Contract Labour Compliance Services for Principal Employers under the OSH Code, 2020

Last updated 16 October 2026

Since 21 November 2025, contract labour in India is governed by the Occupational Safety, Health and Working Conditions Code, 2020 (the OSH Code). Part I of Chapter XI of the Code replaces the Contract Labour (Regulation and Abolition) Act, 1970, often called the CLRA. The licensing threshold, the licence itself, the core activity rules and the penalties have all changed.

TMS helps principal employers across India move their contract labour compliance from the old CLRA framework to the OSH Code: establishment registration, contractor licence checks, wage payment proof, welfare facilities, electronic registers and returns, and inspection support.

What Replaced the Contract Labour (Regulation and Abolition) Act, 1970?

The OSH Code consolidates 13 central labour laws, including the CLRA 1970, the Factories Act 1948 and the Inter-State Migrant Workmen Act 1979. Its contract labour provisions sit in sections 45 to 58. The key changes for a principal employer are:

Area	Old CLRA, 1970	OSH Code, 2020
Applicability	20 or more contract workers	50 or more contract labour on any day of the preceding 12 months (s.45)
Principal employer registration	Separate CLRA registration	One electronic establishment registration under the Code (s.3)
Contractor licence	Separate licence for each work, usually renewed every year	One licence valid for 5 years; State, multi-State or all-India (s.47, s.48)
Contractor without qualifications	No separate route	“Work specific licence” for a single work order (s.47(2))
Core activities	Prohibition only by Government notification	Contract labour in core activities prohibited, with three exceptions (s.57)
Penalties	Up to 3 months or ₹1,000	₹2 lakh to ₹3 lakh general penalty, plus up to ₹2,000 a day if continued (s.94)

Read the Code and the Ministry’s compliance handbook on the Ministry of Labour and Employment website. Central sphere establishments are supervised by the Chief Labour Commissioner (Central).

Who Do the Contract Labour Rules Apply To?

The contract labour Part of the OSH Code applies to:

• Every establishment in which 50 or more contract labour are employed, or were employed on any day of the preceding 12 months, through a contractor.
• Every manpower supply contractor who has employed 50 or more contract labour on any day of the preceding 12 months.

It does not apply where work is only intermittent or casual. Work is not treated as intermittent if it ran for more than 120 days in the preceding 12 months, or more than 60 days in a year for seasonal work.

Below 50 contract labour? The licensing Part does not apply, but the rest of the OSH Code still does. Every establishment with 10 or more workers must register and provide the health, safety and welfare facilities the Code prescribes, and these protections cover contract workers too. The Ministry’s own FAQ confirms the higher threshold is for administrative ease and does not reduce workers’ entitlements.

Principal Employer Obligations under the OSH Code

1. Register the establishment electronically

A new establishment must apply for registration electronically within 60 days of the Code applying to it (s.3). An establishment already registered under a central labour law is deemed registered, provided it gives those registration details to the registering officer in the prescribed time and form. Any change in ownership, management or particulars must be updated within 30 days. An unregistered establishment cannot employ any employee (s.3(7)).

2. Use only licensed contractors

Where the Part applies, a contractor may supply or engage contract labour only under a licence (s.47). If you engage contract labour through a contractor who needed a licence but did not have one, that employment is treated as a contravention of the Code by you (s.54). Check every contractor’s licence, its validity, the State or States it covers and the number of workers it allows.

3. Provide welfare facilities

The principal employer must provide the welfare facilities prescribed under sections 23 and 24 (drinking water, latrines and urinals, washing facilities, first aid, canteens and rest rooms where required, and so on) to contract labour in the establishment (s.53).

4. Make good unpaid wages

The contractor must pay wages by bank transfer or electronic mode within the prescribed period and inform the principal employer electronically of the amount paid (s.55). If the contractor pays late or short, the principal employer must pay the full wages or the unpaid balance, and can recover it from the contractor’s bills or as a debt.

5. Keep contract labour out of core activities

Contract labour cannot be used in the core activities of your establishment, unless the activity is ordinarily done through contractors, does not need full time workers for most of the day, or covers a sudden increase in work that must be finished in a set time (s.57). Support services such as sanitation, security, canteen, loading and unloading, gardening, housekeeping, transport and civil maintenance are not core activities unless your establishment is set up for that activity.

6. Maintain electronic registers and file returns

Registers, records and returns under the Code are maintained and filed electronically in the forms the appropriate Government prescribes. Failing to maintain a register or file a return carries a penalty of ₹50,000 to ₹1 lakh (s.96).

Contractor Duties You Should Verify

• Licence: valid for 5 years for the number of workers stated; increasing headcount needs an amended licence and extra security deposit (s.48).
• Work order intimation: the contractor must inform the licensing authority of each work order it receives (s.50).
• No fees from workers: the contractor cannot charge contract labour any fee or commission (s.49).
• Wages: paid on time by bank transfer or electronic mode (s.55).
• Experience certificate: issued to a worker on demand (s.56).

Penalties for Contract Labour Non-Compliance

Contravention	Penalty under the OSH Code
General contravention of the Code by the employer or principal employer (s.94)	₹2 lakh to ₹3 lakh, plus up to ₹2,000 a day if it continues after conviction
Not maintaining registers or not filing returns (s.96)	₹50,000 to ₹1 lakh
Contravening an order regulating employment of contract labour (s.97)	₹50,000 to ₹1 lakh; repeat: up to 3 months’ imprisonment or fine up to ₹2 lakh
False records or returns (s.98)	Up to 3 months’ imprisonment or fine up to ₹1 lakh
Obstructing an Inspector-cum-Facilitator (s.95)	Up to 3 months’ imprisonment or fine up to ₹1 lakh

Many of these can be compounded: penalties at 50% of the maximum and offences at 75% of the maximum fine (s.114). The licensing authority can also suspend or cancel a contractor’s licence for false information or breach of its conditions (s.51).

TMS Contract Labour Compliance Services

• Applicability check: headcount review over the last 12 months to see whether the 50 contract labour threshold applies, and whether any work is intermittent or casual.
• Registration under the Code: new establishment registration, and updating details of existing registrations so they stay deemed valid.
• Contractor licence audit: licence validity, State coverage, worker numbers, work order intimation and security deposit.
• Core activity review: mapping each outsourced activity against s.57 and the list of support services.
• Wage payment proof: monthly check of electronic wage transfers so you are not left with the s.55 liability.
• Welfare facilities audit: drinking water, latrines, first aid, canteen and rest rooms as prescribed.
• Electronic registers and returns: a compliance calendar and filing support as State rules are notified.
• Inspection support: preparation for and representation during Inspector-cum-Facilitator visits.

How TMS Acts as a Compliant Contractor

When TMS supplies contract staff to your establishment, TMS is the contractor under the Code. We pay wages through bank transfer, share electronic payment proof with you every month, cover PF and ESIC for each worker, issue wage slips and experience certificates, and keep our contractor licence and work order intimations in order. That removes the most common reasons a principal employer ends up liable for a contractor’s failure.

5-Step Contract Labour Compliance Process

1. Applicability and registration: confirm the threshold and register or update the establishment electronically.
2. Contractor due diligence: verify each contractor’s licence, coverage and worker numbers before work starts.
3. Core activity mapping: confirm every outsourced activity is permitted under s.57.
4. Monthly monitoring: wage payment proof, PF and ESIC challans, welfare facilities and registers.
5. Returns and inspections: electronic returns on time and a ready file for every inspection.

Frequently Asked Questions on Contract Labour Compliance

Is the CLRA 1970 still in force?

No. From 21 November 2025, the Contract Labour (Regulation and Abolition) Act, 1970 is replaced by the OSH Code, 2020. Contract labour is now covered by sections 45 to 58 of the Code. Some State rules under the Code are still being notified, so check your State’s current rules before filing.

How many contract workers trigger the contractor licence requirement?

The contract labour Part applies where 50 or more contract labour are employed on any day of the preceding 12 months, up from 20 under the old Act. The contractor must then hold a licence, valid for 5 years.

Is the principal employer liable if the contractor does not pay wages?

Yes. Under s.55, if the contractor pays late or short, the principal employer must pay the full wages or the unpaid balance and can recover it from the contractor.

Can contract labour be used in core activities?

Generally no. Section 57 prohibits contract labour in core activities, except where the activity is normally done through contractors, does not need full time workers for most of the day, or covers a sudden increase in work. Support services such as security, housekeeping and canteen are not core unless your business is set up for them.

What is a work specific licence?

If a contractor does not meet the qualifications for a full licence, the authority can issue a work specific licence that covers only the work order named in it (s.47(2)).

Speak to a Contract Labour Compliance Specialist

The move from the CLRA to the OSH Code changed thresholds, licences and penalties at the same time. Contractor audits are now standard due diligence in M&A and government contract evaluations, and the general penalty starts at ₹2 lakh.

TMS brings 20+ years of labour law and contract staffing experience across every major State.

• Statutory Compliance Services
• Contract Staffing Services
• Payroll Outsourcing Services

Schedule a contract labour compliance review today. Our specialists will assess your current position, identify risks under the OSH Code and give you a practical action plan within 5 business days.

Request a Contract Labour Compliance Audit

Based on the Occupational Safety, Health and Working Conditions Code, 2020 (Gazette text) and the Ministry of Labour and Employment compliance handbook. Updated 16 October 2026. This page is general information, not legal advice.

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