What does your contract labour really cost?

What a contract worker costs you is the wage plus everything stacked on top of it: the employer's PF and ESI, bonus, leave and the contractor's service charge. On 120 workers at ₹15,000 a month with a 28% loading, that comes to ₹23.04 lakh a month, or ₹2.76 crore a year. The calculator also shows the part of that bill you pay for time when no work reaches the line. At 15% idle, that is about ₹41 lakh a year.

How the calculator works

The calculator takes four inputs:

• Contract workers. The average headcount billed to you per month, not the peak and not the contractor's licence strength.
• Monthly wage (₹). The wage per worker the contractor pays. It must not be below the minimum wage your state notifies for that trade and skill level.
• Statutory + contractor margin on top (%). Everything you pay above the wage: the employer's PF and ESI, bonus, leave and holiday wages, and the contractor's service charge. Take it from the contractor's invoice. If the invoice shows a single "all-in" rate per head, divide it by the wage and subtract 1.
• Share of paid time idle (%). The share of paid hours when the workers are present but have no work: waiting for material, for a machine, for the previous operation, or for the shift to start properly. This is an estimate unless you have measured it.

The formulas:

Monthly cost = workers × wage × (1 + loading %)
Yearly cost = monthly cost × 12
Idle cost per year = yearly cost × idle %

GST on the contractor's invoice is not included. Manpower supply is generally taxed at 18%, and a registered manufacturer can usually take input tax credit on it (India Briefing on GST for contract staff). If you can't claim the credit, add it to the loading. Confirm with your CA.

Worked example (India)

Here is how the default 28% loading could break down. It is an illustration, not a standard. Your contractor's invoice is the real number.

The rates above are the commonly applied ones, with two caveats. EPFO also charges the employer small EDLI and administration charges on top of the 12%. And statutory bonus is computed on a capped wage (the amount the government notifies or the minimum wage, whichever is higher), so 8.33% of the full wage can overstate it. Check them against your own payroll and your state's position under the Labour Codes, which changed some definitions of "wages". A 4% service charge is lean, and many contracts also bill leave wages and administration charges separately. If yours does, the true loading is above 28%.

The calculation, with the calculator's defaults (all assumptions):

Is ₹15,000 a realistic wage? In Uttar Pradesh's Category I districts (Gautam Buddha Nagar and Ghaziabad), the minimum from 1 April 2026 is ₹13,690 a month for unskilled workers and ₹15,059 for semi-skilled (UP interim-relief order No. 374/36-2-2026 of 17 April 2026). A ₹15,000 wage is above the unskilled rate there but just under the semi-skilled one, so a semi-skilled deployment in Noida would have to be paid more. Use your own state's notification for your trade.

What typical numbers look like

• Contract workers are a large share of the factory workforce. In the Annual Survey of Industries for FY22, contract workers were reported at 40.2% of all workers in the surveyed factories, up from 38.4% in FY20 (Business Standard, reporting MoSPI's ASI data).
• The licensing threshold is now 50. Since the OSH Code took effect on 21 November 2025, the contract-labour chapter applies to establishments with 50 or more contract workers on any day of the preceding 12 months, up from 20 under the old CLRA Act (OSH Code, 2020, s.45). Under the Central Rules, contractors post a security of ₹1,000 per contract worker (r.90, G.S.R. 345(E)).
• Loading percentages. We found no credible published survey of contractor service charges or all-in loadings in Indian manufacturing. Quoted figures vary by city, trade and contract size. Compare quotes from several licensed contractors rather than relying on a benchmark.
• Idle share. We found no credible published figure for idle paid time among contract workers in Indian factories. The 15% default is an assumption.

What this number does not tell you

• Where the idle time comes from. Idle paid time is usually a flow problem, not a worker problem. Material arrives late, a machine is down, the previous operation is starved, or the shift starts slowly. Fixing the flow recovers the time. Cutting heads alone often just moves the bottleneck.
• Whether you are billed for people who are not on the line. That is a different gap: billed heads versus heads actually present. It is covered in Contract Labour Headcount: Are You Paying for Workers Who Are Not on the Line?.
• Your legal exposure. The calculator is about cost. Whether your arrangement is compliant depends on licensing, wage payment, core-activity rules and your state's position under the Codes. Ask your labour counsel.
• Anything about individuals. Use aggregates per line and per shift, and route any consequence through the contractor. Direct supervision and control of individual contract workers can be used to argue the arrangement is not genuine contracting. If cameras are involved, give workers the DPDP notice for workplace CCTV.
• The real loading. If the invoice bundles leave, uniforms, transport or admin charges, the 28% default understates your cost. Use the invoice.

Related guides

• Contract Labour Headcount: Are You Paying for Workers Who Are Not on the Line?
• Peak-Season Temp Workers in Indian Food Plants: Training, Hygiene and the Real Headcount
• Shop-Floor Discipline Without Micromanaging: What Cameras Actually Reveal
• DPDP and Worker CCTV: What Indian Factories Must Do
• UPH, UPPH and Line Balancing with Indian Wage Maths

FAQ

How do I calculate the cost of contract labour? Multiply headcount by the monthly wage, then by one plus the loading (the employer's PF and ESI, bonus, leave and the contractor's charge). For 120 workers at ₹15,000 with a 28% loading, that is ₹23.04 lakh a month, or ₹2.76 crore a year before GST.

What is included in a contractor's service charge? The contractor's margin for recruitment, payroll, compliance filings and supervision. It sits on top of the wage and the statutory contributions. Ask for the invoice to show the wage, each statutory item and the service charge as separate lines.

Is GST charged on contract labour? Manpower supply services are generally taxed at 18% GST. A registered manufacturer can usually take input tax credit on it, so it is often not a final cost. Confirm the treatment for your contract with your CA.

How many contract workers need a licence under the new Labour Codes? Under the OSH Code, the contract-labour provisions apply where 50 or more contract workers were engaged on any day in the preceding 12 months, up from 20 under the old CLRA Act. Contractors apply for licences online.

How can I reduce idle time among contract workers? Find out what they are waiting for: material, machines, the upstream operation or a slow shift start. Fixing those flows usually recovers more than renegotiating the rate. Measure at line and shift level, not individual level.

Mama reads a factory's existing cameras and each morning tells the owner where machine and line hours were lost the day before, counting people only in aggregate, never by name. Mama can draw a camera plan for the lines and stations where contract crews wait most. Leave an email or phone in the form below.