Engagement of contract labour is, in fact, restricted and regulated by a separate Act called Contract Labour (Regulation and Abolition) Act. According to this Act, an employer is not expected to engage contract labour (workmen through a contractor) in activities that can be carried out by regular and full-time employees. Therefore, in core areas and activities of a perennial nature, contract labour cannot be engaged. In other words, labour can only be engaged through a contractor in part-time activities and tasks that are not directly connected with the main business of the organization.
I don't think there is any way to increase the bondage or productivity of such labour because there is no legal relationship between these workers and the principal employer. Therefore, contract labour will always feel like they are second-category employees to whom no standing order or service conditions are applicable. Although they are covered by PF, ESI, and other social security schemes, their employee-employer relationship ends with the contractor and does not involve the principal employer for whom they work.
Engagement of contract labour also entails a lot of risks. While the aforementioned Act regulating the employment of contract labour is considered unenforced or not being enforced by the authorities for various reasons, many companies find it convenient to employ contract labour even though the purpose of the Act is commendable.
Please follow the link provided: [Madhu.T.K: Contract Labour](http://www.madhu-t-k.blogspot.in/2010/11/contract-labour)
Regards,
Madhu.T.K