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All-in-one HR platform · v2.0
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All-in-one HR platform · v2.0
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The Contract Labour (Regulation and Abolition) Act 1970 makes the principal employer answerable for core protections of contract workers, including wages, even though a contractor engages them.
Check before you rely on thisCheck the applicability thresholds under the Contract Labour Act or the OSH Code as currently in force in your state, registration and licensing requirements, prohibition notifications for your sector and the principal employer's current obligations on PF and ESI for contract workers.
01
The Act regulates the employment of contract labour and allows the government to prohibit it in some processes. It requires the principal employer to register and contractors to hold licences, sets welfare and health facilities, and places a duty on the principal employer if the contractor fails to pay wages.
02
It applies to establishments and contractors employing contract workers at or above thresholds set in the Act and varied by some states. Check the threshold for your state and your contractors.
03
Watch for itContract workers often fall under PF and ESI through the contractor. Check the contractor's challans and returns each month, since the principal employer can be held liable for defaults.
04
| Term | What it means |
|---|---|
| Principal employer | The owner or occupier of the establishment where contract workers work |
| Contractor | The person who supplies or engages workers to do work for the establishment |
| Licence | Permission for the contractor, issued by the licensing officer |
| Core activity | Work central to the establishment, where contract labour may be restricted |
05
The four labour codes, passed by Parliament in 2019 and 2020, came into force on 21 November 2025. Final central rules under all four codes were notified on 8 May 2026, and each state frames its own rules, some of which are still in draft. During the transition, the relevant provisions of the earlier Acts and their rules continue to apply, so check which rules govern your establishment in each state.
The Contract Labour Act is among the laws consolidated into the OSH Code, which addresses contractor licensing and thresholds in its own terms.
Under the Act the principal employer must pay if the contractor fails to, and can recover the amount from the contractor.
Some laws count them, others do not. Check each statute's definition of employee for the purpose concerned.
Not always. The government can prohibit contract labour in particular processes, and the OSH Code addresses core activities. Check the notifications for your sector.
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