At a glance
| Governing law | Threshold | Who is licensed | Licence validity | Principal employer registration |
|---|---|---|---|---|
| OSH Code, 2020, and the Central Rules, 2026 | 50 or more contract labour on any day in the preceding 12 months | The contractor | Five years | Covered by the single establishment registration. No separate filing |
What changed: the 1970 Act is gone
The Occupational Safety, Health and Working Conditions Code, 2020 repeals 13 central Acts, and the Contract Labour (Regulation and Abolition) Act, 1970 is one of them. Since 21 November 2025 the contract labour rules sit in the Code, with the Central Rules notified in May 2026 filling in the procedure.
Three changes matter commercially.
| Then, under the 1970 Act | Now, under the OSH Code |
|---|---|
| Provisions applied from 20 contract workmen | Applies from 50 contract labour. The Ministry of Labour and Employment describes it as an increased licensing threshold for contract labour, from 20 to 50 |
| Principal employer took a separate contract labour registration | One establishment registration under the Code covers engaging contract labour. No separate filing |
| Contractor took a licence for each establishment, renewed periodically | A single licence, valid for five years, usable across establishments and states |
What did not change is the liability. A principal employer who thinks the higher threshold removes its exposure has misread the position, because the wage, welfare and contribution obligations do not disappear at 49 workers.
When the contract labour rules apply to you
The test is the number of contract labour, counted on any day in the preceding twelve months, not the number on your rolls today. A seasonal peak twelve months ago can bring you inside the chapter.
If you are the principal employer
You are inside the chapter if 50 or more contract labour are employed, or were employed on any day in the preceding twelve months, in your establishment through a contractor.
You do not take a separate registration for it. The single establishment registration under the Code, applied for electronically, lets you engage contract labour. What you must do is check that every contractor you use holds a current licence, and keep a copy. For the state-level registration, see shop and establishment registration.
Below 50, the chapter and the licence requirement do not bite, but three things still apply: the Code on Wages on what those workers are paid, the Code on Social Security on provident fund and insurance for them, and your own contract with the contractor. We check all three.
If you are the contractor
You need the licence if you employ 50 or more contract labour and supply them to another establishment. Below that number no licence is required.
Count across all your client sites, not per client. That is the practical effect of moving from an establishment-specific licence to a single one: the threshold is now about your own workforce, and one licence covers the work.
The contractor licence
The licence is applied for electronically on the Shram Suvidha portal and is valid for five years, replacing the old model of one licence per establishment with periodic renewal. A contractor working in more than one state can hold a single licence covering that work rather than one per state.
The licensing authority has a defined window to decide, and commentary on the Central Rules describes the application being generated automatically if the authority has not decided within 45 days of consulting the state government. We treat that as the working position and confirm it with the authority for your state before relying on it.
Practical points from our own filings:
- Apply before the workers are deployed, not after a client asks for the licence copy. Contracts are lost on this.
- The licence belongs to the contractor, so a principal employer cannot fix a contractor's missing licence. It can only decline to engage them.
- Keep the licence current through a change of address or constitution. A licence that names a former address is treated as defective on inspection.
- Government fees are state-specific. We do not publish figures we have not verified for your state, and we tell you the amount before you pay.
Core activities: where contract labour cannot be used
The Code restricts engaging contract labour in the core activity of an establishment. This is the provision that changes how a business is structured, and it is the one most commercial pages leave out.
Three exceptions are recognised:
- Where the activity is ordinarily carried out through a contractor in the normal functioning of that kind of establishment.
- Where the activity does not require full-time workers for the major part of the day, or for a longer period.
- Where there is a sudden increase in the volume of work that has to be finished in a specified time.
A list of activities is treated as not being core activity, which typically covers services such as sanitation, security and canteen work. Whether a particular activity is core depends on what your establishment actually does, so it is a judgement call, and it is one we would rather make before you sign the contractor agreement than after an inspection.
Where the activity is core and no exception applies, the answer is not a better contract. It is direct employment, and we help you cost that.
The principal employer's liability
This is the section to read if you engage a contractor and assume the risk sits with them.
Wages
If the contractor defaults on paying wages to the contract workers, the principal employer must pay those wages and is then entitled to recover the amount from the contractor. Commentary on the Central Rules describes the mechanism as running where the contractor has not paid within seven days after the wage period ends, with the principal employer paying in full within fifteen days.
So build it into the commercial arrangement: proof of wage payment from the contractor before you release each invoice, and a right of set-off in the agreement. Our service agreement drafting covers that clause set.
Provident fund, insurance and welfare
The principal employer is answerable for provident fund and insurance in respect of contract workers where the contractor does not pay. Welfare facilities for contract labour are now to be provided by the principal employer, and contract workers are to get benefits such as appointment letters and annual health check-ups.
That means the contractor's compliance is your compliance problem. In practice we ask for the contractor's monthly challans and the worker-wise breakup before each payment, and reconcile them to the headcount at your site.
See PF registration and ESIC registration for how the contributions themselves work.
Records both sides must keep
Whoever you are in the arrangement, the file is what an inspection tests. We build and maintain the following.
The principal employer keeps:
- Establishment registration details and the Labour Identification Number
- A copy of every active contractor's current licence, with its validity dates
- Wage and attendance records for the contract workers at the establishment
- Evidence of the welfare facilities provided
- The contractor agreement, with the wage, contribution and set-off clauses
- Monthly provident fund and insurance challans collected from each contractor, reconciled to the site headcount
The contractor keeps:
- The licence and any amendment to it
- Worker register, attendance and wage records, with wage slips
- Provident fund and insurance records for the deployed workers
- Appointment letters issued to the contract workers, see offer letter and appointment letter
Both sides retain the records for five years from the date of the last entry. Confirm the exact register formats for your state with us, because the forms follow the rules that apply to your establishment, and several states are still finalising theirs.
Documents we will ask for
- Entity documents: incorporation or registration certificate, PAN, address proof of the establishment
- Existing registrations: establishment registration, provident fund, insurance, professional tax (see professional tax return)
- The contractor agreement or draft, and the scope of work
- Headcount of contract labour at each site, with the highest number in the last twelve months
- Nature of the work the contract labour performs, in enough detail to test it against core activity
- Wage structure for the contract workers, and a sample wage slip
- For a contractor: details of every client establishment where workers are deployed
- Any inspection notice, show cause notice or demand already received
How we run the engagement
- Applicability check. We count contract labour across sites for the last twelve months and tell you whether the chapter applies, on which side, and from when.
- Core activity review. We test the work the contract labour does against the core activity restriction and the three exceptions, and flag anything that needs restructuring.
- Filings. We apply for the contractor licence, or complete the establishment registration, and we correct particulars on an existing registration that has gone stale.
- Contract and clause work. We draft or fix the contractor agreement so wages, contributions, licence warranties, indemnity and set-off are in it. For confidentiality terms, see non-disclosure agreement.
- Record set. We build the register and record set for both sides and train whoever maintains it.
- Monthly control. We run the contractor compliance check each month against the challans and the site headcount, so nothing accumulates. See the compliance calendar for the monthly dates.
Fees
Our professional fee is on quote after a free review, because the work depends on how many sites and contractors are involved and which side of the arrangement you are on. Government fees for the licence are set by the state and paid at actuals.
| Item | Amount |
|---|---|
| Regikart professional fee: contract labour applicability review and core activity opinion | Fee on quote after a free review |
| Contractor licence application, establishment registration, agreement drafting and monthly contractor compliance | Quoted on scope after the review |
| Government fee | State-specific and paid at actuals. We confirm the amount for your state before you pay and do not publish unverified figures |
| Related services with a confirmed fee | POSH compliance set-up from ₹9,499; ESIC return filing from ₹1,499 a month |
Professional fees exclude GST at 18%. Government fees, where they apply, are paid at actuals to the department and are shown separately. Fees verified on 27 September 2026.
Where contract labour arrangements fail an inspection
- Counting today's headcount instead of the highest number on any day in the preceding twelve months.
- Counting per client site rather than across the contractor's whole workforce.
- Assuming the move from 20 to 50 removed the liability. Wage, welfare and contribution exposure survives below the threshold.
- Engaging a contractor with no licence and no copy of one on file.
- Contract labour on core activity with no exception that fits.
- Paying the contractor without proof of wage payment, so the principal employer ends up paying twice.
- No contractor challans collected, so provident fund and insurance for the deployed workers cannot be evidenced.
- A licence that names an old address or a former partner after a change in constitution.
- No appointment letters for the contract workers.
- Records destroyed early, when both sides must retain them for five years from the last entry.
Why employers and contractors use Regikart
- Reviewed by a Chartered Accountant, with the provident fund, insurance and payroll side handled by the same team that checks the contractor's challans.
- We give an opinion on core activity in writing, which is the question that actually decides whether your structure holds.
- Both sides of the arrangement, so a principal employer gets a contractor compliance process and a contractor gets the licence and the records.
- Connected services in one place: labour law compliance, payroll services, PF registration, ESIC registration, service agreement drafting and POSH compliance.
- 250+ clients served from Kolkata, Delhi and Bengaluru.