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Labour Law

What is Agency Fee in Labour Law?

The article explains the various legal connotations associated with staffing and explains agency fees in detail. Certain landmark judgments are also discussed in the given context.

An agency fee is considered to be a fee that an employee makes to the represented workforce of an organisation if he is not willing to join the existing union of labour. This is especially applicable if the employee is working within an agency plant.  However, the connotation of the agency fee is also applicable in other legal contexts. Here, we explain certain legal terminologies like Agency Fee in Labour Law to explain the concepts of staffing and recruitment from a given perspective.

Labour Law: Some Useful Connotations

In order to understand labour law, you need to understand certain legal connotations. There are various laws pertaining to recruitment, retrenchment, contract staffing etc. Each corporate, or business organisation look forward to going for a hiring framework which is contextually approved through certain engaging terms and condition. A major objective is to promote collective bargaining so that, the interest of the labour remains protected, and a mutually beneficial relationship could be worked out. Such legal terminologies are as given below: 

  • Coverage:  A legal connotation is brought about to explain the spread of areas related to an infrastructure, where people are hired for some specific work. However, such establishments or infrastructures should promote a healthy work atmosphere and should take into consideration social security through proper wage disbursals. 
  • Retrenchment:  Any organization that can hire more than 100 staffs need to have a legal permission to close off the premises. This falls in the purview of the Industrial Labour Code as well.
  • Labour enforcement:  Multiplicity of various legal frameworks and laws can actually help the employer to enforce the burden for compliance. Not being able to comply with laid down labour enforcement framework can call for heavy penalties in the context to a legal framework as defined prior to implementing the start of employment. 
  • Contract labour:  Defining the period of labour deployment is what is considered important as it imposes certain mutually beneficial terms and conditions within a given legal framework.
  • Trade Unions:  A registered trade union is a formal group of people working towards fulfilling labour interests within factory premises. Provisions for the same have been created within the Industrial Relations Code. 
  • Delegated Legislation:   This can define the implementation of social security norms within the workplace. It takes into consideration the standards of safety as well as rule-making procedures within a business organisation. 

What Are Agency Fee in Labour Law?

In the connotation of labour law, employment agency fees can actually take into consideration the fee amount paid to an employment agency or a recruitment consultant, for getting an employee recruited. However, it is important to understand that, an employment agency fee being talked about here, can vary from one employment agency to another.

What are the Different Types of Employment Agency Fees?

As per the experts, there are different types of employment agency fees. One is called the  

Employer-paid fees

  • The employer takes the complete responsibility for paying such fees to the recruitment agency
  • It is understood to be a more common type of employee fee paid to an external agency by the employer within the defined scope of operation
  • However, it is important to note that, the employee does not necessarily know anything about the financial engagement that his position brings to the employer or the hiring agency.  
  • Such costs are accounted for by the company while defining the compensation for each role.

However, the agency fee needs to be paid only if the target of hiring or recruitment is successfully achieved within a time frame. The amount can range from 20% to 30% of the basic salary of the employee being recruited. With the right legal framework in place, it is important to note that, the employer should pay the fees directly to the concerned recruitment agency. 

Applicant-paid fees

This is related to paying professional fees to the recruitment firm by the prospective employee. It is understood to be a kind of service charge in relation to the services being rendered by the recruitment agency. Such kind of arrangement can be applicable to contracts to staff as well.

Some Key Takeways

Agency fees, primarily refer to the fees being paid by the employer to the recruitment consultant or the hiring firm. In the Indian context, applicant-paid fees are less common, while employers keep on paying such firms if recruitment happens through them.  However, it is important to note that, the fees can vary in accordance with laid down terms and conditions between the parties. The amount of fees is not standardized and can vary in accordance with the nature and category of employment. However, experts related to such an industry reveal that the entire process is based on contingency calculations, depending on the nature and category of employment agreement.

Some Landmark Judgements on Industrial Labour Disputes: Case Studies

Labour of Firestone Tyre and Rubber Company had a dispute while working with the employer. The labor force was terminated based on the dispute, and the process was facilitated through a domestic Inquiry. However, in the given context, the Industrial Tribunal Act was amended in 1971. In addition, Section 11A was inserted, and this gave power to the employers in conducting a domestic inquiry based on the disputes that may have arisen in relation to such issues.  

Another landmark judgment was carried out in the Indian context, vide a dated notification in 1985. Steel Authority of India Limited was involved against National Union Waterfront Workers, in this dispute. The entire case dealt with the legality of contract staffing and the associated terms and conditions pertaining to employment. The industrial dispute between the employer as well as the employees ( In this case, it is more appropriate to refer to employees as labors)  was settled after necessary verification of the existing conditions of employment.

Conclusion – What is Agency Fee in Labour Law?

Every employment in any country is legally binding and such employment cannot be terminated without valid reasons. It is important to note that, recruitment in any particular business ideas can take place through a third-party vendor, and such recruitments necessarily come with a number of tags. More so, agency fees need to be paid, mostly by the employer, to the third-party vendor, while in certain cases applicant fees are also applicable.

The amount can vary in accordance with the nature and category of employment in the given context. On the whole, it is to be noted that each and every employee is governed through defined terms and conditions, and any dispute arising post the recruitment needs to be addressed within a legal framework. Go through Vakilsearch website to know more.

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