Paying seasonal and temporary staff in India
Reviewed by Mellow Editorial Team, HR & payroll content team
Seasonal and temporary workers in India are subject to the same core payroll and statutory obligations as permanent employees — the key difference is how you structure the engagement and for how long.
Decide the employment structure first
Before you process a single payslip, you need to be clear about the legal basis of the engagement. You broadly have three options:
Fixed-term employment (FTE). Under the Industrial Relations Code 2025, fixed-term employees are entitled to all statutory benefits on a pro-rata basis — including gratuity, if the contract runs long enough. They must also receive the same wages and working conditions as comparable permanent workers. This is the cleanest route for seasonal demand spikes.
Casual or daily-wage workers. Common in construction, agriculture and hospitality. These workers are paid by the day or hour and typically do not have a guaranteed number of days per week. Compliance obligations still apply if they cross the relevant wage thresholds.
Contractor or third-party staffing. You engage workers through a licensed contractor or staffing agency. The principal employer retains liability if the contractor defaults on statutory payments, so due diligence on your vendor matters.
The Four Labour Codes — covering wages, industrial relations, social security and occupational safety — have consolidated much of the earlier patchwork legislation, but the underlying obligations for temporary workers have not gone away.
Wages, TDS and payroll mechanics
Temporary staff are entitled to at least the applicable minimum wage under the Code on Wages 2025. Pay them below that and you expose yourself to penalties.
For income tax, the new regime slabs rise to 30% at the higher end, and a 4% health and education cess applies on the tax computed. A section 87A rebate reduces liability for lower-income earners. In practice, many seasonal workers fall into the nil-tax bracket, but you cannot assume that — you need to calculate based on projected annual income.
If a worker is on your direct payroll, you must deduct TDS at source on salary. You file Form 24Q quarterly and issue Form 16 at the end of the financial year. For very short engagements — say, a three-week harvest run — the annualised income may well fall below the taxable threshold entirely, but the process of checking and documenting that calculation is still yours to complete.
If you pay contractual or freelance workers (not employees), TDS applies under a different section of the Income Tax Act at rates that depend on the nature of the payment. Keep this distinction sharp in your records.
EPF and ESI obligations
EPF. If your establishment is covered under the Employees' Provident Funds Act, and a temporary worker's monthly wages fall within the applicable threshold, EPF contributions apply from day one of employment — there is no minimum tenure exemption for employers. The contribution rate is 12% of basic wages from the employee and 12% from the employer. For seasonal workers engaged for even a few weeks, you need to obtain a UAN, make monthly contributions and file returns accordingly. The administrative overhead is real; factor it into your cost-per-hire calculation.
ESI. If a worker's wages fall below the notified threshold, they are eligible for ESI cover, which provides medical and other benefits. As principal employer, you must register covered workers, deduct the employee's share and remit both shares monthly. This applies regardless of whether the worker is seasonal or permanent.
For very short or highly intermittent engagements, some employers route staff through a registered contractor precisely to shift the administrative burden — but, as noted above, principal employer liability does not disappear.
Gratuity and end-of-contract settlements
Gratuity is payable after five continuous years of service, so a single short season does not trigger it. However, under the fixed-term provisions of the Industrial Relations Code 2025, fixed-term employees who complete their contract term are entitled to gratuity on a pro-rata basis even if they have not completed five years. If you are using FTEs rather than casual engagements, price this into your employment cost.
At the end of any engagement, you must settle all dues — outstanding wages, any accumulated leave encashment if applicable under your state rules, and the employee's EPF and ESI contributions for the final period. Delays in final settlement attract penalties under the Code on Wages.
Keeping your records clean
Temporary and seasonal payroll tends to generate audit problems not because employers ignore the rules but because record-keeping slips under operational pressure. A few practices that help:
- Maintain a separate register (or payroll category) for all fixed-term and casual workers, noting start date, end date and the statutory basis for their classification.
- Obtain PAN from every worker before the first payment; without it, TDS must be deducted at a higher rate.
- File ECR (Electronic Challan cum Return) for EPF on time every month, even for workers who joined or left mid-month.
- Keep copies of all contracts. In a dispute, an unsigned or vague contract defaults to the interpretation most favourable to the worker.
The process Mellow uses to run payroll across multiple countries applies the same principle: compliance is easier when the structure is set correctly at the start rather than corrected after the fact.
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