It was a large factory, its products in demand nationwide and its machines running round the clock. On paper, everything was in order.
A regular inspection conducted in January 1988, covering July 1986 to December 1987, had reported no major omissions. The unit was later assigned to me for a special inspection, which I conducted on June 20, 1988.
The gaps were visible at the gate. Workers moved about without uniforms or safety footwear, unusual for a factory of that scale.
Instead of heading to the office, I stopped and began asking a simple question: “Do you have an ‘atta’?” the term workers locally used for the ESI identity card.
“Ille” (no), came the answer repeatedly.
I began noting names.
The industrial relations advisor, who had received me and was accompanying me, grew visibly uncomfortable. “Why stay out in this heat? Come inside. We’ll give you everything.”
But the answers were not in the office. They were on the shop floor.
Supervisors were asked to produce their “notebooks.” These were, in effect, the real system.
Across departments, over 200 workers existed only in these informal records. They had no entries in wage registers, no attendance logs and no statutory coverage.
In effect, they did not exist in the eyes of the law.
The factory relied heavily on contract labour across glass, processing, unloading and security operations.
At least 56 workers were immediately identifiable outside the legal framework:
And this was only the visible layer.
This was the position in a single shift. With three shifts in operation, the scale of exclusion was clearly far greater.
The list of contractors produced during inspection revealed a pattern. Vacuuming work had been split among four contractors, while the manufacture of double-wall refills had been split among nine.
The structuring appeared intended to keep the number of workers under each contractor below 20, thereby avoiding the applicability of the Contract Labour (Regulation and Abolition) Act.
Entire categories of workers, including sweepers, cleaners and construction labourers, were paid through vouchers. No names. No statutory trace. A workforce hidden in plain sight.
The deeper story lay in the accounts.
The 1987 ledger showed:
Rs 37.24 lakh under “Labour Charges – Glass”
Rs 12.38 lakh under “Labour Charges – Processing”
Rs 4,54,607 under “Salary and Wages (Processing)”
Rs 5,81,534 under “Salary and Wages (Glass)”
Rs 2,76,813 under “Salary and Wages (Administration)”
Rs 11,763 under “Salary and Wages (Plastic)”
Total: Rs 62,87,011
These figures also included huge expenditure under “hostel rent,” “food” and related heads, without supporting details or clear linkage to individual workers.
Supervisors’ notebooks also recorded frequent double shifts. The wage registers showed no corresponding overtime payments.
In light of these findings, I recommended that the employer be advised to pay contribution on the entire amount booked under the head “labour charges,” after deducting labour charges already accounted for under compliance.
Further examination showed Rs 6.98 lakh booked under “Freight Charges and Unloading Cooly” between January and July 1987.
Here too, I recommended that the employer be advised to segregate the wage component and pay contribution accordingly.
The pattern was not confined to large establishments.
In a small factory, I conducted a special inspection on June 28, 1988, with prior notice. The attendance register for temporary employees had been opened only on June 20, 1988, the very week the inspection became known, and contained 24 names.
The claim was that there had been no temporary workers before that.
Even this record was incomplete. Four more workers present during inspection, three reportedly engaged on June 27 and one on June 28, had not been entered in the attendance register.
Once this was pointed out, their names were added and the employer agreed in writing to submit declaration forms and pay contributions for all 28 employees.
Irregularities extended beyond labour records. The 1984–85 ledger listed three “sales offices” in different cities. However, the address of one such office could not be furnished.
The employer stated that these were residential addresses used for routing invoices for sales tax purposes.
This aspect was included in the inspection report for further verification.
Across both inspections, one point stood out: scale made little difference.
The same pattern of under-reporting labour, off-the-books payments and accounting structures designed to absorb labour costs without triggering statutory liability appeared in different forms.
The form differed. The objective did not.
This was not an isolated case. It was a recurring one.
A thorough inspection does more than verify records. It reveals the distance between reported compliance and operational reality.
Even as emphasis grows on ease of doing business, space for effective inspection remains essential.
(Views expressed in this opinion piece are those of the author)
Read earlier parts in the series:
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