Facing Labor License Renewal Challenges: Can We Adjust for Fewer Workers?

Dear Seniors, I am working in a construction company where we have taken a labor license under the CLRA Act for 1000 laborers. Now, our job is in the completion stage, and currently, we have only 100 workers at our project site. Our work will continue for another two or three months into the next year, and we need to renew our license.

Issue with Labor License Renewal

The issue we are facing is that we obtained a license for 1000 laborers, but our current workforce is only 100. I would like to inquire if there is any provision in the CLRA to renew the labor license for only 100 workers. The Labor Department has informed us that we can increase the labor strength but cannot reduce it in the license.

I am in need of valuable advice from seniors promptly as I have to apply for the renewal of the license this month itself.

Thanks & Regards,

P.K. Singh

Renewing the Labour Licence

Now you have to renew the Labour Licence. It is not possible to reduce the labour strength. However, if you obtain Form VI B (Completion of Job) from your client, you can prepare Form VI A. Attach the original Licence and a photocopy of the Labour Security Deposit Challan, and submit them to the Licensing authorities. Your licence will be cancelled, and the security deposit amount will be refunded to you.

It's very simple. Just create a letter of decrease on your letterhead. After preparing the decrease letter, you need to submit Form VII to the labor office to reduce the labor strength from 1000 to 100.

Subject: Decrease of Labor Strength in the Labor License

Dear Sir,

This is to inform you that we have applied for the license under the Contract Labor Regulation and Abolition Act of 1970 for 1000 laborers for our work at "COMPANY NAME AND ADDRESS". Our work scope will be decreased starting from January 2014. Therefore, we kindly request you to consider our revised application to decrease the manpower from 1000 to 100.

We request you to make necessary changes in your records and do the needful.

Thank you,

Yours faithfully,

[Seal & Authorized Sign]

If you have any queries, feel free to contact us.

Regards,
Abhay Singh

You need not worry about the decrease in numbers. You can employ up to 1000 workers. Bills for the actual number are processed, and statutory deductions are made and deposited with PF and ESI authorities. There are no other liabilities.

License Renewal Process

In case the license needs to be renewed, you have to make a fresh application along with Form V issued by the principal employer. The security amount shall be refunded after the completion of the contract. I request you to read the CLRA Act.

Regards,
S.C. Gupta

Just as your labor strength of contract labor is 100, you do not need to apply for a new license. Simply apply for the renewal of the license you have for 1000 labor strength. It is always better to inform the labor department of any decrease in labor strength. Remember to file half-yearly and annual returns on time and ensure the wages register is always available at the worksite office.

Regards,
Raj

In my opinion, you have two options to overcome your problem, which are mentioned below:

(i) You can go for the renewal of your license by applying in the Prescribed Form under the Contract Labour (R&A) Rules of your state, keeping the number of laborers the same as mentioned in your original license. In this case, the fee will be the same as originally paid by you.

(ii) You can submit a report for the completion of contract work in Form 6-B under CL(R&A) Rules and, after obtaining a fresh Form-5 from the Principal Employer, apply for a fresh license for the reduced manpower. But in this case, you have to either deposit a fresh security amount in respect of the manpower you intend to employ or request the Licensing Officer to adjust the security amount already lying with him in respect of the old license, provided he agrees.

The suggestion in (i) above is ideal and more appropriate with fewer hurdles.

Regards,
BS Kalsi
Member since Aug 2011

You can reduce your labor strength to 100 along with the renewal. You may have to pay applicable renewal fees and amendment fees. However, along with the Form VII, you have to take the RC amendment copy from the Principal Employer. In some places, the issuing authority asks only for a letter of confirmation from the Principal Employer regarding the reduction in numbers with an undertaking that they would amend the RC appropriately in the near future. Once satisfied, he will certainly amend the license. I have already made such amendments for two of my sites, one in Karnataka (from 1000 to 300) and another in Tamil Nadu (from 200 to 50).

Regards,
P. Vathiraj
Dy Manager (P)
Aparajitha Corporate Services Limited

Dear Seniors,

Thank you for all your valuable replies. Some of you have commented that the reduction of labor strength in a labor license is not possible, but some of you have said that the license may be reduced. If it is reduced, is there any provision under the CLRA which we can refer to? As per Mr. Abhay Singh and Mr. P. Vathiraj's statement, it can be reduced without canceling the previous license. Since our job is still not completed, we are unable to get Form-VI-B from the principal employer.

Thanks and Regards,
P.K. Singh

Amendment of Labor License under CLRA Rules

Amendment of labor license is elaborated in CLRA Rules. For reference, I would like to inform you that Rule 28 under The CLRA (Central) Rules, 1971 talks about the amendment of labor license. However, the amendment does not limit only to an increase in strength, but vice versa is also allowed. The only thing that has to be kept in mind is to provide sufficient reason for such an amendment to the licensing authority. One such supporting evidence is the RC amendment copy of the Principal Employer or an undertaking letter from PE regarding your reduction in labor strength.

However, you may not claim the security deposit instantly and have to wait until the completion of the project. As suggested by other members, you may submit the application along with Form VIA and Form VIB and the original license to the licensing authority to seek the necessary refund of the security deposit.

Regards,
P. Vathiraj
Dy Manager (P)
Aparajitha Corporate Services Limited

While I do not dispute your interpretation of Rule 28 under the Contract Labour (R&A) (Central) Rules, 1971 in your previous email, we cannot ignore the fact that Sh. PK Singh mentioned in his initial correspondence that "As per the Labour Department, we can increase the labor strength but cannot reduce it in the license." In light of this, I suggested that he should consider renewing the license by applying in the Prescribed Form under the Contract Labour (R&A) Rules of his state, maintaining the same number of laborers as stated in the original license.

It is important to note that Sh. PK Singh reiterated in his subsequent email that their company is facing difficulties in obtaining Form-VI-B from their principal employer due to the ongoing nature of their job.

The solution you proposed may prove to be somewhat cumbersome, especially considering the minimal savings in license fees.

Best regards,
BS Kalsi
Member since Aug 2011

I really appreciate your views. However, Mr. PK Singh, in his initial post, has asked the forum whether any provision exists for reducing the licensed strength from the existing numbers or not. Whether to go for it or not is not debated.

My intention was to inform the forum that it is allowed under the legislation, but due to the interpretation of various authorities, it is generally denied. It is not only the license fees but other expenses are also involved based on the number of workers in the license, which is well understood by the members.

Through this post, I would like to inform the forum that the amendment includes reduction also, but if the number is increased, then we may have to pay the additional fees, including the security deposit. Since I have done two amendments in two different states, I thought it to be useful for others also, who are in genuine need to go for reduction.

Regards,
P. Vathiraj

Now I understand that the actual reason for reducing the number of workers in the labor license is well understood by the members of this forum. As Mr. P. Vathiraj stated in his post, there are other expenses involved based on the number of workers in the license. The license renewal fee is not an issue; it is very nominal and can be managed without any problem. I fully agree with the views of Mr. P. Vathiraj that the amendment of the labor license is elaborated in the CLRA Rules 1971 under Rule 28. Under this rule, I argue that if we can increase the strength of the labor license, then why can't we reduce it under the same rule? Why are the labor authorities telling us that it can't be reduced?

Thanks & Regards,
P.K. Singh

Dear P.K. Singh,

Your assessment is correct, and I fully agree with your views that if we can increase the strength of labor licenses, then why can't we reduce the same? I too agree with the views expressed by Sh. P. Vathiraj on this aspect.

What I have suggested to you is a viable solution in the interest of the smooth continuance of your organization's functioning.

Regards,
BS Kalsi
Member since Aug 2011

Though you have suggested that "you can be issued a certification of completion of work from P.E. and attach it with Form No. VII and submit it to the Licensing Officer, you will get a refund," it seems that you have not read the initial mail of Sh. PK Singh. He mentioned that their job is at the completion stage and currently, they have only 100 workers at their project site. His query was whether one can reduce the number of workers at the time of license renewal, considering the initial workforce at the time of license issuance was 1000 workers. What you have suggested does not align with the rules, as the P.E. cannot issue a certification of completion of work in this scenario.

Regards,
BS Kalsi
Member since Aug 2011