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Compliance guide

Contract Labour Act (CLRA) compliance, explained end to end

The Contract Labour (Regulation and Abolition) Act, 1970 (CLRA) governed how contract workers were engaged in India until 21 November 2025, when the Occupational Safety, Health and Working Conditions Code, 2020 repealed it; that Code, chiefly its Chapter XI, now does the same job. The Code places duties on both the principal employer (who must register) and the contractor (who must be licensed), and prescribes registers, returns and wage and welfare obligations. This guide explains the whole picture; for the step-by-step licence process, see the CLRA licence guide.

When the Code applies

The OSH Code's contract labour chapter applies to an establishment with 50 or more contract labour, and to a manpower supply contractor who employed 50 or more, on any day of the preceding twelve months (section 45). The old CLRA figure was 20, and several states had amended it, so check the rules your state has notified under the Code.

It covers workers supplied by a contractor to a principal employer for the principal employer's work. It does not cover genuinely independent work, and some categories of intermittent or casual work can fall outside it, which is why the specific arrangement matters.

Who is responsible: principal employer vs contractor

The principal employer is the entity for whom the work is done. It must register its establishment under the OSH Code (section 3), provide the welfare facilities the Code requires to contract labour (section 53), and, critically, is liable to pay the workers' wages if the contractor fails to.

The contractor supplies the workers. It must hold a licence where the threshold is met and intimate each work order to the licensing authority (section 50; the old CLRA rules required a licence for each principal employer), pay wages on time, maintain the registers, and provide the wage slips the Code requires. Both parties carry duties, and both can be penalised.

Registers, returns and records

A licensed contractor typically maintains a register of workmen, a wage register and a muster roll, issues wage slips, and displays the prescribed abstracts and notices at the workplace.

Returns are periodic: contractors generally file a half-yearly return and principal employers an annual return, though formats and portals are increasingly state-specific and online. The registers must reconcile with what was actually deployed and paid, which is why keeping them by hand across many sites is where firms slip.

Wages, welfare and the principal-employer liability

Contract workers must be paid at least the applicable minimum wage for their category and zone, on time, with the statutory deductions (PF, ESI, PT, LWF) made and deposited. Welfare facilities such as canteens, restrooms, drinking water and first aid may be required depending on headcount and duration.

The single biggest risk for a principal employer is vicarious liability: if the contractor does not pay wages or make statutory contributions, the principal employer can be made to pay. That is why principal employers increasingly require visibility into each contractor's compliance, not just an invoice.

Penalties and common failures

Deploying without a valid licence or registration, exceeding the sanctioned strength, or failing to maintain records and pay wages are contraventions under the OSH Code, attracting penalties and, on a repeat conviction, possible imprisonment (Chapter XII). The most common failures are lapsed licences, missing or unreconciled registers, late returns, and underpayment against a revised minimum wage.

How ZeniaHR helps

ZeniaHR runs the operational side of CLRA on one worker record: it captures contractor-wise muster at each principal-employer site, maps it to the muster roll and wage register, computes wages against the applicable minimum, and tracks each licence and return with alerts before anything lapses. See contract labour compliance software and contract labour management software.

Frequently asked questions

Who needs a CLRA licence, the contractor or the principal employer?

The contractor obtains a licence where the threshold is met (under the old CLRA rules, one for each principal employer); the principal employer registers its establishment. Both carry duties under the OSH Code, 2020, which replaced the Act.

What is the threshold for CLRA to apply?

Since 21 November 2025 the OSH Code applies the contract labour rules at 50 or more contract labour on any day of the preceding twelve months (section 45); the old CLRA figure was 20. Confirm the rules your state has notified under the Code.

Is the principal employer liable if the contractor does not pay wages?

Yes. If the contractor fails to pay wages, the principal employer can be made to pay them and recover from the contractor. This is why principal employers seek visibility into contractor compliance.

What registers must be maintained under CLRA?

Typically a register of workmen, a wage register and a muster roll, along with wage slips and the prescribed displayed notices. Formats can be state-specific.

How is this different from the CLRA licence guide?

This guide explains the whole contract labour regime and both parties' duties. The CLRA licence guide is the step-by-step process a contractor follows to obtain the licence itself.

This guide explains the general position under the contract labour provisions of the OSH Code, 2020, which replaced the Contract Labour (Regulation and Abolition) Act, and the rules made under it. Thresholds, forms, returns and welfare requirements vary by state and change over time; confirm the current requirement on the official state labour portal before you act. This is general information, not legal advice.

Run CLRA compliance from live operations

ZeniaHR generates the CLRA registers and returns from the same muster and wage data that runs payroll, and alerts you before a licence lapses. Built for manpower and staffing firms.

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