What Changed

Who Needs What

Establishment registration

Every covered establishment requires registration under the Code. Unlike the old regime, in which a principal employer registered separately for the purpose of engaging contract labour, the Code moves to a single common registration for the establishment, which then serves as the basis for compliance across the subsumed subject matter — factories, contract labour, migrant workers, construction work and the other regimes that the Code consolidates.

Registration is applied for electronically, and the position on thresholds and forms for your State should be confirmed against the State rules where these have been notified.

Contractor licence — Section 47

A contractor requires a licence where it has employed fifty or more contract workers on any day in the preceding twelve months. Below that threshold, the licensing obligation under this Chapter is not triggered — although the contractor remains subject to wage, social security and safety obligations under the other Codes, and the principal employer remains subject to its own duties.

Two routes:

• A contractor operating within a single State applies under the relevant State framework
• A contractor with operations across multiple States applies for the national licence electronically in Form XXI under Rule 88

Eligibility

<cite index=”18-1″>Rule 85 of the OSH Rules sets the eligibility threshold, under which a contractor is disqualified only where the applicant is an undischarged insolvent, or has been convicted within the preceding two years of an offence carrying more than three months’ imprisonment.</cite> This is a deliberately narrow disqualification, and the practical effect is that licensing has shifted from a discretionary gate to a largely verification-based process.

Conditions and security deposit

<cite index=”18-1″>Rule 86 prescribes the conditions attaching to a licence, including compliance with the prescribed working hours and payment of wages in accordance with the Code on Wages, 2019. Rule 90 requires a security deposit of ₹1,000 per contract labour, and under Rule 86 the Chief Labour Commissioner (Central) may draw directly on that security where minimum wages go unpaid.</cite>

The security deposit provision deserves attention when pricing a contract. On a deployment of three hundred workers, the deposit is a material working capital commitment, and the direct-draw mechanism means it is genuinely at risk if wage payment slips.

Core and Non-Core Activities

The old Section 10 mechanism, under which the appropriate Government could prohibit contract labour in a particular process or operation after consulting the Advisory Board, has been reframed. The Code works instead from a distinction between core and non-core activities of an establishment, with contract labour ordinarily not permitted in core activities, subject to defined exceptions.

The practical consequence is that the question is no longer “has a prohibition notification been issued for my process” but “is this activity core to my establishment, and if so, does an exception apply“. Activities typically treated as non-core include security, housekeeping, catering, transport, courier, gardening, loading and unloading, and similar support functions — but the classification is fact-specific and turns on what the establishment actually does.

This is now the first question to ask before deploying contract labour on any function, and it should be documented rather than assumed.

The Principal Employer’s Position

Engaging a licensed contractor does not transfer the risk. The principal employer continues to carry:

• Responsibility for wages where the contractor fails to pay — the principal employer becomes liable and may recover from the contractor
• Welfare and facility obligations where the contractor fails to provide them
• Verification duties — that the contractor holds a valid licence, that it is current, and that it covers the deployment
• Record and register obligations in respect of contractors engaged and workers deployed
• Safety obligations under the Code, which apply to the establishment as a whole

Contractual protection is not a substitute for verification. An indemnity from a contractor that becomes insolvent is worth very little, and the statutory liability to the workers is unaffected by what the commercial contract says between the principal employer and the contractor.

Welfare Obligations Have Been Standardised

Under the previous regime, canteen thresholds, crèche requirements, washing facilities, rest rooms and first aid obligations varied by sector and by statute, so an employer could face materially different requirements for the same facility depending on which Act applied. <cite index=”18-1″>The OSH Code consolidates these into a common set of welfare obligations applying across covered establishments, with uniform thresholds and prescribed standards set out in Chapter VI of the OSH Rules, so employers who previously operated under sector-specific regimes must audit their welfare infrastructure against a single, horizontally applicable benchmark.</cite>

A new obligation also applies in higher-risk sectors. <cite index=”18-1″>Rule 5 of the OSH Rules requires every employer engaged in dock work, building or other construction work to arrange a free medical check-up for every employee over the age of forty.</cite>

Related Obligations That Sit Alongside the Licence

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What Has to Be Maintained

• Licence validity — five years, but with the deployment scale and the States covered kept current, and modification applied for on any material change
• Security deposit — maintained, and topped up where the deployment increases
• Wage payment discipline, since the security is directly drawable where minimum wages go unpaid
• Registers and records, now expected to be maintained and filed electronically. <cite index=”18-1″>The Rules move labour administration towards a significantly more centralised and digitised compliance architecture, recognising electronic filings, portal-based submissions, online service of notices and digitally maintained records, which materially raises procedural traceability and documentation expectations for employers</cite>
• Welfare facilities audited against the consolidated Chapter VI standards
• Annual health examinations where the sector obligation applies
• Contractor verification by the principal employer, on engagement and periodically thereafter
• State rule monitoring, because the operative detail in each State will settle at different times

Common Mistakes in the Current Position

1. Applying for, or asking a contractor to produce, a licence under a repealed Act
2. Assuming the old twenty-worker threshold still applies, and licensing deployments that no longer require it — or, conversely, assuming nothing has changed and missing the new obligations
3. Collecting separate licences per site when a single national licence in Form XXI is available
4. Not budgeting the ₹1,000 per worker security deposit into contract pricing
5. Treating the security deposit as a formality, when it can be drawn on directly for unpaid minimum wages
6. Deploying contract labour on a core activity without analysing whether an exception applies
7. Relying on a contractual indemnity instead of verifying the contractor’s licence and wage payment
8. Assuming the Central Rules position applies in every State, when State rules govern most establishments and are being notified at different speeds
9. Not auditing welfare facilities against the new consolidated thresholds
10. Missing the annual health examination obligation for workers over forty in dock, building and construction work
11. Not revisiting standing orders, particularly in the services sector, which is now covered for the first time
12. Not constituting a Grievance Redressal Committee at twenty or more workers
13. Continuing with paper registers where electronic filing and digital record-keeping are now expected
14. Not reassessing wage structures against the revised definition of wages under the Code on Wages, which has knock-on effects across gratuity and provident fund

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How Delhi Legal Company Assists

• Applicability assessment — whether the contract labour provisions apply at all on current headcount, whether the central or State sphere governs, and what the position is in each State where you operate
• Core and non-core analysis — a documented assessment of which functions may lawfully be staffed through contract labour
• Establishment registration and contractor licensing, including the national licence application in Form XXI for multi-State contractors
• Transition review — migrating from CLRA-era registrations, licences, registers and contracts to the current framework
• Principal employer compliance — contractor verification protocols, wage payment monitoring, register and record systems, and contractual protections that actually work
• Contract review — labour supply and manpower agreements, indemnities, wage certification mechanisms and audit rights
• Welfare and safety audit against the consolidated Chapter VI standards
• Adjacent compliance — standing orders including the sector-specific model orders, Grievance Redressal Committees, wage structure review under the Code on Wages, and social security registration
• State tracking — monitoring rule notifications in the States where you operate, and updating your compliance position as each is notified
• Inspections and disputes — responses to inspector-cum-facilitator observations, show cause notices, adjudication and representation

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Frequently Asked Questions (FAQs)

1. Is the Contract Labour (Regulation and Abolition) Act, 1970 still in force?

A. No. <cite index=”18-1″>It was repealed along with thirteen other subordinate legislations when the Occupational Safety, Health and Working Conditions Central Rules were notified</cite>, following the notification of the four Labour Codes on 21 November 2025. Contract labour is now governed by the OSH Code, 2020 and the rules made under it.

2. What is a labour licence now?

A. In practice it is the contractor’s licence under Section 47 of the OSH Code, required by a contractor who has employed fifty or more contract workers in the preceding twelve months. It replaces the establishment-by-establishment licence that contractors previously held under the 1970 Act.

3. What is the threshold?

A. Fifty contract workers, raised from the twenty that applied under the 1970 Act, although some States had already adopted fifty by State amendment. The relevant test is the number employed on any day in the preceding twelve months.

4. How long is the licence valid?

A. <cite index=”18-1″>Five years</cite>, in place of the annual renewal cycle that applied under the previous regime.

5. Do I need a separate licence for each site?

A. No, and this is the most significant practical change. <cite index=”18-1″>Under the OSH Code a contractor obtains a single licence, replacing the previous position under which a separate licence was required for every establishment where contract labour was deployed, frequently across several States</cite>.

6. How does a contractor operating in several States apply?

A. <cite index=”18-1″>Rule 88 of the OSH Rules provides a national licence mechanism, under which a contractor with multi-State operations applies electronically in Form XXI</cite>.

7. How long does the application take?

A. <cite index=”18-1″>Forty-five days, during which the licensing authority must electronically consult the State Governments concerned and raise any objections. If no objection is raised within that period, the licence is auto-generated</cite>.

8. Who is disqualified from holding a licence?

A. <cite index=”18-1″>Under Rule 85, a contractor is disqualified only where the applicant is an undischarged insolvent, or has been convicted within the preceding two years of an offence punishable with more than three months’ imprisonment</cite>. The grounds are deliberately narrow.

9. Is a security deposit required?

A. Yes. <cite index=”18-1″>Rule 90 requires a deposit of ₹1,000 per contract labour</cite>, which should be built into contract pricing and working capital planning at the tender stage rather than discovered afterwards.

10. Can the security deposit be used against me?

A. Yes, directly. <cite index=”18-1″>Under Rule 86 the Chief Labour Commissioner (Central) may draw on the security where minimum wages go unpaid</cite>, which makes wage payment discipline a commercial as well as a legal matter.

11. What conditions attach to the licence?

A. <cite index=”18-1″>Rule 86 prescribes the licence conditions, including compliance with the prescribed working hours and payment of wages in accordance with the Code on Wages, 2019</cite>, alongside the welfare and safety obligations applicable to the establishment.

12. Can I engage contract labour for any function?

A. No. The Code works from a distinction between core and non-core activities, and contract labour is ordinarily not permitted in core activities, subject to defined exceptions. Support functions such as security, housekeeping, catering, transport and gardening are typically non-core, but the classification depends on what your establishment actually does and should be assessed and documented.

13. Does the principal employer still carry liability?

A. Yes. Engaging a licensed contractor does not transfer the statutory risk. The principal employer remains liable to pay wages where the contractor fails to do so, remains responsible for welfare facilities the contractor does not provide, and carries verification, record and safety obligations of its own.

14. Is a contractual indemnity enough protection?

A. No. An indemnity is worth what the contractor is worth, and the statutory liability to the workers is unaffected by what the commercial contract says. Verification of the licence, monitoring of actual wage payment, and documented records are what protect a principal employer in practice.

15. Do these rules apply everywhere in India?

A. Not uniformly yet. Labour is a Concurrent List subject, so States must notify their own rules for the operational detail. <cite index=”18-1″>State governments were still in the process of notifying their corresponding rules, and employers are advised to monitor State-level developments as those frameworks are rolled out</cite>. The position in each State where you operate should be confirmed separately.

16. What should a business do while State rules are pending?

A. Assess applicability under the Code, prepare the documentation the new framework requires, avoid renewing or relying on instruments issued under repealed legislation, and track the notification position in each State. Where a State has not yet notified, transitional arrangements and the central position should be checked before assuming either applies.

17. Do I still need to register my establishment?

A. Yes. The Code provides for a single common registration for the establishment, replacing the several regime-specific registrations that previously applied, and it operates as the foundation for compliance across the consolidated subject matter.

18. Have the welfare requirements changed?

A. Yes, and this is often overlooked. <cite index=”18-1″>Canteen, crèche, washing, rest room and first aid requirements that previously varied by sector and by statute have been consolidated into a common set of welfare obligations with uniform thresholds and prescribed standards in Chapter VI of the OSH Rules, so employers who previously operated under sector-specific regimes must audit their welfare infrastructure against a single benchmark</cite>.

19. Is there a new health check-up obligation?

A. Yes, in specified sectors. <cite index=”18-1″>Rule 5 of the OSH Rules requires employers engaged in dock work, building or other construction work to arrange a free medical check-up for every employee over the age of forty</cite>.

20. Do I need standing orders?

A. The requirement now arises under the Industrial Relations Code, 2020. <cite index=”18-1″>The Model Standing Orders, 2026 provide separate instruments for the manufacturing, mining and services sectors, with the services sector brought under formal standing orders coverage for the first time, addressing work-from-home arrangements, IT-specific working hours and IT security misconduct</cite>. Service sector employers who previously had no standing orders obligation should review their position.

21. What is a Grievance Redressal Committee and do I need one?

A. <cite index=”18-1″>The Industrial Relations Code requires industrial establishments employing twenty or more workers to constitute a Grievance Redressal Committee, and the IR Rules prescribe how members are chosen, how grievances are filed including electronically, and how matters escalate to conciliation officers where a decision is not reached</cite>.

22. Does the new regime affect our salary structures?

A. Very likely. The revised statutory definition of wages under the Code on Wages, and the proportion of total remuneration that must be treated as wages, affects gratuity, provident fund and leave encashment computation. Allowance-heavy compensation structures are the most affected, and the review should be done alongside the licensing work rather than separately.

23. Are registers and returns still maintained on paper?

A. Increasingly not. <cite index=”18-1″>The Rules move towards a centralised and digitised compliance architecture, recognising electronic filings, portal-based submissions, online service of notices and digitally maintained records across a wide range of processes, which raises documentation and traceability expectations for employers</cite>.

24. We hold licences issued under the old Act. What happens to them?

A. They were issued under legislation that has been repealed, so they should not be relied on as continuing authority. The correct step is a transition review — establishing what registration and licensing the current framework requires for your establishments and contractors in each State, and applying accordingly rather than attempting to renew instruments under a repealed statute.

25. What are the penalties for non-compliance?

A. The OSH Code contains its own penalty and adjudication framework, with graduated consequences for different contraventions and, in the case of contractors, exposure to licence conditions and the security deposit. Because the penalty provisions and their operational detail are still bedding down through central and State rules, the specific exposure for a given contravention should be assessed on current law rather than on the amounts that applied under the repealed Acts.

26. What does Delhi Legal Company charge for labour licensing work?

A. It depends on the number of States involved, whether the engagement covers establishment registration, contractor licensing or both, and whether a full transition review from the previous regime is required. We quote in writing, and we begin with an applicability and core-activity assessment so that you are not licensing deployments that no longer require it, or missing obligations that are new.