First of all, you can not engage labour through any contractor on operations related to the core areas of business which are perennial in nature for which a regular employee can be employed. If the operation is not directly connected with the main business like housekeeping, gardening, security service etc, you can have contract labour. If the total number of people to be engaged is not less than 20, you have to take registration under the Contract Labour (Regulation and Abolition) Act from the department of Labour. If any one contractor engages 20 or more persons in your plant, he should also take contract labour licence from the department for which you have to give a certificate declaring that you have appointed him as contractor for engaging labour in your plant.
As Principal employer it becomes your responsibility to ensure that the employees engaged through the contractor(s) are paid at least the minimum wages fixed by the govt. You should also ensure that the contractor complies with statutory rules regarding payment of ESI, EPF etc in respect of employees engaged in your plant. Since it is the duty of the principal employer to ensure payment of wages, contributions towards ESI and PF by the contractor, you will be held liable in case the contractor fails to pay it in time.
Being principal employer,though you have to ensure compliance, you are not expected to negotiate with the employees of the contractor on any matters connected with their wages and other service conditions. You are not supposed to take any disciplinary action against them. By doing so you will be establishing that you have control and supervision over them which will lead to make the contract just a sham contract.
In a situation like that of yours, the contractor has to provide for rest room, lunch room etc and since it is not practical to have separate facilities, the principal employer has to take ownership of these facilities and do the needful so that the workers do not suffer.
Regards,
Madhu.T.K