Contract Staffing in Mumbai: Do We Need to Register with the Labour Commissioner? Seeking Your Insights

Dear all,

We offer Contract/Temp Staffing in Mumbai and have contract staff on our payrolls working at various customer sites. At each of the customers', the number is less than 20 employees. However, our total employee strength is more than 50. In such a scenario, do we have to register ourselves with the Labour Commissioner?

Some consultants say that since we are into Contract staffing, we have to register ourselves, whereas some say that once the number of employees at one customer site exceeds 20, then the customer has to issue Form 5, and then only we have to register.

I request your learned views and experience on this issue.

Wishing you all a Happy Deepawali & warm regards,

Nilesh Joshi

Dear Nilesh Joshi,

Though you are offering contract staff, it means you are also using a "Name" under which all this work is conducted. According to labor law, you are running an organization and providing contract labor, which is a separate consideration. In this case, you must register for all the legal compliances like ESI, EPF, registration for providing contract labor, service tax, etc.

However, if you are already registered with EPF-ESI, then the Labor Commissioner is aware of your operations. You do not need to register separately with the Labor Commissioner.

Regards

Thanks for your inputs. Please note that we are already registered with ESIC, PF, and PT. I am still not clear on the Contract Labour registration.

Regards,
Nilesh

Understanding Labour Law Requirements for Contract Staffing

You need to first determine which Labour Laws are applicable to you. As you are providing staff to various establishments/companies, there is a contract between you and the companies to whom you supply the staff. Your staff are working on the premises of such establishments/companies. In these circumstances, the Contract Labour (Regulation & Abolition) Act, 1970, is applicable to you. Under this Act, you need to obtain a labor license if, on any day, you supply 20 or more staff to such establishments/companies.

Any questions regarding the law cannot be fully addressed on this platform. Please do not misunderstand me. Law is a very vast and complex subject. One needs to hire a practicing consultant/adviser.

Thanks & Regards,
Keshav Korgaonkar

As a matter of fact, you can register yourself as an establishment for supplying manpower to various agencies/companies. Then you can engage more manpower with various companies. Furthermore, you can register your office premises under the Shops and Establishment Act, so no one can question you for such registration.

Thank you.

Dear Bhaskar ji,

Deepavali Greetings!!!

You are correct. Mr. Nilesh ji has to register his business/establishment under the Shops and Establishment Act. It is a statutory obligation to register any kind of establishment, whether it is proprietary, a partnership, private limited, public limited, or run by a trust, under the Shops and Establishment Act even if no employee is employed.

The query of Mr. Nilesh ji was on registration with the labor commissioner.

Thanks and regards,

Keshav Korgaonkar

Certain establishments are given exemptions from registration, which I want to add. Any queries can be discussed.

Thanks and regards,
Keshav Korgaonkar

Please note that we are already registered with ESI, PF, PT, as well as Shop & Est (for registering with ESI, Shop & Est registration is a prerequisite).

Keshav, thank you for your inputs. Please note that I have mentioned in my post that different consultants have offered divergent views, and that's the key reason for me to seek expert and experienced views on this forum. Let me reiterate that consultants offer views that may not be really or legally correct, and that's when forums like this, where we talk and share, can help immensely as some of us would have already undergone such a predicament earlier. You have mentioned registering only after reaching 20 employees. One of my consultants says the same, whereas the other has different views.

I once again request learned views and experiences.

Regards,
Nilesh Joshi

If you supply manpower to a contractor or any establishment, and if you supply manpower for fewer than 20 members, then it is the responsibility of the principal employer/client to maintain the licensing procedure and other documents on behalf of the contractor.

You have to maintain all the statutory records like the workmen register in total and client-wise, attendance register, overtime register, wages register, PF monthly remittance record, PT remittance record, and ESI remittance record. PF, PT, and ESI records should match with the records of the workmen register, attendance register, wages register, bonus register (Form C of Payment of Bonus Rules), nomination form for every workman (Form F as per Payment of Gratuity Rules), and any other relevant documents as required by your clients/principal employer of any concerned premises.

For that one PE's requirement on the concerned premise, you can obtain a license to satisfy the requirement of that employer. We have to satisfy the requirement of PE; only then can we maintain a cordial relationship, which will sustain our business in the long run.

All the best.

I understand you supply manpower to different clients. You need to apply the following tests:

1. If you provide services to a client that comes under central CL&RA, you need not apply for registration as long as your supply of manpower does not exceed 20.

2. If your client falls under State CL&RA rules, please check the applicability strength for registration with the labor commissioner.

3. If you supply manpower to different states, you need to comply with that state's rules like CL&RA, ESI, PT, etc. In such a case, please check your State CL&RA rules; if it states that a contractor has to register even if the engagement strength is less than 20, you have to apply for registration with the concerned labor commissioner.

Regards,

Please have a look at http://labour.nic.in <link updated to site home> (from the Government of India website).

The act states that it applies to any contractor who employs more than 20 workmen. No, it's not 20 per location. The act also states that all contractors covered under the act need a license. Therefore, in your case, a license is required.

Meanwhile, the specific terms of the license and the conditions under which it will be issued depend on the rules that are notified by each state. You will need to review the rules in your state. Where are you located? Or, more precisely, in which states do you supply your contract labor?

It is as simple as that. The act states that 20 or more than 20 workmen, who are actually under the payroll of the principal employer directly or indirectly, need to be registered for an LC License. Whether it be through outsourcing from a third party or the principal employer, at the end of the day, the principal employer is held responsible for the abidance of the law, not the contractor, since the work is done at his site. However, the principal employer has to enforce the same laws to be followed by the contractor/third party before appointing them through mutual agreements. More precisely, contractors hiring the manpower and deploying it at the client's site will have to obtain the LC License for the client's sake. It is also true that security services will not require an LC where such services are governed by the Security Agencies Act 2005 and the state/district boards.

Thanks and warm regards,

B K Majumdar

[Phone Number Removed For Privacy Reasons]

Since you are a Manpower Provider company with 50 employees working for different clients, if their salaries are prepared by your company, then your company has to be registered under the Shops & Establishment Act. If your company is preparing the salary for more than 20 employees, then Provident Fund (for 20 employees) and Employee State Insurance (for 10 employees) are also applicable to your establishment.

Labor License Requirement

Regarding your second question, if the number of employees provided by your company exceeds 20 at any given day at your client's site, you will need to obtain a labor license. Please note that different companies require different labor licenses depending on the number of employees exceeding 20.

Kindly remember,

Regards,
Ratikanta Rath

There is no dispute at all. When, as a principal employer, you agree to employ contract labor in your establishment, it is incumbent on the principal employer to obtain a Registration Certificate. Hence, all employers employing fewer or more than 20 contract laborers should obtain a license from the labor commissioner.

You are providing employment for more than 20 persons, paying them, and exercising ultimate control over their nature of work and place of work. Here, the meaning of the master-servant relationship is established beyond doubt. Therefore, it is deemed that you are a company employing 50 workers.

Since you are providing contract labor to other establishments, you will be governed by the provisions of the Contract Labour Act. Accordingly, you will have to comply with it. Please notify this to the Commissioner of Labour.

Warm regards,
Kathirvel HR Executive

Discussion on Labour Registration Requirements

I work for an infrastructure company. Here is a brief note on the point of discussion:

The project was allocated by the Government of India to a Public Sector Undertaking (PSU) for implementation in the state. The PSU is registered with the Department of Labour, Central. However, for the execution of the project, Form V was issued by the end beneficiary, i.e., the state department. Consequently, we obtained the license from the Department of Labour, State. All formalities such as renewal, returns, etc., are being complied with the Chief Labour Officer (CLO), State.

The PSU is not registered with the state, and we do not have registration with the Department of Labour, Central. The Department of Labour, Central is now insisting on us registering with them.

Questions:

1. Would registrations with either the state or central authorities not be sufficient?
2. In the given scenario, where should we register?

Please help.

Regards,
Srinivas

According to my knowledge, a contract license is given for a specific industry for a specific purpose, wherein the principal employer has to give a declaration in Form V. Therefore, there can be many licenses for one contractor. We are also in the contracting business. When we canceled a contract with one company and entered into a contract with their sister concern, we had to cancel the old license and get a new one, as changing the name or adding new parties on one license is not allowed. Therefore, if you are not providing more than 20 persons in one organization, you need not take any license.

With warm regards,
Nitin Tadvalkar

That statement does not match up with what I am reading in the act. The act says every contractor who has 20 or more employees needs to have a license. So if he has fewer than 20 in one location but more in others, it will need a license for every location.

I went to the Labour Commissioner's office and was informed that a general license cannot be given, as the license requires Form V from the Principal Employer. In case there are fewer than 20 employees with any client, they will not provide Form V, and therefore, the license cannot be obtained. Additionally, as I mentioned earlier, the license is specific to the industry and cannot be a general license.

This is the situation in Maharashtra. There may be different rules in other states, but I doubt it very much.

Regards

You are right, for contracting agencies, the principal employer has to issue Form V and a copy of the agreement to procure a license for the people deployed at a specific site for working. It is also true that for any business entity where the employees are more than 20 on their payroll, the company has to obtain a license as well, for which Form V will not be required.

Thanks and regards,
B K Majumdar

Clarification on Licensing Requirements for Contract Staffing

I went to the labor commissioner's office and was informed that a general license cannot be given as the license requires Form V from the principal employer. In case there are fewer than 20 employees with any client, he will not provide Form V; therefore, the license cannot be obtained. Moreover, as I stated earlier, the license is for a specific industry; it cannot be a general license. This is the case in Maharashtra. There may be different rules in other states, but I doubt it very much.

Same rule everywhere. But the act says you need a license if you have 20 contract workmen. So it has to be done. The principal employees have to provide Form V.

Regards,
Nitin Tadvalkar