What the template contains
- Parties, recitals and definitions: legal names, registered addresses, GSTINs and the principal employer / contractor roles
- Scope of services and nature of work: the activities the supplied workers will perform and the site location
- Term, renewal and notice period
- Deployment schedule: headcount, worker categories, skill grades, shifts and reporting location
- Wages and statutory benefits: minimum / floor wage, EPF, ESI, bonus, gratuity and paid leave treated as cost elements
- Contractor licensing and registration warranties
- Billing, service charge (agency margin) and GST at 18% on the full billed value
- Payment terms, invoice cycle and TDS deduction
- Principal employer obligations: welfare facilities and site conditions
- Wage-payment mechanism and the principal employer backstop
- Indemnity, insurance and limitation of liability
- Replacement, performance standards and absenteeism cover
- Confidentiality, data protection and background verification
- Termination, exit and handover of compliance records
- Dispute resolution, jurisdiction and governing law
- Annexures: rate card, deployment list, compliance checklist and a sample tax invoice
How to use it
- Fill in the legal names, registered addresses and GSTINs of both the contractor and the principal employer.
- Confirm your contract labour licence position for this specific principal employer: a contractor needs a separate licence for each principal employer, and the applicability threshold (the OSH Code sets it at fifty or more contract labour) must be checked against your state's notified rule.
- Describe the scope and nature of work precisely, and check it against the core-activity restriction before agreeing to supply.
- Attach the rate card and deployment schedule as an annexure rather than burying rates in the body, so revisions stay easy.
- State wages at or above the applicable minimum wage / floor wage, and name the wage period and the payment date.
- Set out the statutory cost split (EPF, ESI, bonus, gratuity, leave), your service charge, and GST at 18% shown separately on every invoice.
- Fill the payment terms and record that the client will deduct TDS under Section 194C and reflect it in Form 26AS.
- Confirm in writing which welfare facilities the principal employer provides at the site.
- Have both authorised signatories sign, exchange copies, and retain the agreement with your wage registers, ECR challans and tax invoices.
- Get the draft reviewed by a lawyer for your state before signing: thresholds, licence form numbers and professional tax rules vary by state.
Key fields and clauses
| Field or clause | What to put |
|---|---|
| Parties and principal employer identification | Full legal names, addresses and GSTINs that fix who is the contractor and who is the principal employer. |
| Scope and nature of work | Defines the activities supplied; note the OSH Code Section 57 restriction on contract labour in core activities. |
| Contractor licence warranty | Contractor confirms a valid licence under OSH Code Section 47; supply without one is a contravention under Section 54. |
| Wages clause | Wages at or above the minimum / floor wage under the Code on Wages, with the wage period and payment timeline stated. |
| Statutory contributions | Allocates EPF and ESI employee and employer shares and confirms monthly ECR filing and UAN coverage. |
| Wage-payment mechanism and backstop | Wages paid by bank or electronic transfer (Section 55); principal employer must pay and then recover if the contractor defaults. |
| No charge to workers | Contractor will not take any fee or commission from the workers (OSH Code Section 49). |
| Service charge, billing and GST | Agency margin plus GST at 18% (SAC 9985) on the full taxable value, not only on the margin. |
| TDS | Client deducts TDS on labour supply under Section 194C, subject to threshold; reconciled via Form 26AS. |
| Welfare facilities | Records that the principal employer provides welfare facilities to the contract labour (Section 53). |
| Indemnity and liability | Contractor indemnifies the client for its own statutory defaults; liability caps and insurance defined. |
| Experience certificate and records | Contractor issues experience certificates on demand (Section 56) and maintains statutory registers. |
| Termination and exit | Notice, wind-down of deployment, final billing and handover of compliance records. |
| Dispute resolution and governing law | Names the forum, seat and governing law that apply to disputes. |
Why this document matters
This agreement is made relevant by the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code), Chapter XI, Part I, which governs contract labour and which subsumed the Contract Labour (Regulation and Abolition) Act, 1970. The labour codes came into force on 21 November 2025, with Central Rules notified on 8 May 2026. The Code requires the contractor to hold a licence to supply contract labour (Section 47) and treats supply by an unlicensed contractor as a contravention (Section 54). It makes the contractor responsible for paying wages by bank or electronic transfer (Section 55), while making the principal employer liable to pay, and then recover, if the contractor defaults, including from the licence security deposit. It places welfare facilities on the principal employer (Section 53), bars the contractor from charging any fee to the workers (Section 49), and restricts contract labour in core activities (Section 57). The Code sets applicability at establishments and manpower supply contractors with fifty or more contract labour (Section 45), but this threshold and the exact licence form numbers vary by state and must be checked against the state's notified rules. On the commercial side, manpower supply attracts GST at 18% (SAC 9985) on the full billed value, and payments for supply of labour attract TDS under Section 194C of the Income-tax Act. Wages must be at or above the minimum wage or floor wage fixed under the Code on Wages, 2019. This is a practical contracting checklist, not legal advice: confirm current rates, thresholds and forms for your state before you rely on it.
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Get the templateCommon questions
Is a written manpower supply agreement legally required?
The OSH Code does not prescribe this single contract as one statutory form, but a written agreement is how a staffing firm proves its scope, its licence position and its allocation of wage and welfare duties. Because the Code makes the principal employer a wage-payment backstop and treats supply by an unlicensed contractor as a contravention, both sides normally insist on a signed agreement before deployment. Separately, the contractor itself must hold a contract labour licence for that principal employer under Section 47.
Who is responsible if the contractor does not pay the workers?
The contractor is primarily responsible for paying wages, and must do so by bank or electronic transfer under Section 55 of the OSH Code. If the contractor fails to pay or pays short, the principal employer is liable to pay the wages in full and can then recover that amount from the contractor, including from the licence security deposit. This is why the agreement should fix the wage rates, the payment date and the recovery mechanism clearly.
What licences and registrations should the contractor hold?
A manpower firm typically holds a contract labour licence under the OSH Code (a separate one for each principal employer), GST registration, EPF and ESI registration, Professional Tax registration where the state levies it, and a Shops and Establishment registration for its own office. A firm supplying security guards additionally needs a PSARA licence from the State Controlling Authority, obtained separately for each state. Confirm current thresholds and forms against your state's notified rules.