Contractual workforce has seen a consistent 12-15% year on year (YoY) growth, according to the Indian Staffing Federation (ISF). This growth, as per ISF, isn’t merely about meeting past demands but reflects new employment opportunities.
Contrary to traditional employment paradigms, contractual workers initially find themselves outside the direct purview of income taxation.
In a recent interview conducted by CNBC TV18, Suchita Dutta, Executive Director of the ISF, stressed on the importance of formalising employment to ensure essential benefits such as minimum wages, social security, and skill recognition.
Dutta said as contractual workers transition into formal employment, they indirectly contribute to taxes through consumerism, eventually becoming part of the direct taxation framework.
Uniformity characterises India's taxation structure across employment types, based on earnings rather than employment status.
As contractual workers ascend to higher roles, they integrate into the tax-paying populace.
Acknowledging the unique challenges faced by contractual workers, Dutta focused on the importance of empowering them with knowledge and resources to manage their tax obligations effectively.
"While contractual workers associated with the general staffing industry may not fall under tax brackets initially, those within the IT sector may have different tax obligations. Nonetheless, adherence to government protocols ensures transparency and fairness in tax deductions, contributing to a robust tax ecosystem," she said.
Dutta also spoke on the responsibilities of employers in guiding contractual workers through tax obligations.
She stressed on the importance of adherence to government protocols, whereby companies deduct taxes based on employees’ declarations, ensuring compliance and supporting contractual workers in navigating tax-related matters effectively.
Looking ahead, Dutta expressed anticipation for the implementation of labour codes.
She highlighted the benefits, including streamlined business operations, formalisation of informal workers, and continuous employment opportunities.
Also, the transition of the Contract Labour Regulation and Abolition Act (CLRA) into a national or state licence, emphasising the potential for effective regulation and formalisation of the industry, will foster accountability among principal employers and staffing agencies.
