What the template contains
- Parties and definitions block: principal employer, contractor / staffing firm, contract labour, and the exact deployment site or establishment
- Scope of indemnity: the statutory dues covered (wages, EPF, ESI, bonus, gratuity, welfare, licence compliance)
- Wage backstop acknowledgement that mirrors OSH Code Section 55(3)
- Carve-out that leaves the principal employer's own non-delegable duties in place (welfare facilities under Section 53)
- Licence and registration warranties: contractor holds a valid, separate licence for this principal employer
- Documentary-proof and audit-rights schedule: monthly wage proof, EPF ECR, ESI challans
- Recovery and set-off mechanism: deduction from sums payable and from the licence security deposit
- Indemnity cap, duration and survival period
- GST and TDS handling reference for the billed manpower supply
- Notice, dispute resolution and governing-law clauses
- Signature and page-initial block
How to use it
- Fill the parties block with legal names, registered addresses, GSTINs and the exact deployment establishment(s).
- Confirm your contract labour licence covers this specific principal employer, since a separate licence is needed per principal employer.
- Choose the statutory dues you are indemnifying: keep the wages, EPF and ESI items (these track the statutory backstop) and decide on any optional commercial add-ons.
- Retain the carve-out that leaves welfare facilities as the principal employer's own duty under Section 53; do not agree to shift that statutory duty.
- Set the indemnity cap, duration and survival period to match your master service agreement and your risk appetite.
- Attach the documentary-proof schedule (monthly wage payment proof, EPF ECR, ESI challan) so any future recovery claim is evidenced.
- Have both parties initial each page and sign, and file the signed clause with the master service agreement.
- Before relying on any statutory reference, verify current form numbers, applicability thresholds and any state-specific rules against your state's notified OSH rules.
Key fields and clauses
| Field or clause | What to put |
|---|---|
| Parties and deployment site | Legal names, GSTINs and the exact establishment; strongly recommended for enforceability, though not itself a statutory requirement. |
| Wage payment indemnity | Mirrors the statutory backstop in OSH Code Section 55(3); the underlying liability exists in law whether or not this clause is written. |
| EPF and ESI indemnity | Covers contractor default on provident fund and state insurance; a well-established parallel principal-employer liability, so clients require it. |
| Welfare facilities carve-out | Welfare facilities to contract labour remain the principal employer's own duty under Section 53 and cannot be shifted by indemnity; keep this carve-out. |
| Licence and registration warranty | Contractor warrants a valid licence held for this principal employer; engaging labour through a non-licensed contractor is a contravention under Section 54. |
| No-deduction-from-workers warranty | Confirms no fee or commission is charged to the workers, consistent with Section 49. |
| Recovery and set-off | Lets the principal employer recover paid-out amounts by deduction from sums due or from the security deposit, tracking the recovery route in Section 55(3). |
| Documentary-proof schedule | Monthly wage, EPF ECR and ESI challan evidence; optional as drafting but the backbone of any recovery claim. |
| Indemnity cap and survival | Commercial limit and how long the indemnity outlives the contract; optional, negotiate to your risk appetite. |
| GST and TDS clause | Records 18% GST on manpower supply (SAC 9985) and TDS under Section 194C; optional in an indemnity but avoids billing disputes. |
Why this document matters
Contract labour engagement is governed by the Occupational Safety, Health and Working Conditions Code, 2020, Chapter XI, which subsumed the Contract Labour (Regulation and Abolition) Act, 1970 (the labour codes came into force on 21 November 2025 and the Central Rules were notified on 8 May 2026). Section 55(3) makes the principal employer liable to pay contract workers' wages in full, or the unpaid balance, if the contractor defaults or short-pays, with a right to recover that amount from the contractor, including by deduction from sums payable and from the licence security deposit. Section 53 keeps welfare facilities to contract labour as the principal employer's duty, and Section 54 makes engaging labour through a non-licensed contractor a contravention. A well-established parallel principle extends principal-employer liability to EPF and ESI where the contractor defaults. This indemnity clause is a contractual allocation of those statutory liabilities between the parties; it does not remove them as against the worker or the State. Confirm the applicability threshold, licence form numbers and any state-specific rules against your state's notified OSH rules before relying on them.
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Get the templateCommon questions
Does signing an indemnity clause remove the principal employer's statutory liability?
No. Under OSH Code Section 55(3) the principal employer must still pay contract workers' wages if you default; the indemnity only governs reimbursement between the two parties and gives the client a recovery route. Treat it as a payment-discipline obligation, not a loophole.
Can a client ask the staffing firm to indemnify welfare facilities as well?
A client can ask, but welfare facilities to contract labour are the principal employer's own duty under Section 53, so keep the carve-out. You may agree commercially to provide or fund specific amenities, but the statutory duty stays with the principal employer.
Do we need a separate indemnity clause for each client?
Yes in practice. A contract labour licence is tied to a specific principal employer and each service agreement is separate, so fill a fresh clause per client with that client's site, GSTIN and licence reference, and verify your licence covers that principal employer.