked and caged in the sites, and came to them for help. The contractors were then compelled to provide the workers rented accommodation for the duration of the lockdown.

“Ultimately, workers are dependent on contractors, and that’s a huge responsibility for us. We were the ones who promised them employment after they had left villages. We are responsible for what happens to the workers, isn’t it? The subcontracting company is usually not in contact with workers, it is us, the contractors,” said one contractor.

The accommodation situation also varies across sites. While some workers stay on-site, others stay in rented rooms or accommodation outside the site, provided by the contractor. After the outbreak of the COVID-19 crisis and the subsequent national lockdown in the country, the subcontracting companies started providing rations to workers on-site. However, the workers who stay outside the labour camps/sites have no option but to depend on the contractor for rent and weekly kharchi. With workers leaving construction sites citing legitimate worries and numerous uncertainties, in most cases, the contractor has been the figure who arranged their stay and food — since the management did not take into account those workers who stay off-site.

In our conversations with workers in cities like Mumbai, Delhi and Hyderabad, most of the workers mentioned that they haven’t been paid their wages since the onset of the lockdown. With no money in hand and no work, they are now entirely dependent on the contractor. Inflation in the prices of essential goods has only made matters worse.

“12 of my workers are in a labour camp. The realty company has not paid us anything to give to the worker. One worker requires Rs. 1000 a week, and the expenses are increasing every day because everything is being sold at higher cost. The kharchi is only for the ration needs of workers, the rent/accommodation is another worry that hangs over us”, a contractor in Delhi tells us.

But unlike Ramesh Thakur’s case, most of the contractors replied that they will not deduct the kharchi from the monthly wages of the workers, which falls in line with the government order. Another contractor suspects that geography is also playing an important part in determining whether the real estate companies will provide workers with monetary help and food relief. One contractor who has his workers in both Delhi and Gujarat says that the subcontracting company has been providing help in Gujarat but there is no monetary assistance given to workers who work in Delhi. “You don’t give us anything, you send the money to their accounts directly,” he adds.

Not a homogenous story

The construction sector is India is not only highly fragmented in terms of hierarchies, but also varies according to the activities undertaken and the scale of operations. Section F of the National Industrial Classification, 2008 recognizes construction activities under three main categories, which constitute their sub-activities, respectively, as illustrated in the chart below:

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The role of the contractor varies from site to site. Quite often, big construction sites have a subcontracting company that employs its own contractors. These contractors work on multiple sites under the same subcontracting company. The other type are the contractors who directly get tenders from the builders — an arrangement that is common in small construction sites, and the work is carried out by unlicensed contractors, according to a JNU study.

In small construction sites, especially where there is no subcontracting company between the builder and the contractor, the contractor usually acquires the tender directly from the builder. There is a presence of unlicensed contractors (sub-sub-contractors), which puts the workers in an even more precarious situation. The money from the tender is what the contractor has at his disposal. As the present crisis looms large, the contractor is providing for the workers from the money for his tender. “The workers need to be taken care of — that is there, so we are providing them with monthly wages along with the kharchi.”

A worker, who recruited 8 other workers from his village because his contractor asked him to, told us that he is spending Rs. 700–800 every day. “I called them here, so I have to take care of them.”

The Desire to Return

On 31st March 2020, the Government of India in its status report to the Supreme Court had said that workers, at both the destination and the source, are being taken care of and there is no need for workers to return to their home states. However, through our conversations with contractors and workers, this was clearly not the situation on the ground. Apart from not having access to basic needs like rations, wages and a channel for remittances, workers were anxious to just return to their families. Expressing the concern on the desire of workers hoping to leave, a contractor told us, “My labourers have already booked transportation for themselves. The moment the lockdown ends, they are going to leave. They will not come back, and I must look for workers again. This will also delay my work and the subcontracting company will not pay me.” Both skilled and unskilled will leave, and it will be difficult to deal with the labour shortage and find other workers with their skillsets.

A month later, the Government of India has now announced that stranded workers will be able to return to their home states. Whether they return or continue to stay, the responsibility still lies in the hands of the contractor, in the absence of a clear answer on who the employer is.

*The authors are researchers at India Migration Now. Follow their work on twitter @nowmigration and on instagram @indiamigrationnow. Edited by Karthikeya Ramesh, he can be found on Twitter @AbstractOpinion.

Migration is an opportunity, we want to ensure India grabs it. IMN is a South East Migration Foundation venture, based out of Bombay, since Feb 2018.

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