This is a legal requirement if any contractor engages contractual manpower at any site. At the time of closure of the contract, he is supposed to give one month's notice to the employees. Removing the contractual employees all of a sudden at the end of the contract will be a wrong decision from a legal and ethical point of view.
You have not specified whether you are from the Principal Employer (PE) or a contractual manpower provider; also, specify the nature of the contract. If the contract is ending from the contractor's point of view only, but the contracted work will continue with another contractor, in that case, the contractual manpower can be enrolled by the new contractor (depending on the nature of the work, the nature of the contract, etc.).
To keep himself safe, the contractor has taken the right decision on his part.
Regards