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Contract Labour Act

Contract Labour Act

Contract Labour Act

The Contract Labour (Regulation and Abolition) Act, has been enacted by the Indian Legislature from the year 1970. The act intends to prohibit the employment of contract labour in certain circumstances and to regulate the working conditions of contract labour during employment. In this article, we look at the Contract Labour Act applicable in India in detail.

Applicability of the Act

The Contract Labour (Regulation and Abolition) Act applies to the following entities:

  • It applies to any establishment in which twenty or more workmen are employed on any day of the of the accounting year as contract labour.
  • It applies to any contractor who employs or who employed twenty or more workers on any day of the accounting year.
  • Also, it does not apply to the establishments if any work performed in the intermittent nature.
  • It does not apply to the establishments if any work not performed for more than one-twenty days in a year.
  • It does not apply to the establishments situated in the special economic zone(SEZ).
  • It does not apply to the establishments if any work performed in the seasonal nature for more than sixty days in a year.

Contractor under section(2) of the act

A contractor is a person who takes over the responsibility to produce a given result for the establishment, other than a supply of goods or services of manufacture to such establishment, through contract labour or the person who provides contract labour for any work of the establishment and includes a sub-contractor.

Advisory Boards

The central Government under section 3 is excepted to set up the Central Advisory Contract Labour Board on activities relating to the administration of the act.

The Central Board should consist of the following are

  • The Chairman to be appointed by the Central Government.
  • The Chief Labour Commissioner (Central).

Central Advisory Board

The number of members, which does not exceeds seventeen but should not be less than eleven, as the Central Government may specify to represent the government, the Railways sector, the coal industry, the mining sector, the contractors, the workmen and any other sector with the opinion of the Central Government have to represent on the Central Board.

State Advisory Board

The State board should consist of the following are

  • A Chairman to be nominated by the State Government
  • The Labour Commissioner or in his absence any other officer represented by the State Government.
  • The number of members, which does not exceed eleven but should not be less than nine, as the State Government may appoint to represent the government, industry, contractors, workers and any other sectors with the opinion of the State Government have to represent on the State Board.

Registration of Establishments Employing Contract Labour

Every establishment which proposes to employ contract workers for its work is required to obtain a certificate of registration from the appropriate Government.

The procedure for registering establishment employed with contract labour are explained here.

  • The employer should approach the Registering office with Application for registration in Form No I and along with the receipt representing payment of the prescribed fee.
  • If the application for registration is fulfilled in all aspects, the registering officer can register the establishment and grant the copy of the registered certificate in Form-II.

Every certificate of registration will contain the following

  • The name and address of the establishment.
  • The maximum number of workers to be contracted as contract labour in the establishment.
  • The type of business.
  • Other important particulars, if any.

Documents Required for Registration

The required documents are to be produced by the contractor to the employer for approval. They are

  • Copy of the report showing the legal status of the firm.
  • Photograph of the document showing allotment of PF Code No.
  • Copy of receipt/cover note/insurance policy received.
  • Copy of challans showing remittance of security deposit.
  • The license fee to receive the labour license.

Note: Contractors should in an application Form for engaging contract labour every month or a new entry.

Effect of Non-Registration

In case an establishment required to be enrolled under Section 7 has not been recorded within the time specified for the purpose under that section, then the punishment will be given as per section 36.

Licensing of Contractor

Every contractor who has employed twenty or more workers on any day of the month has to obtain a license for engaging contract labour working for any establishment.

The authorised licensing officer will issue the license as per the provisions under section12.

Grant of License under section 13G

The  Procedure for granting the license is as follows:

  • The Contractor has to request the Licensing Authority along with the application for the grant of a license in Form No-IV.
  • Security amount of Rs.20 that has to be deposited at the time of applying for the license.
  • Receipt about the fee paid to the licensing officer.
  • Certificate by the principal employer in Form-V stating that he employs the applicant as the contractor concerning its establishment.
  • The licensing officer, after making necessary investigations will grant a license in Form VI which can be renewed from time to time.

Renewal of License

Procedure for renewal of the license is given below:

The contractor should approach the Licensing authority before 30 days of the expiry date of the license along with the application for the renewal of license in Form VII in multiple copies.

The required fee has to be remitted by the applicant. If the applicant does not submit prescribed date the renewal application, then the contractor will have to pay a fee of 25% more than the fee ordinary Payable.

Responsibilities of the Employer

The following responsibilities to be carried out by the employers are explained below:

  • To get the registration of the Establishment.
  • To engage workers only through licensed contractors.  The notice showing the name and address of the Inspector in the language of both English and Local Language, the rate of salary, date of payment.
  • To retrieve the expenses involved from the contractor through bills payable.
  • The principal employer has to choose a representative to be present at the time of disbursement of wages to the contract workers.
  • It is the duty of such representative has to certify the amount paid as wages in the wage-register.
  • Report the details relating to contract labour when the inspector requires.
  • Maintain a register of Contractors (Form XII).
  • Number of Contractors – Nature of Work performed.
  • To send the information relating Annual Return (Form XXV) to licensing authority by 15th February.
  • To submit returns for each contractor within 15 days of start or completion of work (Form VIA).
  • To provide welfare and Health facilities, if the contract is not producing under Section 16 and section 20.

Responsibilities of the Contractor

The following responsibilities to be carried out by the contractors are explained below:

  • To get approval from the Employer.
  • To obtain a License from the Licensing Authority.
  • To submit the monthly printed bill to the firm for payment of the work done by him starting from the day of the month.
  • To present the Name of the Inspector, Wages paid & Abstract of the Act.
  • To maintain Muster roll, Wages, Deductions, Overtime, Fines, Advance, Wage slipsRegisters under Section 29.
  • To provide Welfare and Health facilities such as Canteens, if labour is above a hundred members restrooms has to be compulsorily provided and also drinking water, urinals, latrines, first aid under section 19.
  • To be responsible for the payment of wages before the 7th of each month underSection 21.
  • To disburse the salaries in the presence of the representative of the employer.
  • To distribute employment cards to all the workers by three days of the start of work.
  • To send the half early return in form xxiv after 30 days from close of the halfyear, i.e. June and December.


Contravention of provisions concerning employment of contract labour

Any persons who violate any clause of this Act or any rules made under this Act will be punishable with custody for a term which is more than three months, or with the penalty which is more than one thousand rupees, or with both.

In the case of a continuing contravention then the additional fine imposed which will be more than one hundred rupees for every day of such violation continues after conviction for the first such contravention.

Other offences

If any person infringes any of the provisions of this Act or of any rules made under the act for which no additional penalty is provided, then he will be punishable with imprisonment for a course which may be more than three months, or with fine more than one thousand rupees or with both.

Offences by Employer

If an employer is committing a crime under this Act, the employer, as well as the responsibility of the company for the conduct of its business at the time of the commission of the offence, will be considered to be guilty of the crime and liable to be proceeded against and punished accordingly.

Provided that nothing contained in this sub-section should render any such person liable to any punishment if he states that the offence was committed without his knowledge or that he practised the due diligence to prevent the commission from such offence.