Am I a Labor Contractor or an Independent Employer for This Outsourced Task?

Outsourcing Task Clarification

Manufacturing Company outsourced a particular task to my firm. The company will pay me based on the number of units processed by my firm, and the company doesn't care whether I am hiring employees or not to complete the task. I have hired 25 employees to complete these tasks. All these employees have to work on the company premises.

My question is: Will I be a labor contractor or will I be an independent employer? Will the employees hired by me be contract employees for the company?

Dear Colleague,

If you read the definition of the Contract Labour (R&A) Act 1970, it states under 2(c) "contractor," in relation to an establishment, means a person who undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment, through contract labour or who supplies contract labour for any work of the establishment and includes a sub-contractor.

Hence, if you only supply material to the Parent Company, then you are not a contractor. But you are the Direct Employer for your employees who need to comply with all the requirements as per the Labour Laws if your establishment is within the eligibility conditions under Acts like ESI, PF, Factories Act, Employees Compensation Act, Bonus, and other such Acts.

In such a case, you are only a supplier to the Parent Factory, and you are called a Supplier or Vendor only.