Is Our Security Contractor Breaking the Rules by Not Having a License for Over 30 Workers?

Dear Sirs, we seek clarifications on the following:

Agreement with a security contractor

As a company, we have entered into an agreement with a security contractor for supplying manpower for security. The contractor is supplying more than 30 persons as detailed below and does not have a license. The location details are also entered in the agreement:

1. Main Factory: 18 Nos
2. MD House: 3 Nos
3. Godown outside the factory locations: 6 Nos (2 godowns 10 KMs away from the factory)
4. Windmill: 6 persons

License requirement and RC amendment

We seek your clarifications on whether he has to apply for a license or not. In the company RC, they have also mentioned 18 manpower. Due to this, the contractor is not having a license. He is raising one invoice in the company name for supplying manpower (no separate invoice for different locations).

We seek your clarifications on the applicability of the license and the amendment of RC.

Regards,
Ganapathy V

Dear Colleague,

Understanding the Magic Number 20 in Contract Labour

The magic number 20 comprises adding contract workers deputed by different contractors from the perspective of the "Principal Employer" for his establishment. If the number reaches 20, then registration needs to be done.

Contractor's Obligation for Licensing

In the case of the Contractor, if he deputes 20 contract workers, adding all numbers deputed for the "Principal Employer for his Establishment," then he needs to apply and obtain a license under the Act.

Examining Different Establishments

Here, whether the Factory, MD House, Wind Mill, Godown outside the factory premises need to be examined carefully. We cannot get a direct clue from the definition under the Act as it is generic in nature:

2(e) "establishment" means-- (ii) any place where any industry, trade, business, manufacture, or occupation is carried on;

Practical Examination Points

Practically, you may examine:

1. Whether the security guards are rotated from all these entities internally by the Contractor
2. Whether all the entities are under one "establishment" registered under the Companies Act
3. Whether all payments to the different entities are from your Factory Accounts
4. Whether payments for Wind Mill, Godown, and Factory are all managed by Factory Accounts only
5. How the PF, ESI are remitted by the Contractor, whether under the same code number, etc.

Even though it is practically possible to split the invoices, show the numbers as different, etc., which is a "hiding number game" only to avoid the process of getting a license, it is not advisable from my perspective. Normally, in a practical scenario, it is very safe to engage "Licensed Contractors" only when the total number reaches 20. This will be helpful to have a very effective Contract Labour System that will always protect the interests of the Principal Employer in the long run.

Recommendation for Registration and Licensing

From the given information, it is suggested to go for registration by the Employer and obtain a license by the Contractor. Here, you can rotate the security guards within these entities and pay in one invoice, etc. (The Labour Code, which is going to come in the near future, will increase the number to 50. When the Code will come into force is not clear yet.)

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I have corrected the spelling, grammar, and formatting errors in the text while ensuring that the original meaning and tone remain intact. Let me know if you need further assistance.

Amendment of RC and License Requirements

First, ensure your RC is amended if you have more than 18 contract workers deployed. I am not aware of your specific state, but most states in India have increased the license requirement limit to 50 workers.

You need to clearly define where your establishment is located and what it encompasses. If you have a factory license, do all the locations fall under it? If yes, the threshold is 30 workers. If not, the number is limited to the actual number of contract workers deployed in the factory.

Separate RC and Payroll for Each Location

You need to have a separate RC for each location if you have more than 20 workers at that location. Additionally, ensure that you maintain separate payrolls (or that the contractor maintains them) for each location, along with all relevant documents required under various acts.

Dear All,

Please let me know if it is necessary to add a security services provider agency in the Principal Employer Contract Labour License. If possible, for clarification, please share with us the rules for further information.

Thanks

Contractors and Licensing Under the CLRA Act

All the contractors, including manpower suppliers such as housekeeping, maintenance, security, etc., shall be added to the RC under the CLRA Act. Contractors shall obtain a license depending on the headcount.