Contract Labour Compliance — CLRA Act

CLRA applies to: establishments employing ≥20 contract labourers (directly or indirectly) on any day in the preceding 12 months; and contractors employing ≥20 contract labourers. Both the principal employer and the contractor must obtain separate registrations under CLRA. States have varying thresholds — some states reduce the threshold to 5 or 10 workers.

Principal employer must: (1) register the establishment (Form I) before engaging contract workers; (2) ensure the contractor has a valid contractor licence (Form IV); (3) provide welfare facilities (canteen, rest rooms, first aid, drinking water) if the contractor fails to provide; (4) ensure contract labourers are paid wages in the employer's presence or by a nominee; (5) maintain a register of contractors (Form XII). Violation: ₹500–₹10,000 fine plus imprisonment up to 1 year.

The contractor must: obtain a licence (Form IV) from the licencing officer before deployment; pay wages by the 7th of each month (or 10th if over 1,000 workers); maintain a register of wages (Form XVII), muster roll (Form XVI), and deduction register (Form XX); display the abstract of CLRA Act at the worksite. The licence specifies the number of workers — exceeding the licensed count without amendment is a violation.

The appropriate government can prohibit contract labour in specific processes under Section 10 of CLRA after consulting the Central/State Advisory Board. On abolition in a notified process, the contract labourers become employees of the principal employer — not automatic; the Supreme Court in SAIL v National Union (2001) held that absorption is not automatic but the government may direct it. Abolition is sector/process-specific and does not cover all contract labour.

The Code on Social Security 2020 and the Code on Occupational Safety, Health and Working Conditions (OSH Code) 2020 subsume CLRA. Once notified, CLRA will be repealed. The OSH Code raises the contract labour threshold to 50 workers for establishments and contractors (vs. 20 under CLRA). However, as of June 2026 the Codes remain not operationalised — CLRA continues in force. Employers should monitor state-level operationalisation notifications.