Navigating Compliance for Over 200 Contract Workers Across States: What Should We Know?

Hello all, I am currently working with an organization with branches in various states across the country, with a total of more than 200 contract workers. The relevant governing body for us is the State government. My query is whether the act that applies to establishments with more than 20 workers will apply to us. If it does not apply, what compliances will be required for both us and the contractors?

Additionally, if we have a single contractor working for us across all locations, will any specific requirements apply to them?

Looking forward to your suggestions.

Regards, Anand K

We do not have more than 20 out of 50 contract workers in any state (as the limit is applicable).

Under state jurisdiction, the CL act applies to a unit. If your manpower is lower than the threshold manpower of that state, then the act will be applicable to the contractor.

It is a tricky act. Does the contractor have a supervisor at each location in each shift? If the answer is no, then it can be a case of the abolition of the contractor manpower and their transfer to the employer's role.

Thanks for your reply, Shrikant. The contractor does not have a direct supervisor at each site, but limited supervision is allowed under the act, as supervision in itself does not mean a sham contract. The attendance is marked by the contractor, and wages are processed by them as well. Additionally, the contract is also framed for the work to be done. The contractor is free to take as many employees as he wants, provided it's for the contractor. If the act is applicable to him, he needs to get Form V from us. Do we also need to be registered for issuing the same?

Dear Anand, I also have the same type of job. We also have many branches all over India where we have given some contracts to deploy manpower as per requirement. The difference is we work as a prime contractor and sub-let different contracts.

Applicability of the Act

Principally, the Act is applicable: "Every establishment in which 20 or more workmen are employed or were employed on any day of the preceding 12 months as contract labour. Every contractor who employs or who employed on any day of the preceding twelve months 20 or more workmen."

However, in the case of Maharashtra, with effect from 5th January 2017, the phrase "20 or more workmen" has been substituted by "50 or more workmen" (notification dated 5th January 2017).

So, in my view, the Act is not applicable to you (as you have less than 20/50). But you have to act as a principal employer. If you place a single contract/agreement to a contractor where he deploys 20/50 or more personnel, then he is covered under the Act as a contractor.

This will be differently applicable in different states. If compliance is not done as per the Act, the area inspector can impose a penalty against the Abolition of the Act. The Director of your company may be asked to present before the Commissioner's Office. The competent authority has adequate rights to take legal action in such cases. Please don’t panic, usually, it is not done. But if any accident occurs at the site, then it is more complex (for both the principal employer and the contractor).

Even if you engage a single contractor, he has to follow the obligations differently in every state (all locations). You have to issue Form V and a valid agreement for further compliance.

Hope I have clarified your points. Mr. Umakant Sir can shed more light on the matter.

Dear Mr. Anand,

You have to register your establishment under the CLRA Act. Only then can you issue Form V to a contractor for obtaining a license. There are instances where the application for the grant of a license to the contractor is rejected on the grounds that the principal employer is not registered under the CLRA Act.

In AP, the act is applicable even if you engage 5 persons in the state.

Thank you all, this has been very helpful.

I have one more query. When it comes to the registration of PE, will I have to get registered in every state individually, or can I do registration in the state where my corporate offices are located?

If you do not fall under CLRA under central jurisdiction, you will have to register in each state provided the state rules become applicable to you because of the manpower you engage therein. In such a case, you will need to have an office in such state(s). Even if you do not have your office, find someone who is ready to share their premises for namesake and address for monthly rent.

Thank you for considering. Statewise, we do not have more than 20-50 workmen in any state. However, we do plan to have PE registration done to avoid any complications down the road.

We do not have more than 20-50 workmen in any state. However, for the applicability of the act, you have to check the applicability of the act. For example, in Andhra Pradesh, the act is applicable if 5 or more contract employees are engaged.