TL;DR
- A contract labour management system tracks each contractor's licence and work order, every contract worker's records, wage payment, and EPF and ESI membership, so the principal employer can prove compliance each month.
- Under the OSH Code 2020, which replaced the CLRA Act from 21 November 2025, the principal employer must pay wages the contractor fails to pay, under section 55, and provide welfare facilities under section 53.
Quick Answer: A contract labour management system tracks each contractor's licence and work order, every worker's records, wage payment, and EPF and ESI membership. It lets the principal employer prove compliance under the OSH Code 2020, which replaced the CLRA Act from 21 November 2025. The principal employer must pay any wages the contractor fails to pay, under section 55.
The Contract Labour (Regulation and Abolition) Act 1970 was repealed when the Occupational Safety, Health and Working Conditions Code 2020 (OSH Code) commenced on 21 November 2025. Chapter XI Part I of the Code now governs contract labour, with procedure in the OSH (Central) Rules 2026. A system configured on CLRA forms and registers is tracking repealed law.
Contract labour duties at a glance
| Duty | Who carries it | Provision |
|---|---|---|
| Licence where 50 or more contract labour are engaged | Contractor | Sections 45(1), 47(1), OSH Code |
| Licence validity of five years | Contractor | Section 48(3) |
| Welfare facilities for contract labour | Principal employer | Section 53 |
| No engagement of unlicensed contractors | Principal employer | Section 54 |
| Wages paid in full, with principal employer liable on default | Contractor, then principal employer | Section 55 |
| No contract labour in core activities, with exceptions | Principal employer | Section 57 |
What Must a Principal Employer Do for Contract Labour Under the OSH Code?
The Part applies to every establishment in which 50 or more contract labour are employed, or were employed on any day of the preceding twelve months, under section 45(1) of the OSH Code 2020. It also applies to a manpower supply contractor with 50 or more contract labour. An establishment in which only intermittent or casual work is performed is excluded under section 45(2).
What Is the Principal Employer Liable For?
Three things above all. Section 53 requires the principal employer to provide welfare facilities to contract labour. Section 54 deems engagement of an unlicensed contractor a contravention of the Code. Section 55(3) makes the principal employer pay any wages the contractor fails to pay, in full or as a balance, and recover them from the contractor.
Which Activities Cannot Use Contract Labour?
Core activities, under section 57(1), unless the activity is ordinarily done through a contractor, does not need full-time workers for most of the day, or responds to a sudden increase in volume. Support services such as sanitation, security, canteen and loading or unloading are not core activities where the establishment is not set up for them, under the proviso to section 2(1)(p).
What Should a Contract Labour Management System Track?
Four layers of data, matched to the Code and the OSH (Central) Rules 2026, notified as G.S.R. 345(E) on 8 May 2026.
| Layer | What the system holds | Rule or section |
|---|---|---|
| Contractor licence | Licence number, validity, single or pan-India licence, renewal window | Section 48(3); Rules 87, 88, 91 |
| Work order | Each work order intimated by the contractor within 15 days | Section 50; Rule 94 |
| Worker records | Employee register, attendance-cum-muster roll, wages register and wage slips | Rule 72, Forms XIII to XVI |
| Social security | EPF and ESI membership of every contract worker, subject to the Code on Social Security | Rule 93(4) |
How Is the Contractor Licence Renewed?
For a section 47(1) licence, section 48(3) fixes five years' validity and the Code sets no renewal procedure; renewal sits in Central Rule 91, which applies where the Centre is the appropriate Government. Where a State is the appropriate Government, check that State's position in the multi-state labour law compliance checklist.
The contractor applies on the Shram Suvidha portal at least 30 days and not more than 90 days before expiry. A late application pays 25% extra, and a renewal not decided within 7 days is deemed issued. A labour licence consultant service can support the licence application itself.
What Equal-Treatment Rule Must the System Check?
Rule 93(2) requires holidays, hours of work and other conditions for contract labour to match those of direct workers doing the same or similar work. Records are kept for five years under Rule 72.
How Should the Monthly Principal-Employer Sign-Off Work?
Around the wage cycle in Central Rule 98, because wage default is where the principal employer's own liability starts.
| Step | Requirement | Rule |
|---|---|---|
| Wage period | Not longer than one month | Rule 98 |
| Wage payment by contractor | Before the expiry of the 7th day after the wage period ends, by bank transfer or electronic mode | Rule 98; section 55(2) |
| Principal employer on contractor default | Pays within 15 days and recovers from the contractor | Rule 98(8) |
| Contractor half-yearly return | Form XVIII | Rule 98(7) |
| Principal employer annual return | Form XVII Part III, by the last day of February (not for contracts to produce a given result) | Rule 98(9) |
A monthly sign-off closes the loop: wage proof received, EPF and ESI challans matched to the muster roll, and licence and work-order status confirmed for every contractor on site. The employer registers and returns matrix lists each form behind these checks.
Is a Contractor Compliance Management System the Same Thing?
Largely, yes. "Contractor compliance management system" is the same tool seen from the contractor-onboarding end: licence checks, document collection and periodic evidence. A contract labour system adds the worker-level layer, such as wages, attendance and social security, which the principal employer needs for section 55. Broader labour law compliance software extends the same tracking to the rest of the Code.
How Does LexComply Support Contract Labour Compliance?
A compliance management platform holds each contractor's licence, renewal window and monthly evidence as dated obligations with owners.
LexComply does not grant licences; the licensing authority does. The principal employer and the contractor file their own returns. To see how contractors would be tracked, get in touch.
Common Mistakes to Avoid
- Still citing the CLRA Act 1970. It was repealed from 21 November 2025, and Chapter XI Part I of the OSH Code now applies.
- Checking only one headcount. Section 45(1) counts contract labour at establishment level, while Central Rule 90(4)(a) counts per contractor; check both and the State rule.
- Citing section 57 for unpaid wages. The principal employer's wage liability is in section 55(3); section 57 bars contract labour in core activities.
- Looking for the renewal procedure in the Code. Section 48(3) fixes five years' validity for a section 47(1) licence; the renewal procedure sits in Central Rule 91.
- Paying a contractor's default late. Rule 98(8) requires the principal employer to pay within 15 days and then recover.
- Treating security or canteen work as core. The proviso to section 2(1)(p) excludes such support services where the establishment is not set up for them.
Legal Disclaimer
This article is general information on Indian labour law, current as at the date shown above. It is not legal advice and does not take account of any particular establishment's facts. State rules may differ from the Central Rules. Obtain professional advice before acting on any position described here.