What drive these big companies in bakery industry for contract manufacturing and co -packer arrangement is low cost labor and cheap labor . The Co-packers ( CP ) or CMU ( Contract manufacturing units ) employs several contractors to get workers at very low salaries mostly unskilled and with low literacy rates . As workers are not aware of the legal wages these small companies make huge money out of these worker .
This is how companies cut over head cost of workers in these units as they don't pay for
No ESI ( Employee contribution from contractors or companies
No PF ( Provident Fund )deduction and contribution from the contractors or companies
No Gratuity for the workers who worked for more than five years
No Earned Leave for these workers
No Standard Over time payment
No Incentives or Bonus linked with production
No Medical or Insurance for the worker
No Uniform and Clothing Allowances .
Deduction in salaries for flimsy ground or absence
( Will State agencies look into these malpractices which are rampant in such units some of which mandatory by law payable to the workers ? )
As these workers are paid less there fore the rate of attrition is very high thus impacting the product quality and the process . Also as these workers starts searching for better opportunities or work part time doing extra jobs, which negates what ever efforts these companies have put to train them thus entering into vicious cycle of training unskilled labour all the time
Cheap labor has its own cost which companies are aware of but for profits they try to run the production with these workers .
Here are few negative results from cheap labor
Production inefficiency
High Maintenance cost due to break downs
High number of foriegn body complaints
High cost on continuous training ( few opts for no training )
More Product recalls
More consumer complaints due to defective s
Stress on supervisory personnel .
Major Accidents & Cuts
Hence it can be concluded that cheap labor is actually costlier than skilled and qualified labor . Companies should recognize this and aim for building effective and productive labor in longer run
This is how companies cut over head cost of workers in these units as they don't pay for
No ESI ( Employee contribution from contractors or companies
No PF ( Provident Fund )deduction and contribution from the contractors or companies
No Gratuity for the workers who worked for more than five years
No Earned Leave for these workers
No Standard Over time payment
No Incentives or Bonus linked with production
No Medical or Insurance for the worker
No Uniform and Clothing Allowances .
Deduction in salaries for flimsy ground or absence
( Will State agencies look into these malpractices which are rampant in such units some of which mandatory by law payable to the workers ? )
As these workers are paid less there fore the rate of attrition is very high thus impacting the product quality and the process . Also as these workers starts searching for better opportunities or work part time doing extra jobs, which negates what ever efforts these companies have put to train them thus entering into vicious cycle of training unskilled labour all the time
Cheap labor has its own cost which companies are aware of but for profits they try to run the production with these workers .
Here are few negative results from cheap labor
Production inefficiency
High Maintenance cost due to break downs
High number of foriegn body complaints
High cost on continuous training ( few opts for no training )
More Product recalls
More consumer complaints due to defective s
Stress on supervisory personnel .
Major Accidents & Cuts
Hence it can be concluded that cheap labor is actually costlier than skilled and qualified labor . Companies should recognize this and aim for building effective and productive labor in longer run
