HRMS for staffing companies and contract labour

A staffing company runs payroll for people who work at someone else's premises, under someone else's supervisor, on someone else's shift pattern. Engage keeps each associate's deployment, attendance and pay in one record, and gives principal employers the evidence the OSH Code expects them to hold.

Client-wise deployment
Bulk associate payroll
Principal employer records
Fixed-term contracts

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The triangle at the centre of contract labour

Contract labour is a three-party arrangement: the worker, the contractor who employs them, and the principal employer whose premises they work on. The law puts duties on both organisations, and most disputes start where their records disagree.

Deployment by client and site

Each client site can be set up as its own location with the client's shifts, weekly offs and holiday list. Associates are deployed to it, check in there by geo-fence, kiosk or face recognition, and move to the next assignment without a new employee record.

Payroll for thousands of associates

Associates at different clients sit on different pay structures, in different states, with different professional tax and LWF. Engage runs them in one payroll with PF, ESI and state levies applied by deployment location, and generates the ECR, challans and bank file from the same run.

Evidence the principal employer can check

Principal employers increasingly ask for muster rolls, wage registers, proof of electronic wage payment and PF and ESI deposits before they pay an invoice. Engage produces those from the same data that ran payroll, so the pack you send matches what your associates were actually paid.

Reviewed by Mannu Matta, Founder, Engage HRMSUpdated on 11 November 2026

Contract labour under the OSH Code

The Contract Labour (Regulation and Abolition) Act, 1970 was repealed on 21 November 2025. Contract labour is now governed by Chapter XI of the Occupational Safety, Health and Working Conditions Code, 2020, alongside the Code on Wages and the Code on Social Security. The structure is familiar; the thresholds and some of the duties are not.

When do the contract labour provisions apply?

The contract labour Part applies to an establishment in which fifty or more contract workers are employed, or were employed on any day in the preceding twelve months, and separately to a manpower supply contractor who has employed fifty or more on any such day. The count is across all contractors, not per contractor, and it is the highest day, not the average.

It does not apply where the work is only intermittent or casual, but work done for more than one hundred and twenty days in the preceding twelve months is not intermittent. An arrangement described as occasional that runs most of the year is inside the Part. The contract labour glossary entry sets out the counting rules.

What licence does a staffing company need?

No contractor may undertake or execute work through contract labour except under a licence issued under section 47 of the OSH Code. A contractor without a general licence can be issued a work-specific one, and a contractor supplying contract labour in more than one state, or across India, can obtain the licence from the Central Government authority rather than state by state.

For the principal employer, engaging an unlicensed contractor is not a neutral act. It exposes the establishment and weakens the argument that the workers were the contractor's responsibility. Keep the contractor's licence on file and check it is in force before each renewal of the contract.

What does the principal employer still owe?

Three things, whatever the service agreement says. Under section 53, welfare facilities for contract labour in the establishment are the principal employer's own duty, not a fallback that applies only if the contractor defaults. Under section 55, the contractor must pay wages by bank transfer or electronic mode and tell the principal employer the amount; if the contractor fails to pay or pays short, the principal employer must pay and can recover from the contractor. And under section 57, contract labour is barred from core activities unless one of three exceptions applies.

An indemnity in the contract gives you a right to recover from the contractor. It does not change the statutory liability, and a small contractor may not be there when the claim arrives. The control that works is monthly evidence collected before the invoice is paid.

Which activities can use contract labour?

Core activity means any activity for which the establishment is set up, including activities essential or necessary to it. Eleven categories are excluded from core activity where the establishment is not set up for them: sanitation; watch and ward and security; canteen and catering; loading and unloading; hospitals, educational and training institutions, guest houses and clubs run as support services; courier as a support service; civil and other constructional works including maintenance; gardening and lawn maintenance; housekeeping and laundry as support services; transport including ambulance; and intermittent work even in a core activity.

Contract labour can still be used in a core activity where the activity is ordinarily done through contractors, where it does not need full-time workers for most of the working day, or where there is a sudden increase in volume that must be completed in a specified time. Where it is disputed whether an activity is core, the appropriate Government decides.

Is fixed-term employment an alternative to contract labour?

For work that is genuinely time-bound, often yes. The Labour Codes recognise fixed-term employment, with benefits on a proportionate basis. A fixed-term employee is on your own rolls for a defined period. Under the Code on Social Security, the five-year qualifying period for gratuity does not apply when a fixed term expires, and gratuity is paid pro rata.

It can be simpler than a contractor arrangement because there is only one employer. Engage handles fixed-term contracts with an end date on the employee record, so expiring contracts can be reviewed in advance and settled on time.

Contract labour compliance by obligation

Who owes what, and where Engage helps either side. State rules decide forms and fees.

Obligation	What the law requires	Where Engage helps
Registration	Principal employer registers the establishment electronically; changes intimated within thirty days.	Establishment, location and headcount data for each site, including contract workers.
Licence	Contractor holds a licence under section 47; pan-India licence available from the Central Government for multi-state contractors.	Licence and contract copies kept in document management, next to the records of the workers deployed under them.
Wage payment	Contractor pays wages electronically and informs the principal employer; principal employer pays if the contractor defaults.	Bank transfer file from payroll and wage registers for each client deployment.
Welfare facilities	Principal employer's own duty under section 53.	Headcount by site and shift so facilities can be sized to the people actually deployed.
PF and ESI	Contractor deposits contributions for deployed workers; principal employer exposed if they are not paid.	PF and ESI computed per associate, with the ECR and challans generated from payroll.
Registers and muster roll	Contractor maintains the registers; the principal employer is expected to see that it does.	Attendance and wage registers from the same data that ran payroll.

Statutory references are checked against the primary texts: Code on Wages, 2019, Code on Social Security, 2020 and Occupational Safety, Health and Working Conditions Code, 2020.

Engage modules staffing companies use most

Associates use the mobile app at the client site. Your operations and payroll teams use the web console.

Attendance
Geo-fences around each client site, kiosk mode at the client's gate, face recognition and biometric integration.
Engage attendance management
Payroll
Pay structures by client, PF, ESI, PT, LWF and TDS by deployment location, ECR and bank file from one run.
Engage payroll
Recruitment
Job posts, candidate database search, offers and onboarding for high-volume associate hiring.
Engage recruitment
Core HR
Associate records with documents, ID cards, multi-organisation support and role-based access for operations, payroll and client coordinators.
Engage core HR
Leave
Client-specific holiday lists and leave policies applied by deployment.
Engage leave management
Helpdesk
Associates raise payslip and PF queries in the app, with SLAs so none of them sit unanswered.
Engage HR helpdesk

What Engage HRMS customers say

Teams that moved attendance, leave and payroll onto Engage describe what changed.

Engage HRMS is an intuitive HR solution that automates HR, attendance, leave, and payroll processes for us. The team is always available for support and helped with custom solutions as per our organisation specific needs. We were highly satisfied with the service provided by their product

Neelansh

Director, Switcher

Frequently asked questions

What is contract labour management software?

Contract labour management software keeps records of workers engaged through contractors: who they are, where they are deployed, when they worked and what they were paid. For a staffing company it runs associate payroll; for a principal employer it provides independent evidence that contract workers were paid and their PF and ESI deposited. Engage does both from one system.

Is the Contract Labour (Regulation and Abolition) Act still in force?

No. It was repealed on 21 November 2025 by the Occupational Safety, Health and Working Conditions Code, 2020. Contract labour is now governed by Chapter XI of the OSH Code, which applies at fifty or more contract workers on any day in the preceding twelve months.

How many contract workers trigger the OSH Code's contract labour provisions?

Fifty or more contract workers employed on any day in the preceding twelve months, counted across all contractors together. It also applies to a manpower supply contractor that has employed fifty or more on any such day.

Is the principal employer liable if the contractor does not pay wages?

Yes. Under section 55 of the OSH Code, the contractor must pay wages electronically and inform the principal employer of the amount. If the contractor fails to pay or pays short, the principal employer must pay the unpaid amount and can recover it from the contractor.

Can Engage HRMS run payroll for associates deployed at different clients?

Yes. Each client site can be a separate location with its own shifts, holidays and pay structures. PF, ESI, professional tax and LWF are applied by deployment location, and the ECR, challans and bank transfer file come from one payroll run.

Do fixed-term employees get gratuity?

Yes. Under the Code on Social Security, 2020, the five-year qualifying period does not apply when a fixed-term contract expires, and gratuity is paid on a pro rata basis.