Navigating Labor Licenses: Do We Need Separate Licenses for Subcontractors?

Dear Seniors,

Our construction company is executing a project for NTPC (Principal Employer). We have obtained a labor license for 1,000 workmen under CLA, and we have engaged 08 subcontractors who are providing us with manpower to execute the job. Each contractor has EPF codes, and compliance is being carried out under their respective EPF codes.

Principal Employer's Requirement

Now, the Principal Employer is asking us to either cover all these workmen under our Establishment PF code or obtain separate labor licenses for each of our subcontractors. According to the Principal Employer, they do not have any connection with our subcontractors, so they will not accept any compliance (EPF) that is being done under their name.

Query on Labor Licenses

So, my question is, since we have obtained the labor license and all our subcontractors' workmen are covered under the same, do we need to take separate licenses for our subcontractors under the act?

I am waiting for your valuable suggestions.

Thanks and regards,
Jaspal

Contractor Compliance Under CLRA Act

As a contractor, according to the CLRA Act, you cannot engage subcontractors. If you do so, you cannot issue a Form V to them. Therefore, it is better to include all employee names under your EPF code and submit PF amounts accordingly. This way, during the Form 10 (Payment Wage Sheet) presentation, you can easily submit it to the NTPC IR Manager.

You need not deduct the PF for the subcontractor. Instead, you may ask the subcontractor to obtain Form V from the principal employer, NTPC, and request them to submit the PF returns using their code. However, any manpower he supplies through your work order, the rate for his work will be determined by you, not the principal employer. Therefore, there is no issue.

If you have any queries, please call me at [Phone Number Removed For Privacy Reasons].

As per the CLRA Act, you cannot engage a subcontractor. If you do so, you cannot issue a Form V to them. I think it's better to include all employee names under your EPF code and submit the PF amount accordingly. This way, during the Form 10 (Payment wage sheet) presentation, you can easily submit it to your principal employer.

It is a common problem with big corporate houses that they always recognize only reputed contractors instead of engaging petty contractors. NTPC has awarded the work assignment/contract to your company; hence, they will not issue Form No. V to subcontractors, and as such, a significant quantity of manpower is needed in bulk to execute the work. For all subcontractors, you will be the principal employer, and you have to ensure compliance with various labor laws such as the Payment of Wages Act, Minimum Wage Act, CLA, and BOCW Act. You have only one option, which is to communicate with the NTPC management regarding the technicalities of the work. Since the assignment will be divided into different parts, talk with the management in a positive manner and address your issues with them. There will be no violation of the CLA if you deploy petty contractors to different assignments, subject to their commitment and compliance with labor laws.

Mr. Jaspal and other seniors,

Only one thing is justified from all the answers, and that is from Mr. Yadav. He has rightly said that you are the principal employer for your subcontractors, and it is your duty to ensure all labor compliance is followed by them.

Remaining Question

The remaining question is still there. I think if you collect PF submission challans from all of your subcontractors and submit them with your bills, it must be acceptable by NTPC. You may give in writing with all the names and other details of your subcontractors to NTPC, stating that the onus of all compliance from all the subcontractors is yours only. This may satisfy the HR department of NTPC.

If you take a separate license for each subcontractor, you may lose your trust in NTPC, and NTPC may directly contact them, which will not be suitable for your business.

Regards,
Manish Bali

[Phone Number Removed For Privacy Reasons]

You are hereby advised to go through the definition of Contractor under CLRA, which is as follows:

Definition of Contractor

The point raised by Mr. Jaspal Negi will automatically clarify the sense:
“Contractor” - A person who undertakes to produce a given result for the establishment other than a mere supply of goods or articles of manufacture to such establishment through contract labour or who supplies contract labour for any work of the establishment. A contractor includes a sub-contractor.

Regards,
Tirlok Dhir
[Phone Number Removed For Privacy Reasons]

You are acting as a contractor to NTPC, which is acting as the Principal Employer to you. As per the law, you are entitled to give work to the subcontractors. For this purpose, you have to issue Form V certifications to all of your 8 subcontractors, acting as the Principal Employer to them, and they shall obtain a contractor license in Form IV. All queries are solved herewith.

Judgment Attachment

I am attaching the judgment of the Madras High Court to support my view.

For any further queries, you are always welcome to call me.

Thank you all,

Regards,
Adv. Raj Singh Phogat
Labour Consultant
[Phone Number Removed For Privacy Reasons]

Thank you for your valuable input on the matter. My question pertains to whether, having obtained a labor license for 1000 workers under our establishment's name, we are legally required to also acquire a separate license for our subcontractors. It is important to note that all compliance under the CLA is being handled by us, with only PF compliance being managed in the subcontractors' name under the EPF Act. Given that both acts are distinct and are being adhered to, could you please clarify if any further action is necessary in this regard?

Thank you and regards,
Jaspal

You do not have to take separate licenses for the 8 subcontractors, but all 8 subcontractors separately and individually shall obtain a contractor license to act under you. Your CLRA compliances are okay, but ensure that all subcontractors do comply with the CLRA compliances under your Principal Employership to them. Subcontractors are already having compliances under the EPF Act, so there seems to be no problem. Moreover, NTPC is right in their correspondence with you for their insistence on this.

Regards,
Adv Raj Singh Phogat
[Phone Number Removed For Privacy Reasons]
Labour Law Consultant

In such occasions, you may have to apply to the principal employer to issue FORM V to your contractor to obtain a labor license for contractors so they can easily comply with their workers' PF in their code.

Thanks,
Subroto

This issue has been raised by NTPC. You are requested to refer to the Agreement/Work/Purchase Order of NTPC. NTPC is a government enterprise, and they cannot entertain subcontractors. This term/condition may be in your agreement. This practice is common in the private/corporate sector all over India.

I am a labor law auditor and consultant for Aditya Birla-Grasim Industries, Hindalco Industries, Ultratech, etc. The main contractor is M/s Shapoorji and Palonji Co. Ltd. They have deputed 15 subcontractors at a construction site and have covered all subcontractors' employees under their PF Code. If NTPC permits the deputation of subcontractors, then NTPC will accept the compliance of subcontractors. Kindly update the compliance under the Contract Labor Act and BOCW Act.

If you need any assistance, feel free to call me or write - [Phone Number Removed For Privacy Reasons], [Email Removed For Privacy Reasons]

Regards,
N. Dilip
Vidarbha Industries Navi Mumbai.

I think if you collect PF submission challans along with the ECR PDF format and submit them to your principal employer, this will help them know that you are checking the statutory compliances. When you have obtained a license for 1,000 laborers, you can engage as many subcontractors as you want, but each laborer will be considered your own, not the subcontractor's. Maintain common single registers and include all the names of laborers excluding subcontractors. Since the work order has been provided to you, you have correctly obtained the license to carry out the work.

Please correct me, seniors, if I am wrong...

As per the CLRA Act, you cannot engage a subcontractor. If you do so, you cannot issue a Form V to them. It is better to include all employee names under your EPF code and submit the PF amount accordingly. This way, during the Form-10 (Payment wage sheet) presentation, you can easily submit it to your principal employer.

CLRA does not prohibit the engagement of subcontractors. It is a standard practice, and the local labor office will have a procedure. In most cases, the application needs to come with a letter from the principal employer.

Clarification on Contractor and Principal Employer Roles

To my understanding, how can a contractor become a Principal Employer under the CL(R&A) Act? The judgment cited and attached by you is in respect of questions arising under the Employee Compensation Act, not in reference to the CL(R&A) Act.

The CL(R&A) Act clearly specifies and covers subcontractors under the definition of "Contractor." It reads as "contractor," in relation to an establishment, means a person who undertakes to produce a given result for the establishment, other than a mere supply of goods or articles of manufacture to such establishment, through contract labor or who supplies contract labor for any work of the establishment and includes a subcontractor.

A contractor cannot be a Principal Employer on the establishment of the Principal Employer.

For compliance under the CLRA Act, either the contractor has to take a license covering all employees of subcontractors and make compliance under the Act, or the contractor can ask the Principal Employer if allowed to issue Form V and include in RC under CLRA.

Regards,
Adv. Raj Singh Phogat
Labour Consultant
[Phone Number Removed For Privacy Reasons]