Blog Content Overview
- 1 Why the CLRA route no longer applies and what replaced it
- 2 Who needs a contract labour licence in India under the current law?
- 3 How does principal employer registration work under the OSH Code?
- 4 How does a contractor obtain, renew or lose a contract labour licence?
- 5 What welfare obligations and wage-default liability apply to contract labour?
- 6 What annual returns, registers and inspections apply under the OSH Code?
- 7 Why state rules are still uneven, and what that means for multi-state operations
- 8 What penalties apply for non-compliance with contract labour licensing?
- 9 A compliance checklist for principal employers and contractors
- 10 Common mistakes that cost employers time and money
- 11 FAQs on Contract Labour Compliance in India
Contract labour license registration in India no longer runs through the Contract Labour (Regulation and Abolition) Act, 1970. That Act stood repealed and folded into the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) when the Code came into force on 21 November 2025, with the Central Rules notified on 8 May 2026. For a manufacturing plant or a GCC campus running housekeeping, security, pantry and staffing contracts across two or three states, this is not a footnote: the worker threshold has moved, the registration mechanic has changed, and several states are still on transitional rules while the centre has already moved to the new regime. This article sets out who needs to register or hold a licence today, how the process works, and where the practical risk sits for facilities-heavy employers.
Is a contract labour licence still required under the CLRA Act in 2026?
No. The CLRA Act, 1970 was repealed on the commencement of the OSH Code, effective 21 November 2025 (notification S.O. 5321(E)). Contract labour registration and licensing now run under Chapter XI, Part I of the OSH Code, 2020, read with the Occupational Safety, Health and Working Conditions (Central) Rules, 2026, notified on 8 May 2026. Establishments still holding CLRA-era registrations must migrate these onto the OSH Code framework; a live CLRA registration on its own is not a substitute for updating particulars on the Shram Suvidha Portal.
Why the CLRA route no longer applies and what replaced it
The Contract Labour (Regulation and Abolition) Act, 1970 was one of thirteen labour statutes consolidated into the OSH Code, 2020. Parliament passed the OSH Code in September 2020, but it stayed dormant, uncommenced, for five years while the Central Government waited on state-level readiness. That changed on 21 November 2025, when the Ministry of Labour and Employment brought the OSH Code, along with the Code on Wages, the Industrial Relations Code and the Code on Social Security, into force. The Central Rules under the OSH Code followed on 8 May 2026.
Three things changed at once for contract labour, and each has direct cost or process implications:
| Feature | Under CLRA, 1970 (repealed) | Under OSH Code, 2020 (current) |
|---|---|---|
| Applicability threshold | 20 or more contract workers (some states raised this to 50) | 50 or more contract workers, uniform across India |
| Principal employer registration | Separate Form I registration under CLRA | Single/common establishment registration under the OSH Code covers this; no separate contract labour registration |
| Contractor licence | One licence per establishment served, renewed annually | Single licence valid across states or all of India, valid for 5 years |
| Governing forms | Form I, IV, V, VI (state variants) | Shram Suvidha Portal filings, Form XXI for licence application |
| Migrant worker coverage | Not included in “contract labour” definition | Inter-state migrant workers expressly included |
Employers should treat this as a genuine regime change, not a renaming exercise. An establishment that registered under CLRA in, say, 2019 does not automatically hold a valid OSH Code registration; it must update its particulars on the Shram Suvidha Portal within the transition window the Central Rules prescribe, or risk being treated as unregistered when an inspector shows up (Rule provisions on saving of existing registrations, OSH Code (Central) Rules, 2026).
Who needs a contract labour licence in India under the current law?
Any establishment engaging 50 or more contract workers on any day in the preceding twelve months falls within Chapter XI, Part I of the OSH Code (Section 45, OSH Code 2020). This is a fifty-worker test, not twenty, and it is now uniform across states, replacing the patchwork where Maharashtra and Telangana, among others, had already moved to 50 while most states stayed at 20 under CLRA.
Two entities carry obligations, and they are distinct:
- The principal employer, meaning the establishment where the contract workers actually perform work. Once the establishment holds a single OSH Code registration (see the next section), it does not need a further, separate registration to engage contract labour.
- The contractor, meaning the person or firm that recruits, supplies and pays the workers. A contractor employing 50 or more contract workers, cumulatively across all the establishments they place workers in, must hold a single licence under Section 47.
A critical point for facilities-heavy employers running several small vendors: the 50-worker count is assessed at the establishment level for the principal employer, and at the aggregate level for each contractor. A GCC campus using five vendors, each supplying eight to ten workers, crosses the threshold on a combined headcount of over 50 contract workers at that establishment, even though no single vendor individually crosses 50. This mirrors the counting logic that used to trip up employers under CLRA’s 20-worker rule, and it has not gone away under the new threshold; it has simply moved.
The definition of “contract labour” itself has widened under Section 2(zr) of the OSH Code. It now expressly includes inter-state migrant workers, and it brings in supervisory staff earning up to ₹18,000 a month (against a ₹500 ceiling under the old Act), and manpower supply arrangements more broadly. A supervisor on a contractor’s payroll earning ₹15,000 a month who was arguably outside CLRA’s protection is squarely inside the OSH Code’s definition today.
Inter-state migrant workers get a separate, more detailed layer of protection under Part II of Chapter XI. Beyond simply being counted as contract labour, they are entitled to self-registration on an Aadhaar basis rather than depending on their employer to register them, portability of Public Distribution System benefits under Section 62 through schemes such as One Nation One Ration Card, access to a toll-free grievance helpline, and an annual lump-sum journey allowance for travel to and from their native place. This is a live compliance channel, not a paper right: the Ministry of Labour and Employment reported over 31.89 crore workers registered on the associated eShram database as the portal marked five years of operation on 26 August 2026. For manufacturing plants and GCC facilities that source housekeeping, security or production-line contract staff from other states, checking that a vendor’s migrant workers are actually registered is now a distinct item on the compliance checklist, separate from the vendor’s own licence status.
Contract labour is generally prohibited in the core activity of an establishment, meaning the activity for which the establishment is principally set up (Section 57(1)). A factory cannot, as a rule, outsource its principal manufacturing process to contract labour. Three exceptions apply, and they are the exceptions manufacturing employers actually rely on:
- The activity does not ordinarily require a full-time worker for the major part of the working day or for an extended period.
- There is a sudden, time-bound increase in the volume of work in the core activity.
- The activity is one that, by the normal functioning of the establishment, is ordinarily carried out through a contractor.
Non-core activities, such as sanitation, security, courier services, housekeeping, laundry and transport, remain freely outsourceable regardless of the core-activity restriction, which is exactly why facilities and GCC employers rely on contract labour as heavily as they do.
A related question is whether a core-activity breach, or an arrangement that looks like disguised direct employment, lets contract workers claim absorption as regular employees. The leading authority is the Supreme Court’s Constitution Bench ruling in Steel Authority of India Ltd v. National Union Waterfront Workers (2001) 7 SCC 1: even a valid prohibition of contract labour does not automatically create absorption; an adjudicator must separately examine, on the facts, whether the contractor arrangement is genuine or a sham. This was decided under the now-repealed Section 10 of the CLRA Act, and no court has yet tested how it applies to a Section 57(1) breach under the OSH Code, so treat it as the likely direction rather than a settled position. The practical takeaway is unchanged either way: a principal employer directing day-to-day work, fixing hours, and controlling output like a regular employer is the fact pattern that invites this claim, whichever statute is doing the prohibiting.
How does principal employer registration work under the OSH Code?
An establishment employing 10 or more workers, contract labour included, must obtain a single registration under the OSH Code (Chapter II, read with the 2026 Central Rules). This replaces the separate registration principal employers previously had to file under CLRA purely to be permitted to engage contract labour.
In practice, registration runs through five steps:
- Confirm applicability. Count workers across the whole establishment, including every contractor’s headcount, not the direct payroll alone.
- File electronically on the Shram Suvidha Portal. The application captures the establishment’s details, the nature of work, and the maximum number of workers expected on any day, including contract labour.
- Wait for deemed registration. Where the application is complete, the establishment is deemed registered within 7 days of submission.
- Receive the auto-generated certificate. No physical verification visit is required for deemed registration; the certificate issues on the strength of the application itself.
- Update, do not re-file, if a prior registration existed. An establishment holding a valid registration under any of the thirteen erstwhile labour laws the OSH Code subsumed, including a CLRA registration, may carry that registration forward, provided the particulars are updated on the Shram Suvidha Portal within the window the Central Rules allow.
Every establishment is issued a Labour Identification Number (LIN), a single identifier the government intends to use to link EPF, ESI and other labour law filings over time. As of now, EPF and ESI returns are still filed separately on their respective portals.
For manufacturing units with an existing factory licence or an existing CLRA registration, the practical task in 2026 is not starting from scratch; it is confirming the migration was actually done, because a stale CLRA certificate that was never carried onto the Shram Suvidha Portal is functionally the same as no registration at all if an inspector asks for the current OSH Code certificate.
How does a contractor obtain, renew or lose a contract labour licence?
A contractor engaging 50 or more contract workers must hold a single licence under Section 47 of the OSH Code, issued by the designated licensing authority appointed under Section 46. The application is filed electronically on the Shram Suvidha Portal in Form XXI, under the national licence mechanism the 2026 Rules create in Rule 88. Where the contractor supplies labour to establishments across more than one state, or across the whole of India, the licensing authority has 45 days to electronically consult the concerned state governments and raise objections; if none are raised within that window, the licence is auto-generated. This 45-day clock is worth building into a contractor’s own project planning, since a national licence application filed the week before a large deployment is too late.
The eligibility and operating conditions are set out in two specific rules that are worth knowing by number, because they are what a licensing officer actually checks against:
- Rule 85 (eligibility) disqualifies an applicant on only two grounds: being an undischarged insolvent, or having been convicted, within the preceding two years, of an offence carrying imprisonment of more than three months. This is a narrower bar than many contractors expect, and a past conviction outside that two-year window does not by itself block a licence.
- Rule 86 (conditions of licence) ties the licence to ongoing compliance with prescribed working hours and timely wage payment under the Code on Wages, 2019. A contractor can hold a valid licence on paper and still be in breach of its conditions if wage payment slips, which is a separate and independent risk to the licence itself, not just an underlying wage dispute.
Some further specifics that matter operationally, drawn from Rule 90 of the OSH Code (Central) Rules, 2026:
- No licence fee applies below 50 contract workers. For 50 or more, the fee starts at ₹1,000 and rises progressively with headcount.
- Security deposit is calculated at ₹1,000 per contract worker the contractor proposes to employ, with fixed slabs at the top end: ₹10 crore for 1 to 1.5 lakh contract workers, ₹15 crore for 1.5 to 2 lakh, and ₹20 crore for 2 lakh or more.
- The licence is valid for 5 years, with renewal and revalidation windows of 15 to 30 days built into the portal-driven process, a sharp change from the annual renewal cycle under CLRA that cuts the recurring paperwork load for large staffing contractors materially.
- A work-specific licence is available for project-based engagements, useful for a construction contractor or a plant expansion vendor who does not want a standing 5-year licence for a one-off job.
- No fee, commission or cost of obtaining the licence may be recovered from the workers (Section 49).
A licence is not permanent once granted. Section 51 allows the designated authority to revoke, suspend or amend a licence, typically for a breach of the Rule 86 conditions or the Code’s welfare obligations, and Section 52 gives the contractor a statutory right of appeal against that decision. Separately, Section 56 requires the contractor to issue an experience certificate to every contract worker on completion of their contract, a record that carries real practical value for the worker seeking their next assignment and one that facilities employers should confirm their vendors are actually issuing, since it rarely appears on a standard compliance checklist.
Section 54 of the OSH Code carries the sharpest risk for principal employers: employing contract labour supplied by a contractor without a valid licence has consequences that fall on the principal employer, not only the contractor. This is the provision manufacturing and GCC facilities teams should track most closely, because it is the one that converts a vendor’s paperwork lapse, including a licence lapsed through revocation or suspension under Section 51, into the client establishment’s statutory liability.
What documents each side needs ready. The Central Rules do not require paper filing, but a Shram Suvidha application still rests on real documentation, and this is what an audit or inspection asks for first.
For the principal employer: PAN and GST registration, address proof of the premises, the certificate of incorporation or partnership deed, a list of every engaged contractor with its licence number and expiry, and the work order governing each engagement.
For the contractor: PAN and GST registration, the principal employer’s registration or LIN, the work order with the principal employer, EPF and ESI registration (Code Numbers), a worker list with wages and identity proof, and the security deposit challan for the Rule 90 fee slab.
A gap in either list typically surfaces first at inspection, not a gap in the underlying substantive compliance, so a facilities team auditing its vendor base should start here.
What welfare obligations and wage-default liability apply to contract labour?
The OSH Code places welfare obligations on the contractor in the first instance, with the principal employer stepping in as a backstop. Under Section 53, the principal employer is liable for welfare facilities, canteen, rest rooms, first-aid, drinking water and sanitation, if the contractor fails to provide them within the prescribed time. Under Section 55, if the contractor defaults on paying wages to the contract workers, the principal employer must pay the wages and is then entitled to recover the amount from the contractor, either by deduction from the contract value or as a debt. Separately, Rule 86(iv)(2) gives the enforcement side of this a direct route of its own: the Chief Labour Commissioner (Central) can draw on the contractor’s security deposit under Rule 90 directly if minimum wages go unpaid, rather than waiting for the principal employer to chase recovery first.
This is not new in substance; CLRA had a comparable wage-default mechanism. What is new is the compliance discipline needed to catch a default early, since a principal employer running five or six vendors across a facility only finds out about a wage shortfall when the workers escalate, unless the vendor’s payroll and PF/ESI remittances are actively verified on a recurring basis rather than reviewed only at contract renewal.
Welfare requirements that continue to apply, calibrated to headcount:
- Canteen where 100 or more contract workers are employed and the work runs six months or more.
- Rest rooms, first-aid boxes, and separate facilities for male and female contract workers.
- Crèche facilities where the establishment employs a prescribed number of women workers, aligned with the broader OSH Code welfare provisions rather than a contract-labour-specific threshold.
What annual returns, registers and inspections apply under the OSH Code?
Filings did not disappear under the new regime; they moved onto a single portal and picked up firmer deadlines. The general obligation sits in Section 33 of the OSH Code (“Maintenance of registers, records and filing of returns”), which requires covered establishments to maintain registers in prescribed form, electronically or otherwise, and to file returns with the Inspector-cum-Facilitator. Two specific obligations apply across the board:
- Annual returns must be filed electronically with the jurisdictional Inspector-cum-Facilitator on or before the last day of February following the end of each calendar year, replacing the separate, differently timed annual returns that used to run under CLRA and the other subsumed laws.
- Registers and records, including contractor licence copies, wage records and attendance data for contract workers, must be maintained for at least five years from the date of the last entry and produced to the Inspector-cum-Facilitator on demand during an inspection.
A nuance worth flagging for anyone assuming one filing covers everything: the Code on Wages (Central) Rules, 2026 separately prescribe an Employee Register (Form I), a combined Register of Wages, Overtime, Advances, Fines and Deductions (Form IV), and an Attendance Register-cum-Muster Roll (Form IX). Where these are already maintained, they satisfy the equivalent registers under the OSH Rules, a genuine simplification, the four Labour Codes together cut the registers an employer maintains from 84 under the old Acts to 8, and the prescribed forms from 181 to 73. But the contract-labour chapter of the OSH Code carries its own register requirements on top of this, so Wage Code paperwork alone should not be assumed to discharge what Chapter XI, Part I separately expects for contract labour.
Inspections themselves are moving toward a risk-based, digitised model rather than the routine scheduled visits many facilities teams are used to, with self-certification playing a larger role for lower-risk establishments. Where a specific complaint is filed against an employer or a contractor, the Central Rules set out a formal enquiry process: there is no fixed statutory time limit to complete the enquiry, but no more than three adjournments are permitted, proceedings may be conducted by video conferencing, and an Inspector-cum-Facilitator may decline to register a complaint filed more than six months after the alleged offence occurred. For a principal employer, this six-month window is a practical reason to resolve a vendor wage or welfare dispute quickly rather than letting it drift, since a stale complaint loses some of its statutory force but an unresolved one within the window does not.
Unsure if your OSH Code contract labour compliance is current? Let’s Talk
Why state rules are still uneven, and what that means for multi-state operations
Labour is a Concurrent List subject. The Central Government notified the OSH Code and its Central Rules, but each state must separately frame and notify its own procedural rules, and as of September 2026 that process is genuinely uneven: trackers disagree on whether states like Maharashtra, Karnataka and Tamil Nadu have final or draft OSH Code rules, even where their Wage Code rules are settled. What every source agrees on is the mechanism: until a state notifies its own OSH Code rules, employers there continue to operate under the Central Rules together with whatever transitional or savings provisions apply to procedural matters, such as local registers and inspection formats.
For a manufacturing group or a GCC operator running facilities in, say, Bengaluru, Pune and Chennai, this means three different procedural postures can exist for the same central obligation at the same time. The substantive law, the 50-worker threshold, the single licence, the welfare obligations, is identical everywhere; the procedural layer, which forms are used locally and how inspections are scheduled, is not. This is the single most common point of confusion Treelife sees among clients with multi-state operations, and it is worth verifying directly with each state’s labour department rather than relying on any one tracker.
Table: illustrative state posture as of Q3 2026 (verify current status before filing)
| State | Central Rules apply | State OSH Code rules | Practical effect for contract labour |
|---|---|---|---|
| Rajasthan | Yes | Notified, effective 30 June 2026 | The state now has its own operative OSH Rules covering registration, licensing and contract labour; state-specific forms and the state portal apply alongside the central framework |
| Maharashtra | Yes | Reported as final by some trackers, draft by others | Confirm current status with the state labour department before relying on state-specific forms |
| Karnataka | Yes | Draft Rules issued January 2026; final Rules awaited per some sources | State procedural matters (inspection, local registers) likely still transitional |
| Tamil Nadu | Yes | Reported as pending or draft depending on source | Manufacturing and plantation-heavy sectors most exposed to procedural ambiguity |
| Gujarat | Yes | Reported as final by some trackers; not independently confirmed against a gazette copy | A significant manufacturing hub, so verify directly before relying on any tracker’s claim |
| Haryana | Yes | Reported as final by some trackers; not independently confirmed against a gazette copy | GCC and manufacturing corridor around Gurugram; same verification caveat applies |
| Uttar Pradesh | Yes | Reported variously as final or draft depending on source | Large contract labour base in industrial belts; confirm locally |
| West Bengal | Yes | Among the last states without even draft OSH Code rules published, as of early 2026 | Employers there sit furthest into the transitional, Central-Rules-only position |
| Delhi | Yes | Reported as pending across all four codes | Centrally administered NCT structure has slowed state-level notification |
Rajasthan is a useful marker of how this is actually progressing: it moved from a draft published on 3 February 2026 to a final, effective notification within five months, which is the pace other large states are expected to follow, unevenly, over the rest of 2026 and into 2027.
What penalties apply for non-compliance with contract labour licensing?
The OSH Code moved away from the CLRA’s imprisonment-first posture toward a fine-based, compoundable structure, though imprisonment remains available for serious or repeat contraventions.
- Where a specific penalty is not separately prescribed, contravention of the OSH Code attracts a fine of ₹2 lakh, extendable to ₹3 lakh.
- Obstructing an Inspector-cum-Facilitator carries imprisonment of up to 3 months, or a fine of up to ₹1 lakh, or both.
- A contravention that results in the death of a worker due to negligence attracts imprisonment of up to 2 years, or a fine of up to ₹5 lakh, or both.
- An employee who violates a provision of the Code can be fined up to ₹10,000.
- First offences punishable with fine only are compoundable on payment of 50 percent of the maximum fine; offences punishable with fine, imprisonment or both are compoundable at 75 percent of the maximum fine, which meaningfully reduces the litigation burden for a genuine first-time procedural lapse.
The provision that actually bites hardest for a principal employer is not the headline fine; it is Section 54’s effect of engaging an unlicensed contractor, because it exposes the principal employer’s own registration and welfare compliance to challenge over a vendor default the principal employer may not have caused directly, but is treated in law as responsible for.
A compliance checklist for principal employers and contractors
Employers running a large, multi-vendor contract labour base should build a recurring cycle rather than a one-time filing exercise.
For principal employers:
- Confirm the CLRA registration, if one existed, has actually been carried onto the Shram Suvidha Portal with updated particulars. A certificate never migrated counts as no registration.
- Add up contract workers across all vendors at each establishment, not per vendor. This is the single most common undercount Treelife sees.
- Verify every vendor’s licence before onboarding and periodically thereafter, not only at signing. A lapsed licence mid-contract exposes the principal employer under Section 54.
- Track wage and PF/ESI remittances at the vendor level, not just invoice level. Section 55 liability crystallises at default, usually discovered late if the only check is a paid invoice.
- Map core versus non-core activity for every outsourced function. A function drifting into a full-time core-activity substitute draws inspection attention and SAIL-style sham-contract scrutiny.
- Confirm the documents checklist above is complete for every active vendor before renewal season, not during it.
- Build a state-by-state compliance calendar, since procedural obligations and forms still vary by state even though the substantive threshold and licence terms are now uniform.
For contractors:
- Confirm the 50-worker count across every establishment served, cumulatively, not per site.
- Apply on the Shram Suvidha Portal in Form XXI before the threshold is crossed; operating unlicensed even briefly triggers Section 54 exposure for the client, not only the contractor.
- Keep the Rule 86 conditions, working hours and timely wage payment, demonstrably current, since a licence can be revoked under Section 51 without any change in headcount.
- Issue the Section 56 experience certificate to every worker on completion, as routine rather than on request.
- Track the 5-year licence validity and the 15 to 30 day renewal window against a calendar, not a client reminder.
Common mistakes that cost employers time and money
Assuming a CLRA licence is still current. The CLRA is repealed. A licence issued under it before 21 November 2025 needs to be reflected in an updated OSH Code registration, not simply filed away as still valid.
Undercounting contract workers per vendor instead of per establishment. Five vendors at eight to ten workers each still crosses the 50-worker threshold in aggregate at that establishment, exactly the trap that used to catch employers under CLRA’s 20-worker rule.
Treating “single licence” as “no licence needed,” and not verifying validity mid-contract. The single licence removes the need for multiple licences across establishments; it does not remove the requirement itself once the 50-worker threshold is crossed, and a lapsed licence on a long-running vendor is usually discovered only at the next audit, by which time Section 54 exposure has already accrued.
Ignoring state-level procedural variance. Assuming the Central Rules alone govern every filing detail leads to missed state-specific registers or return formats in states that have already notified their own OSH Code rules.
FAQs on Contract Labour Compliance in India
Q: Does contract labour licensing apply to GCCs and IT/ITES facilities, not just factories?
A: Yes. The OSH Code applies to any establishment employing 50 or more contract workers, regardless of sector. A GCC campus using housekeeping, security, cafeteria and transport vendors is squarely covered once the aggregate contract worker count crosses 50.
Q: What does contract labour licence registration typically cost?
A: The contractor’s licence fee under Rule 90 starts at ₹1,000 for 50 or more workers and rises with headcount; no fee applies below 50. Professional assistance is typically a fixed advisory fee, varying with vendor and state count.
Q: How long does OSH Code establishment registration take?
A: Where the application is complete, the Central Rules provide for deemed registration within 7 days of submission on the Shram Suvidha Portal, with an auto-generated certificate issued on deemed registration.
Q: What documents does a contractor need to apply for a licence?
A: PAN, GST registration, EPF and ESI registration details, proof of the work order with the principal employer, the Form XXI application on the Shram Suvidha Portal, and the prescribed security deposit.
Q: Does the 50-worker threshold apply per vendor or per establishment?
A: Both, differently. The principal employer’s obligation is tested on the aggregate count at that establishment, across all vendors. The contractor’s licence obligation is tested on its own aggregate count across every establishment it serves.
Q: What happens if our old CLRA registration was never migrated to the OSH Code?
A: The establishment risks being treated as unregistered, even though it operated compliantly under CLRA. The fix is updating particulars on the Shram Suvidha Portal, an administrative correction rather than a fresh registration, provided the underlying facts have not materially changed.
Q: Are inter-state migrant workers covered under contract labour licensing?
A: Yes. Section 2(zr) brings inter-state migrant workers within the definition of contract labour, with separate welfare provisions under Part II of Chapter XI covering journey allowance and benefit portability.
Q: Can contract labour be used in a factory’s core manufacturing process?
A: Generally not. Section 57(1) prohibits contract labour in core activities, subject to three exceptions: work not requiring a full-time worker for the major part of the day, a sudden time-bound increase in volume of work, and activity ordinarily done through a contractor by the establishment’s normal functioning.
Q: What happens if the contract worker headcount drops below 50 after registration?
A: The registration and licence obligation does not automatically lapse. Once an establishment or contractor has crossed the threshold on any day in the preceding twelve months, the obligation continues until formally updated or cancelled on the Shram Suvidha Portal, mirroring the “no automatic de-registration” position that applied under CLRA.
Q: Can a contractor’s licence be revoked, and does the contractor have a right of appeal?
A: Yes. The designated authority can revoke, suspend or amend a licence under Section 51, typically for breaching the working-hours and wage-payment conditions attached to it under Rule 86. The contractor has a statutory right of appeal against that decision under Section 52.
Q: Can contract workers claim absorption as regular employees of the principal employer?
A: Not automatically. The Supreme Court’s ruling in Steel Authority of India Ltd v. National Union Waterfront Workers (2001) 7 SCC 1 held that even a valid prohibition of contract labour does not create an automatic employer-employee relationship; an adjudicator examines whether the arrangement was a genuine contract or a sham on the specific facts.
Q: If our headquarters is overseas, does the principal employer obligation still apply to the Indian entity?
A: Yes. The obligation attaches to the establishment where the contract workers physically perform work in India, regardless of where the parent or global headquarters is incorporated. A GCC’s Indian subsidiary or branch is the principal employer for this purpose.
Q: Who is liable if the contractor stops paying wages mid-contract?
A: The principal employer, under Section 55, must pay the unpaid wages and recover the amount from the contractor, typically by deduction from the contract. Separately, under Rule 86(iv)(2), the Chief Labour Commissioner (Central) can draw on the contractor’s own security deposit directly for unpaid minimum wages.
Q: Does engaging a contractor without checking their licence status expose the principal employer, even if the contractor was licensed when the contract was signed?
A: Yes. Section 54 attaches consequences to engaging an unlicensed contractor at the relevant time, which is why licence status needs periodic re-verification through the contract term, not a one-time check at signing.
Q: What records must a principal employer maintain for contract labour today? A: Establishment registration details and LIN, copies of every active vendor’s current licence, wage and attendance records for contract workers, and evidence of welfare facilities provided or the contractor’s compliance with them.
Regulatory references
- Contract Labour (Regulation and Abolition) Act, 1970 (repealed with effect from 21 November 2025)
- Occupational Safety, Health and Working Conditions Code, 2020, Chapter XI, Part I (Sections 45 to 58), Part II (Sections 59 to 65)
- Occupational Safety, Health and Working Conditions Code, 2020, Section 2(zr) (definition of contract labour)
- Code on Wages (Central) Rules, 2026, notified 8 May 2026 (Employee Register Form I; Wages/Overtime/Deductions Register Form IV; Attendance-cum-Muster Roll Form IX)
- Steel Authority of India Ltd v. National Union Waterfront Workers, (2001) 7 SCC 1 (Supreme Court, Constitution Bench, 30 August 2001; no automatic absorption on prohibition; decided under the repealed Section 10, CLRA Act)
- Notification S.O. 5321(E), dated 21 November 2025 (commencement of the four Labour Codes)
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