Is a Labor License Needed for Contractors with Fewer Than 20 Workers? Seeking Advice

Labor License Requirement for Contractors

Just a small query I want to share with you all and need your views on it. Is it mandatory for a contractor to obtain a labor license if the number of workers employed by them is less than 20? What if we have a job contract with them? We have listed them as our contractor in the license obtained from the labor office. Please advise.

Regards,
Ranjeet

It is better to have a license so that the liability of the principal employer shall not be there. If the employees of the contractor are working on your premises, then it's better to have a license.

Regards,
Kamesh

In terms of Section 12 read with Section 1 of the Contract Labour Act 1970, a contractor who employs twenty or more contract laborers to execute any work through them is required to obtain a license under the Act. If the contractor is employing fewer than twenty contract workers at any point in time, he does not need to have a license under the Act. However, in my view, a contractor who executes work through contract labor in more than one establishment is also required to obtain a license if the number of contract workers in all the establishments is 20 or more, even if he employs fewer than 20 contract laborers in one establishment.

As the principal employer, it is advisable to engage a contractor who has a labor license.

Regards,
B. Saikumar HR & Labor Law Consultant Chipinbiz Consultancy Pvt. Ltd Mumbai [Phone Number Removed For Privacy Reasons]

The Contract License shows that the contract labor belongs to a particular contractor and works for the employer through the contractor for contract works. The indirect relationship is confirmed by the contract.

Whereas, if the Contract Labor License is not there, there is every possibility that the labor working will be construed as direct labor employed by the employer. The contract between yourself and the contractor will not hold good. In case of any risk, the employer is liable.

Regards,
D. Gurumurthy
LL. HR & IR Consultant

As rightly mentioned by Mr. Gurumurthy, it is better to engage contract labor through a contractor. If you don't require 20 laborers, it's better to engage 20 for some time, obtain a license, and afterwards reduce the number. This approach ensures that you are safe. Failing to do so may lead to the labor working being construed as direct labor, potentially raising issues of regularization over time.

Regards,
Kamesh

Dear All, Thank you for your replies, which were right on target. We have engaged contractors for horticulture, wherein we have a job contract with them. Is such regulation mandatory for them? Can you provide me with references to cases where disputes regarding employment arise due to the unavailability of the labor license, even when the number of employees engaged by them is less than 20? I will need this information to discuss with my manager.

Regards,
Ranjeet

Hi Ranjeet,

This is a reply to your query regarding the conditions for obtaining the labor license for contractors. According to the Central Rules for Contract Labour (Regulation & Abolition) Act 1972, the condition for obtaining the labor license is as follows: if the number of contract workers is greater than or equal to 20, it is the principal employer's responsibility to obtain the labor license. If we have a job contract with them, then it depends on the work order with the principal employer and the number of manpower proposed in the work order.

Regards,
Bhagat Singh
HR Executive
Shree Nakoda Ispat
Raipur, Chhattisgarh
[Phone Number Removed For Privacy Reasons]