Short answer. Yes, it is a significant warning sign. The Labor Code defines that exact situation as labor-only contracting when the agency lacks substantial capital or investment in tools, equipment, or work premises, and its workers perform tasks tied to the client's main business — with real consequences for who counts as your employer.
What the law says
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer.
Labor Code, Article 106 — Contractor Or Subcontractor. Read the full provision →
What the law is describing
Article 106 draws a line between legitimate contracting, where an outside firm genuinely undertakes work using its own resources, and what it calls "labor-only" contracting. That happens where the agency supplying you has no substantial capital or investment in tools, equipment, machinery, or work premises, and the workers it places are performing activities directly related to the client's principal business. An agency that is really just a payroll conduit — no equipment, no premises, no independent business of its own beyond supplying bodies — fits this description closely.
Why the two conditions matter together
Both elements generally need to be present: a lack of substantial capital or investment, and work that is directly tied to what the client company itself does for a living. An agency without equipment that supplies purely incidental support, unconnected to the client's main line of business, is a different case from one supplying workers who do the client's core work with nothing of its own behind them. The lack of capital is the sign you noticed; whether your actual tasks are core to the client's business is the other half of the picture.
What follows if the arrangement is labor-only
The consequence is significant: the article treats the agency as merely an agent of the client company, which becomes responsible to you "in the same manner and extent as if [you] were directly employed by him." In other words, the label on your contract does not control — if the arrangement is labor-only in substance, the client company is treated by law as your real employer for purposes of the Labor Code, with all that implies for your standing to raise employment claims against it directly.
What to check and document
Because this turns on facts, not on what your contract calls the arrangement, it helps to note concretely what the agency actually owns and controls versus what the client provides: whose premises you work at, whose tools or systems you use, who supervises your day-to-day tasks, and whether your work is core to the client's business or merely support. Keep your engagement contract, any deployment memo, and records of who directs your work, since those are what would establish whether the agency has the substance the law requires or is functioning as a labor-only intermediary.