OSH Code, 2020: Contract Labour Rules Have Changed — Here Is What Employers Must Do

The Occupational Safety, Health and Working Conditions Code, 2020 has been in force since 21 November 2025. For companies that use contract staffing, this is the most consequential of the four Labour Codes, because it absorbs the Contract Labour (Regulation & Abolition) Act, 1970 (CLRA) — the law that governed every principal-employer/contractor relationship in India for five decades.

What the OSH Code Replaced

The Code consolidates thirteen central laws, including:

• Factories Act, 1948
• Contract Labour (Regulation & Abolition) Act, 1970
• Inter-State Migrant Workmen Act, 1979
• Building and Other Construction Workers Act, 1996
• Mines Act, 1952, plantation, motor transport, beedi & cigar, dock workers and related laws

One registration, one licence framework, one inspection regime — replacing the overlapping registrations of the old Acts.

Key Employer Obligations Now in Force

1. Appointment letters are mandatory — for everyone

Every employee, including contract workers, must receive a formal appointment letter in the prescribed format. This is now a baseline inspection item. No letter = non-compliance, and it also weakens your position in any dispute about terms.

2. Registration and licensing thresholds raised

• The Code applies its establishment registration to establishments with 10 or more workers.
• Contract labour provisions now apply to establishments and contractors engaging 50 or more contract workers, raised from 20 under the CLRA (some states had already moved to 50); state rules may refine mechanics.
• Contractors require a licence; the Code provides for a single pan-India licence (valid five years, issued electronically) for staffing firms supplying contract labour across states.

Practical effect: small engagements fall out of the licence net, but mid-size and large deployments remain squarely regulated — and using an unlicensed contractor above the threshold makes the engagement itself non-compliant.

3. Welfare obligations — and who bears them

The Code carries forward and standardises welfare requirements: drinking water, washrooms, first aid, canteens (100+ workers), creches (50+ workers), and annual free health check-ups for prescribed categories — under the Central Rules, workers aged 40 and above in factories, docks, mines and construction, with pre-employment and periodic checks regardless of age for hazardous processes.

For contract labour, the sequencing matters:

• The contractor is primarily responsible for welfare facilities and timely wage payment to contract workers.
• If the contractor fails, the principal employer must provide the facilities / make the payment and may recover from the contractor.

That fallback liability is not new — but the Code’s unified inspection regime makes gaps easier to find.

4. Working hours, leave and inter-state migrant workers

• Standard working hours framework: 8-hour day norms with overtime at twice the ordinary rate; spread-over and weekly caps per central/state rules.
• Annual leave with wages accrues at one day per 20 days worked (for workers who have worked 180+ days in the year), with encashment provisions.
• Inter-state migrant workers — now including workers who move on their own (earning up to ₹18,000/month), not just those recruited through contractors — get portability of benefits and an annual lump-sum to-and-fro journey allowance from the employer. If your staffing footprint moves people across states, this applies to you.
• Women may work night shifts across establishments, subject to consent and prescribed safety conditions.

5. Core vs non-core activities

The Code prohibits deploying contract labour in core activities of an establishment, with defined exceptions (and state positions on the mapping can vary). Getting the core/non-core mapping wrong is one of the fastest routes to a demand that contract workers be absorbed as direct employees.

What Changes for Contract and Outsourced Workforces

The threshold rise is not a free pass

With the threshold at 50 contract workers, some smaller engagements no longer need a contract-labour licence. But every other obligation — appointment letters, wages on the new base, PF/ESI, welfare, working hours — still applies through the other Codes. Deregulation of the licence is not deregulation of the relationship.

Who bears the compliance risk — you or your staffing partner?

Under the OSH Code the risk splits like this:

Obligation	Primary bearer	Fallback
Contractor licence	Staffing company	Engagement invalid if absent — principal employer exposed
Wages to contract workers	Staffing company	Principal employer must pay, then recover
Welfare facilities	Staffing company	Principal employer must provide
Appointment letters, registers, returns	Staffing company (for its employees)	Inspection findings land on both
Safety at the workplace	Principal employer (it is your premises)	Not transferable

The honest summary: you can outsource the work, not the worksite. Everything payroll-and-employment-side can sit with a licensed staffing partner; physical safety of your premises cannot.

How TMS handles this: TMS operates as a licensed contractor with the deployed workforce on TMS’s payroll and registrations. Appointment letters, wage compliance on the new wage definition, PF/ESI, registers and returns are TMS’s obligation as the employer — evidenced to you monthly. TMS carried all client engagements through the November 2025 transition with zero cost impact for TMS clients.

Compliance Checklist — OSH Code

• Confirm your establishment registration under the Code (applies at 10+ workers)
• Count contract workers per contractor and per establishment against the 50-worker licence threshold
• Verify every staffing vendor’s licence status — unlicensed above threshold = your problem too
• Appointment letters issued to 100% of workers, including contract staff
• Map core vs non-core activities before deploying contract labour (check your state’s position)
• Audit welfare facilities (water, washrooms, first aid; canteen at 100+, creche at 50+ workers)
• Check working-hours, overtime and leave configuration in your HRMS against the Code and your state’s rules
• If workers cross states: inter-state migrant worker obligations and the annual journey allowance

The Four Labour Codes

Read alongside the Code on Wages guide, the Industrial Relations Code guide and the Code on Social Security guide. For the month’s deadlines, see the India HR compliance update.

Frequently Asked Questions

Is the CLRA still in force?

No — the Contract Labour (Regulation & Abolition) Act, 1970 stands subsumed into the OSH Code, which has been in force since 21 November 2025. Its concepts survive (principal employer, contractor, licence), but thresholds and mechanics have changed.

What is the contract labour licence threshold now?

The Code applies contract-labour regulation at 50 or more contract workers, raised from 20 under the CLRA (some states had already raised it to 50) — check your state’s notification for local mechanics.

Are appointment letters really mandatory for contract workers?

Yes. Every employee — permanent, fixed-term or contract — must receive a formal appointment letter. It is a standing inspection item under the Codes.

Can I use contract labour in core activities?

Generally prohibited, with defined exceptions. The core/non-core mapping should be documented before deployment — it is the highest-stakes classification decision in contract staffing.

If my staffing vendor doesn’t pay wages, am I liable?

Yes — the principal employer must pay if the contractor defaults, with a right of recovery. Vendor selection is therefore a compliance decision, not just a procurement one.

Who is responsible for safety of contract workers on my premises?

You are, as the occupier/principal employer of the worksite. Payroll and employment obligations can sit with the staffing company; physical safety cannot be contracted away.

What changed for inter-state migrant workers?

The definition now covers self-migrating workers earning up to ₹18,000/month, with benefit portability and an annual employer-paid journey allowance — relevant to any multi-state staffing deployment.

Is Every Contractor You Use Licensed?

One inspection answers that question for you — a compliance review answers it before the inspector does. Call +91-22-4896-7640