WAGE STRUCTURES IN THE INDIAN GARMENT INDUSTRY The Indian economy adopted a liberalised economic policy regime after 1990--91, in an attempt to ensure greater integration of the domestic economy with global competitive markets. This was motivated by the policy assumption that opening up of domestic markets would enhance the competitive efficiency of domestic business enterprises on account of transfer of technology, knowledge and skill sets from abroad. A large set of literature has shown that despite the modernisation of domestic enterprises over the past two decades, the Indian manufacturing sector has failed to propel itself on a high growth trajectory (Unni and Rani, 2004). Contrary to the policy belief, severe competition in the global export markets have led domestic firms to resort to cost cutting labour market strategies that have led to the widespread prevalence of oppressive labour relations across the Indian manufacturing sector (Vijay, 2009). In a bid to remain globally competitive, firms have targeted reduction of labour costs as a tool to ensure a reduction in production costs. This is evident in firms denying payment of minimum wages, social security, or fringe benefits to its workforce and increasingly resorting to informal employment contracts that ensure flexibility to businesses in terms of labour costs. Persistent minimum wage violations or

1. 1
A Study of Subcontracting in the
Garment Industry in Gurgaon
Society for Labour and Development
New Delhi, February 2013
Supported by: Rosa Luxembourg Stiftung

2. 2
Table of Contents
1. Introduction ………………………………………………………………………………...............3
2. Methodology………………………………………………………………………………………….3
3. Subcontracting in the Indian Manufacturing Industries……………………………………..4
4. An Overview of the Subcontractors (Fabricators) in the Garment Industry in
Gurgaon…………………………………………………………………………………………………4
4.1 Organisation of Production…………………………………………………………............4
4.2 Distribution of Subcontractors………………………………………………………………6
4.3 Workforce and the Legal Framework………………………………………………………7
4.4 Seasonal Nature of Work and Working Hours……………………………………..........9
5. Brief Profiles of some Tier 1 Factories Studied………………………………………………10
6. Comparison of General Working Conditions in the Tier 1 Factories and
Subcontractors…………………………………………………………………………………………13
7. Reasoning of Tier 1 Companies in Subcontracting Production……………………………16
7.1 Flexibility in Production……………………………………………………….……….16
7.2 Reduced Overhead Cost……………………………………………………………...…16
7.3 Reduced Workforce and Reduced Responsibility…………………………………..16
7.4 Freedom of Association…………………………………………………………………17
8. Why workers want to work at the Subcontractors when they can easily get jobs in the
factories? ……………………………………………………………………………………………….17
8.1 Wages………………………………………………………………………………………17
8.2 Relative Ease in Accessing Leaves……………………………………………………19
8.3 The Fear of Contractors………………………………………………………………..21
8.4 Working Hours and Breaks……………………………………………………...........21
8.5 Compulsory Overtime …………………………………………………………………..21
8.6 Target Pressure and Subsequent Violence…………………………………………..22
8.7 Highly Skilled Workers’ Preference to Make Complete Garments……...………22
9. Conclusion…………………………………………………………………………………………..22
10. Recommendations……………………………………………………………………..…24

3. 3
1. Introduction: It is common knowledge that labour intensive industries engage in
subcontracting or outsourcing of production, though in varying degrees, depending on the
nature of the industry. From our interaction with workers in the garment industry, it has been
learned that in the last half a decade, the subcontracting in the garment industry in Gurgaon
has been maturing as a common practice. Subcontractors have become an integral part of the
export oriented garment industry in Gurgaon and they contribute significantly to sustain the
business cycle the Indian suppliers face by providing the extra shop floor space required to
produce more during the peak seasons, and by absolving the Tier 1 companies from the legal
liability of keeping a regular workforce and by assisting the Tier 1 companies to adhere to the
lean manufacturing principles. Subcontracting is taking place in the garment industry in a
discreet manner (the agencies or entities which are getting the subcontracted work are not
registered as factories, or micro/small/medium enterprise, or contractor/ subcontractor under
any of the Laws) and thus making this invisible in the eyes of law.
The objective of this research has been to understand the general trends practiced by major
garment manufacturing companies in Gurgaon with regard to ‘subcontracting’ and the
reasons and implications of these practices on the working conditions and freedom of
association of workers.
2. Methodology: In order to understand the above mentioned objective, an extensive
mapping of subcontracted firms/workshops in Kapashera- Dundahera belt is conducted.
During the mapping period, (July – September 2012) 60 functioning subcontracted
workshops were found in the region. The actual number of workshops- functioning and
temporarily closed- is estimated to be between 90 and 95. Though the total number of
workers employed in the functioning subcontractors during the time of the mapping is
estimated to be anywhere between 3000 and 4000, workers estimate that there are about
7000- 8000 workers employed by the subcontractors on an average. 63 workers from 14
subcontracted units and 21 workers from 7 Tier 1 factories were interviewed to get primary
information on the subcontractors and the Tier 1 companies. Right to Information Act, 2005
has also been used to get information pertaining to the Tier 1 companies.

4. 4
3. Subcontracting in the Indian Manufacturing Industries
Subcontracting is defined as a type of inter firm relationship where large firms procure
manufactured components sub-assemblies and products from a number of small firms1
. In the
garment industry, subcontracting takes place in the form of ‘product subcontracting’2
where
the subcontractors produce the complete product and the parent firm essentially markets the
product. This is significantly different from the subcontracting taking place in the automobile
industry in Gurgaon, where it is mainly component subcontracting. The variation extensively
practiced from the product subcontracting in the garment industry in Gurgaon is that the
parent firms supply the ‘cut’ fabric and other essential raw materials to the subcontractor and
the subcontractor produces the product as per the parent firm’s specification. This is
popularly known as ‘job work’ in the garment industry in India and these subcontractors are
popularly called as ‘fabricators’ in Gurgaon. The subcontracting practiced in the garment
industry in Gurgaon is more of a permanent nature than a temporary set up. An analysis of
this is done in the following sessions.
4. An Overview of the Subcontractors (Fabricators) in the Garment Industry in
Gurgaon:
4.1 Organisation of Production:
Tier 1companies and other smaller companies which get contracts for production from the
Tier 1 subcontract work to the ‘fabricators’ in the Kapashera- Dundahera belt. The companies
provide the cut fabric along with other raw materials and sample garment with the prescribed
measurements to the subcontractors. In most cases, a reporter (a recorder) from the Tier 1
company brings the raw materials to the subcontractor. Upon receiving them, the proprietor
of the subcontractor signs a ‘contract’ and he brings the finished products to the company
after the production. Small trucks are used for transportation. After receiving the raw
materials, it is on the subcontractor to decide how the production in the shopfloor to be
1
R
Nagaraj:
Subcontracting
in
Indian
Manufacturing
Industries:
Analyses,
Evidence
and
Issues
http://www.igidr.ac.in/faculty/nag/Sub-­‐Contracting%20in%20Indian%20Manufacturing%20Industries.pdf
2
This
definition
is
adopted
from
R
Nagaraj:
Subcontracting
in
Indian
Manufacturing
Industries:
Analyses,
Evidence
and
Issues
http://www.igidr.ac.in/faculty/nag/Sub-­‐Contracting%20in%20Indian%20Manufacturing%20Industries.pdf

5. 5
organised. Most of the subcontractors in the belt are owned by locals from Haryana and all
workers are migrants from UP and Bihar. These workers have the same background as the
migrant workers in the Tier 1 companies.
According to workers, almost all companies in Gurgaon use the help of subcontractors
though the degree of help varies. Some companies use subcontractors to produce more than
half of the total production on a regular basis and some uses them occasionally to deal with
emergency situations. Subcontractors benefit by not having to have any independent
relationship with the brands since that require more knowledge of the industry and market
situations. Moreover, these subcontractors do not have the infrastructure required by major
clothing brands to undertake production. For example, some of the brands like Inditex for
which production is found to have happened in the subcontractors in the Kapashera-
Dundahera belt require safe and hygienic working conditions in the supply chain3
. However,
most of the subcontractors in the belt violate even the provisions of hygiene, safety and health
in the Factories Act, 1948 let alone the codes of the brands.
However, there is a symbiotic relationship existing among the big companies in Gurgaon and
the subcontractors in Kapashera- Dundahera belt. Some of the subcontractors in Kapashera-
Dundahera belt get production order from as far as Khandsa (10 km) and Manesar (20km to
30km) regularly.
In the subcontractors, workers have a greater say in the organizing of production than in the
bigger companies where the production process is determined by the production engineers. In
the subcontractors, masters provide the sample and raw materials to workers and in most
cases workers organize production. For example, in some fabricators, even though there is
enough number of machines to set up assembly line production workers decide to produce
full garment and they are allowed to follow production in the way want to. In some cases, 2
to 4 workers make a workstation and produce the garment together. This flexibility is
allowed since productivity-linked wages ensures that workers will not have to be paid in case
they produce less by adopting a method they want to rather than the one master determines.
3
http://www.inditex.com/en/corporate_responsibility/social_dimension/code_of_conduct_for_manufacturers
_and_suppliers

6. 6
Most of these subcontracting are undertaken by the Tier 1 companies by violating the
supplier code of brands. For example, Marks and Spencer clearly mentions in their supplier
code that ‘suppliers must agree with them about production sites and no subcontracting of
their order is allowed’4
However, in the past, suppliers of Marks and Spencer in Gurgaon
used subcontracting as a means of punishing workers for exercising their freedom of
association.
4.2 Distribution of Subcontractors
Garment workers who are working in Gurgaon report that the subcontractors or what they
popularly call as ‘Fabricators’ are on growth in the last one decade. They describe this growth
as ‘from less than 5 fabricators in Kapashera- Dundahera area in 2000 to over 90 in 2012’.
That is, in terms of the number of fabricators, they grew 18 times in 12 years. Workers say
that it is not difficult to find at least 2 ‘fabricators’ in each alley in the residential area where
migrant workers live.
The actual number of fabricators – currently functioning and temporarily closed5
- is
estimated to be between 90 and 95. Some are temporarily closed due to inadequate work
during the low season in the garment industry. However, workers report that from September
till May, the peak season of production starts and most of them restores production. Most of
the closed-down fabricators still keep the premises occupied and pay rent for it during the
low season. Though the total number of workers employed in the functioning subcontractors
during the time of the mapping is estimated to be anywhere between 3000 and 4000, workers
estimate that there are about 7000- 8000 workers employed by all subcontractors functioning
in this belt on an average.
Why are these subcontractors functioning from the residential areas where workers are
living? The rent for floor space in the residential areas in Kapashera- Dundahera region is
much lower than the rent in Udyog Vihar, where garment industries in Gurgaon tends to
concentrate6
. And this lower rent in the residential area ensures lower overhead cost per
4
Marks
and
Spencer:
Global
Sourcing
Principles
http://corporate.marksandspencer.com/documents/how_we_do_business/global_sourcing_principles.pdf
5
The
closure
of
the
fabricators
is
temporary
since
these
will
be
reopened
in
a
few
weeks
to
restart
production
when
the
season
picks
up.
6
There
have
been
various
media
reports
in
2011
and
2012
about
the
increasing
price
and
rent
of
real
estate
in
the
industrial
area
in
Gurgaon.
Some
of
the
reports
claim
that
the
rent
per
square
feet
of
floor
space
in
Udyog

7. 7
product produced in the fabricators. Workers have also reported that ‘power theft’ by the
subcontractors may also be contributing to the lower overhead cost of production in the
subcontractor. Another factor is the proximity of subcontractors to workers’ living areas
makes the availability of labour easier7
.
4.3 Workforce and the Legal Framework
The 14 subcontractors studied employs approximately 372 workers during lean season of the
year and as per workers’ estimate this goes up to 830 workers during the peak season of
production. The average number of workers employed by these subcontractors is 27 during
the lean season when the interviews were conducted. However, workers have estimated that
during the peak season, this increases to 59 on an average. However, the size of these
subcontractors varies significantly. The smallest subcontractor employed 10 workers during
lean season and had employed up to 20 workers in the previous one year period. The largest
of the subcontractors, had employed 50 workers during lean season and up to 130 workers
during peak season. Some subcontractors find enough work to employ a relatively steady (in
terms of numbers) workforce throughout the year, though most subcontractors experience
significant variation in the ability to employ a steady number of workers throughout the year.
The following table explains the distribution of workforce in these selected subcontractors.
Vihar
area
is
between
Rs
30
and
Rs
50
and
real
estate
price
has
shown
upto
50
times
increment
in
price
in
the
last
15
years.
http://www.fridaygurgaon.com/news/1658-­‐now-­‐cyber-­‐vihar-­‐s.html
7
Though
other
cities
in
India
like
Ludhiana,
Amritsar,
Kolkata,
Ahmedabad,
Surat
and
Bangalore
have
been
reportedly
facing
labour
shortage
in
the
garment
industry
,
Gurgaon
has
been
successfully
luring
skilled
workers
to
its
factories
from
Uttar
Pradesh
and
Bihar.
http://www.thehindu.com/business/Industry/textile-­‐industry-­‐facing-­‐labour-­‐shortage-­‐
assocham/article2139390.ece
http://www.thehindubusinessline.com/industry-­‐and-­‐economy/economy/article2159113.ece
Though
labour
shortage
has
never
been
the
issue
in
Gurgaon,
the
industry
faces
high
turnover
rate.
The
trade
unions
working
in
the
area
accuses
the
skewed
human
resource
management
of
the
companies
where
workers
are
denied
their
statutory
labour
rights
and
right
to
freedom
of
association
for
this
high
turnover.

8. 8
Table 1: Distribution of Workforce in the 14 subcontractors studied
Particulars
No. of workers
reported to be
working during
the time of
interview
Maximum
number of
workers
reported to have
worked
in the last one
year
Subcontractor 1 50 50
Subcontractor 2 37 40
Subcontractor 3 25 80
Subcontractor 4 20 35
Subcontractor 5 45 130
Subcontractor 6 35 80
Subcontractor 7 20 70
Subcontractor 8 15 40
Subcontractor 9 50 110
Subcontractor 10 10 20
Subcontractor 11 13 45
Subcontractor 12 14 20
Subcontractor 13 15 70
Subcontractor 14 23 40
Total Workers 372 830
Average no. of
workers 26.57142857 59.28571429
The above table describes that all the subcontractors who were studied have employed more
than twenty workers in the last one year. Therefore the Factories Act, 1948 is enforceable in
these subcontractors.
Under section 2(m) of the Factories Act, 1948 a factory is defined as any premises

9. 9
a) Whereon ten or more workers are working, or were working on any day of the
preceding twelve months, and in any part of which a manufacturing process is being
carried on with the aid of power
b) Whereon twenty or more workers are working, or were working on any day of the
preceding twelve months, and in any part of which a manufacturing process is being
carried on without the aid of power.
And section 2(k) defines manufacturing as ‘making, altering, repairing, ornamenting,
finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating
or adapting any article or substance with a view to its use, sale, transport, deliver or disposal.
All these subcontractors ‘factories8
’ use electric sewing machines- in most cases, the most
modern machines of JUKI brand- for production and thus must be covered under the
Factories Act, 1948 even if only 10 workers are employed. However, none of these
factories/subcontractors are registered under the Factories Act, 1948 either in Delhi or in
Gurgaon as per the data available from the labour departments9
.
Therefore, the existence of these subcontractors without being registered under the Factories
Act, 1948 in the first place is illegal.
4.4 Seasonal Nature of Work and Working Hours
According to workers, September to May is the peak season of production in the garment
industry in Gurgaon and this is also the season when the subcontractors work with full
capacity of production. All subcontractors which are studied except one operate from rented
premises in the residential areas in Kapashera- Dundahera.
Average working hours during the peak season in a week in the subcontractors is 78 hours.
The pattern workers have reported is that on weekdays they work from 9am to 9 pm and on
Sunday from 10am to 4pm. During lean season, some subcontractors manage to provide 8
hours of work on weekdays to workers and some unable to provide any work and close down
their operation. Even if we assume that most of the subcontractors close down during the lean
8
The
term
factories
are
used
to
refer
to
these
production
units
deliberately
since
they
are
legally
factories.
9
http://hrylabour.gov.in/docs/tenders/
http://delhi.gov.in/wps/wcm/connect/doit_labour/Labour/Home/Factories+Inspectorate/

10. 10
season, workers working in these subcontractors work 3100 hours and 30 minutes10
in a year.
This is well over the 2544 hours11
of maximum work a worker will have to do in a factory in
a year and equivalent to 8 hours of work on weekdays and an average 1.78 hours12
of
overtime on weekdays.
That is, if production is restructured in these subcontractors, the layoff practiced during the
three months from June-August by the subcontractors could be avoided.
5. Brief Profiles of some Tier 1 Factories Studied:
• CREW BOS Products Limited
As per data available from the Labour Department through RTI, the company operates from
its premises in Plot 199, Udyog Vihar Phase 1, Gurgaon and employed 188 workers in
2011. The workers who were interviewed for this study also confirmed that the company
employs less than 200 workers in this particular premise. However, the company
subcontracts on a regular basis to one of the subcontractors in Gurgaon. The company
specializes in manufacturing leather garment and accessories. As per the statement of
audited financial results for 2011/2012, the profits from operations before other income and
financial costs are reported to be 4974.43 lakhs for the year ended on 31st
March 201213
.
The income the company earned from operations is 43204.04 lacs and this includes income
to the tune of Rs 11475.46 lacs from international merchant trading.
Workers who are working in the Company are paid salary, well over minimum wages since
that is the industry standard in the leather garment and accessories manufacturing. Major
brands which source from this Company is Next, Gap, American Eagle and Zara. The
subcontractor of Crew BOS employs around 40 workers during the peak season and during
the time of interview there were 23 workers working in the subcontractor. This
subcontractor acts as dedicated subcontractor of CREW BOS and throughout the year
10
(
78
hours
a
week*
39.75
weeks
of
the
peak
season)
11
(48
hours*
53
weeks).
This
is
after
assuming
that
the
worker
had
not
availed
any
leave
or
holiday.
12
(3100
½-­‐2544)/312
working
days.
The
assumption
here
is
that
the
worker
works
on
all
weekdays
and
do
not
take
any
leave
from
work
throughout
the
year.
13
http://www.crewbos.com/docs/2011-­‐12/Audited_Results_31032012.pdf

11. 11
production is taking place for CREW BOS. In terms of distribution of production, little over
21% of the production14
is taking place in the subcontractor.
Workers are provided with 1 and a half days of earned leave in 30 days. The company does
not provide any other casual or sick leave benefit to any workers. The working hours in the
company is extended to 7pm to 8pm on a regular basis without any additional payment.
That is, workers are expected to work 2 to 3 hours of overtime without any additional
overtime payment. No weekly off is provided to any of the workers and working on
Sunday is compulsory. Workers are paid a days’ wage for working on weekly off day.
Company provides Provident fund and ESI facilities to all workers.
• Ambika Overseas
Ambika Overseas is a garment manufacturing and exporting company with head office in
Plot 677, Udyog Vihar Phase 5, Gurgaon, The Company employs around 200 workers in this
premise. However, most of the production is taking place through 5 different subcontractors
of the company operating from Kapashera and Dundahera. Production is organized based on
salary and piece rate system. About 20 women workers employed by the company get
transportation facility to the company. Around 50 salaried workers in the company are
provided with provident fund and ESI facilities. However, the piece rate workers are not
provided any social security by the company.
Most of the production is managed through the subcontractors. These 5 subcontractors of
Ambika Overseas employ around 102 workers during the low season and around 315 workers
during the peak season. That is about 50% of the production is managed from the
subcontractor during the low seasons and about 61% of the production is managed by
subcontractors during the peak season15
.
• Evergreen International
Evergreen International is another leather garment manufacturing company operating from
Plot No: 775, Phase 5, Udyog Vihar, Gurgaon. The Annual returns filed by the company
under the Factories Act, 1948 shows that the company employs 100 workers on an average.
However, workers report that there are about 300 workers working in the company and
14
This
is
by
merely
comparing
the
workforce
in
the
parent
firm
and
in
the
subcontractor.
15
This
comparison
is
based
on
the
workforce,
not
on
the
output.

12. 12
around 60% of them are employed through a contractor. Moreover, the company employs
four subcontractors for additional production. One of them is in Dundahera region and the
other two are operating from three residential areas in Delhi like Khanpur, Nangloi and
Sangam Vihar. The company produces leather garments, mainly leather jackets. The workers
in the company are employed on the basis of salary and workers in one of the subcontractors
are employed on the basis of piece rate system.
The subcontractors of Evergreen International are in operation since 2007 and since then the
company regularly produces through the subcontractors.
• Richa Group
It is one of the biggest companies in Gurgaon in terms of workforce, output and reputation in
the industry. Richa Group has over 17 units in Gurgaon in the name of Richa Global, Gaurav
International and ABC Leathers. Gap, Next, Zara, Armani etc. are some of the major brands
sourcing from the Company. However, this company is also not free from the vice of
subcontracting. The fabric to the subcontractors is sent out regularly from one of the units of
the company. That is, the group keeps the connection to subcontractor out from all
manufacturing units, rather it engages with the subcontractors from one particular
manufacturing unit. Workers who work in this unit is recruited on the basis of piece rate
system unlike the salaried workers in all other units. All different manufacturing units of the
Group are dependent on this particular unit to the get work done through subcontractors
whenever necessary. However, according to workers, Richa Group engages with
subcontractors only when it is urgent. However, the involvement of one particular unit with
subcontractors and keeping all other units guardedly out of any connection with the
subcontractors is very systematic. The major units of Richa Group employs more than 1000
workers each in the units and provides most workers minimum wages, provident fund, ESI,
minimum bonus etc.
• Knitscraft
The Company employs around 1000 workers in Plot No 490, Phase 3, Udyog Vihar,
Gurgaon. More than 80% of the workers are recruited through a few contractors. Most
contract workers are faced with rampant wage theft and non-enrollment with social security
facilities and non-payment of bonus by the company and the contractor. Zara is one of the
major buyers sourcing from the company. However, this company also gets production done

13. 13
through subcontractors in Kapashera - Dundahera area. One of the subcontractors studied is a
regular supplier of Knitscraft and produces throughout the peak season for Knitscraft. There
have been reported wage violations in Knitscraft in the last one year where contract workers
are not paid their wages according to the Minimum Wages Act, 1948.
6. Comparison of General Working Conditions in the Tier 1 Factories and
Subcontractors
Conditions of: Tier 1 Companies Subcontractors
Wages
Most workers are provided
minimum wages. However, there
is general violation of wages
according to grade and experience
of workers. Overtime is paid at
single rate in most of the
companies. That is, there is
general tendency and practice of
wage theft in these factories.
Wages are paid on monthly basis.
Though workers do not get
guaranteed minimum wages in the
subcontractors, during peak
season, they earn more than the
minimum wages. Wages are paid
on a fortnightly basis.
Social Security
Some companies enroll workers
with PF and ESI. However, the
benefits of social security are, in
most cases, limited to the workers
employed directly by the
company.
No workers in the subcontractors
are enrolled with social security
facilities such as PF and ESI. None
of the workers are provided with
any bonus.
Leaves
Though various labour laws make
provisions of earned, festival,
casual and sick leaves, most
workers working in the Tier 1
factories are deprived of leaves.
Only a handful of workers are
provided with earned leaves. Only
those workers who are enrolled at
ESI department enjoy the benefit
No workers are provided with any
paid leave in the subcontractors;
be it earned, casual, sick or festival
holidays. However, accessing
unpaid leave is reported to be easy
in the subcontractors

14. 14
of sick leave. Even accessing
unpaid leaves during emergency
situation is difficult in the
factories.
Contract Labour
Many companies in Gurgaon are
increasingly recruiting workers
through contractors and keeping
them under insecurity of casual
employment. Moreover, wherever
contractors are involved workers
face more violence and
oppression.
No contractors are involved in the
recruitment of workers in the
subcontractors.
Safety and Health
Accidents are on rise in the
companies in Gurgaon. One of the
Tier 1 companies studied in the
report had two deaths in the
shopfloor in 2012 during early
hours of Sunday morning. These
companies have adopted modern
architecture etc. in the building,
however, workers’ safety is not
their major concern16
.
Subcontractors in this belt are
functioning from rundown
buildings, even some of them with
asbestos roofing like sweatshops.
All health and safety provisions as
prescribed under various acts are
compromised in these production
facilities.
Freedom of
Association
The general trend in Gurgaon is to
deprive workers of their right to
freedom of association and
collective bargaining. Workers
who are vocal about their rights
get easily terminated from the
service. In order to keep workers
out of the trade union activities,
these companies involve local
Workers in the subcontractors
have no freedom of association at
all. Since the complete set up of
production in the subcontractors is
informal, it is easy to be thrown
out. There are no unionised
workers in the subcontractors in
this belt at all.
16
Workers
have
said
during
a
few
occasions
that
impressing
buyers
with
massive
buildings
is
more
important
to
companies
than
providing
safe
workplace
for
workers.

15. 15
thugs and practice violence.
Described below are some of the major problems faced by workers of subcontractors
a) Insecurity in the Job and Seasonal Layoff: Insecure job is in fact the major concern
workers of the subcontractors have. From May to August, most subcontractors in the
belt slow down the production or closes down. This is due to the lowered demand for
production from subcontractors from the Tier 1 companies. Workers reported that
during this slow season, some of them visit their villages in UP and Bihar. But for
many workers, especially married workers who have families and school going
children, this is a difficult time. Some of them find jobs in the big factories in these
months and joins the ‘fabricators’ when the season starts.
b) Fluctuating Piece Rate: Workers report that the rate paid to them for piece varies
significantly depending on the season. Due to the high demand for subcontracting
from the Tier 1 companies in the peak season, the pieces fetch a higher rate. However,
the same or similar pieces fetch much lower rates during low season and significantly
reduce the earnings of workers. The negotiating power workers have with regard to
the piece rate is much lower during the low season and that has serious impacts on
their earnings and life.
c) Substandard Physical Conditions: Most of the subcontractors operating from the
housing colonies do not adequately follow the safety and health provisions provided
in the Factories Act, 1948. Some even have only one common toilet for over hundred
male and female workers. At the same time, most of the Tier 1 factories in Gurgaon
operates from highly modern buildings. In some fabricators, the drinking water
provided to workers is not potable as per workers. The floor space provided to
workers in all the subcontractors is less than the prescribed 3.38 square metre per
worker according to the Factories Act, 194817
. In a nutshell, most of them operate like
sweatshops from the housing areas.
17
Section
16(2)
of
the
Factories
Act,
1948
prescribes
that
there
shall
be
in
every
workroom
of
a
factory
at
least
14.2
cubic
metres
of
space
for
every
worker
employed
there
in
with
a
condition
that
no
height
of
more
than
4.2
metres
is
counted
to
this
effect.
This
necessitates
that
each
worker
in
the
factory
must
be
provided
a
floor
space
of
3.38
square
metre.

16. 16
7. Reasoning of Tier 1 Companies in Subcontracting Production
7.1 Flexibility in Production
The growing contract labour in the garment industry in Gurgaon and the way in which the
contractors are functioning provides a huge flexibility to the companies in Gurgaon in terms
of workforce. It is fairly easy to hire when workers are required and fire when they are not
and thus follow lean principles of production18
. However, without having to arrange for
anything else by the Tier 1 Companies, except providing the sample garment with
measurement and the cut fabric, the subcontractors deliver the finished product ready for
shipping to the Company. Though contract labour provides a lot of flexibility, it is more
flexible with complete subcontracting of production to a separate entity altogether. Most
Companies in Gurgaon procure order beyond the normal shopfloor capacity during the peak
season and that necessitates unreasonable hours of overtime. For some companies, even with
the excessive overtime hours of production, shipping on time becomes difficult and there the
subcontractors come as a boon. Out of the 7 Tier companies studied, four of them (Ambika
Overseas, CREW BOS Private Limited, Evergreen International and Knitscraft) have more
than one regular and exclusive subcontractors and one of these companies has up to 5
subcontractors. 3 Tier 1 companies have subcontracting in each peak season almost regularly.
7.2 Reduced Overhead Cost
When the rent per square feet floor space in UdyogVihar region where garment companies
are operating from is upto Rs 50 in 2012, the per square feet rent in the Kapashera-
Dundahera region is little over 12 Rupees19
. Workers have also reported that there is rampant
power theft practiced by subcontractors in the region which further brings the cost of
production down at the subcontractors. This lower per unit cost is another advantage of
subcontracting.
7.3 Reduced Workforce and Reduced Responsibility
Having to employ lesser workers without compromising production is quite advantageous to
the tier 1 factories. Legally, there is greater responsibility associated with greater number of
workers and this is quite low when it comes to subcontractors. If workers are employed in the
18
This
has
been
discussed
in
detail
in
a
previous
report
published
by
Society
for
Labour
and
Development
“
A
Study
of
the
Contract
Labour
System
in
the
Garment
Industry
in
Gurgaon”
19
This
calculation
based
on
of
the
subcontractor
paying
Rs
16000
for
the
area
of
1300
square
feet
in
Kapashera.

17. 17
same premises of the Tier 1 Company through contractors, the Tier companies, who are the
principal employers, cannot legally get away from the liability of wages, social security and
other benefits to contract workers. However, almost no involvement of the Tier 1 companies
in the production process happening in the subcontractors dissolves them of all liabilities
towards workers. Moreover, sometimes the subcontractor himself gets the contract for
producing for the Tier 1 Company through some middlemen and in this case the
subcontractor himself will have little knowledge of the Tier 1 Company.
7.4 Freedom of Association
Another major reason cited by workers for Tier 1 companies subcontracting production is to
regulate workers’ freedom of association. There has been incidence of subcontractors coming
to the help of Tier 1 Companies producing for global brands during the time of a partial
illegal lockout in Gurgaon in 2010. This Tier 1 Company had sustained production a few
months with the help of subcontractors working in the Kapashera-Dundahera region.
Subcontractors come to the help of companies when former needs help to bring down the
little negotiating powers workers and their organizations have.
Due to the presence of subcontractors and their ability to produce same or sometimes even
better (due to the presence of experienced tailors they have) quality products, a temporary
halt in the production by workers/ unions does not affect the Tier 1 companies much.
8. Why workers want to work at the Subcontractors when they can easily get jobs in the
factories?
It has been revealed during our investigation that workers who are working in the
subcontractors prefer working at subcontractors than to work in factories. Though these
subcontractors are functioning illegally, all workers interviewed except two leather workers,
said that they prefer to work in the subcontractors than in the companies. The reasons for this
preference by workers are summarized below.
8.1 Wages
As discussed before, most of the subcontractors operating in Kapashera- Dundahera area are
based on piece rate or part rate. A look at the below table shows some examples of the piece
rates/part rates existed in the subcontractors during June – October 2012 and the wages
workers earned for 8 hours of work under the respective piece rate system.

18. 18
Table 2: Piece/part rates in subcontractors of Tier 1 garment companies in Gurgaon.
Items
Piece/Part
Rate (in
Rs)
No of
pieces
produced
in 8 hours
Total Wage
Earned (in
Rs)
Full sleeve cotton ladies shirt 25 10 250
Gents T shirt ( Hosiery) 8 32 256
ladies shirt 45 6.4 288
Stitching of sleeve of cotton
shirt of gents 1.6 300 480
Denim shirt with 30 operations
for gents 62 8 496
Denim Shirt 75 4 300
Ladies Top 20 17.5 350
Shirt 20 12 240
Night Gown for Ladies 15 40 600
Gents Shirt 25 20 500
Skirt 35 8 280
Average
Wage
Earned 367.2727273
The average wage of Rs 367 leaves workers with about Rs 4620
per hour they work. There is
variance in the hourly wage from Rs 31.25 to Rs 75 according to the style of garment, type of
fabric etc. The piece rate per hosiery garment is sometimes as low as Rs 8 per stitching a
gents T shirt. The highest piece rate reported in the above table is for denim shirt for gents
which fetched workers Rs 75 per piece and the productivity of labour is as low as 0.521
in an
hour. However, all these workers earn more than the notified minimum wages payable to
manufacturing workers in Gurgaon. The hourly wage payable to the highly skilled
manufacturing workers in the garment industry according to the Minimum Wages Act, 1948
20
Rs
367/8
hours
21
Productivity
of
labour
is
measured
as
the
output
produced
per
labour
time.
The
assumption
here
is
that
no
other
factors
like
technology,
work
environment
etc.
change
during
the
time
of
measurement.

19. 19
is Rs 27. However, the hourly wage prevailing in the labour market for garment workers in
Gurgaon is between Rs 23.9 and Rs 27. This is 14 % to 24% less than the average wage they
earn in the fabricators under the piece rate system.
This is one of the major reasons why workers those who are working in the subcontractors
prefer to work in the subcontractors.
A previous study by Society for Labour and Development has revealed that most labour
contractors engaged by the garment companies in Gurgaon engage in stealing significant
amount of money from the wages of workers. All subcontractors hire workers directly and
there is no contractor involved at any stage of the hiring. Most of the hiring is informal as
new workers are brought by ‘masters’ or colleagues and the environment in the shopfloor is
of very informal nature. The non-involvement of labour contractors by the subcontractors
leaves less possibility of wage theft.
Workers report that quite often they need to take loans to finance some or the other of
household needs. Workers also report that in the factories the possibility of a wage advance
is very limited. However, the subcontractors advance wages to workers on request and
workers find that as an added advantage in working at the subcontractors.
8.2 Relative Ease in Accessing Leaves
As explained in one of the previous sessions, most companies in Gurgaon violate the
provisions of leave. The Punjab Industrial Establishment (National and Festival Holidays
Casual and Sick Leave) Act, 1965 mandates that workers must be provided with three
gazetted holidays of national importance, 5 festival holidays, 7 casual leaves and 14 sick
leaves. In addition to this, the Factories Act, 1948 mandates annual leave of 1 day for every
20 days of work. However, most of the companies in Gurgaon do not provide all these leaves
to its workers. Among the 7 Tier 1 companies studied only 4 of them provide the earned
leaves. Casual as mandated by the Act is not provided to any of the Tier 1 company workers.
Paid festival leaves are not provided to any of the workers.
The data from the Chief Inspector of Factories regarding the compliance of Tier 1 companies
towards the earned wages show that wherever data is available, not all workers worked in the
companies have been provided with the earned wages as per the Act. For example, the

20. 20
Annual returns filed by one of the main units of Richa Global22
claims that out of the 3654
workers who were employed by the factory in the year 2009, 572 workers had applied not to
avail the earned leaves and the company had provided earned leave for 1008 workers and
1791 workers who left the service (termination or resignation or by any other means) were
paid wages in lieu of earned leaves. That still leaves a minimum of 283 workers that is almost
8% of the workforce without the earned leaves in 2009. Gaurav International, another
subsidiary company of Richa Group, employed 2584 workers during 2009 and claimed that
937 workers applied not to avail the earned leaves and the company paid earned leaves to
1257 workers and also to 924 workers who have left the job. And the total number of workers
who the company claimed to have provided leaves seems to exceed 534 than the actual
number of 2584 workers the company claimed to have employed! This suggests that the
numbers shown in the returns have been faked.
In most companies workers are not only denied paid leaves but also unpaid leaves during
emergency. In the feudal family setup prevailing in the areas these migrant workers come
from, a few days of leaves to look after family emergencies, to participate in marriages, births
and deaths are very inevitable. And denial of that from the factory’s side and having to search
for alternate jobs after returning from the villages is conceived as an unnecessary annoyance.
The subcontractors do not provide any paid leaves to workers at all. Since their wages is
linked to productivity, on the day of leave, the day they produce nothing, they are not paid
any wages. However, all workers reported that it is easy to get unpaid leave sanctioned in the
subcontractors. They can take leaves for as many days as needed and still come back to the
same job. Workers have also reported that if the Tier 1 companies are willing to provide 18
earned leaves as mandated by the Factories Act, 1948 and festival leaves, national holidays
and casual leaves as prescribed by Punjab Industrial Establishment (National and Festival
Holidays Casual and Sick Leave) Act, 1965 and sick leaves prescribed by either Punjab
Industrial Establishment (National and Festival Holidays Casual and Sick Leave) Act, 1965
or Employee State Insurance Act, 1948, they would not need any additional leaves under
normal circumstances.
In the Tier 1 factories, accessing leave is also reported to be difficult with permissions from
supervisors, line in charges and managers of different levels. However, the relationship
workers have with masters and the informal environment in the shopfloor in the
22
Plot
No
232,
Phase
1,
Udyog
Vihar,
Gurgaon

21. 21
subcontractors makes accessing unpaid leave easy. Not having to search for new job while
returning from villages is one of the major advantages identified by workers as working in
the subcontractors.
8.3 The Fear of Contractors
The growth of contract labour in the garment industry in Gurgaon is another major reason for
workers preferring to work in the subcontractors. Most of the companies in Gurgaon employ
workers through contractors who engage in various illegal practices and violate various
labour rights of workers including wage theft, non-enrollment with social security facilities,
engaging in physical violence etc. The subcontractors operating in Kapashera- Dundahera
area hire workers directly. Workers get the information regarding hiring through masters or
their friends working in a particular subcontractors. The social capital workers build in the
workplace with masters and coworkers gives them the feeling of safety from physical
violence and wage theft.
8.4 Working Hours and Breaks
Most workers working in subcontractors have identified the ability to take sufficient and
frequent breaks from work as another advantage. Workers report that the one hour break- half
hour lunch break and fifteen minutes tea break in the morning and post lunch- available to
Tier 1 Factory workers is not sufficient. Workers report that the manual work they do in the
shopfloor require more breaks to restore energy. All piece rate workers interviewed for the
study reported that they take sometimes up to 5 short breaks23
excluding the lunch break in 8
hours of work. In the subcontractors, workers have the freedom to go out during their breaks.
8.5 Compulsory Overtime
Though overtime work and the extra earning from that is very crucial for survival of workers
and their families in Gurgaon given the meagre income they earn from the 8 hours work,
workers do not like to be compelled indiscriminately for overtime work every day. And the
production process in the garment industry is so organized that it cannot meet the
requirements of buyers without unreasonable hours of compulsory overtime. Therefore, the
companies require that all workers do overtime during the peak season regardless of their
23
Workers
say
that
they
use
these
breaks
normally
to
smoke
or
chew
pan
and
drink
tea.

22. 22
physical conditions and familial situations. However, at the subcontractors, workers have the
freedom to refuse overtime work.
8.6 Target Pressure and Subsequent Violence
The target pressure workers report in the factories is not existent in the subcontractors.
Workers report that all salaried workers working in the factories in Gurgaon are pressurised
to meet production target. Supervisors and line in charges are responsible for meeting the
target. They attempt to achieve the production target by restricting workers’ toilet breaks, and
by exerting pressure through verbal abuse. Physical violence is also another means exercised
by the supervisors and in charges to extract more production. This target pressure and the
subsequent verbal abuse and physical violence are limited in the subcontractors.
8.7 Highly Skilled Workers’ Preference to Make Complete Garments
Almost all of the garment factories in Gurgaon are working in the assembly line where their
role is to perform a repetitive and monotonous task. If the capitalist organization of
production alienates producers from the product, the assembly line organization of production
completes that alienation by alienating workers from the necessary and complete skill they
need to produce the complete product. The highly skilled workers who can produce the
complete garment feel more and more alienated by the assembly line production
organization. The possibility of producing complete garment is better in the subcontractors
and the highly skilled workers prefer to work under that system than under the assembly line
production. Even when piece rate work is preferred in some of the factories in Gurgaon, it is
based on assembly line which is popularly called as ‘part rate’ system by workers. The
employment of highly skilled workers in the Tier 1 and other factories is limited in the role of
sampling masters. These companies employ only a minimum number of sampling tailors
since they are more expensive than the assembly line tailors. Therefore, the highly skilled
workers prefer to work in the subcontractors.
9. Conclusion
The symbiotic relationship between Tier 1 companies and the subcontractors are
promoting forced labour and indecent work in the garment industry in Gurgaon.
If the poverty level wages in the garment industry can be raised to living wages and the issue
of wage theft can be addressed effectively through organized workers’ struggles and

23. 23
consistent legal struggles, working at Tier 1 companies will become financially attractive for
workers. At this point, most of the workers in the garment industry are working there since
that is the only employment option available to them other than construction work. This
economic coercion on workers to work at a wage which is well below a decent living wage
combined with substandard working conditions is ‘forced labour’. The coercion which leads
them to work in sweatshops at subcontractors for a mere 20% increased earnings than that of
in the Tier 1 companies is nothing other than forced labour. If the Tier 1 factories pay
workers the ‘notified minimum wages’ along with the legally mandatory double overtime,
this 20% increment in the earning workers get at the subcontractors would not arise. The
global brands which have been found to be benefiting from the presence of the subcontractors
in the belt are morally responsible for pushing workers to accept such indecent and illegal
working conditions. The failure of the labour department in Gurgaon in ensuring employers’
compliance to labour laws and the failure of the global brands in ensuring compliance of
labour laws and international labour standards from the suppliers are the catalysts of this
forced labour in this global industry.
Personal dignity, one of the major components of decent work as defined by ILO, is being
compromised significantly by the Tier 1 Companies by indulging in verbal and physical
abuses in order to meet unreasonably set targets. Furthermore, recruitment of workers
through contractors who act as thugs to keep workers out of exercising their freedom of
association and forcing workers to work at sweatshops of subcontractors is a major means
depriving workers of their personal dignity. Another major component of ILO decent work,
family stability, is highly compromised by the employers by indulging in wage theft and
leaving workers with meagre real income to lead a dignified life. The refusal of legally
mandatory weekly off day and other earned and casual leaves to workers is also another
factor contributing to undermine the family stability of garment workers. Fundamentally, the
garment industry is violating the concept of decent work by pushing workers to accept illegal
and inhuman working conditions.
The legal invisibility of the subcontracting in the garment industry and the subsequent
undocumented workforce leads to the creation of inefficient industrial and labour policies by
the government. From the point of view of effective governance, it is important that these
subcontractors get registered and legally be part of the system.

24. 24
10. Recommendations
1. The global brands should take responsibility in tracing down their supply chain and
ensuring compliance to the labour laws and international labour standards.
2. Clear provision should be made in the Contract Labour (Regulation and Abolition)
Act, 1970 to include subcontractors even though they are not using contract labour for
production.
3. Disclosure of subcontracting by the Tier 1 Companies should be made mandatory to
the labour department and the global brands.
4. Government of Haryana must conduct a thorough mapping of the subcontractors and
smaller production houses in and around Gurgaon and take necessary measures to
bring legal accountability of these subcontractors to the Government.
5. Subcontracting of work by Tier 1 companies as a response to the trade union activities
must be included in the unfair labour practices defined by 5th
schedule of the
Industrial Disputes Act. 1948