Does a Contractor Need a Labour Licence?

The rule: a licence is mandatory once you cross the threshold

Contract labour is now governed by the Occupational Safety, Health and Working Conditions Code, 2020 (Chapter XI, Part I). The Code came into force on 21 November 2025 and the Central Rules were notified on 8 May 2026; the earlier Contract Labour (Regulation and Abolition) Act, 1970 is subsumed into this Code. Section 45(1) applies Part I to (i) every establishment in which fifty or more contract labour are employed, or were employed on any day of the preceding twelve months, through contract, and (ii) every manpower supply contractor who has employed on any day of the preceding twelve months fifty or more contract labour. Section 47(1) then provides that no contractor to whom this Part applies shall supply or engage contract labour in any establishment, or undertake or execute work through contract labour, except under and in accordance with a licence issued by the authority under section 119. The licence specifies the number of contract labour who can be supplied or engaged and the amount of security to be deposited. Note: the Code text states fifty, but the applicability threshold is set by the Code and rules and can vary by state, so verify the number against your state's notified rule rather than treating fifty as universal.

Who counts as a 'contractor' and 'contract labour'

A 'contractor' is a person who either undertakes to produce a given result for the establishment (other than a mere supply of goods or articles of manufacture) through contract labour, or supplies contract labour for any work of the establishment as mere human resource, and this includes a sub-contractor. 'Contract labour' is a worker deemed to be employed in or in connection with the work of an establishment when hired for that work by or through a contractor, with or without the knowledge of the employer, and includes an inter-State migrant worker. It does not include an employee (other than a part time employee) who is regularly employed by the contractor, whose employment is governed by mutually accepted standards of the conditions of employment (including engagement on a permanent basis), and who gets periodical increment in pay, social security coverage and other welfare benefits. If your model is to supply people to a client's establishment, you are squarely a manpower supply contractor for these purposes.

The exception that usually applies: intermittent or casual work

Section 45(2) provides that Part I does not apply to an establishment in which work only of an intermittent or casual nature is performed. This is the exception most owners ask about, but it is narrow. The Explanation states that work is NOT deemed to be of an intermittent nature if it was performed for more than one hundred and twenty days in the preceding twelve months, or if it is of seasonal character and is performed for more than sixty days in a year. Where a question arises as to whether work is intermittent or casual, the appropriate Government decides it after consultation with the National Board or a State Advisory Board, and that decision is final. In practice, ongoing manpower supply to a client rarely qualifies as intermittent, so do not assume this exception without a clear factual basis.

Licence basics: validity, work-specific licence and multi-state supply

An application for a licence is made electronically to the designated authority (section 48, read with section 119). A licence issued under section 47(1) is valid for five years for the number of contract labour specified in it (section 48(3)); if you want to increase that number you apply for an amendment and deposit additional security for the balance period. Where a contractor does not meet the requisite qualifications or criteria, the authority may instead issue a 'work specific licence', renewable electronically, that permits supply or execution only for the concerned work order (section 47(2)). If you intend to supply or engage contract labour in more than one State or for the whole of India, you may obtain the licence from the Central designated authority under the first proviso to section 47(3). Under the rules a contractor generally needs a separate licence for each principal employer; confirm the exact forms and route against your state's notified rules before applying.

What happens if you supply without a licence

Operating without the required licence is not a technicality. Section 54 provides that where a principal employer employs contract labour through a contractor who is required to obtain a licence but has not obtained one, the employment is deemed to be in contravention of the Code, which exposes both sides to the offences and penalties in Chapter XII. Separately, section 49 bars you from charging any fee or commission from the contract labour. Section 55 makes the contractor responsible for paying wages (by bank transfer or electronic mode), and if you fail to pay or short-pay, the principal employer becomes liable to pay the workers in full and can recover that amount from you, including by deduction from sums due to you or from your licence security deposit. Section 51 lets the authority revoke or suspend a licence obtained by misrepresentation or where conditions are breached.

Action step

1) Check whether you employed fifty or more contract labour on any day in the preceding twelve months, or otherwise fall within section 45(1). 2) Confirm the exact threshold and the applicable form numbers against your state's notified rule, because these vary by state. 3) Apply electronically to the designated authority under section 119 (application under section 48); if you supply across States or all-India, apply to the Central authority under section 47(3). 4) If a specific work order does not warrant a full licence and you do not meet the requisite qualifications, check the work-specific licence route under section 47(2). 5) Remember section 57: contract labour in an establishment's core activities is prohibited except in the limited situations listed there, so confirm your engagement is permitted. 6) If you run a private security agency, you also need a PSARA licence from the State Controlling Authority under the Private Security Agencies (Regulation) Act, 2005, separately from the labour licence, on a per-state basis.

Sources, last verified and disclaimer

Last verified: 20 September 2026, against the Occupational Safety, Health and Working Conditions Code, 2020 and the Central Rules notified 8 May 2026 (the labour codes came into force from 21 November 2025). This page is general information for staffing and manpower firm owners and is not legal advice; thresholds, form numbers, fees and security deposits vary by state and must be checked against your state's notified rule before you act. Reviewed by: pending named legal review.

Key points

• Governing law: contract labour is now under the OSH Code, 2020, Chapter XI, Part I; the Contract Labour (Regulation and Abolition) Act, 1970 is subsumed into it.
• Trigger: a manpower supply contractor who employed fifty or more contract labour on any day in the preceding twelve months needs a licence (section 45(1)(ii)); an establishment using fifty or more contract labour is also covered (section 45(1)(i)).
• Prohibition: section 47(1) bars supplying or engaging contract labour, or executing work through it, without a licence issued under section 119.
• Main exception: purely intermittent or casual work (section 45(2)), but not if performed for more than 120 days in the preceding twelve months, or if seasonal and performed for more than 60 days in a year.
• Licence validity: five years for the specified number of workers (section 48(3)); increasing the number needs an amendment and further security deposit.
• Work-specific licence: a limited, work-order-only route for contractors who do not meet the requisite qualifications (section 47(2)); multi-state or all-India supply is licensed by the Central authority (section 47(3)).
• Operating without a licence is a deemed contravention (section 54); the principal employer also becomes liable for unpaid wages and can recover from you, including from your security deposit (section 55).
• A separate licence per principal employer is the usual position under the rules; confirm the exact forms against your state's notified rule.
• State thresholds, form numbers, fees and deposits vary; verify against your state's notified rule before acting.
• Private security agencies additionally need a PSARA licence (per state) under the Private Security Agencies (Regulation) Act, 2005, separate from the labour licence.

Related questions

Check for your state

• The exact contract-labour licence applicability threshold varies by state and must be checked against the state's notified rule; the Code text states fifty, but state notifications may differ.
• Exact form numbers for principal-employer registration and contractor licence (for example Form I, Form IV, Form V, Form VI carried from the CLRA regime) must be confirmed against the state's notified rules.
• Licence fee, security deposit amount, and the renewal period for the work-specific licence are as prescribed and are not fixed in this answer; verify against the notified rules.
• The requisite qualifications or criteria a contractor must meet for a licence are as prescribed by the Central Government and are not specified here.
• Whether a particular activity is a 'core activity' where contract labour is prohibited (section 57) is a case-specific determination by the appropriate Government.