Direct amployees are on the rolls of the company & the contract employees are on contractual basis can be also called as outsourcing (rolls of someother company e.g. placement agency).
In simple terms
Direct employee will be in the muster rolls of the company.
PF & ESI registration is done by the company under their regn no.
Company is directly & legally liable for any consequences.
Cant' be terminated without referring the Standing orders of the company.
Contract employee will be in the muster rolls of the contractor.
PF & ESI regn is done by the contractor under their regn no.
Can be terminated as per the contract agreement with the contract employee.
Company is not directly liable, but as an principal employer liable to pay compensation but recoverable with the contractor.
Further to what has been said already:
Contract can be of two types:
1) Direct: where contractors are paid monthly fees, and the company takes out 5.1% TDS. They do not enjoy other benefits as employees do.
2) Indirect: Where the associate is on payrolls of a substaffing firm. The contractor is an employee of the agency, and enjoys privileges as an employee to the company.
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