Payroll vs. Contractual Workers in Factories: Which is Better for Companies?

Hi,

I have recently joined a company and have a quick query in mind: What is more beneficial for the company, to have workers on the payroll or to have them on a contractual basis?

Awaiting your response.

Dear Jeevika,

The answer to this query is dependent on the situation. Mostly, the decision to keep people on a contractual basis is made considering costs and to avoid unionized employment. However, one needs to think if this practice is truly valid in the eyes of the law. If you consider ethics and the "LAW," you cannot hire contractual or temporary employees for any permanent nature of work.

Hi Manoj,

I highly appreciate your help. In addition to the ethics part, could you also assist me with some more pros and cons?

Thanks

Dear Jeevika,

The benefits of contract labor are:
1. Labor available at a lower cost
2. No unionized turmoil in many cases
3. No need for one-on-one negotiations with employees for salary hikes
4. Bonus payments can be kept at a minimum

On the downside, there are some drawbacks:
1. Lack of stable employment/loyalty towards the organization
2. The final responsibility for all statutory dues lies with the principal employer
3. Finding the right fit is very challenging while employing workers on irregular contracts.