Contract Labour Mgmt

Contract Labour Management

The section provides inputs on the best practices that should be adopted while engaging Contract Labour at the premises.

Important factors to be considered while engaging Contract Labour

  1. The Contractor should be selected through a tendering process.
  2. A contract agreement should be entered with the Contractor who has bagged the contract in the tendering process. Contract agreement shall also contain clauses that requires the Contract to comply with the statutory provisions applicable to him

Pre-requisites of the Employer

  • Should have a Registration Certificate under Contract Labour (Regulation & Abolition) Act (Central).
  • Should keep a continuous check on the number of Contract workers engaged at the premises so that the same may not over-shoot the permissible limits as per the contract labour license.
  • If the premise is a Factory, the introduction of the Contractor shall not breach the limit for the maximum number of people that could be engaged within the factory premises as per the Factory license too. [Here, all the persons working within the premises, direct & indirect will have to be considered for ascertaining the numbers being within the limits of the Factories License.]

What documents to ask a Contractor while settling a Contractors monthly Bill?

  • ESI & PF Challan of previous months payment
  • Details of Monthly returns sent under the PF Act
  • If the Returns sent are not conclusive proof of payment of deductions by the Contractor, then a declaration may be taken on a monthly basis.
  • If it is a period of returns then the copy of the Annual/ Half –Yearly Returns for EPF / ESI maybe asked for which would give detailed statements of payments against each worker.

Do’s & Don’ts Of Contract Labour Engagement

1.         The Contractor should possess a valid license to take up the works in an establishment or organisation.

2.        Every establishment which engages contract labour should obtain a Certificate of Registration under the Contract labour (R & A ) Act, 1970.

3.        The work of the contractor should never be supervised or administered by the officers of the principal employer.  In other words, the element of supervision, control and direction should only be from the contractor and not from the principal employer.

4.        The establishment in the first instance, must ensure that they have got a registration certificate from the competent authority as provided u/s 7 of the Contract Labour ( R & A)  Act, 1970. Before proceeding to engage the contract labour.

5.        The establishment must ensure that they issue certificate in Form – V to the contractor for obtaining license as provided u/s 12 of the Act.

6.        It must be ensured that the contractor who is employing more than 20 persons has a valid license issued in his name by the competent authority as provided under the Act.

7.        The payment of wages to the employees employed by the contractor is disbursed to his employees by the contractor himself or his nominee and principal employer has to depute his representative to be present and sign the payment register in token of having disbursed the salary in his presence by the contractor.

8.        There should not be any supervision and control by the principal employer in respect of employees employed by the contractor to fulfill the obligation of the contract.

9.        The work for which contract labour is engaged is not of perennial nature.

10.      Discipline of the employees of the contractor in the discharge of duties must be regulated by the contractor and not by the principal employer.

11.       Contract should not specify the number of persons required but must quanitfy the work itself.

12.      Leave to the employees of contractor must be sanctioned by the contractor and not by the principal employer.

13.      No advance should be paid by the principal employer to the contractor’s employees directly. Only contractor must regulate the same.

14.      Maintenance of all type of record in respect of the employees employed by the contractor should be his own responsibility and principal employer should not intervene in such matters.

15.      If the establishment is covered by the Employees’ Provident Fund & Misc. Provisions Act and the Employees’ State Insurance Act then the preference should be given to those contractors who have their own code numbers under these Acts.

16.      To ensure to submit annual return to the prescribed authority in the prescribed form under the Act.

17.      The contractor should submit the printed bills and sign under the Rubber Stamp.

18.      The contractor should maintain records through his staff and not by the staff of principal employer.

19.      The contractor’s labour should do only the specific work agreed by the contractor.

20.      The contractor should issue the photo identity card to his workers under his name, trading style and signature.


1.        The agreement should be drafted and executed on non-judicial stamp paper.

2.        The agreement must disclose the names and addresses of the Contractor and the principal employer.

3.       The agreement must contain the rights and obligation of both the parties.

4.       The agreement must disclose the place of work, time of working, rate of compensation ( towards consideration) and consequences arising out of breach of contract and procedure for termination by either of the parties to the agreement.

5.       The agreement must disclose the scope of work, deployment of manpower in number, period of validity, compensation, security deposit and terms of payment of bills.

6.       The agreement should be between the contractor and the principal employer and should be witnessed by two witnesses.

7.       The agreement should disclose the name and address of the contractor.

8.       The agreement should disclose the exact nature of job to be assigned.

9.       The agreement should narrate  the job actually to be performed.

10.     The agreement should ensure and disclose the obligations to pay the minimum wages as applicable.

14 Responses to “Contract Labour Mgmt”

  1. dear sir.
    here you can also give format of Contract License application and renewal and all. about various Fee charges etc.

    whom to contact forwarding letter etc.

  2. Labourworks Contract Labour Management System by Scrum System P Ltd is a nice system which can be used for managing the contract workers in a smooth manner

  3. sir

    any one guide me what are the amenities given to the contract labour under Contractlabour ( R & A ) 1970 act like leaves, uniform, shoe or any other essential amenities please guide me immediately

  4. Hi Sai Krishna,
    There are lot of amenities to be given. You will have to go through the bare act to to understand the applicability. A few of them are given below –

    1. Canteen – If engaging more than 100 workers.
    2. Drinking water facility.
    3. Toilet facility
    4. Rest room – if the job requires a night halt.
    5. Washing facility
    6. First aid facility.

  5. sanjay waykole 11. May, 2012 at 9:59 am

    any one guide me that what should be the amenities and allowances demands to principle employer other than minimum wages,PF,WHILE quating tenders and please tell me that by rule

  6. Hi Sanjay,

    If i have understood your question correct, the Principal employer will have to consider the following statutory minimal costs while making an internal estimate for a tender
    1. Minimum Wages
    2. PF at the rate of 13.61%
    3. ESI at 4.75%
    4. Bonus at 8.33% minimum on a wages of Rs.2500


  7. Can anyone tell me why principle employer cannot supervise contract labor and what is the case of gratuity for them.

  8. Hi Vijay,

    Principle Employer can supervise the work to the extent of checking the quality and progress of the work assigned but cannot instruct the contract workers directly. It ca only be done through the Contractor or the supervisor assigned by him.

    Excepting in Tamilnadu, Gratuity Act liability will not fall on the Principle Employer.

  9. can any one pl tell me if the minimum wages rates are revised should an employer revise his employees’ salary? In what way he should do it? pl clarify with an example.

  10. Hi Srinivasan,

    Yes Minimum Wages are to be revised. If your establishment is only operating in the present State as a private establhsment then you need to abide by the State Minimum Wages. Please check the list of industried from the Minimum Wages list and then decide on the wage rates based on each occupation.

  11. For contract employee, principal has to provide the photo id card to enter the premises is it right?? How often the contract emp. id card has to renew by the principal employer as per labour law??

  12. Dear Sir,

    Here we will have to differentiate between Identity Card and Entry permit card. Only a Contractor can issue a Identity card to his worker as the Principle Employer has no role in identifying a Contract worker. The labour law does not require a principle employer to issue any identity card. Enry permit card may be issue by the Principle Employer to allow entry for a Contract worker.

  13. In continuation to the earlier query as said before If your establishment is only operating in the present State as a private establishment then you need to abide by the State Minimum Wages. and what if the establishment is operating at Pan India Level then we need to abide by ? please guide, this are interview question asked by the Interviewer,

    Kumar Nair

  14. We have a few petty contractors, who are not having PF & Esic code no’s. I have two questions-
    1. Can we pay their employees contributions to company code?
    2. If we pay their contributions, can their employees can call as permanent employee of the company?
    Please confirm.