Contract jobs through staffing agencies: how they really work

Picture someone who has worked in the loan processing team of a large private bank in Hyderabad for two years. She sits at the bank's desk, uses the bank's systems, wears the bank's ID card on a different-coloured lanyard, and is paid by a staffing company she visited once, on the day she joined. Her friend at the next desk, hired the same month, is on the bank's own rolls and earns about 20% more for the same work.

Her situation is normal in India. A large share of jobs at banks, telecom companies, warehouses, factories, hospitals, IT services firms and government offices are filled through staffing agencies. Some people stay on agency payroll for years; some move to company rolls within a year. This piece explains how the arrangement works, what the law now says you are owed, and what actually decides whether you get converted.

Three parties, one job

In a contract job there are three parties:

• The principal employer (the bank, the factory, the PSU): where you work, whose work you do.
• The contractor or staffing firm: your employer on paper. It issues your appointment letter, pays your salary, deducts PF and ESI, and bills the principal employer for your time plus a margin.
• You.

Your day-to-day boss is usually someone at the principal employer. Your HR, payslip and leave balance usually sit with the agency. When something goes wrong, people get bounced between the two, which is why knowing who is responsible for what matters.

On Highlisted, about 22% of the fresher jobs open in mid-November 2026 were posted by staffing firms. The share is higher in some fields: about 36% of facility management jobs, for example. And many agency roles are never posted online at all; they are filled from the agency's own database and walk-ins.

The kinds of contract job

Third-party payroll at a private company

The most common kind. A staffing firm hires you for a client: a bank's back office, a telecom store, an IT services firm's support desk, a car plant's assembly line. The contract is often 6 to 11 months, renewed if the client keeps the role. The offer letter will name the staffing firm as employer and usually the client as your "place of deployment".

Outsourced staff in government offices and PSUs

Central and state government offices, PSU banks, public sector companies and hospitals hire data entry operators, office assistants, drivers, security, housekeeping and some technical staff through manpower agencies. Much of the central government's outsourcing is bought through the Government e-Marketplace (GeM), where agencies bid for manpower contracts. You work in a government building, but you are not a government employee: you have no claim to a government post, and when the contract changes hands, you may move to the new agency or be let go.

Many people take these jobs hoping they lead to a permanent government post. They don't, by themselves. Government posts are filled through recruitment rules and exams. What outsourced work gives you is a payslip, experience you can show, and time to prepare for those exams. See government exams basics.

Fixed-term employment directly with the company

Some companies hire you on their own rolls for a fixed term, say 12 or 24 months. No agency is involved. Under the Labour Codes, a fixed-term employee gets the same wages and benefits as a permanent employee doing the same work, and gratuity after one year of service rather than five. This is often a better deal than agency payroll, even though both are called "contract".

Project contracts in IT and engineering

IT services and engineering firms hire contract staff for a client project, through vendors. These are usually higher-skill roles with higher pay, and the conversion path is to the vendor's own rolls or the client's, depending on the project.

What the law now gives you

The four Labour Codes came into force on 21 November 2025. For contract workers, the changes that matter most:

• An appointment letter for every worker, stating your designation, wage and social security. If an agency won't give you one, that alone is a reason to walk away.
• Minimum wage for every employee, in every kind of job, at your state's rate for your skill category.
• Overtime at twice the ordinary wage rate.
• Deductions capped at 50% of your wage, and only for things the law allows. A "placement fee" deducted from salary is not one of them.
• PF and ESI. On a gross salary up to ₹21,000 a month, ESI should be deducted (0.75% from you). PF should be deducted from your basic. Check your EPFO passbook every few months; the most common contract-job complaint is PF deducted on the payslip but not deposited.
• Gratuity after one year if you are a fixed-term employee.

The OSH Code also sets the rules for contractors. A contractor supplying 50 or more workers needs a licence (the old threshold was 20). Contract labour is barred in the "core activities" of an establishment, except where that work is normally done through contractors, isn't full-time, or there is a sudden surge, and the Code lists support work like security and sanitation as non-core. It also covers contract workers in government offices. Welfare facilities at the workplace, like drinking water, canteens and first aid, apply to you too. And if a contractor fails to pay wages, the principal employer is the one who must make sure you are paid; take a written complaint to the principal employer's HR or admin before you go to the labour office.

Getting moved to company rolls

There is no rule that says a contract worker must be made permanent after a certain time. Conversion is a decision by the principal employer, and it follows patterns you can read.

What makes it more likely:

• The role exists on both sides. If people doing your exact job are on company rolls in the same team, the company has budget for that role. If everyone in the team is on agency payroll, conversion is rare.
• Your manager asks for you. Conversions happen when a team lead tells HR "this person is doing the work, I want them on my headcount". Make sure your manager knows you want it, early and once, not every week.
• Timing. Most companies fill own-rolls positions in the new financial year (April) or when someone leaves. Ask when the last conversion in your team happened.
• Clean paperwork. Degree completed, documents verified, no attendance problems. Companies run a fresh background check before conversion.

What doesn't help: years alone. Some people are on the same agency payroll at the same client for five years. If nobody has been converted in your team for two years, treat the job as a good stepping stone and apply to company-rolls roles elsewhere with your experience.

Before you sign an agency offer