What is the Contract Labour Act? – Highlights, procedure & violations.

Last Updated at: Sep 15, 2022
What is contract labor Act
On 24th November, 2020, the Odisha Assembly approved three bills including the Contract Labour (Regulation and Abolition) (Odisha Amendment Bill, 2020  for providing infrastructure facilities to propel investment proposals in the State. As per the new amendment of the Contract Labour (regulation and Abolition) Act, 1970, establishments and contractors employing less than 50 contract labourers will not be required to obtain registration certificate or license. 


Contract labour refers to an employed person, hired to work in a company through a contractor for a specific work and a finite period. The contract labours are not recruited directly by the companies, and they do not have a particular payroll. Companies hire contractors who, in turn, recruit these workmen for different jobs. To prevent the ill-treatment of workers in any establishment and to ensure a healthier working environment for them, the contract labour regulation and abolition act were introduced in 1970.  This act, apart from regulating the welfare, health, payments of the contract labour, also has detailed provisions for the registration of the companies and grants of the license to the contractors.

Highlights of the Contract Labour (Regulation And Abolition Act), 1970

This act applies to all firms of India.

The act applies to all those firms which have twenty or more workmen, presently employed or previously employed on any day of the past twelve months. It also applies to every contractor who employs or employed twenty or more workers on any day of the past twelve months. It does not apply to firms where casual or irregular work is performed. This again has sub-sections:-

  1. If the establishment performed for more than one hundred and twenty days in the past twelve months, it cannot be considered as an intermittent one.
  2. If the establishment performs for more than sixty days in a year and is seasonal, it cannot be considered as an intermittent one.

Procedure for Registration of the Companies Hiring Contract Labours

Every firm which employs contract labours for its work has to acquire a certificate of registration from the appropriate government. Given below is the procedure for the registration of such companies:

  1. The employer should go to the registration office with the application for registration in Form no. 1 along with the receipt representing the payment of the prescribed fee.
  2. If the application received is complete in all respects, the registration officer registers the company and grants the copy of the registered certificate in Form-II.

Labour Law Advisor In India

Details of The Certificate Of Registration

  1. Name and address of the establishment.
  2. A maximum number of workers to be hired as contract labours.
  3. Type of business and any other relevant information.

License for The Contractor

Every contractor working for an establishment who hires twenty or more workers on any day of the past twelve months has to obtain a permit for engaging contract labour registration. The licensing officer provides this license as per the provisions of section 12 of the contract labour act.  Under such section, a permit may contain conditions about the hours of work, fixation of wages, and other necessary facilities to the contract labours.

Procedure for Grant Of License

Given below is the process for applying for a license from a licensing officer:-

  1. The contractor has to request the Licensing Authority along with the application for the grant of a license in Form no. IV
  2. A security fee of Rs. 20 has to be deposited at the time of application.
  3. The receipt of the fee paid to the licensing officer has to be retained.
  4. A certificate by the employer in Form V stating that he has employed the concerned contractor for his establishment.
  5. The licensing officer may make further necessary investigations and grant the license in Form VI, which has to be renewed before 30 days of the expiry date along with the prescribed fee, failing which the contractor will have to pay 25% more fee than the ordinary amount.

Duties of the Contractor And The Employer

The employer should ensure that the contractor does the following:-

  1. Pays the wages as fixed by the government or
  2. Pays the wages as fixed by the commissioner of labour.
  3. In their absence, pays fair wages to the labours.
  4. Provides the following facilities:
      • Canteen to the labours (if the employed workmen are 100 or more and the work is performed for six months or more).
      • Issues employment card to the labours.
      • Restrooms for the workers working at night and where the work is performed for three months or more.
      • Required number of separate urinals for men and women.
      • Drinking water, washing, first aid, crèche, etc. for the labours.
  5. Maintains the various registers and records, notices, etc.

Violations To The Contract Labour Act

  1. Any person who violates any part of any clause of the act will be punished with custody for more than three months or with a fine of Rs 1,000 or maybe both, depending on the severity of the violations.
  2. If a person breaks any rules under the act for which no additional fine is provided, then he or she shall be sentenced to three months imprisonment or a fine of one thousand rupees or both.
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