What is the Contract Labour Act?
The Contract Labour (Regulation and Abolition) Act, 1970, often shortened to the CLRA Act or the Contract Labour Act 1970, was the central law that regulated the use of contract labour in India until 21 November 2025, when the OSH Code, 2020 repealed it and carried its licensing, wage and welfare rules into Chapter XI. "Contract labour" means a worker who is hired for an establishment through a contractor, rather than employed directly.
The Act had two aims: to regulate the conditions of contract workers (wages, welfare, records) and, where appropriate, to abolish contract labour in work that is perennial in nature. The OSH Code keeps both ideas: it regulates contract labour and prohibits it in core activities, with limited exceptions (section 57). For most manpower and staffing businesses, the day-to-day obligations are about registration, licensing and record-keeping.
Who does it apply to?
Under the OSH Code (section 45), the contract labour chapter applies to:
- Every establishment in which 50 or more contract labour are employed, or were employed on any day of the preceding 12 months, through contract, and
- Every manpower supply contractor who has employed 50 or more contract labour on any day of the preceding 12 months.
Under the old CLRA the figure was 20 and several states had notified their own thresholds, so check the rules notified under the Code by the state where the work is carried out. The threshold is counted across the preceding 12 months, not just today, so seasonal peaks can bring you within the Code.
Principal employer vs contractor
The OSH Code splits duties between two parties, as the CLRA did:
| Principal employer | Contractor |
|---|---|
| The establishment for whom the work is done. | The person who supplies the contract workers. |
| Must register the establishment. | Must obtain a licence to supply labour. |
| Ensures welfare facilities are provided. | Pays wages and maintains worker records. |
| Liable to pay wages if the contractor defaults. | Primary responsibility for timely wages. |
The last row matters most: if a contractor fails to pay contract workers, the principal employer becomes liable to pay and can recover the amount from the contractor. This is why principal employers audit their contractors' compliance so closely.
Registration and licensing
There are two separate approvals:
- Registration of the establishment by the principal employer, made electronically to the registering officer under section 3 of the OSH Code (an establishment already registered under an earlier Central labour law is deemed registered once it gives its registration details, section 3(8)).
- Licence for the contractor, which states the number of contract labour it covers and is valid for five years (OSH Code sections 47 and 48); a work-specific licence covers a single work order (section 47(2)).
Engaging contract labour without the principal employer's registration, or through an unlicensed contractor, is itself a breach, even if wages and welfare are otherwise in order.
Registers and records to maintain
The exact forms depend on the central and state rules. The OSH (Central) Rules, 2026 (rule 72) set an employee register, an attendance register-cum-muster roll and a register of wages, overtime and deductions, with wage slips; some state rules and principal employers may still ask for the older CLRA set, which commonly included:
- Register of contractors, kept by the principal employer.
- Register of workmen employed by each contractor.
- Muster roll and wage register.
- Register of deductions, damages or loss, and fines.
- Register of overtime.
- Wage slips issued to workers, and proof of wage payment.
These overlap heavily with what you already produce for payroll and PF and ESI compliance, which is why maintaining them from one system, rather than in separate spreadsheets, saves the most time.
Wages and welfare
Contract workers must be paid at least the applicable minimum wage for their state and skill category, within the wage period, and the contractor must maintain proof of payment. Welfare provisions under the OSH Code (sections 23 and 24) can include drinking water, restrooms, first-aid and, where thresholds are met, canteens, and section 53 makes the principal employer responsible for providing them to contract labour.
Penalties for non-compliance
Contravening the OSH Code or its rules can lead to penalties and, for repeat offences, imprisonment under the Code's penal provisions (Chapter XII), alongside the practical costs: blocked client payments, lost contracts and back-wage liability. The commercial risk usually dwarfs the statutory fine.
What the OSH Code changes
The Contract Labour Act has been repealed and subsumed into the Occupational Safety, Health and Working Conditions (OSH) Code, 2020, one of the four consolidated labour codes, which came into force on 21 November 2025. The Code raises the applicability threshold from 20 to 50 contract labour (section 45) and moves to electronic, five-year licences (sections 47 and 48). Registrations, licences and rules made under the old Act continue only so far as they are consistent with the Code until replaced (section 143(3)), and an existing CLRA licence stays valid for the period it was issued (section 119(5)). Check the rules your state has notified under the Code for forms and fees.
Keep contract-labour compliance audit-ready, automatically
ZeniaHR maintains the register of workmen, muster roll and wage register per principal employer and site, and generates PF, ESI and returns from the same payroll. Built only for manpower and staffing companies.
Frequently asked questions
What is the Contract Labour Act?
The Contract Labour (Regulation and Abolition) Act, 1970 was the central law that regulated contract labour in India. It was repealed when the OSH Code, 2020 came into force on 21 November 2025, and its rules on registration, contractor licences, wages, welfare and records now sit in that Code, with contract labour in Chapter XI.
Who does the Contract Labour Act apply to?
The Act has been replaced by the OSH Code, 2020, whose contract labour chapter applies to establishments with 50 or more contract labour, and to manpower supply contractors who employed 50 or more, on any day in the preceding 12 months (section 45). The old CLRA figure was 20; check your state's notified rules for forms and fees.
Who is liable if the contractor does not pay wages?
The principal employer is liable to pay contract workers if the contractor fails to, and may then recover the amount from the contractor.
Which registers are needed for contract labour?
Under the OSH (Central) Rules, 2026: an employee register, an attendance register-cum-muster roll, a register of wages, overtime and deductions, and wage slips. Some state rules and principal employers may still ask for the older CLRA records, such as the register of contractors and the register of workmen, and exact forms vary by state.