Contract Labour Under the New Codes
The engagement of contract labour has witnessed significant growth across sectors. The Occupational Safety, Health and Working Conditions Code, 2020 introduces important changes to the contract labour framework previously regulated by the Contract Labour (Regulation and Abolition) Act, 1970.
Major Changes in the OSHW Code
Increased ThresholdSec. 45, OSH Code 2020
Previous: 20 Workers
CLRA Act applied to establishments employing 20+ contract workers
New: 50 Workers
OSHW Code applies to establishments employing 50+ contract workers
Widened AmbitSec. 2(zr), OSH Code 2020
Contract labour definition now includes:
- Inter-state migrant workers to provide equal benefits
- Supervisors earning up to ₹18,000/month (previously ₹500)
- Manpower supply explicitly included
Core Activity ProhibitionSec. 57(1), OSH Code 2020
Contract labour prohibited in core activities of any establishment (activity for which establishment is set up).
Non-Core Activities (Permitted):
Sanitation, watch & ward, courier, housekeeping, laundry, transport services
Exceptions to Core Activity Ban:
- • Activities not requiring full-time workers
- • Sudden increase in work volume (time-bound)
- • Activities ordinarily done through contractors
Single License SystemSec. 47, OSH Code 2020
Contractor can obtain a single license valid for multiple states or all of India (5-year validity).
Work-Specific License:
Authority can issue licenses for specific work orders, providing flexibility for project-based engagements.
No Separate Registration:
Principal employer no longer needs separate registration for contract labour under unified registration system.
Registration & Licensing Requirements
Principal Employer
Registration Requirement
Every principal employer must obtain single unified registration if 10 or more workers are employed (covers all four codes).
No Separate Contract Labour Registration
OSHW Code has eliminated the requirement for separate registration specifically for contract labour.
Timeline
Registration must be obtained within 60 days from the date of applicability of the OSHW Code.
Contractor
License Requirement
Contractor must obtain license through electronic application (Form XIII) before supplying or engaging contract labour.
Single License for Multiple States
Contractor may obtain one license valid for more than one state or for whole of India (5-year validity).
Work-Specific License
For particular work orders, authority can issue renewable work-specific licenses.
Security Deposit
License will specify number of contract workers and required security deposit amount.
Duties: Contractor vs Principal Employer
Principal Employer Duties
Under CLRA Act, welfare facilities were contractor's responsibility. Under OSHW Code, this responsibility shifts to Principal Employer.
Required Facilities:
- • Cleanliness and hygiene
- • First-aid facilities
- • Canteen (where applicable)
- • Rest rooms and washing facilities
- • Drinking water
Principal employer is responsible for ensuring proper health, safety, and working conditions for contract labour in the establishment.
- Safe working environment free from hazards
- Compliance with occupational safety standards
- Annual health examination provisions
Wage Payment Liability
In the event of contractor's failure to pay wages, principal employer is liable to make payment to contract labour.
Authority can recover wages from contractor's security deposit.
Contractor Duties
Contractor is primarily responsible for payment of wages to contract labour.
Electronic Payment Mandatory
Contractor must disburse wages through bank transfer or electronic mode and inform principal employer electronically about the amount paid.
Failure consequence: Principal employer becomes liable for payment, recoverable from security deposit.
Contractor must provide, on demand, an experience certificate to contract labour in prescribed format (FORM-XV).
This is a new requirement under OSHW Code, providing workers with documented employment history.
Contractor must intimate the authority about work orders received from principal employer.
Failure Consequence
Non-intimation can result in suspension of contractor's license.
When Principal Employer Becomes Liable
Contractor Fails to Pay
Contractor does not disburse wages to contract workers
Principal Employer Pays
Principal employer must pay wages directly to workers
Recovery from Deposit
Authority recovers from contractor's security deposit
Compliance Checklist
For Principal Employers
- Identify core and non-core activities of establishment
- Ensure no contract labour deployed in core activities (unless exceptions apply)
- Obtain unified registration (if 10+ workers employed)
- Provide welfare facilities to all contract workers
- Ensure health, safety and working conditions compliance
- Monitor contractor's wage payment electronically
- Be prepared for backup wage payment liability
- Maintain proper records and registers
For Contractors
- Obtain license before supplying/engaging contract labour
- Consider single license for multi-state operations
- Submit security deposit as specified in license
- Intimate authority about all work orders received
- Pay wages through bank transfer/electronic mode only
- Inform principal employer about wage payments electronically
- Provide experience certificates on demand (FORM-XV)
- Maintain updated records of all contract workers
Key Takeaways
The OSHW Code brings significant changes to contract labour regulation. Principal employers now bear greater responsibility for welfare facilities, health, and safety, while also serving as backup for wage payment.
The prohibition of contract labour in core activities (with specific exceptions) requires careful analysis of establishment operations. The single license system simplifies contractor compliance across states.
Principal employers must: Revisit compliance requirements, ensure no deployment of contract labour in core activities, provide proper welfare facilities, and monitor contractor wage payments.
Contractors must: Obtain appropriate licenses, maintain security deposits, ensure electronic wage payments, intimate authorities about work orders, and provide experience certificates to workers.
Discuss this topic with our Employment Law team