Contract labour under the OSH Code: what changed from CLRA

CLRA has gone, the duties have not

The Contract Labour (Regulation and Abolition) Act, 1970 is one of thirteen laws repealed by the Occupational Safety, Health and Working Conditions Code, 2020. The OSH Code took effect on 21 November 2025. Contract labour registrations now sit under the OSH Code (formerly CLRA).

Central rules under the Code were notified on 8 May 2026, and states are still notifying theirs. Meanwhile, section 143(3) keeps rules and notifications made under the old Acts in force until they are repealed, to the extent they are not contrary to the Code. Where the two conflict, the Code prevails.

Existing licences carry over. Under section 119(5), a contract labour licence taken under a central labour law before the Code is deemed to be a licence under the Code. It stays valid for the period it was issued for, and has to be taken afresh when it expires.

From 20 contract workers

The contract labour part of the OSH Code applies from 20 contract workers, to two kinds of party:

• an establishment in which 20 or more contract labour are employed, or were employed on any day of the preceding twelve months, through a contractor;
• a manpower supply contractor who has employed 20 or more contract labour on any day of the preceding twelve months.

The count looks back a full year, so one busy day can bring an establishment in. A contractor with fewer than 20 contract workers needs no licence. The part does not apply where the work is only intermittent or casual.

Work is not intermittent if it ran for more than 120 days in the preceding twelve months, or, if seasonal, for more than 60 days in a year. Contract labour includes inter-state migrant workers. It excludes a contractor's own regular employees with settled terms, increments and social security.

Five-year licences, and one for all of India

The licence itself has changed most. The table sets the CLRA position beside the OSH Code.

A licence names the number of contract labour the contractor may supply and the security deposit it must make. To raise the number, the contractor applies for an amendment and deposits the extra security for the rest of the period. A contractor that does not meet the qualifying criteria can be given a work-specific licence, limited to the named work order.

Each new work order has to be reported to the licensing authority, and failing to do so can cost the contractor its licence. A contractor may not charge workers any fee or commission.

Core activities and the three exceptions

CLRA let the government abolish contract labour for a particular type of work by order. The OSH Code goes further and sets a rule for every establishment.

“Notwithstanding anything contained in this Part, employment of contract labour in core activities of any establishment is prohibited.”

A core activity is one the establishment is set up for, and anything essential or necessary to it. The Code then lists support work that is not core unless the establishment exists to do it.

• Sanitation, cleaning and waste disposal; security and watch and ward.
• Canteen and catering; loading and unloading; courier services.
• Hospitals, educational and training institutions, guest houses and clubs run as support services.
• Civil and construction work, including maintenance; gardening and lawns.
• Housekeeping and laundry; transport, including ambulances; and any work of an intermittent nature.

Even in a core activity, contract labour is allowed in three cases. The activity may be one normally done through contractors, or one that does not need full-time workers for most of the day. The third is a sudden rise in core work that has to be finished within a set time.

If a dispute arises over whether an activity is core, the appropriate Government decides, and it can refer the question to a designated authority. Expect core deployment to draw attention at inspections. Record which activities you treat as core, and the exception you rely on wherever contract labour works in one.

What the principal employer still answers for

The principal employer is the factory's owner or occupier, or the manager named for it. In other establishments, it is whoever is responsible for supervision and control. The Code puts five duties squarely on that person.

1. 1Use licensed contractors. Engaging contract labour through a contractor who needs a licence but has none is deemed a contravention of the Code.
2. 2Provide welfare. The welfare facilities the Code requires, such as drinking water, washrooms, canteens and first aid, must be provided to contract labour too.
3. 3Back the wages. The contractor pays, by bank transfer or electronic mode, and informs you electronically of the amount. If it pays late or short, you pay the workers in full and recover it from the contractor.
4. 4Watch social security. PF contributions you pay for a contractor's employees can be recovered from the contractor, and you remain answerable if the contractor defaults.
5. 5Keep registration current. Report any change in your registration particulars within 30 days. When your contractors change, the certificate should change with them.

Under the old Central Rules, wages were paid in cash at the work premises, in front of your representative, who certified the wage register. Under the Code on Wages, monthly wages are paid before the end of the 7th day of the following month, and the OSH Code requires a letter of appointment for every employee.

We do this work under our contractor and vendor compliance service. Each contractor's licence, registers, wages, PF and ESI are checked, and your principal employer certificate is amended as contractors change. New registrations and licences under the Code are handled by our licences and registrations team.