The three-party workforce
Principal employer, contractor and worker each hold part of the record. What each side should keep, and why the Labour Codes make it matter now.
Guide: the three-party workforceThree parties, one set of facts
India's formal flexi workforce is growing fast: an Indian Staffing Federation study expects about 8.09 million formal flexi workers in FY26, up from 5.7 million in FY23. Most contract work still runs on paper registers and phone messages.
In each contract the principal employer, the contractor and the worker hold different pieces. When the pieces do not match, nobody can show the full picture at an inspection or a payment dispute.
Who holds what
| Party | Holds | Needs from the others |
|---|---|---|
| Principal employer (the company that uses contract workers) | Work orders, contractor invoices, the contractors it uses and their licences, the combined headcount at each site | Contractors' licences, attendance and wage records it can check |
| Contractor (the labour supplier) | Workers, attendance, wages, documents and its own licence | A clean register and muster sheet to share with each client |
| Worker | Their own days worked and pay | A simple way to mark attendance and see their record |
Why it matters now
The Labour Codes in force from 21 November 2025 raised the threshold for the contract labour provisions from 20 to 50 workers. The combined headcount across contractors at a site is counted, so five vendors with ten workers each can cross the line even though no single vendor does. Rules differ by state and are still being rolled out.
What each side should keep
- A vendor register: every contractor at the site, with licence status and validity
- Worker records and daily attendance for every contract worker
- Wage records ready to show when asked
- The documents each contractor must give you
- A fresh count whenever you add a contractor or a site
Free help from USR
USR Workforce is a free app for contractors: a worker register and phone attendance with location for up to 25 workers, and a muster sheet the contractor can share with the client. It runs on one login with the rest of USR Apps.
Questions
What is a three-party workforce?
Work done by contract workers: the principal employer uses the workers, a contractor employs and pays them, and the worker does the work. Each holds part of the records.
What changed with the Labour Codes?
The Labour Codes in force from 21 November 2025 raised the contract labour threshold from 20 to 50 workers, and the combined headcount across contractors is counted. Rules differ by state and are still being rolled out.
Does this guide tell me whether the law applies to me?
No. It is general information, not legal advice. Please confirm with a labour-law professional or your CA.
Is there a free app for contractors?
Yes. USR Workforce keeps worker records and phone attendance, free for up to 25 workers.
Staffing firms, CA firms and payroll providers: bring USR Workforce to your contractor clients, free for them to start.
Sources: IANS: India's flexi workforce report (Indian Staffing Federation) · Deccan Herald: formalisation of India's labour market (Quess Corp report) · Mondaq: Labour Codes implemented · Treelife: contract labour compliance in India · Omnivoo: Labour Codes implementation status. Last checked: 8 November 2026.
