Ensuring Compliance with Contractor Agreements
You should, first of all, have a watertight contract with the contractor to ensure that he is paying the minimum (or fair) wages and all statutory dues as per the law. This includes 8-hour shifts, weekly offs, overtime within statutory limits, and proper annual leaves.
Saying the contractor is not interested in paying is a strange and baseless statement. He is a contractor. How can he refuse to obey the principal employer? Are you paying him enough to enable him to provide proper wages? Are you providing him with enough to make a margin? Calculate the net amount he is receiving after service tax and TDS and evaluate.
If he has enough money and still refuses to pay, then you should immediately change the contractor and replace him with one who will comply with the law.
You can also pay the arrears directly to the workers as a one-off case and recover the same from his bill. But be cautious of that approach as it can be misused at a later date.