Contract Labour Registration India 2026: Licensing Rules

Every establishment employing ten or more workers must hold an electronic registration under Section 3 of the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code), and that single registration now covers engaging contract workers. Separately, every contractor who employed fifty or more contract labour on any day of the preceding twelve months must hold a licence. If you engage third-party manpower or supply it, getting contract labour registration and licensing right is what stands between your business and a penalty that starts at Rs 2,00,000.

What changed for contract labour registration on 21 November 2025?

On 21 November 2025 all four new labour codes commenced. The OSH Code subsumed and replaced the Contract Labour (Regulation and Abolition) Act, 1970 (CLRA), and on 8 May 2026 the Central Government notified the OSH (Central) Rules, 2026 by G.S.R. 345(E) to operationalise it. Chapter XI Part I of the Code, Sections 45 to 58, is now the whole of the law on contract labour.

The old dual-filing structure is gone. Under the CLRA a principal employer took a registration certificate under Section 7 while the contractor applied separately under Section 12, site by site, renewing year after year. Under the OSH Code an establishment holds one digital registration and a contractor holds one licence for five years:

The shift changes how contract staffing companies in India deploy people, and it gives principal employers a digital record of every vendor they use.

Which establishments and contractors cross the 50-worker threshold?

Whether Chapter XI Part I applies to you turns on a rolling twelve-month headcount, not on your headcount today. Section 45(1)(i) applies the Part to every establishment in which fifty or more contract labour are employed, or were employed on any day of the preceding twelve months, through contract. Section 45(1)(ii) applies it to every manpower supply contractor who employed fifty or more contract labour on any day of the preceding twelve months.

Read that literally. If your contract workforce touched fifty on a single peak day eleven months ago, you are inside the Chapter now even if you are running thirty workers today. The same test binds contractors, counting workers across all client sites rather than per site.

Section 45(2) carves out establishments where only intermittent or casual work is performed, and its Explanation removes the guesswork:

• Work is not intermittent if it was performed for more than one hundred and twenty days in the preceding twelve months.
• Work is not intermittent if it is of a seasonal character and was performed for more than sixty days in a year.

So a deployment that runs 121 days in a twelve-month cycle is non-intermittent as a matter of law, and the contract labour registration and licensing obligations bite the moment the headcount test is also met.

How does establishment registration work on the Shram Suvidha Portal?

Under Section 3(1), an employer of an establishment employing ten or more workers must apply electronically to the registering officer within sixty days of the Code becoming applicable; a later application is entertained only on payment of a late fee. The mechanics under the 2026 Rules:

• Form I. The application is filed electronically on the Shram Suvidha Portal with establishment details, registration documents and proof of identity and address.
• Form III within seven days. A complete application is granted a registration certificate in Form III within seven days.
• Deemed registration. Under the proviso to Section 3(3), if the registering officer does not act within the prescribed period, the establishment is deemed registered, the certificate is auto-generated, and responsibility for the failure rests on the officer, not on you.
• Existing establishments. Businesses carried over from the repealed laws have six months to update their particulars on the portal.
• Changes within thirty days. Section 3(4) requires any change in ownership, management or registered particulars to be intimated electronically within thirty days.
• Closure within thirty days. Section 3(5) requires you to inform the registering officer within thirty days of closing and to certify that all dues to workers have been paid.

The gain is real: one Section 3 registration covers the engagement of contract labour, so there is no separate principal employer certificate to chase, provided the registration is live and its particulars match your operations. Contract labour registration failures now trace more often to a stale Form III than to a missing one.

What licence does a contractor need, and what security must be deposited?

Section 47(1) is absolute: no contractor may supply or engage contract labour in an establishment, or execute work through contract labour, except under a licence issued by the designated authority. The licence itself states the number of contract labour who may be supplied or engaged and the security to be deposited. Under Section 48(3) it runs for five years, for the headcount written into it; to deploy beyond that number mid-cycle the contractor applies to amend the licence and deposits additional security for the balance period. The financial and eligibility terms:

• Security deposit. Rule 90 sets it at Rs 1,000 per contract labour, so a licence covering 150 workers carries a deposit of Rs 1,50,000.
• National licence. Under the proviso to Section 47(3)(b) and Rule 88, a contractor working in more than one State, or across India, applies electronically in Form XXI to the Central designated authority. That authority consults the State Governments concerned electronically over a forty-five day window; if no objection is raised, the licence is auto-generated.
• Disqualifications. An applicant who is an undischarged insolvent, or who has been convicted within the preceding two years, cannot hold a licence.
• No charge to workers. Section 49 bars the contractor from charging any fee or commission, directly or indirectly, in whole or in part, from the contract labour.
• Work-order intimation. Section 50(1) requires the contractor to intimate the authority on receiving a work order, within the prescribed time. Under Section 50(2), failing to do so lets the designated authority suspend or cancel the licence after a show-cause opportunity.
• Wage conditions. Rule 86 attaches conditions on working hours and on paying wages in line with the Code on Wages, 2019, and Rule 86(iv)(2) lets the Chief Labour Commissioner (Central) draw on the security deposit directly where minimum wages have gone unpaid.

When can you use a work-specific licence instead?

Not every contractor meets the prescribed qualifications for a full five-year licence, and the Code does not leave those vendors outside the law. Under Section 47(2), a contractor who does not fulfil the requisite qualifications or criteria may instead be issued a work specific licence: granted electronically, renewable within the prescribed period, and valid only for the particular work order named in it, subject to the conditions written into it.

That makes it the right instrument for a one-off project, a shutdown or turnaround, or a seasonal surge. It is not a shortcut around contract labour registration, because the headcount cap, the security deposit and the licence conditions all still apply, and the licence dies with the work order.

Which activities can you never staff with contract labour?

Section 57(1) prohibits the employment of contract labour in the core activities of an establishment, and Section 2(p) defines a core activity as any activity for which the establishment is set up, including anything essential or necessary to it. The proviso to Section 57(1) permits contract labour in a core activity in only three situations: where the normal functioning of the establishment is such that the activity is ordinarily done through a contractor; where the activity does not require full-time workers for the major portion of the working hours in a day or for longer periods; or where a sudden increase in the volume of core-activity work must be finished within a specified time.

Section 2(p) then lists eleven support services that are not treated as essential or necessary, provided the establishment was not set up for that line of business:

• Sanitation works, including sweeping, cleaning, dusting, and collection and disposal of all kinds of waste
• Watch and ward services, including security services
• Canteen and catering services
• Loading and unloading operations
• Running of hospitals, educational and training institutions, guest houses, clubs and the like, where these are support services
• Courier services which are support services
• Civil and other constructional works, including maintenance
• Gardening and maintenance of lawns and other like activities
• Housekeeping and laundry services and other like activities, where these are support services
• Transport services, including ambulance services
• Any activity of an intermittent nature, even if it constitutes a core activity of the establishment

Where a genuine dispute arises over whether a role is core, Section 57(2) lets the appropriate Government appoint a designated authority to advise, and an aggrieved party may apply for a decision rather than guess.

What does the principal employer remain liable for?

Outsourcing the payroll does not outsource the liability. Four provisions land squarely on the principal employer:

• Unlicensed contractors (Section 54). Where you engage contract labour through a contractor who was required to hold a licence but does not, that employment is deemed a contravention of the Code. The exposure is yours, not the vendor’s alone.
• Welfare facilities (Section 53). You must provide the facilities specified in Sections 23 and 24 to contract labour working in your establishment. Section 24 lists separate washing facilities for male and female employees, bathing places and locker rooms, storage and drying of clothing, sitting arrangements for those obliged to stand, first-aid boxes accessible during all working hours, and a canteen wherever one hundred or more workers including contract labourers are ordinarily employed.
• Wages (Section 55). The contractor pays the wages, must disburse them by bank transfer or electronic mode, and must tell you electronically what was paid. But under Section 55(3), if the contractor pays late or short, you must pay the balance in full, recovering it afterwards by deduction from sums due under the contract or as a debt. Under Section 55(4), the Government may instead order those wages paid out of the contractor’s security deposit.
• Experience certificates (Section 56). Every contractor must issue an experience certificate on demand to contract labour, setting out the work performed.

Fold those vendor checks into the same routine that carries your statutory compliance checklist and your Apprentices Act compliance filings, so they are reviewed on one calendar rather than three.

What must you file, and by when?

The annual return is filed electronically with the jurisdictional Inspector-cum-Facilitator on or before the last day of February following the end of each calendar year. The final Rules added a declaration on Employees’ State Insurance and Provident Fund contributions, so your contract-labour social security position is now something you certify in writing once a year rather than something an inspector digs out.

Alongside it, keep the prescribed registers in electronic form, keep the Form III particulars current inside the thirty-day window, and, as a contractor, keep the Section 50 work-order intimations up to date. Those three habits carry most of the contract labour registration burden between annual returns.

What are the penalties for getting contract labour registration wrong?

• Section 94, general penalty. For a contravention of the Code or the rules, the employer or principal employer is liable to a penalty of not less than Rs 2,00,000 and up to Rs 3,00,000. If the contravention continues after conviction, a further penalty of up to Rs 2,000 applies for each day it continues. Engaging an unlicensed contractor and deploying contract labour in a core activity both land here.
• Section 96, registers and returns. Failing to maintain a prescribed register or document, or failing to file returns, attracts not less than Rs 50,000 and up to Rs 1,00,000. On a repeat conviction the range rises to Rs 50,000 up to Rs 2,00,000.
• Section 95, obstruction. Wilfully obstructing an Inspector-cum-Facilitator, refusing entry, failing to produce a document you are required to produce, or failing to comply with an order is punishable with imprisonment up to three months, or a fine up to Rs 1,00,000, or both. A repeat offence carries up to six months, or Rs 1,00,000 to Rs 2,00,000, or both.

Note the asymmetry: a paperwork lapse costs tens of thousands, while a structural error in how you engage contract labour starts at Rs 2,00,000 and accrues daily. That is where audit effort belongs.

What should your compliance team do this quarter?

• Test the twelve-month peak. Pull vendor attendance and billing across every site for the preceding twelve months and find the single highest contract headcount, not the average.
• Confirm your Form III is live and accurate. Check the registration on the Shram Suvidha Portal and push any change in ownership, management or particulars inside the thirty-day window.
• Collect every contractor licence. Verify validity, check the licensed headcount covers your current deployment, confirm the Rs 1,000 per worker deposit is lodged, and get Form XXI on file for any vendor serving you across States.
• Screen job profiles against Section 2(p). Anything genuinely core moves to direct employment or must fit one of the three Section 57(1) exceptions.
• Check the wage trail before you pay the vendor. Electronic disbursement proof and the Section 55(2) intimation should reach you before the invoice clears, because a contractor’s default becomes your payment obligation.
• Start the annual return early. The ESI and PF declaration takes longer to assemble than the headcount data, so work back from the last day of February.

Getting this right takes portal fluency, current vendor documentation and a standing audit rhythm, and most HR teams are carrying it alongside a full recruitment load. e People India provides contract staffing, workforce licensing support and statutory compliance audits for employers across India. Talk to our compliance team about your contract staffing and contract labour registration position before your next inspection.

Frequently Asked Questions

Does an establishment need a separate principal employer registration under the OSH Code?

No. The separate principal employer certificate required under the CLRA 1970 is gone. Under Section 3 of the OSH Code an establishment employing ten or more workers takes a single electronic registration, applying in Form I on the Shram Suvidha Portal and receiving Form III, and that one registration covers engaging contract labour. What it does require is that you keep the registered particulars current, intimating any change within thirty days.

What is the threshold for a contractor to obtain a licence?

Section 45(1)(ii) brings in every manpower supply contractor who employed fifty or more contract labour on any day of the preceding twelve months, counted across all client sites rather than per site. Once inside, Section 47(1) bars the contractor from supplying or engaging contract labour, or executing work through it, without a licence, backed by a security deposit of Rs 1,000 per worker under Rule 90.

What is the difference between a standard licence and a national licence?

A standard licence is issued by the designated authority of the appropriate Government for that establishment and runs five years under Section 48(3). A contractor operating in more than one State, or across the whole of India, may instead apply to the Central designated authority under the proviso to Section 47(3)(b), in Form XXI under Rule 88. That authority consults the State authorities electronically, and the licence is auto-generated if no objection is raised within forty-five days.

Can contract labour be engaged for security, sanitation and catering?

Yes, provided your establishment was not set up for that line of business. Section 2(p) expressly excludes watch and ward services, sanitation works, and canteen and catering services from the definition of core activity, along with eight other support services. Engaging licensed contractors for these does not breach the Section 57 prohibition, though every other obligation, including the contractor’s licence, still applies.

What happens if a contractor fails to pay wages to contract workers?

Under Section 55(3), if the contractor fails to pay within the prescribed period or makes a short payment, the principal employer must pay the wages in full or the unpaid balance to the workers concerned, and may then recover the amount from the contractor by deducting it from sums payable under the contract or as a debt. Under Section 55(4), the appropriate Government may instead order payment out of the contractor’s security deposit.

When must employers and contractors file the annual return?

The annual return is filed electronically with the local Inspector-cum-Facilitator on or before the last day of February following the end of each calendar year. The final OSH (Central) Rules, 2026 added a declaration relating to Employees’ State Insurance and Provident Fund contributions, so contract-labour social security data must be reconciled before the return is submitted rather than after.