Startup Construction Dilemma: Should You Choose a Labor License or Workers' Comp Policy?

Labor License vs. Workers' Compensation Policy for Startups

For a startup construction company, private builder, or developer, it is essential to consider whether to obtain a labor license or a workers' compensation (WC) policy. Both have their own benefits and legal implications, and the choice may depend on the specific requirements of your business and local regulations.

As an HR professional, you must understand under which act these two compliance requirements fall before making a decision. The labor license falls under what category, and the Workers' Compensation (WC) Policy, which is a welfare statute, falls under which category.

Thank you.

Dear Sudhir, generally, there is a difference between the terms 'Licence' and 'Insurance'. In the context of Labor Laws, the former refers to a statutory obligation to be complied with by an employer under any such law, and the latter refers to the employer's making an alternative arrangement to discharge certain future liability through an insurer as permitted by the particular law.

Licensing and Insurance Requirements for Construction Companies

Since yours is a construction company, you are required to take up a contractor's license under the CLRA Act, 1970, and register yourself under the BOCW Act. You would be required by the principal employer to take up an insurance policy in respect of the liability to pay compensation to the workmen under the EC Act, 1923, in case of any employment accident. Thus, they are not alternatives to each other.