Do We Need a Labour License for Facility Services When Using a Contractor? Seeking Advice

Hello Seniors, I need clarification on the following:

Labour License Requirement for Facility Services

We are providing facility services to an office tower (let's name my company B). The office tower is occupied by a company (let's say this company A). Now we have taken manpower through a contractor (let's name the contractor C).

My question is, does company B need to have a Labour License? As per my knowledge, since we are the principal employer for company C, we don't require a license as C has the labor license.

I appreciate your valuable feedback.

Thanks,
Swati

It depends on whether you are raising bills to the tower for work or if company A is paying you the salary of your employees with some extra amount. Is your employee working for company A? If yes, then company A will be the principal employer. Otherwise, you will be the principal employer.

Hello, thank you for your inputs.

1) We raise a bill to company A.
2) We are paying salaries to our employees.
3) The housekeeping manpower is outsourced through a contractor. I need to know if we also require a labor license.

Dear Swati,

It's not that simple. Now, you are providing manpower services to company A, which means you are a contractor for company A, and company C is a contractor for you (i.e., a subcontractor for A). This implies that you have to have a labor license, and perhaps you need GST registration as well.

Understanding Contract Labour under the CLRA Act

As per the CLRA Act, a workman shall be deemed to be employed as "contract labour" in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer.

Definition of Contractor

"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 labour or who supplies contract labour for any work of the establishment and includes a sub-contractor.

Roles of Companies A, B, and C

In your case, Company "A" is the Principal Employer as you mentioned in your queries that Company "A" is the Occupier. Company "B" is a Contractor as you mentioned in your queries that Company "B" is providing facilities services to the Occupier, i.e., Company "A." In other words, Company "A" has given a contract directly to Company "B."

Company "C" is a Sub-Contractor as they are supplying contract workmen for performing work through a contractor (Company "B") with or without the knowledge of the principal employer.

Responsibility for Labor License

Based on the above explanation, you (Company "B") are responsible for taking a labor license.

Regards,
Amit

The question of registration or obtaining a license under the Contract Labour Act arises if 20 or more workmen are employed as "Contract Labour."

Dear Swati,

What I understood from your posting is that your company has been engaged under Company "A" to perform some work. Instead of doing it yourself, a contractor "C" has been engaged to perform the job awarded to you.

Simply, you cannot engage any contractor or sublet the job without the consent of Company "A," who is the principal employer for both "B" and "C." Whether your company has registered or obtained a labor license from the labor department. If Company "A" has issued Form V to your company upon the award of the job? If yes, then your company is the contractor, not the principal employer.

If your company does not want to do it on its own, then you can engage a subcontractor but will be controlled by you. If the engagement of labor is 20 or more, then the subcontractor can apply for a license, but Company 'A' has to issue Form V for that process.

Regards,

Dear Swati, though the learned members have well explained the matter, let me clarify a few points where you might be confused, as per my opinion.

1. You are not the Principal Employer (PE). Company A is the PE for both B (Main contractor) and C (Sub-contractor). Hence, only Company A can issue the Form V (either to B or C, depending upon mutual understanding).

2. As rightly said by Mr. Prabhat, you can't engage (sub-let) any job without the consent of the PE. It is also important that this must be mentioned in the agreement as well. Otherwise, it can create problems while applying for the license.

3. If your total strength is less than 20 but the sub-contractor's strength is 20 or more and you want to avoid taking a license, then Company C can apply for the license. In such a case, A has to issue Form V in favor of C. If you take the license, then you will be responsible for compliance regarding both your (B) and the sub-contractor's (C) staff deployed at the site. But if C obtains the license, then he is supposed to maintain only C's manpower records (for submission of Half Yearly Returns).

4. Please note, before issuing Form V, A must have the RC (Registration Certificate) as a PE. Only then will the labor office accept the Form V and license application.

5. In Delhi, the Labour License process has now been converted to digital. Whoever applies for the license must do so on the Delhi Govt Portal (known as e-District).

I hope I have clarified your points. For more clarification, you can contact me. I am handling around 10 Labour Licenses for Delhi and other state units.