What Replaced the Contract Labour Act, and What You Must Do

The Contract Labour Act was repealed on 21 November 2025. That is why it is hard to pin down now.

The rules themselves did not go. They moved into a new Code, which sets its own threshold, and a contractor now applies for the licence online.

This page sets out what replaced the Act, who the new rules cover, when a licence is needed, and what lands on you when a contractor gets it wrong.

The Contract Labour Act Is Repealed

Section 143 of the OSH Code repeals it. The same section repeals twelve other Acts, the Factories Act among them.

The repeal arrived with the notification that switched the four labour codes on. They came into force on 21 November 2025.

So a PDF of the 1970 Act is a historical document now. The same is true of the form numbers people still search for under it.

What the Contract Labour Act Became

Chapter XI, Part I of the OSH Code, 2020 now carries contract labour. It runs from section 45 to section 57.

The structure survived the move. There is still an applicability threshold, still a licence for contractors, still duties that sit with the principal employer rather than the contractor.

What changed is the numbers, the process and where the liability falls.

The detail arrived later. The Occupational Safety, Health and Working Conditions (Central) Rules were notified on 8 May 2026.

The Code had said a licence was needed without saying how to get one. These Rules say how: an application form, a licence form, a bank guarantee, and the option of one licence covering every state a contractor works in.

This page calls them the 2026 Rules from here on.

The Industrial Relations Code got its own rules the same day. That is where the six-month probation period for new joiners comes from, and it applies to the people you hire directly rather than to contract labour.

Who Do the Contract Labour Rules Cover?

Fifty people, counted two ways. Whichever one describes you, section 45 of the OSH Code, 2020.

Who	The threshold
An establishment	50 or more contract labour employed, on any day of the preceding twelve months
A manpower supply contractor	50 or more contract labour employed, on any day of the preceding twelve months

Read the twelve-month wording carefully, because it is not a headcount taken today. A single day last year, on which fifty people happened to be on site, pulls the establishment in for the whole year.

There is one exclusion, and it is narrower than it sounds. These rules do not apply where the work is only intermittent or casual. Section 45(2) then defines intermittent, and the definition closes the obvious gap.

1. Work is not intermittent if it was performed for more than 120 days in the preceding twelve months.
2. Seasonal work is not intermittent if it was performed for more than 60 days in a year.

If it is arguable either way, you do not get to decide. The government does, after taking advice from a labour advisory board, and the government’s answer is final.

Work You Cannot Give to Contract Labour

Your core activities are off limits. Section 57 bars contract labour from the core activities of an establishment, and it overrides everything else in the contract labour chapter.

The Code does not print a list of what counts as core. It is the work the establishment exists to do, judged establishment by establishment.

There are three ways back in, and the section spells them out. A principal employer may still put contract labour on a core activity if one of these holds.

1. The establishment normally runs that way, and the activity is ordinarily done through a contractor.
2. The activity does not need anybody full time for most of the working day, or over any longer stretch you measure it across.
3. There is a sudden increase in the volume of work on a core activity that has to be finished inside a set time.

If you and the department disagree about whether an activity is core, the government settles it. It can appoint a designated authority to advise, and either the business or the workers may apply for a decision.

When a Contract Labour Licence Is Needed

Always, for a contractor these rules cover. Section 47 leaves no room: without a licence, that contractor may not supply contract labour to you, employ it, or run the job with it.

What the Licence Actually Says

The licence is not a formality. It is issued in FORM-XXII, it cannot be transferred, and it caps the number of contract labour that contractor may employ on any day.

Who Is Allowed to Hold One

The 2026 Rules set the bar, and it is a low one. A contractor is disqualified if it is an undischarged insolvent, or was convicted in the last two years of an offence punishable by more than three months in prison.

How a Contractor Applies

The application goes in electronically through the Shram Suvidha Portal, on FORM-XXI. A contractor operating in more than one state can use the same form to apply for a single licence covering them all, instead of one per state.

Then comes the deposit. Before the licence is issued the contractor lodges a bank guarantee, calculated at ₹1,000 for every contract labour it has applied to employ.

One more duty is easy to miss. On receiving a work order, the contractor has fifteen days to give the details of it to the licensing authority, which is the labour department office that issued the licence.

What the Principal Employer Owes

More than most businesses expect, and the Code says so directly rather than leaving it to contract.

Duty	Where it sits
Washing, bathing, locker, canteen and creche facilities under sections 23 and 24	The principal employer, section 53
Toilets, washrooms, drinking water, bathing and changing, first aid, canteen and creche, on your premises	The principal employer, 2026 Rules
Facilities and entitlements beyond those	The contractor, 2026 Rules
Paying wages to contract labour	The contractor, section 55(1)
Paying those wages if the contractor does not	The principal employer, section 55(3)
Gratuity for contract labour	The contractor, after five years of service

The two rows about your premises are the 2026 Rules at work. They do not rewrite section 53. They attach a condition to the contractor’s licence.

That condition names which amenities are yours once the work happens on your premises: the toilets and washrooms, drinking water, bathing and changing facilities, the first aid box, the canteen and the creche.

The row that costs money is the one about unpaid wages. If the contractor pays late, or pays short, you owe the workers the shortfall.

You pay first and recover from the contractor afterwards, under section 55(3).

There is a second route to the same money, and it does not let you off the first. Where minimum wages go unpaid, the 2026 Rules let the Chief Labour Commissioner pay the workers out of the contractor’s guarantee.

Your liability under section 55(3) stands either way. The guarantee is a way of reaching the contractor, not a reason you stop being on the hook.

Who Pays Gratuity

This is the duty businesses assume is theirs, and it is not. The Ministry of Labour and Employment’s FAQ on the labour codes puts gratuity on the contractor.

It falls due once a contract worker completes five years of continuous service, at fifteen days’ wages for each completed year.

The Certificate a Worker Can Ask For

Section 56 gives contract labour a right that costs you nothing and surprises contractors. On demand, the contractor has to issue an experience certificate setting out the work that person did.

How Wages Have to Be Paid

Wages must be paid by bank transfer or electronic mode, and the contractor has to tell the principal employer electronically what was paid. Use it. A shortfall you see at month end is cheaper than one you learn about when it has already become your bill.

What Happens Without a Licence?

Section 54 answers this in one sentence. If a contractor needs a licence and does not have one, hiring labour through that contractor counts as your breach of the Code, the same as if you had broken it directly.

The breach is yours as well as the contractor’s, because you are the one who put those workers on the job.

There is a related rule worth passing to any contractor you work with. Section 49 bars a contractor from charging the contract labour any fee or commission, directly or indirectly.

Where the Contract Labour Rules Trip You

The faults repeat, and they differ by how the work is organised.

Type of business	The usual fault
Construction site	Counting only today’s headcount, not the busiest day of the last twelve months
Manufacturing unit	Treating a long-running contract as intermittent when it ran past 120 days
Hotel or resort with contract housekeeping	A licence held, but for fewer people than are actually supplied
Hospital or diagnostic chain	The toilets and canteen left to the contractor when they are yours to provide
School or college campus	No electronic record of what the contractor paid, so a shortfall surfaces late
Warehouse or logistics hub	Loaders hired through two contractors, each under 50, counted separately

Not one of those is a decision to break the rules. Each is something nobody checked: a headcount, a date, a licence, a duty, a payment record, or a second contractor nobody added to the first.

One pattern is worth naming, as judgement rather than data. A principal employer almost never hears about a licence problem from the contractor.

It surfaces in an inspection, or in the week a worker is not paid and the bill lands back on the business that thought it had outsourced the risk.

What to Ask a Contractor Before You Renew

None of this needs a lawyer. Four questions in an email, and the answers tell you more than the contract does.

Ask this	What a good answer looks like
Send me the current licence, and the number on it	A FORM-XXII copy, in date, capped above the headcount you actually use
How many people were on our site on the busiest day last year?	A figure from a record, not a recollection
How are wages paid, and can we see the report?	Bank transfer, with the electronic report the Code already makes them send you
Is anyone else supplying labour to this site?	A straight yes or no. Section 45 counts the people on your site, not the people on each contractor’s books

A contractor who answers all four from records is a contractor whose paperwork exists. One who answers from memory is the one whose licence you should read line by line.

Your Contract Labour Act Checklist

Six questions to run before your next contract renewal.

1. Has any day in the last twelve months put 50 or more contract labour on site?
2. Is any of this work a core activity, and if so, which of the three exceptions are you relying on?
3. Is a current licence copy on file, and does it cap enough people?
4. Did the work run past 120 days, or past 60 if it is seasonal?
5. Are wages arriving by bank transfer, with the amounts reported to you?
6. Where the work happens on your premises, are you providing the toilets and washrooms, drinking water, bathing and changing facilities, first aid, canteen and creche?

The short version is this. The Act is repealed, the threshold is 50, the licence is the contractor’s job, and the unpaid wages are yours.

For the documents that follow once somebody joins you directly, see our guide to appointment letter formats, and the labour codes readiness checklist covers what else the four codes moved.

One caution is worth keeping. This page sets out the central position in the Code. State rules under it differ and are still being notified, so check what your own state has issued before you rely on a number here.

Frequently Asked Questions