Manpower and Staffing Compliance in India: The Complete Guide

ZeniaHR is a manpower and HRMS platform built for Indian staffing and manpower firms. It runs the worker master, attendance, payroll, statutory contributions, and the registers and returns that a labour-supply business must keep, alongside the HR workflows a growing agency needs. This page is the hub for manpower and staffing compliance: it maps, in one place, every licence, registration, register and return a labour-supply agency is expected to maintain, and points to the deeper guides for each. The ground shifted recently. India's four labour codes came into force on 21 November 2025, and the Central Rules were notified on 8 May 2026. The old Contract Labour (Regulation and Abolition) Act, 1970 and the Building and Other Construction Workers Act, 1996 are now subsumed: contract labour is governed by the OSH Code 2020, Chapter XI. So if your agency supplies workers to other establishments, Chapter XI is the statute you live under, and the rest of this guide builds out from there. Answer first: plan for six to eight licences and registrations, then confirm each one against your state.

Who this applies to: contractor, contract labour and the manpower agency

Two definitions from the Code on Social Security 2020 decide whether these rules reach you.

Contract labour means a worker who is deemed to be employed in or in connection with the work of an establishment when hired by or through a contractor, with or without the employer's knowledge, and it includes an inter-State migrant worker. It does not include a regular employee of the contractor (other than a part-time employee) whose employment is governed by mutually accepted standards, who gets periodical increments, social security coverage and other welfare benefits.

A contractor is a person who either undertakes to produce a given result for the establishment through contract labour, or supplies contract labour for any work of the establishment as mere human resource, and the term includes a sub-contractor.

So a manpower or staffing agency that places workers with client establishments is a contractor, and the workers you place are contract labour. That single fact pulls in the licensing, wage-responsibility and register duties described below.

The contract-labour licence under OSH Code Chapter XI

This is the central licence for a labour-supply business.

Applicability (section 45): Part I of Chapter XI applies to every establishment in which fifty or more contract labour are or were employed on any day of the preceding twelve months through contract, and to every manpower supply contractor who employed fifty or more contract labour on any day of the preceding twelve months. The Code text sets this at fifty; under the earlier CLRA regime the threshold was twenty or more contract workmen. State thresholds can vary, so treat fifty as the Code figure to check against your state's notified rule. The Part does not apply to work of an intermittent or casual nature; work is not intermittent if it was performed for more than one hundred and twenty days in the preceding twelve months, or is seasonal and performed for more than sixty days in a year, and the appropriate Government decides any dispute.

Licence requirement (section 47): no contractor to whom this Part applies may supply or engage contract labour, or execute work through contract labour, except under a licence. The licence specifies the number of contract labour who may be supplied or engaged and the security deposit. Where a contractor does not meet the prescribed qualifications, the authority may issue a work-specific licence for a particular work order.

Procedure and validity (section 48): every application is made electronically. A licence issued under section 47(1) is valid for five years for the number of contract labour specified. To increase that number, you apply for an amendment and deposit additional security for the balance period.

Multi-state and all-India (section 47 proviso): to supply or engage contract labour in more than one state, or for the whole of India, you may obtain the licence from the central authority under section 119, which consults the concerned state authorities before issuing it.

Forms and one-licence-per-principal-employer: the legacy forms carried into the rules are Form I (principal employer registration), Form IV (contractor licence application), Form V (certificate by the principal employer) and Form VI (the licence). A contractor needs a separate licence for each principal employer. Confirm the exact form numbers against your state's notified rules.

Work-order intimation (section 50): when you receive a work order to supply contract labour or execute work through contract labour, you must intimate the authority within the prescribed time and manner; failure to do so can lead to suspension or cancellation.

Revocation, appeal and no worker fees: a licence obtained by misrepresentation, or held by a contractor who breaches the conditions, may be revoked or suspended after a show-cause opportunity (section 51). A person aggrieved by an order under sections 47, 48 or 51 may appeal within thirty days (section 52). A contractor shall not charge, directly or indirectly, any fee or commission from the contract labour (section 49).

The licence and registration checklist (the six to eight you plan for)

This is the summary a staffing-firm owner should start from. Treat it as a checklist, not a final list, because the count and the details vary by state and by activity.

That is seven core items. A typical agency carries six to eight, depending on its state and its mix of activities: for example, PSARA applies only if you supply security, and Professional Tax only where the state levies it. The count and the details vary by state and by activity, so confirm each item against your state's notified rule before you rely on it. This checklist appears only on this hub page.

Wages, the principal-employer backstop and non-licensed contractors

Your client cares whether you are licensed, and both of you share exposure on wages.

Non-licensed contractor (section 54): where a principal employer engages contract labour through a contractor who is required to hold a licence but has not obtained one, that employment is deemed to be in contravention of the Code. That is why principal employers insist on seeing a valid licence and a Form V certificate.

Payment of wages (section 55): the contractor is responsible for paying wages to each contract labour before the prescribed period, and must disburse them by bank transfer or electronic mode and inform the principal employer electronically of the amount paid. If the contractor fails to pay in time or short-pays, the principal employer must pay the full amount or the unpaid balance to the workers and recover it from the contractor, including by deduction from amounts payable or as a debt. The appropriate Government may order payment from the contractor's security deposit. A well-established parallel principle applies to PF and ESI where the contractor defaults.

Welfare facilities (section 53): welfare facilities specified under sections 23 and 24 are provided by the principal employer to the contract labour employed in the establishment.

Experience certificate (section 56): on demand, the contractor issues an experience certificate to a contract labour, giving details of the work performed.

Core activity: where contract labour cannot be used

Section 57 prohibits the employment of contract labour in the core activities of an establishment. The principal employer may still engage contract labour in a core activity where the normal functioning of the establishment is such that the activity is ordinarily done through a contractor, or the activity does not require full-time workers for the major portion of the working hours, or there is a sudden increase in the volume of core-activity work that must be completed in a specified time. The appropriate Government appoints a designated authority to decide whether an activity is a core activity. When you scope a placement, check whether the work sits in the client's core activity, because that determines whether the placement is permitted at all.

Inter-State migrant workers (Part II of Chapter XI)

If your placements move workers across state lines, Part II applies.

Applicability (section 59): Part II applies to every establishment employing ten or more inter-State migrant workers on any day of the preceding twelve months.

Duties (section 60): the contractor or employer must ensure suitable conditions of work; in case of a fatal accident or serious bodily injury, report to the specified authorities of both states and to the next of kin; and extend to such workers all benefits available to a worker of that establishment, including benefits under ESI and EPF and the facility of medical check-up.

Journey allowance (section 61): the employer pays every inter-State migrant worker, once a year, a lump sum to-and-fro fare to the native place, with the minimum service for entitlement, periodicity and class of travel as prescribed by the appropriate Government.

Other provisions: portability of public distribution benefits (section 62), a toll-free helpline where provided (section 63), and extinguishment of unsettled past debt on completion of employment (section 65).

EPF, ESI, gratuity and bonus

These are the social security costs you carry on every covered worker, under the Code on Social Security 2020 and the Code on Wages 2019.

EPF: the employee contributes 12 percent of wages and the employer 12 percent, of which 8.33 percent goes to the pension scheme (EPS) subject to the pension wage ceiling and the balance to EPF, plus employer administrative and EDLI charges. Each member has a Universal Account Number (UAN) that is portable across employers; the employer files a monthly Electronic Challan cum Return (ECR) and deposits the contributions.

ESI: the employee contributes 0.75 percent and the employer 3.25 percent; the ESI wage ceiling is Rs 21,000 per month (Rs 25,000 for a person with disability). ESI is administered by ESIC through its regional offices. Verify the current rates and ceiling before you publish figures.

Gratuity: 15 days of wages for every completed year of service (a factor of 15/26) after five years of continuous service; fixed-term employees receive pro-rata gratuity without the five-year condition.

Bonus: under the Code on Wages, Chapter IV, the statutory bonus is a minimum of 8.33 percent and a maximum of 20 percent of wages, with eligibility and ceilings as notified.

Wages under the Code on Wages 2019

Getting the wage base right protects both your compliance and your costing.

Wage definition (section 2): wages means all remuneration capable of being expressed in money, and includes basic pay, dearness allowance and retaining allowance. It excludes a defined list, including statutory bonus, house rent allowance, employer contributions to pension or provident fund, conveyance allowance, overtime, commission, gratuity and retrenchment compensation, subject to the proviso that if the excluded payments together exceed one-half (or the notified percentage) of all remuneration, the excess is added back into wages.

Floor wage (section 9): the Central Government may fix a floor wage, and a state's minimum wage fixed under the Code shall not be less than the floor wage for that area.

Minimum wage (section 5): the employer shall pay wages not less than the minimum rate fixed by the appropriate Government.

Wage period (section 16): the employer fixes the wage period on a daily, weekly, fortnightly or monthly basis, not exceeding one month.

Timelines (section 17): wage-payment time limits follow the wage period; on removal, dismissal, retrenchment, resignation or closure, wages are paid within two weeks.

Paid leave as a cost: under the OSH Code, a worker is entitled to annual leave with wages, calculated as one day of leave for every twenty days of work performed. Treat paid leave as a statutory cost element when you cost a placement.

GST and TDS on manpower supply

Tax on labour supply has two edges: GST you charge, and TDS the client deducts.

GST: manpower supply and staffing services are taxed at 18 percent under SAC 9985, and the tax is charged on the full taxable value of the supply, the total billed amount, not only on your margin. Security services are also taxed at 18 percent, but under the Reverse Charge Mechanism (Notification 13/2017-Central Tax (Rate), as amended by Notification 29/2018-Central Tax (Rate), effective 1 January 2019) the registered recipient pays the GST when the supplier is a non-body-corporate. General manpower supply is not under RCM by default. Input tax credit is available subject to the section 16 conditions. A compliant tax invoice carries the GSTIN of supplier and recipient, the invoice number and date, the description of service (SAC 9985), the billing period, and the tax split: CGST and SGST for an intra-state supply, or IGST for an inter-state supply, at 18 percent. The recipient reconciles input tax credit through GSTR-2B and TDS through Form 26AS.

TDS: payments to a contractor for the supply of labour attract TDS under section 194C of the Income-tax Act, at 1 percent if the payee is an individual or HUF and 2 percent otherwise, subject to the section 194C thresholds.

Registers, records, returns and penalties

The paperwork is a statutory duty, not housekeeping. Under Chapter VIII of the OSH Code, section 33 requires the maintenance of registers and records and the filing of returns. Under Chapter XII, section 96 penalises non-maintenance of registers and records and non-filing of returns; section 94 is the general penalty for offences; and section 98 punishes the falsification of records. Keep the prescribed registers current and file returns on time to stay clear of these penalties.

Gig and platform workers

If your model includes gig or platform work, note that the Code on Social Security 2020 provides for social security schemes for gig workers and platform workers, which may be funded through contributions including from aggregators at a notified rate, credited to a social security fund. The exact rate and scheme are as notified, so treat this as a mechanism to plan for and confirm against the notified scheme.

How ZeniaHR keeps the stack compliant

ZeniaHR is manpower plus HRMS, so the licences, contributions and registers above live in one system. It holds the worker master with each member's UAN, computes EPF and ESI, and produces ECR-ready contribution data; generates the prescribed registers and returns so section 96 exposure is managed; tracks each contract-labour licence with its worker-count limit and five-year validity, and flags the separate licence needed per state and per principal employer; times wage disbursement within the wage period and by bank transfer, with electronic intimation to the principal employer; and produces GST-compliant invoices at 18 percent on the full value with SAC 9985 and both GSTINs. Because so many numbers are set by state notification, keep the platform's thresholds, slabs and rates verified against your state's current rule.

Sources, last verified and legal disclaimer

Official sources relied on: Occupational Safety, Health and Working Conditions (OSH) Code, 2020, Chapter XI (sections 45 to 65), Chapter VII (annual leave with wages), Chapter VIII (section 33, registers, records and returns) and Chapter XII (offences and penalties, sections 94, 96 and 98); the Code on Social Security, 2020 (Employees Provident Fund, Employees State Insurance, gratuity, and gig and platform worker provisions, and the definitions of contract labour and contractor); the Code on Wages, 2019 (sections 2, 5, 9, 16 and 17); the Central Goods and Services Tax Act with the State GST and Integrated GST Acts and rules; Notification 13/2017-Central Tax (Rate), as amended by Notification 29/2018-Central Tax (Rate), effective 1 January 2019; the Income-tax Act, 1961, section 194C; and the Private Security Agencies (Regulation) Act, 2005. Codes brought into force on 21 November 2025, Central Rules notified on 8 May 2026, subsuming CLRA 1970 and BOCW 1996 into the OSH Code 2020.

Last verified: 20 September 2026.

Disclaimer: this guide is general information, not legal advice, and it does not create a lawyer-client relationship. Labour and tax rules change, and many thresholds, fees, forms and rates are set by state notification. Verify each item against the current notified rule for your state and activity, and take professional advice before you act.

Reviewed by: pending named legal review.

Illustrative example: costing and invoicing 50 workers placed with a factory

Illustrative example only. The figures below are used purely for arithmetic and are not minimum-wage, fee or rate assertions. Confirm every rate and threshold against the current notified rule.

Assume your agency, a private limited company, places 50 workers with a factory at an agreed monthly wage of Rs 15,000 per worker. Because the agency employs fifty or more contract labour, the Chapter XI contract-labour licence requirement applies (verify the exact threshold against your state's notified rule).

Per worker, per month: - Wages: Rs 15,000 - Employer EPF at 12 percent: Rs 1,800 (of the employer share, 8.33 percent goes to EPS subject to the pension wage ceiling; administrative and EDLI charges are additional) - Employer ESI at 3.25 percent (the worker is within the Rs 21,000 ceiling): Rs 487.50 - Statutory bonus provision at the minimum 8.33 percent: Rs 1,249.50 - Subtotal statutory cost: Rs 18,537. A gratuity provision at 15/26 days per completed year, and paid leave at one day for every twenty days worked, also accrue as costs.

Add an illustrative agency service charge of 8 percent on the statutory cost: Rs 1,483. Taxable value per worker: Rs 20,020.

GST is charged on the full taxable value, not on the margin alone: 18 percent of Rs 20,020 = Rs 3,603.60. Invoice value per worker: Rs 23,623.60.

For 50 workers: taxable value Rs 10,01,000; GST Rs 1,80,180; total invoice Rs 11,81,180. The invoice carries both GSTINs, the invoice number and date, SAC 9985, the billing period, and CGST plus SGST (intra-state) or IGST (inter-state) at 18 percent.

On payment, the factory (the recipient) deducts TDS under section 194C. As the agency is a company, the rate is 2 percent (it would be 1 percent for an individual or HUF payee), subject to the section 194C thresholds. Whether TDS applies to the value excluding GST is governed by the applicable rule, so verify the current position. The recipient reconciles input tax credit through GSTR-2B and the TDS through Form 26AS.

This is general manpower supply, so GST is paid by your agency in the ordinary way. If instead you supplied security guards as a non-body-corporate to a registered recipient, the Reverse Charge Mechanism would apply and the recipient would pay the GST.

Employer checklist

• Confirm whether your worker count crosses the contract-labour licence threshold in each state where you operate, then apply for or renew the licence (valid five years)
• Hold a separate contract-labour licence per state and per principal employer, and keep the licensed worker-count limit updated by amendment
• If you supply security guards, hold a PSARA licence in each state
• Register EPF and ESI codes, assign a UAN to every member, and file the monthly ECR and deposit contributions on time
• Register for Professional Tax where the state levies it, and Shops and Establishment for your office
• Register for GST once you cross the threshold, and invoice at 18 percent on the full value with SAC 9985 and both GSTINs
• Pay wages within the wage period by bank transfer, and inform the principal employer electronically
• Maintain the prescribed registers and file returns to avoid section 96 penalties
• Never charge any fee or commission to the workers you place (section 49)
• Track inter-State migrant worker counts, since ten or more triggers Part II duties and the yearly journey allowance
• Verify every threshold, fee, form and rate against your state's current notified rule

For the worker

• No fee or commission may be charged to you by the contractor (OSH Code section 49)
• Wages must be paid on time and by bank transfer or electronic mode (section 55); if the contractor fails, the principal employer must pay
• You can demand an experience certificate for the work you performed (section 56)
• You are entitled to EPF, ESI and other applicable benefits, and to annual leave with wages of one day for every twenty days worked
• Inter-State migrant workers are entitled to a yearly to-and-fro journey allowance and to the benefits available to the establishment's own workers

Common questions

Check these for your state

These items are set state by state. Confirm each against your state's current notified rule before you rely on it.

• Contractor licence and principal-employer registration thresholds: verify against each state's notified OSH rule (Code text says fifty; CLRA was twenty)
• Contract-labour licence security deposit amount and licence fee: verify against the state's notified rule
• Exact form numbers (Form I, IV, V and VI): confirm against the state's notified rules
• Professional Tax slabs, applicability and periodicity: verify against each state's notified rule
• Shops and Establishment registration requirements and forms: verify against each state's notified rule
• PSARA licence fees and validity: verify against each state's notified rule
• EPF and ESI current contribution rates and the ESI wage ceiling: verify before publishing
• GST turnover-registration threshold and place-of-supply treatment: verify current rule
• Section 194C interaction with GST (whether TDS applies on value excluding GST): verify current CBDT position
• Minimum wage and floor wage figures for each state and area: verify against current notifications
• Inter-State migrant worker journey allowance periodicity, class of travel and minimum service: as prescribed by the appropriate Government
• Gig and platform worker aggregator contribution rate and scheme: as per the notified scheme
• Whether your specific activity mix triggers additional registrations: verify per state