Understanding the Contract Labour Act: When Do State vs. Central Rules Apply?

I do not have clarity on the applicability of the Contract Labour Act to the organization. When are the State rules applicable, and when are the central rules applicable? Please provide clarity on this.

Dear Mr. Krishna,

Good Evening :)

The license is purely based on the Principal Employer's registration.

The Contract Labour (Regulation and Abolition) Act is a Central Act. However, the State is empowered to make rules, so the state government will have separate rules, but subject to the provisions of the basic Act only. Therefore, the rules may be similar. If there is any variation regarding the licensing procedure or renewal procedure, the rules set by the state will have to be followed.

Regards, Madhu.T.K

Dear,

For the applicability of the Contract Labour (R&A) Act, 1970 to any establishment, we need to examine section 1(4) of this Act. This Act applies to every establishment in which twenty or more workmen are employed or were employed on any day of the preceding twelve months as contract labour. Regarding the applicability of the Rules, we should review the definition of the 'appropriate Govt.' and determine the applicability of the Central or State Govt. If it is the State Government, then we need to specify which State. The State Rules will apply where our establishment is situated; otherwise, we must adhere to the Central Govt. Rules.

With Regards,
R.N.Khola

Sir,

I am in a government organization (herein referred to as the principal employer) and we have around 10 job contracts with various contractors. Five contractors are employing 15 to 20 personnel, and the remaining five are employing more than 30 employees. All these contract workers are working on the premises of the principal employer every day from 0900 hrs to 1700 hrs. Since I am new to this assignment, I need clarification on the following:

(a) Does the Principal Employer have to get registered with the labor commissioner for a license even though it's a government organization? If this government organization is a defense organization and a prohibited place, what are the regulations on this matter?

(b) Is it necessary for the contractor to have a license under the Contract Labor Act?

(c) Apart from the salary, what payments does the contractor have to make such as EPF and ESI? Is the amount that he pays to the employees supposed to be reimbursed by the principal employer? If yes, how?

(d) If the Contractor fails to pay the EPF and ESI, is the principal employer liable to pay the same? And how should the contractor be penalized?

(e) Can you email me a sample copy of a contract that is to be awarded (interested in the legal language - how to ensure the Contractor has a license, how he pays EPF, ESI, and how he provides proof, the penalty clause if he fails to pay them, medical insurance, etc.)?

As you can see, I am completely ignorant about these contracts, and so are all of them in my establishment. We have been operating in this manner for 3-4 years, but unfortunately, nothing has happened. Now that I am aware that such obligations exist, we want to ensure that we correct our mistakes. Please guide me correctly. Thank you.

Sir,

I am in a government organization (herein referred to as the principal employer) and we have around 10 job contracts with various contractors. Five contractors are employing 15 to 20 personnel, and the remaining five are employing more than 30 employees. All these contract workers are operating in the premises of the principal employer every day from 0900 hrs to 1700 hrs. Since I am new to this assignment, I need clarification on the following:

(a) Does the Principal Employer have to get registered with the labor commissioner for a license, even though it's a government organization? If this government organization is a defense organization and a prohibited place, what are the regulations on this matter?

(b) Is it necessary for the contractor to have a license under the Contract Labor Act?

(c) Apart from the salary, what other payments does the contractor have to make, such as EPF and ESI? Is the amount he pays to the employees supposed to be reimbursed by the principal employer? If yes, how?

(d) If the contractor fails to pay the EPF and ESI, is the principal employer liable to pay the same? And how is the contractor to be penalized?

(e) Can you email me a sample copy of a contract that is to be awarded (interested in the legal language - how to ensure the Contractor has a license, how he pays EPF, ESI, and how he provides proof, the penalty clause if he fails to pay them, medical insurance, etc.)?

As you can see, I am completely ignorant about these contracts, as are my colleagues. We have been operating in this manner for 3-4 years, but unfortunately, nothing has happened. Now that I am aware that such regulations exist, we want to ensure that we correct our mistakes.

For banking, insurance, etc., businesses, the central authority and commercial establishments are state authorities.

It depends on the nature of the business and the controlling authority.

Re: Contract Labour Applicable

Hi Sabira,

I have attached my comments which may be useful to you.

Regards,
Balamurugan Sivaprakasam
Head-HR, ICIL - MM Nagar

The question was answered in a different thread as well. Please follow the link: https://www.citehr.com/235995-job-co...ontractor.html.

Regards,
Madhu.T.K

Dear Sabira,

Here are the answers to your questions:

a) The principal employer has to obtain registration under the act irrespective of whether it is a government or private organization. The Contract Labour (R&A) Act applies to every establishment in which twenty or more workmen are/were employed on any day of the preceding twelve months as contract labour. As per Section 2(1)(e), establishment means any office or department of the government or a local authority, or any place where any industry, trade, business, manufacture, or occupation is carried on.

b) No contractor, to whom this act applies, shall undertake or execute any work through contract labour without obtaining a license.

c) There is no rule for reimbursement of PF and ESI amounts paid by the contractor from the principal employer. Basically, it depends on the contract made between the principal employer and the contractor. The contractor fixes his rate, including all the components of payment.

d) If the contractor fails to meet statutory requirements, the principal employer becomes liable. To have the contractor penalized, you may stop payment until the contractor clears all the statutory dues.

e) For a sample copy of the contract, please provide your email ID.

To ensure whether the contractor is complying with the statutory requirements, obtain the following documents:

i) PF challan every month by the 16th

ii) ESI challan every month by the 22nd

iii) Half-yearly return every 6 months (January & July)

iv) Renewal of license every year.

Regards,

Debrishi

Hi Balamurugan,

I have a doubt on the applicability of the Contract Labour Act. The principle of the CLRA Act is not to engage contract employees in the core functions/activities of the organization. However, in APSRTC, the management has been employing contract employees as drivers and conductors. Is this allowed under the purview of the CLRA Act? Could you please shed some light on this matter?

Regards,
Sankar Alla

Certainly, as per the Contract Labour (Regulation and Abolition) Act, the employer, APSRTC, is not expected to engage drivers and conductors through a contractor. Please read as "engage drivers and conductors THROUGH CONTRACTORS" and be sure that these drivers and conductors are engaged through any outside agency. In many public sector units, there is a tendency to employ workers on a contract for a specified period which is beyond the purview of the Contract Labour Act. These employees are also commonly referred to as contract employees or employees on a fixed-term contract. I believe that the drivers and conductors of APSRTC as mentioned in the post are not engaged through a contractor but employed by the APSRTC directly for a fixed term.

Regards,

Madhu.T.K

My queries:

I am a contractor in a construction company, and I want to obtain a license for that. What should I do? Where can I get the license, from the Inspector of Factories or the Inspector of Labour? Please provide me with details.

Dear Member,

If you are required to have a contract labor license, first decide whether the appropriate authority is the Central or State government. Then, contact your local labor office to inquire about the designated Licensing Officer under The Contract Labor Act and the procedure for submitting the application.

Regards,
R.N. Khola

Hi Friends,

I have a question on the Contract Labour Act. According to the Andhra Pradesh State Amendment u/s 2 (dd), the definition of the core activity of an establishment is very clearly defined. My question is whether a gym located on the premises of the principal employer falls under the purview of the core activity. Is a gym considered a service provider if it is within an educational institute (principal employer)?

Kindly provide me with the details as soon as possible.

Regards, SANJAY

Gym or a similar activity within the premises of a school will not be considered a core activity.

Regards,
Madhu.T.K

I have one minor confusion regarding the Contract Labor Act. Is it mandatory to maintain compliance if there are fewer than 20 employees?

Dear all,

I am working as an HR executive in a manufacturing organization. Here, we have engaged a manpower contractor. My question is: what types of forms should be maintained and submitted to the appropriate government as the principal employer? Additionally, which types of forms are required for the annual returns of CL in Telangana state?