Seeking Expert Insights: 35 Real-World Questions on Contract Labour Challenges and Solutions

Dear Friends,

I am sharing herewith 35 important questions related to the engagement of contract labour and looking forward to the answers from Labour Laws Experts and CITEHR members.


1. What are the differences between contract labour and outsourcing? Which is the better option and why?

2. Is the Contract Labour Act applicable when jobs and services are outsourced?

3. What are the non-perennial and non-permanent jobs which can be assigned to contract labour?

4. Can we have permanent employees and contract labour working side by side on the same job?

5. What is the best ratio between permanent and contract labour? Can we engage 100% contract labour?

6. Can we have different wages and other terms for permanent employees and contract labour doing the same or similar job?

7. Can we transfer casuals/temporaries to the rolls of a contractor?

8. Application and implication of P.F., ESI, Bonus, Gratuity, and other statutory benefits to contract labour, casuals, etc., and how to ensure compliance?

9. How to ensure submission of PF and ESI returns by the contractor?

10. How to get a new PF code number from PF authorities?

11. Security, Housekeeping, Drivers, Canteen, Horticulture, etc., on contract/voucher payment. Sustainability? Are there any case laws?

12. Liability of the principal employer for injury, illness, disability, death, etc.

13. Can and should the employer have a say in the number and selection of contract labour?

14. Who is to take disciplinary action against contract labour? Under what rules? Are standing orders applicable to contract labour?

15. Is it necessary and desirable to issue an employment card/gate pass/identity card to contract labour? If so, under whose authority/signature? Safeguards?

16. Each contractor engaging less than 20 but together they engage more than 20. Will the provisions of registration, licensing, and other statutory provisions apply?

17. Statutory requirements and precautions in awarding contracts for safeguarding management's interests.

18. If the license is not renewed but the contractor continues to work—legal implications including permanency?

19. Contractor changing but contract labour not changing—implications, precautions required?

20. Contract terminated due to unsatisfactory performance of the contractor, contractor leaves—can contract labour claim permanency? What should the employer do?

21. Contract labour terminated through a settlement. Should the principal employer be a party?

22. When the contractor runs away leaving his workforce and supervisor, how to manage work and labour and who is to handle pending conciliation reference?

23. What to do if the contractor refuses to pay the labour?

24. What actions are required to be taken by the management after the abolition of contract labour?

25. Can management challenge the decision of the appropriate government regarding the abolition of jobs?

26. Should contractor and contract labour be rotated? Why? How often?

27. How to reduce the number of contract labour?

28. Contract labour demanding permanency—How to handle?

29. Contract labour demanding similar benefits as permanent employees. Is the claim legally valid?

30. Is the Pension Scheme also applicable to contract labour?

31. Is the Minimum Wages Act applicable to contract labour?

32. What is the liability of the Principal Employer in the case of sub-contracting?

33. What are the implications of the Supreme Court Judgment in the SAIL case reversing the earlier Air India Judgment?

34. Implications and liabilities of temporary/casual/probationer employees/trainees? Is there any maximum duration?

35. What is the relevance of 180/240 days and what are the implications of breaks?

Regards,

Vikram Singh
[Phone Number Removed For Privacy Reasons]
[Email Removed For Privacy Reasons]

You may find answers to most of your questions in the attached document, which I found while surfing the net. The source is unknown.

Regards,
Swapnil

Dear Vikram,

Here is the full answer to most of your questions, thanks to Mr. Swapnil.

Q. What is the difference between contract labour and outsourcing? Which is the better option and why?

Ans. Neither the term "Contract Labour" nor the term "outsourcing" has been defined under the Contract Labour Act. The intention and ultimate net result of both terms appear to be the same. The term "outsourcing" has been coined very intelligently to create confusion between the two.

"Contract Labour" is a term applied to manpower engaged by somebody else to produce a given result for the principal employer where this manpower has no direct employer-employee relationship with the principal employer. This includes the simple supply of manpower to the principal employer by a contractor where the contractor is not involved in a specified activity.

"Outsourcing" conveys more or less the same meaning. When an employer engages somebody else to deliver a specified result where the employer is not involved with the manpower engagement, supervision, or control activity over such manpower. If any activity outsourced to someone is carried out outside the premises of the principal employer, such manpower engaged will not be termed as "workman" under the Contract Labour Act.

It is not the nomenclature of the term but the real intent that decides whether it is Contract Labour or outsourcing. It can also be said that contract labour reflects manpower whereas outsourcing reflects the job or the activity.

The Bombay High Court in the case of Sudhir Kondiram Jadhav (2002 I CLR 97) has held that workers employed by agencies will be considered Contract Labour under the Act.

Q. Is the Contract Labour Act applicable when jobs and services are outsourced?

Ans. When jobs and services are outsourced and carried out in premises not under the control and management of the principal employer, the Contract Labour Act will not apply. For all other jobs and services outsourced that are carried out on the premises of the principal employer, the Act will apply.

Q. What are the non-perennial and non-permanent jobs that can be assigned to contract labour?

Ans. Neither the term "perennial" nor "permanent" is defined under the Act. The word "perennial" has been used under sec. 10(2)(b) where it is mentioned that if the job exists for a sufficient duration, it will be considered of "perennial" nature. The act nowhere prohibits the engagement of contract labour on any job, activity, or service unless prohibited by the Appropriate Government under the provisions of the Act.

Andhra Pradesh State Government amended the CL Act in 2003 and clarified the jobs/activities on which contract labour can be deployed, but no other state has moved in this direction to bring clarity on this point. At present, contract labour can be engaged on any permanent nature of job in a strict legal sense, but it should be avoided as this may become a basis for the state government to prohibit the employment of contract labour on that particular job/activity/service in the industry.

Q. Can we have permanent employees and contract labour working side by side on the same job?

Ans. Yes! As explained above, unless it is prohibited by the Government.

Q. What is the best ratio between permanent and contract labour? Can we engage 100% contract labour?

Ans. There is no guideline provided under the Act about this ratio. The concept of engagement of contract labour or giving a job on a contract basis originated to get things done in a given time frame to be paid based on the net result and not on the number of manpower involved. This concept can always be applied to those areas of the industry where activities do not require full-time workers for the major portion of the working hours or any sudden increase in the volume of work that needs to be accomplished in a specified time. So, 100% contract labour can't be engaged unless the whole industry is leased out to someone else, who ultimately becomes the principal employer for the manpower engaged by him. In my view, the ideal ratio of contract labour, to maintain healthy industrial relations, should be around 70/30 (70% to be engaged by the principal employer and 30% through contract labour).

Q. Can we have different wages and other terms for permanent employees and contract labour doing the same or similar job?

Ans. Though rules framed under the Contract Labour Act by the Central Government as well as State Governments carry a condition [central rule 25 (2) (v)(a) & (b)] that where the workmen employed by the contractor perform the same or similar kind of work as the workmen directly employed by the principal employer of the establishment, the wage rates, holidays, hours of work, and other conditions of service of the workmen of the contractor shall be the same as applicable to the workmen directly employed by the principal employer of this establishment on the same or similar kind of work. But, recently the Supreme Court in the case of U.P. Rajya Vidyut Utpadan Board case (2010 LLR 453) clarified that the nature of work, duties and responsibilities attached to the job of permanent workmen and contract labour are relevant in comparing and evaluating whether the workmen employed through a contractor perform the same or similar kind of work as the workmen directly employed by the principal employer.

The degree of skills and various dimensions of a given job have to be considered to reach a conclusion that the nature of duties of the workmen in two categories are on par or otherwise. Often the difference may be of a degree. It is well settled that the nature of work can't be judged by the mere volume of work; there may be a qualitative difference regarding reliability and responsibility.

However, the Madhya Pradesh High Court in the case of Steel Authority of India Ltd. (2007 LLR 79) has held that the workers through a contractor under the CL Act will be entitled to equal wages that were being paid to regular employees.

Q. Can we transfer casuals/temporaries to the rolls of a contractor?

Ans. As a principal employer, one should not do it. Transfer from the rolls of the principal employer to the rolls of the contractor establishes that the contract is sham and camouflage, and the real control and supervision are of the principal employer. Even if one wants to do this, the better way would be to first clear full and final accounts, sever the relationship of the principal employer and casual/temporary workmen by proper documentation. Then the contractor can engage/employ such casual/temporary workmen on his rolls. In this whole process, documentation is the key to establishing whether the arrangements are genuine or fake.

Q. Liability of the principal employer for injury, illness, disability, death, etc.

Ans. The principal employer is fully responsible in the case of injury, illness, disability, or death unless the contract labour is covered under ESI with his contractor employer.

Q. Can and should the employer have a say in the number and selection of contract labour?

Ans. No! Once the job/services/activities are allocated to a contractor under a proper agreement, the principal employer should not have a say in the number and selection of contract workmen, at least on documents. If the principal employer is selecting the contract labour, appointing them under the name of the contractor, it is sufficient to establish the employer-employee relationship between the principal employer and the so-called contract labour.

Q. Who is to take disciplinary action against contract labour? Under what rules? Are standing orders applicable to contract labour?

Ans. The contractor as an employer in relation to contract workmen should take disciplinary action against such errant workmen under the service rules of his organization/terms of employment. Standing Orders are not applicable to contract labour as the definition of the workman under the Industrial Employment Standing Order Act does not cover contract labour unless your Standing Orders cover this category.

Q. Is it necessary and desirable to issue employment card/gate pass/identity card to contract labour? If so, under whose authority/signature? Safeguards?

Ans. Yes! It is very much desirable. The issue of an employment card/identity card is an obligation under the provisions of the Contract Labour Act and rules. The employment card/Gate pass/identity card should be issued by and under the seal of the contractor because he is their employer. The management of the principal employer should not involve themselves in this activity.

Q. Each contractor engaging less than 20 but together they engage more than 20. Will the provisions of registration, licensing, and other statutory provisions apply?

Ans. In this situation, the principal employer will be under a legal obligation to obtain registration under the Contract Labour Act, but individual contractors having less than 20 workmen will not be required to obtain a license under the act as the same does not apply to them. However, there is a catch. If a contractor employs 20 persons on any day during the preceding 12 months, the act will apply.

Q. Statutory requirements and precautions in awarding a contract for safeguarding management's interests.

Ans. The principal employer should execute a well-drafted agreement and other documents to establish the relationship of principal employer and contractor. The principal employer should not establish supervision and control over the contract labour for carrying out any activity. It is advisable to have expert services for this whole process because any minute lacunae in drafting various documents may land the principal employer and the organization in trouble in case of a dispute. I strongly discourage the growing habit of the copy-paste exercise normally concerned managers do while engaging a contractor for their organization in terms of various documents. This should not be done because each organization has its own specifications, limitations, nature of work, and requirements, etc.

Q. License not renewed but contractor continues to work – legal implications including permanency?

Ans. Even if the license of the contractor is not renewed but continues to work, contractor labour can't claim permanency with the principal employer merely on this ground. However, the contractor can be prosecuted for the violation of the provisions of the act for not getting his license renewed. The Karnataka High Court in the case of Steel

Dear Mr. Vikram ji, Your 35 questions do not fully capture the meaning of the "Contract Labour Act." Firstly, please clarify whether your questions are related to the Act or a general contract with an employee-employer agreement. It is important to first understand the Contract Labour Act.

Regards, PBS KUMAR

I would like to know what the total hours of work are for contract staff, including lunch hours.

Rules framed under the Contract Labour Act by the Central Government as well as State Governments carry a condition (Central Rule 25 (2) (v)(a) & (b)) that where the workmen employed by the contractor perform the same or similar kind of work as the workmen directly employed by the principal employer of the establishment, the wage rates, holidays, hours of work, and other conditions of service of the workmen of the contractor shall be the same as applicable to the workmen directly employed by the principal employer of this establishment on the same or similar kind of work. However, if there is a disagreement regarding the type of work, it shall be decided by the concerned Labour Commissioner.

Thank you.

Dear Mr. Vikram Singh, Here are the answers to the questions you have raised.

1. Differences Between Contract Labour and Outsourcing

The engagement of labour through a contractor for specific tasks, other than core ones in an organization, is generally termed as contract labour. Outsourcing, on the other hand, refers to contracting out certain incidental or lean activities/services to outside agencies. Both involve contractual arrangements between the de facto employer (the principal employer) and the de jure employer (the contractor/service provider). The difference lies in their execution. In contract labour, the contractor supplies the required number of skilled workers, while the principal retains supervision and control. In outsourcing, services are often performed elsewhere under the service provider's supervision. Contract labour is a continuous operation, while outsourcing is typically ad hoc. Contract labour involves legal obligations for the principal employer, whereas outsourcing does not. From an economic and control perspective, contract labour is better for incidental activities, while outsourcing is preferable for effective services and timely delivery.

2. Applicability of Contract Labour Act to Outsourced Jobs

Normally, the Contract Labour Act does not apply to outsourced jobs/services performed elsewhere. However, if they are performed on the principal's premises by the outsourcing agency's employees, the Act applies.

3. Non-Perennial and Non-Permanent Jobs for Contract Labour

Defining non-perennial and non-permanent jobs precisely is challenging as it depends on the context of the trade, business, or core activity. Generally, jobs requiring a short period are non-perennial, and those intermittent or occasional are non-permanent.

4. Permanent Employees and Contract Labour Working Together

Generally, no, as regular engagement of contract labour alongside permanent employees may indicate a sham contract. However, occasional engagement for sudden workload increases may be justified.

5. Best Ratio Between Permanent and Contract Labour

The ratio depends on the core and non-core activities of the establishment.

6. Different Wages for Permanent Employees and Contract Labour

No; Rule 25(2)(v)(a) of the Central Rules, 1971, mandates equal wages and conditions for contract labour and directly employed workmen doing similar work.

7. Transferring Casuals/Temporaries to Contractor Rolls

No.

8. Statutory Benefits for Contract Labour and Compliance

The EPF Act, 1952, and ESI Act, 1948, include contract labour in their definitions of 'employee.' The principal employer must ensure compliance with statutory benefits.

9. Ensuring Submission of PF and ESI Returns by Contractor

Include a clause in the agreement requiring the contractor to submit returns and furnish certificates with monthly bills.

10. Obtaining a New PF Code Number

Members familiar with EPF procedures may provide guidance.

11. Sustainability of Contract/Voucher Payment for Services

If personnel are employed through contractors for incidental jobs not prohibited by notification, it's sustainable. However, statutory obligations may convert them to principal employer employees.

12. Liability of Principal Employer for Employee Injuries

Section 12(1) of the Employees Compensation Act, 1923, holds the principal employer liable for compensation, with indemnification rights from the contractor.

13. Employer's Say in Contract Labour Selection

Yes, for determining the number and skills required, but not for individual selection.

14. Disciplinary Action Against Contract Labour

The principal employer lacks disciplinary control over contract labour.

15. Issuing Employment Cards to Contract Labour

Employment cards in Form XIV are given, and ID cards signed by the contractor may be issued for additional safeguards.

16. Applicability of Statutory Provisions for Contractors Engaging Less Than 20 Workers

The CLRA Act applies if the total contract labour exceeds 20, requiring principal employer registration.

17. Precautions in Awarding Contracts

Ensure the job is not prohibited, assess contractor compliance, and consider insurance coverage and statutory contributions.

18. Legal Implications of Unrenewed Contractor License

Contractors working without a renewed license commit a criminal offense, but the Act does not mandate automatic absorption of contract labour.

19. Contractor Change Without Labour Change

This situation, known as an "umbrella contract," may indicate a sham arrangement and unfair labour practice.

20. Contract Termination Due to Unsatisfactory Performance

Contract labour engagement ends with the contract. Seek a new contractor.

21. Contract Labour Terminated Through Settlement

The principal employer need not be a party.

22. Contractor Abandonment

Stop engaging the workforce, settle wages, and inform the conciliation officer.

23. Contractor Refusal to Pay Labour

Make direct payments and debit the contractor's account.

24. Actions After Abolition of Contract Labour

Do not engage contract labour in prohibited activities. Absorption depends on various factors.

25. Challenging Government Decisions on Job Abolition

Yes, if there are valid grounds.

26. Rotation of Contractor and Contract Labour

No.

27. Reducing Contract Labour Numbers

Engage multi-skilled regular workers for perennial and intermittent jobs.

28. Handling Contract Labour Demands for Permanency

Contract labour cannot claim permanency unless the contract is deemed a sham. They may raise disputes for absorption.

29. Contract Labour Demanding Similar Benefits

Yes, if engaged in similar jobs as permanent employees.

30. Applicability of Pension Scheme to Contract Labour

Yes.

31. Applicability of Minimum Wages Act to Contract Labour

Yes.

32. Liability of Principal Employer in Sub-Contracting

The principal employer's liability remains unchanged.

33. Implications of Supreme Court Judgment in SAIL Case

The judgment clarifies the determination of the "appropriate government" and states no automatic absorption of contract labour.

34. Implications of Temporary/Casual/Probationer Employees

The classification of workmen depends on the industry and employment nature. Probation periods and temporary work conditions vary.

35. Relevance of 180/240 Days and Implications of Breaks

Sec. 25B of the Industrial Disputes Act, 1947, defines continuous service, considering interruptions for sickness, leave, and accidents.

I have tried to answer all 35 questions to the best of my knowledge and experience. Corrections or improvements are welcome.

Regards,

All your posts are really interesting and informative. A person like you, with so much experience, spending time on equipping young practitioners, is truly appreciable. It shows the interest you have in building HR competency for the nation as well as the passion you have towards the community.

Query Regarding Payment of Bonus to Contract Labor

I have one query regarding the payment of bonus to contract labor. Why should the principal employer pay a bonus to the contract workmen? Is the contractor not running a separate business, and if so, the bonus should come from his profits and not from the principal employer. Please clarify.

Regards,

Dear Raja,

Please refer to my response to query no. 8. As you are well aware, although our Constitution aims at securing living wages for our working class, the actual scenario is quite pessimistic. Both the Central and State Governments continue to include more employments under the Minimum Wages Act, 1948, year after year. To increase wages, bonuses are considered deferred wages and are provided as additional monetary compensation to employees. As I mentioned in my response, these bonuses should be factored into the labor cost by the contractor, making it logical and just for the Principal Employer to indemnify the contractor in this respect. However, your question's rationale is valid. It is important to note that Principal Employers do not provide contract labor with the same level of bonus as regular employees. If I am not mistaken, only 8.33% of the contract labor's wages in an accounting year are added to the contractors' charges. Therefore, even though contract labor receives bonuses solely from the contractor, the Principal Employer holds vicarious liability for their payment.

Thank you.

Below are sections 20 and 21 of the CLRA for your review and conclusions on the bonus liability of the principal employer (PE).

20. Liability of Principal Employer in Certain Cases:

1. If any amenity required to be provided under sections 16, 17, 18, or 19 for the benefit of the contract labor employed in an establishment is not provided by the contractor within the prescribed time, the principal employer shall provide such amenity within the specified time.

2. All expenses incurred by the principal employer in providing the amenity may be recovered from the contractor, either by deduction from any amount payable under the contract or as a debt.

21. Responsibility for Payment of Wages:

1. A contractor is responsible for paying wages to each worker employed as contract labor within the prescribed period.

2. The principal employer must nominate a duly authorized representative to be present during wage disbursement by the contractor. It is the duty of this representative to certify the wages paid.

3. The contractor must ensure wage disbursement in the presence of the authorized representative of the principal employer.

4. If the contractor fails to pay wages within the specified period or underpays, the principal employer is liable to pay the full wages or the outstanding balance due to the contract labor. The principal employer can recover this amount from the contractor as a debt or by deduction from any payable amount under the contract.

Thank you.

Dear Punchbala, I appreciate your work in replying to these questions. At the same time, members should try to find out the general answers themselves after taking a little pain of reading the concerned act. Thanks, dear.

Regards,
Vikram Singh
[Phone Number Removed For Privacy Reasons]
[Email Removed For Privacy Reasons]

Emerging trends in hiring of labor show that contractual labor has become an important avenue for industries. This article from Business Standard is worth reading: [Radhicka Kapoor & P P Krishnapriya: Doing away with unequal contracts | Business Standard Column](http://www.business-standard.com/article/opinion/radhicka-kapoor-p-p-krishnapriya-doing-away-with-unequal-contracts-115091900718_1.html) and comments by readers.

I appreciate the depth of your reasoning in the discussion. It indicates your passion for the subject and your involvement in the work.

Query on Wage Agreement for Contract Labor

I have a query. The contractors' association and the contract labor unions have a wage agreement before the DLC. The agreement witnesses an enhancement of certain allowances from the previous agreement. It continues to be applicable to all those persons and trades who were receiving the allowance during the tenure of the previous agreement. Drivers of outsourced vehicles never received such an allowance, which is specific to dusty areas.

Now, drivers of outsourced vehicles have filed a complaint and are claiming the allowance. The PE stated that it was never paid and it was not applicable, as drivers are not working in the factory area. The agreement does not mention any trade.

Do you think the allowance is payable?

Regards,
KS Murthy

Dear Murthy,

Even though a settlement/agreement makes no mention of the trade in which a particular category of workmen, i.e., in this case, contract labor, is employed, any allowance granted pertaining to the special nature of duties will be applicable only to those engaged in such work and not to others. Therefore, in my opinion, contract drivers cannot stake their claim for a dust allowance.

Hi All,

I have a doubt about the casual employees employed. Can they be involved in the core processes of any factory? Is there any law that states they are not permitted to do core processes?

Kindly provide a valuable answer at the earliest.

Thank you.

Regards,
Smita

Dear Sir,

We have 7 workers working as contractors. The contractor has only 7 workers and is working only for us. Are they covered under the ESI Act?

Request your guidance, please.

B. Vijayakrishnan
9094007603

Your query pertains to casual employees and not contract employees under CLRA. First, you need to understand the term 'casual employee.' A casual employee is someone engaged on a non-regular basis with no systematic working hours. There is no guarantee for them to get work, not even for definite hours.

Apart from casual employees, there are employees engaged to cover leave vacancies or in place of absent employees. For example, in textile mills in Mumbai, there was a system of 'badli employees' who were supposed to remain present at the gate at the beginning of every shift with no guarantee of work.

Nowhere in any labor law is it mentioned that such casual employees, temporary employees, badli employees, or leave vacancy employees should not be engaged in core activities, to my knowledge.

You need to answer this: If a skilled employee engaged in a core activity remains absent, can I not engage a casual employee who can perform this core activity and avoid production loss?

Dear Sir,

We have 8 contractors, each having 7-8 workers engaged in our industry. Does each contractor need to take a license from the labor department? Do we need to take a certificate of registration from the labor department? Do these workers fall under the PF Act, ESI Act, Payment of Bonus Act, and Payment of Gratuity Act?

Please clarify.

M. Srinivas
Bhimavaram

Dear Srinivas,

Strictly speaking, contractors having fewer than 20 workers engaged in the particular work of the Principal Employer need not take a contractor's license under the CLRA Act, 1970; but the Principal Employer has to obtain a registration certificate under the Act.

Thank you all for the insightful discussion on the CL Act.

Could someone clarify the basis on which contract laborers can claim permanent employment rights?

Understanding the Contract Labour System

Strictly speaking, the Contract Labour System is an indirect form of labor used to meet the requirements of only incidental and intermittent nature of works in any establishment. The prudence of any employer, in the interest of the economy of operations, would naturally compel them to outsource such intermittent and incidental activities to another party who has the manpower at their disposal, the ability to monitor work-in-progress, and accomplish the activities in time to the satisfaction of the establishment's employer.

However, over time, this system began to be misused by employers due to the emergence of a surplus supply of labor compared to demand. The resulting effect was the gradual and unscrupulous contractualization of labor, even for the core activities of the establishments, for the sake of operational economy. To address this issue, the Central Government enacted the Contract Labour (Regulation and Abolition) Act of 1970.

Regulatory and Prohibitory Aspects of the Act

The simultaneous existence of incidental and intermittent activities, along with core and perennial activities in every establishment, makes this Act regulatory and prohibitory in its operation. Section 10 of the Act empowers the Appropriate Government to abolish the contract labor system by prohibiting the employment of contract labor in any process, operation, or other work in any establishment based on certain factors. Thus, contract labor, per se, is permissible in the processes, operations, or other works in which it is not prohibited.

Therefore, the claim for permanency or absorption as regular workmen of the Principal Employer is only possible when the contract is deemed as sham by the adjudicator or Court.

Regards,
Vikram Singh

Dear Sir, I am facing a dilemma in deciding how to provide compensation to the worker who passed away on the job. The agency holds a labor license as well as insurance from the M.P. Government, while we, as the principal employer, are registered with the U.P. Government. We issued form V to the agency, and they obtained a license from the MP Government. The accident occurred at a location in MP. However, the ALC has stated that it is not covered under the industrial area and advised us to go to the Labor court. Upon meeting with the advocate at the labor court in MP, the agency was informed that if the principal employer obtains form V from the MP Government and applies for new registration with the MP Government, the court may be more favorable.

Could you please guide us on whether it is possible for a company to be registered with both the UP and MP governments and have this issue resolved? Our primary goal is to resolve this matter promptly so that the dependents of the deceased individual can receive the compensation amount from the insurance.

Thank you.

Is a labor license required to be obtained if we have fewer than 10 employees per deployment location, and the total number of locations is 15? Do we need to verify the above in each state separately? Urgent opinions will be greatly appreciated.

Licensing of Contractors under the CLRA Act, 1970

Licensing of contractors under the CLRA Act, 1970 is a requirement strictly based on the number of contract labor employed by them in every contract they enter into with the Principal Employer, as fixed in section 1(4)(b) or under its proviso thereof. If the number of contract labor engaged in a particular contract work is less than the minimum number prescribed, there is no necessity to obtain a license under section 12 of the Act. However, the number of contract labor required to attract licensing may differ from state to state. Hence, it is necessary to check the criteria in all the states where your locations are situated.

I'm working for an HR outsourcing company that also provides staffing services on behalf of other companies through their payroll. We have a client who acts as a contractor for other major industries, selling and applying their products. To assist with the application process, they engage subcontractors at the workmen level who help with the actual application. We, in turn, act as a subcontractor, providing Application Engineers who are primarily responsible for managing shifts and ensuring that the work is completed by the other contractual workmen engaged by the contractor through other subcontractors. These engineers are also responsible for production and report to the contractor's Accounts Manager and also to the Production Engineer. Their role is purely managerial or supervisory in nature, and they receive salaries ranging from 16K to 30K, excluding benefits such as PF, ESIC, Bonus, and Gratuity. The majority of them hold diplomas or graduate degrees in engineering.

Application of the CLRA Act

According to the definition of workmen under the Contract Labour (Regulation and Abolition) Act, they do not fall under the category of "Workmen." Does the CLRA Act apply to them? In other words, is it necessary to maintain all registers and records as per the CLRA Act for this group? Currently, we maintain a soft copy of their attendance, process payroll through banks, issue payslips, and provide PF regardless of the coverage limit. If they are covered under ESIC, they receive ESIC benefits, or alternatively, they receive insurance under the Employees' Compensation Act.

I seek your valuable advice on this matter.

Thanks and regards,

Koyel Debnath - W.B.

[Email Removed For Privacy Reasons]

[Phone Number Removed For Privacy-Reasons]

Dear Koyel, When there is a multiplicity of applications of Labor Laws to a particular establishment, the application of every such enactment is limited by its scope. When the employees supplied by you to your client are not "workmen" as defined under the CLRA Act, 1970, the Act won't apply in respect of such employees.

Dear Sir,

I want to know the entire process and the total cost incurred to obtain a labor license as a Principal Employer under the CLRA for 100 laborers in Uttar Pradesh. Additionally, I am looking to engage approximately 15 contractors for the completion of the task.

Is it obligatory that only contractors having a valid labor license be engaged? One organization engages fewer than 10 contract laborers through a contractor. Being exempted, the contractor did not have any labor license. What will be the consequences of such engagement?

A.K. Maitra

Dear Friends,

You can also view the independent thread:

E-Book On Contract Labour Engagement - FAQs. This is the upgraded and revised version with answers to most of the similar questions raised by members in this post. You can download this e-book.

Regards