Improving Ethical Labour Practices in the Indian Construction Industry

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Improving Ethical Labour Practices in the Indian Construction Industry

Under project Saksham, at Sattva, we are privileged to be working towards improving ethical labour practices in the construction industry with KOIS, LabourNet Services India Pvt. Ltd., Gromor Finance and Haqdarshak Empowerment Solutions.

The consortium is working on a systemic two-pronged approach aligned with the identified problems—the myriad micro-issues faced by micro-contractors (MCs) and the higher-level issues involving large industry stakeholders.
Socio-economic challenges, absence of financial safety net, lack of business acumen, no access to affordable financing, no steady work-orders are some of the challenges faced by MCs.

The current programme has onboarded 240 MCs and 2400 workers in Bangalore and Delhi NCR.

Bottom-up Stream

Project Saksham aims to improve ethical labour practices in the Indian construction industry through a package of four interrelated interventions. These interventions are for the MCs, the direct employers of construction workers and a critical stakeholder group in India’s construction industry.

(i) Intervention 1: Connecting micro-contractors to a low-cost working capital facility

The first intervention addresses the problem of long working capital cycles resulting in the non-payment of workers.

MCs frequently face payment delays from developers or sub-contractors. Even if MCs want to pay their workers, they cannot because they do not receive consistent, on-time payments from their employers. Thus, this intervention aims to provide access to low-cost working capital loans to MCs to enable them to give complete and timely payments to their workers.

(ii) Intervention 2: Providing access to work orders

The second intervention addresses the problem of unsteady work orders leading to volatile or unsafe employment conditions for workers under MCs.

MCs are not hired permanently by construction companies; they are hired for specific, finite projects, often for just a few weeks or months. Work order flow for MCs is inconsistent. Thus, this intervention aims to provide MCs access to work orders to ensure a consistent inflow of projects and new business from larger, formal, more reputable construction companies. This will also result in more stable employment and safer site conditions for their workers.

(iii) Intervention 3: Ethical entrepreneurship training for MCs

The third intervention provides training to MCs that consists of conventional business and entrepreneurship training as well as ethical practices.

Most MCs are tradespeople with only practical industry experience. They are not skilled in sales, recruitment, procurement, management, finance, or other business functions. They are also unaware of various national and international laws and regulations and international ethical standards for work. This intervention aims to provide them access to business entrepreneurship training, ethics training and handholding support to improve the workplace experience for workers under these MCs.

(iv) Intervention 4: Connecting MCs to ethically sourced workers

The fourth intervention addresses several problems linked to the recruitment and onboarding of workers.
Currently, MCs recruit workers through informal networks and do not offer contracts, social security benefits, ration cards, bank accounts, etc. Consequently, workers have no reason to stay in employment, leading to high attrition rates and project delays. This intervention aims to responsibly source workers and thus prevent recruitment-related exploitation.

Top-Down Stream

In addition to the bottom-up interventions, Project Saksham also aims to engage with influential industry stakeholders to understand the challenges in employing last-mile worker welfare, explore potential synergies and begin securing commitments for further collaboration. This stream aims to lay the groundwork for future interventions that can drive impact at scale and with sustainability.

Way Forward

The learnings from both the bottom-up and the top-down streams inform the financial service model that could best cater to this demography. A suitable financial product for MCs should consider factors such as quick turnaround time, ease of convenience for withdrawals, timeline flexibility in withdrawals and repayments, comprehensive awareness sessions, a lower threshold of formalisation in terms of documents required for the loan application and so on.

On the other hand, industry consultations in the top-down stream have indicated that productivity enhancement and cost competitiveness can emerge as a critical use case for the ethical treatment of workers in the ecosystem.
At the policy level, even though upcoming regulations in India levy higher compliance, they do not provide the impetus for ethical treatment because some are disclosure-based or are yet to be implemented.

Sattva has been working with various non-profits and social organisations as well as corporate clients to help them define their social impact goals. Our focus is to solve critical problems and find scalable solutions. We assist organisations in formulating their long-term social impact strategy by strategically aligning with business to provide meaningful solutions to social issues.

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