How much of the workforce can be contract workers?


As per rules is there any percentage restrictions for hiring contract workers in a company?

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Hi Madhu,

We generally have:

Contract workforce that are regulated by the Contract Labour (Regulation & Abolition) Act, 1970. This will permit establishments to engage contract labour through contractors and this engagement can be only for work that do not form part of the core operations, if the establishment is a company, then aligning with the memorandum of association of the company.

The thumb rule to follow is that a contract workforce should not be employed:

  • Where the work is perpetual in nature that goes on daily basis;
  • The work is incidental, and ordinarily performed by regular workforce of the establishment for which full-time employees can be employed.

Other than the above, we also have:

Contract of services – the contract employees whom we assign for specific duration for certain assignments/role functions other than the ordinarily performed roles in the establishment. The establishment provides industry standard remuneration and allowances as applicable and such employees sign certain obligations as agreed between the employer and employee.

Contract for services – the independent contractors for providing certain services and do not fall within the definition of contract employees of the establishment.

Bhuvana Anand

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