Penalty for Engaging Contract Labour Without a Licence

The governing provision

The Occupational Safety, Health and Working Conditions Code, 2020, Chapter XI, Part I governs contract labour, after the Contract Labour (Regulation and Abolition) Act, 1970 was subsumed into the Code. Section 47(1) states that no contractor to whom this Part applies shall (a) supply or engage contract labour in any establishment, or (b) undertake or execute work through contract labour, except under and in accordance with a licence issued by the designated authority. Section 54 adds that where a principal employer engages contract labour through a contractor who is required to obtain a licence but has not obtained one, that employment is deemed to be in contravention of the Code. So both sides carry exposure: the contractor for operating without a licence, and the principal employer for using an unlicensed contractor.

Where the penalty is set

The penalties sit in Chapter XII (Offences and Penalties). Section 94 is the general penalty for offences, and Section 97 is the punishment for contravention of certain provisions. The exact monetary amounts are prescribed within those sections of the enacted Code and should be confirmed against the current statutory text before you rely on a figure. Beyond a monetary penalty, the authority can revoke or suspend a licence under Section 51 where it was obtained by misrepresentation or where the holder has contravened the Part or its conditions, after giving the contractor an opportunity to show cause. Certain offences may also be compoundable under Section 114.

The exception that usually applies

Part I does not cover every arrangement. Under Section 45(1) the Part applies to an establishment in which 50 or more contract labour are employed, or were employed on any day of the preceding twelve months, and to a manpower supply contractor who has employed 50 or more contract labour on any day of the preceding twelve months. Section 45(2) provides that the Part does not apply where only work of an intermittent or casual nature is performed; by the Explanation, work is not treated as intermittent if it was performed for more than one hundred and twenty days in the preceding twelve months, or if it is seasonal and performed for more than sixty days in a year. The figure of 50 appears in the Code text, but applicability thresholds are widely reported as raised from the earlier level and state notifications can vary, so check the threshold notified for your state before concluding that no licence is needed.

The action step

If Part I applies, a contractor obtains the licence under Section 47 by making an electronic application under Section 48, and a licence for engaging contract labour under Section 47(1) is valid for five years (Section 48(3)). Where the contractor does not meet the requisite qualifications or criteria, a work specific licence may be issued for the concerned work order (Section 47(2)). A contractor typically needs a separate licence for each principal employer, and the exact application and licence form numbers should be confirmed against your state's notified rules. If you are the principal employer, verify that your contractor holds a valid licence covering your work before engagement, because Section 54 places the contravention on you if the contractor is unlicensed, and Section 55 makes you liable to pay wages to the contract labour if the contractor defaults, an amount recoverable from the contractor including from the licence security deposit.

Illustrative example

Illustrative example. A manpower firm places 70 workers with a factory for continuous production work that runs well beyond one hundred and twenty days in the year. Part I applies because the count is 50 or more and the work is not intermittent, so the contractor must hold a valid licence under Section 47 and the factory, as principal employer, must confirm that licence before engaging the workers. If the contractor operates without a licence, the engagement is a contravention of the Code for both the contractor (Section 47) and the factory (Section 54), and the penalty falls under Chapter XII. This example is illustrative only and does not state a specific penalty figure.

Sources, last verified and disclaimer

Sources: Occupational Safety, Health and Working Conditions Code, 2020, Chapter XI Part I (Sections 45, 47, 48, 50, 51, 54, 55) and Chapter XII (Sections 94, 97, 114). Context: the labour codes came into force on 21 November 2025 and the Central Rules were notified on 8 May 2026, with the Contract Labour (Regulation and Abolition) Act, 1970 subsumed into the OSH Code. Last verified: 2026-09-20. Disclaimer: this page is general information for staffing and manpower firm owners and is not legal advice; apply it to your own facts and your state's notified rules. Reviewer status: pending named legal review.

Key points

• Where Part I of the OSH Code 2020 applies, supplying or engaging contract labour without a valid licence is a contravention of the Code (Sections 47 and 54).
• The monetary penalty is set in Chapter XII: Section 94 (general penalty) and Section 97 (punishment for contravention); confirm the exact amount against the enacted Code text.
• Part I applies at 50 or more contract labour on any day of the preceding twelve months, for both the establishment and the manpower supply contractor (Section 45(1)); state notifications can vary the threshold.
• Work only of an intermittent or casual nature is outside Part I, but work over one hundred and twenty days in the preceding twelve months, or seasonal work over sixty days in a year, is not treated as intermittent (Section 45(2)).
• The licence is applied for electronically (Section 48) and a Section 47(1) licence is valid for five years (Section 48(3)); a work specific licence is available where the criteria are not met (Section 47(2)).
• A principal employer using an unlicensed contractor is deemed in contravention (Section 54) and is liable for the contract labour's wages if the contractor defaults, recoverable from the contractor (Section 55).
• The licensing authority can also revoke or suspend a licence under Section 51, and some offences may be compounded under Section 114.

Related questions

Check for your state

• Exact monetary penalty amounts for engaging or supplying contract labour without a licence (OSH Code Chapter XII, Sections 94 and 97) are not in the grounding pack and must be verified against the enacted Code text.
• The applicability threshold is stated as 50 or more in Section 45(1), but state notifications can vary; the threshold notified for the relevant state must be confirmed before relying on it.
• Contractor licence application and licence form numbers (for example the CLRA legacy Forms IV and VI carried into the rules) must be confirmed against the state's notified rules before citing.
• Whether a given establishment's work is of an intermittent or casual nature, or whether an activity is a core activity under Section 57, can be a question decided by the appropriate Government and should be confirmed for the specific facts.
• The prescribed period for wage payment and other licence conditions are set by the appropriate Government rules and must be checked against the applicable state or Central notification.