Understanding Contract Employees
A contract employee is an individual engaged by a contractor to perform work for a principal employer. They receive their salary from the contractor, who is also responsible for their contributions to ESI or EPF, as well as bonuses. The principal employer, however, only provides the scope of work. There is no direct employer-employee relationship between the principal employer and the contract labor, meaning the contract labor cannot claim permanency in the principal employer's office or establishment.
When a Contract is Considered a Sham
However, if the contract is a sham or camouflage, where the principal employer decides who should be employed, determines wages, takes disciplinary action, and controls and supervises the contract labor, then the situation changes. If it can be proven that the contract labor is performing the same work as regular workers, and the work is of a perennial nature that requires regular workers or permanent employment, then the contract is considered a sham. In such cases, the workers can demand regularization. This rule does not apply to genuine contracts.