Contract labour

In short

• The contract labour Part of the OSH Code applies to an establishment that employed fifty or more contract labour on any day of the preceding twelve months, and to a manpower supply contractor with fifty or more s. 45(1).
• A contractor covered by the Part needs a licence before supplying or engaging contract labour s. 47(1).
• The contractor pays the wages; if the contractor fails to pay or pays short, the principal employer must pay in full and recover the amount from the contractor s. 55(1), (3).
• The principal employer provides the Code’s welfare facilities to the contract labour in the establishment s. 53.
• Contract labour may not be employed in the establishment’s core activities, except in the cases the Code lists s. 57(1).

Does this apply to you?

• You are a principal employer if contract labour work in your establishment: in a factory, the owner or occupier (or the named manager); in a mine, the owner or agent; in any other establishment, the person responsible for its supervision and control s. 2(1)(zz).
• You are a contractor if you undertake to produce a given result for an establishment through contract labour, or supply contract labour for its work, and this includes a sub-contractor s. 2(1)(n).
• Contract labour are workers hired in or in connection with an establishment’s work by or through a contractor, with or without the principal employer’s knowledge, including inter-State migrant workers s. 2(1)(m).
• They do not include the contractor’s own regular employees who are engaged on agreed standard conditions, receive periodic increments and have social security and welfare benefits s. 2(1)(m).
• The Part does not apply where only intermittent or casual work is done; work is not intermittent if it was done for more than one hundred and twenty days in the preceding twelve months, or for more than sixty days in a year if it is seasonal s. 45(2).

What the law requires

The contractor’s licence

• No covered contractor may supply or engage contract labour, or execute work through contract labour, except under a licence that states the number of contract labour allowed and the security to be deposited s. 47(1).
• A contractor who does not meet the qualifying criteria may be given a work-specific licence for a single work order s. 47(2).
• To qualify, the contractor must not be an undischarged insolvent, or have been convicted in the last two years of an offence punishable with more than three months’ imprisonment rule 85.
• Apply online on the Shram Suvidha Portal in Form XXI rule 87; a contractor working in more than one State, or across India, can take a single licence from the authority the Central Government designates s. 47(3) rule 88.
• A licence is valid for five years, for the number of contract labour it states s. 48(3).
• Before the licence is issued, the contractor gives a bank guarantee as security at ₹1,000 for each contract labour to be employed rule 90(1).
• A licence cannot be transferred, and the number of contract labour employed must not exceed the number in the licence on any day rule 89(2).
• Apply for renewal at least thirty days before the licence expires but not earlier than ninety days before; a late application costs an extra twenty-five per cent of the fee rule 91(2)–(3).
• An order refusing, suspending or revoking a licence can be appealed within thirty days of the date it is communicated s. 52(1).

What the contractor must do

• Charge no fee or commission, directly or indirectly, from the contract labour s. 49.
• Report each work order on the Shram Suvidha Portal within fifteen days of receiving it, with the principal employer’s name, the work site, the start date, the number of contract labour and the duration rule 94(1); failing to report it can lead to the licence being suspended or cancelled s. 50(2).
• Pay at least the rates fixed under the Code on Wages, 2019, or the rates fixed by an agreement, settlement or award where those are set rule 93(1).
• Where contract labour do the same or similar work as the principal employer’s own workers, give them the same holidays, hours of work and other conditions of service rule 93(2).
• Enrol contract labour in the Employees’ Provident Fund and Employees’ State Insurance where those apply rule 93(4).
• Fix wage periods of no more than one month, and pay wages before the end of the seventh day after the wage period rule 98(1)–(2).
• Pay by bank transfer or electronically, and tell the principal employer electronically what was paid s. 55(2); make no deductions other than those the Central Government specifies rule 98(5).
• Display a notice of the wage period and the date and time of payment at the place of work, and send a copy to the principal employer rule 98(6).
• Issue an experience certificate in Form XXIII on demand s. 56 rule 100.

What the principal employer must do

• Provide the Code’s welfare facilities to the contract labour employed in the establishment s. 53; at the principal employer’s premises these include toilets, washrooms, drinking water, bathing facilities if required, a changing room, a first-aid box, a canteen and a crèche rule 86(1)(iii).
• Use only licensed contractors: employing contract labour through a contractor who needs a licence but has none is a contravention of the Code s. 54.
• If the contractor has not paid wages within seven days of the end of the wage period, pay the contract labour in full, or the unpaid balance, within fifteen days and recover it from the contractor rule 98(8) s. 55(3).
• Settle the contractor’s bills for contract workers’ dues within the time agreed with the contractor rule 98(3).
• Set up a grievance committee, chaired by the principal employer’s authorised representative and including representatives of the principal employer and the contractor, to hear grievances on health, working conditions and wages rule 184(1)–(2).

Where contract labour is not allowed

• Employing contract labour in the core activities of an establishment is prohibited s. 57(1).
• A core activity is any activity the establishment is set up for, together with anything essential or necessary to it s. 2(1)(p).
• Unless the establishment is set up for them, these are not core activities: sanitation and waste disposal, watch and ward, canteen and catering, loading and unloading, support services such as hospitals, schools, guest houses and clubs, courier, civil works and maintenance, gardening, housekeeping and laundry, transport including ambulances, and any intermittent activity s. 2(1)(p).
• Contract labour may still be used in a core activity if it is ordinarily done through contractors, if it does not need full-time workers for most of the working day, or to meet a sudden increase in work that must be finished in a specified time s. 57(1), proviso.
• Whether an activity is core can be referred to the appropriate Government, which may ask its designated authority to advise s. 57(2); no adverse action is taken while the question is pending rule 101.

Penalties

• Contravening the Code or its rules, or an order regulating the employment of contract labour, carries a penalty of not less than fifty thousand rupees and up to one lakh rupees s. 97(1).
• Being convicted again of the same offence can bring imprisonment of up to three months, a fine of up to two lakh rupees, or both s. 97(2).
• Before prosecuting, the Inspector-cum-Facilitator must give the employer thirty days to comply, except after an accident or a repeat of the same violation within three years s. 110(1).

Numbers at a glance

What	Figure	Where
Contract labour that brings in the Part	fifty or more, on any day of the preceding twelve months	s. 45(1)
Work that is not intermittent	more than one hundred and twenty days in twelve months, or sixty days a year if seasonal	s. 45(2)
Licence valid for	five years	s. 48(3)
Security	₹1,000 for each contract labour	rule 90(1)
Renewal application	not earlier than ninety days, and at least thirty days, before expiry; twenty-five per cent extra if late	rule 91(2)–(3)
Report a work order	within fifteen days of receiving it	rule 94(1)
Wage period	at most one month	rule 98(1)
Wages due	before the end of the seventh day after the wage period	rule 98(2)
Principal employer pays unpaid wages	within fifteen days	rule 98(8)
Grievance committee decides	within thirty days	rule 184(3)
Appeal against a licence order	within thirty days	s. 52(1)
Penalty	₹50,000 to ₹1 lakh	s. 97(1)

Records and deadlines

• Contractor: a half-yearly return in Form XVIII, filed electronically within thirty days after the end of each half-year (January to June, July to December) rule 98(7).
• Principal employer: an annual return in Form XVII (Part III), filed electronically by the last day of February after each calendar year, except for contracts to produce a given result rule 98(9).
• Contractor: report any change in the number of contract labour or in their conditions of work on the Shram Suvidha Portal rule 93(5).
• Grievance committee: if a grievance is not settled within thirty days, the principal employer forwards it electronically to the Inspector-cum-Facilitator rule 184(4).

Not covered here

• Journey allowance and the other duties towards inter-State migrant workers s. 60 s. 61.
• The details of each welfare facility, such as canteens and crèches s. 24.
• Exemptions the Government can grant in an emergency s. 58.
• State rules, where your State Government is the appropriate Government.

In short

• If you are hired through a contractor to work in someone else’s establishment, you are contract labour s. 2(1)(m).
• Your contractor cannot charge you any fee or commission s. 49.
• You must be paid before the end of the seventh day after your wage period rule 98(2).
• If your contractor does not pay, the principal employer must pay you within fifteen days rule 98(8).
• If you do the same or similar work as the principal employer’s own workers, you get the same holidays, hours of work and other conditions of service rule 93(2).

Does this apply to you?

• Yes, if you are hired by or through a contractor for work in or connected with an establishment, whether or not the principal employer knows of it s. 2(1)(m).
• It includes inter-State migrant workers s. 2(1)(m).
• It does not include you if you are the contractor’s own regular employee, engaged on agreed standard conditions with periodic increments, social security and welfare benefits s. 2(1)(m).
• These rules apply where fifty or more contract labour work in the establishment, or for a manpower supply contractor with fifty or more s. 45(1).

What the law requires

Your pay

• Your wages must be at least the rates fixed under the Code on Wages, 2019, or higher rates fixed by an agreement, settlement or award rule 93(1).
• Your wage period cannot be longer than one month, and you must be paid before the end of the seventh day after it ends rule 98(1)–(2).
• You should be paid by bank transfer or electronically s. 55(2), with no deductions other than those the Central Government allows rule 98(5).
• A notice at your workplace must show your wage period and when you will be paid rule 98(6).
• If the contractor pays you late or short, the principal employer must pay you the full amount or the balance s. 55(3).
• If neither pays, the Government can order your wages to be paid out of the security the contractor deposited for the licence s. 55(4).

Your conditions of work

• Doing the same or similar work as the principal employer’s own workers means the same holidays, hours of work and other conditions of service rule 93(2).
• You should be enrolled in the Employees’ Provident Fund and the Employees’ State Insurance where those apply rule 93(4).
• At the principal employer’s premises you must have toilets, washrooms, drinking water, bathing facilities if needed, a changing room, a first-aid box, a canteen and a crèche rule 86(1)(iii).
• When you ask, your contractor must give you an experience certificate showing the period and the work you did s. 56 rule 100.

Work you should not be given

• Contract labour may not be employed in an establishment’s core activities, the work it is set up to do and anything essential to it s. 57(1) s. 2(1)(p).
• Contract labour can still be used for such work if it is ordinarily done through contractors, if it does not need full-time workers for most of the day, or for a sudden increase in work that must be finished in a specified time s. 57(1), proviso.

Numbers at a glance

What	Figure	Where
Wages due	before the end of the seventh day after the wage period	rule 98(2)
Longest wage period	one month	rule 98(1)
Principal employer pays if the contractor does not	within fifteen days	rule 98(8)
Grievance committee decides	within thirty days	rule 184(3)
Inspector resolves a forwarded grievance	within sixty days	rule 184(5)

What to do if it isn’t followed

• Raise a grievance about health, working conditions or wages with the principal employer rule 184(1).
• A committee with representatives of the principal employer and the contractor must decide it within thirty days rule 184(2)–(3).
• If it is not settled in that time, the principal employer must send it to the Inspector-cum-Facilitator, who must resolve it within sixty days rule 184(4)–(5).
• For unpaid wages you, your registered trade union or an Inspector-cum-Facilitator can file a claim under the Code on Wages, within three years s. 45(4), (6).

Not covered here

• The extra protections for inter-State migrant workers, such as the journey allowance s. 60 s. 61.
• State rules, where your State Government is the appropriate Government.