Labour Laws

Contract Labour Act: A Synopsis of Key Provisions

calendar22 Apr, 2022
timeReading Time: 3 Minutes
Contract Labour Act: A Synopsis of Key Provisions

Contract labour Act seeks to regulate the hiring and operation of contract labour in certain establishments and provides for its closure in specific scenarios and affairs connected therewith. The write-up aims to shed some light on different facets of this Act, such as applicability, norms, registration, contractor’s obligations, etc.

Applicability of Contract Labour Act

Contract labour Act applies to every establishment, technically known as Principal Employer, in which 20 or more labours are employed or were hired on any day of the preceding one year as contract labour. It also applies to contractors who hire or who hired on any day of the past 12 months 20 or more labours.

What is the legal definition of the Principal Employer?

The following shall be referred to as the Principal Employer as per the Contract labour law[1] ;

  • The head in the case of an office or the government department or the local authority
  • the owner or occupier, or manager in case of a factory
  • The person handling the overall affairs of the establishment

Provisions around Registration of Establishment & its fee:

  • The Principal Employer of the Act-governed establishment is required to get registered with the Assistant Labour Commissioner or the Labour-cum Conciliation officer by filing form-1 in triplicate in case of offline mode along with the applicable fee.
  • The Registering Officer shall grant the certificate of registration within 30 days of receiving the application form. However, the grant of the said registration would not be possible in cases where the application is found incorrect or misleading.

Norms around Revocation of Registration certificate & its amendment

The concerned officer can revoke a Certificate of Registration if it is secure by suppression or misrepresentation of facts etc. However, the cancellation shall remain on hold until the principal employer puts his/her case before the hearing committee.

Changes in the Registration certificate

Licensee should intimate the authority on the following events that occurred in the course of the business. Accordingly, they must apply for a change in the registration certificate

  • Any changes occur on account of the establishment.
  • The hiring of additional labour
  • The shift of registered office

Provisions for Licensing of Contractor and renewal of a certificate

  • Every contractor falling under the Contract Labour Act is mandated to secure a license by filing form IV in triplicate with the respective Assistant Labour Commissioner and the applicable fee. The applicant is also required to submit a security fee of Rs 270/-per worker (this cost may vary state-wise).
  • The contractor can renew the contract labour license by applying Form VII in triplicate and a standard fee.
  • The vetting/concerned officer shall grant the contract labour license within 30 days of the receipt of the application, provided there is no loophole therein.

Obligations of the contractor on account of labour welfare

According to the Contract Labour Act, where 100 or more contract labour is operational in one or more canteens, the contractor is liable to provide the following amenities without failure.

  • First aid facilities,
  • Restrooms,
  • Drinking water,
  • Latrines and washing facilities etc.

If the contractor does not meet such a condition, the Principal Employer will be accountable for addressing such obligation.

Obligations of the contractor on account of wage payment

A contractor is obligated to make timely payment of wages in the presence of authorized officials of the principal employer. The wages rate should not be less than the standard rate as prescribed by the State Government.

Obligations of Principal Employer

Every principal employer falling under the Contract Labour Act is liable to;

  • Maintain a register of contractors in Form XXV in duplicate
  • File annual return in Form XXV (in duplicate) before Feb 15.

Post compliances for contractors

Every contractor falling under the Contract Labour Act is liable to maintain;

  • Register of labour in form XIII
  • muster roll* register of wages in form XVI & Form XVII when combined
  • register of deductions for damages or loss in Form XX
  • Register of wage-cum-muster roll in form XVII where the wage period is fortnightly or less
  • Register of Overtime in Form XXIII
  • Register of advances in Form XXII
  • Register of fines in Form XXI

Apart from that, the contractor is also liable to file half a yearly return in the form prescribed by the Act.

(Note: The Form number mentioned above may vary state-wise)

What is Muster Roll*?

Muster Roll is a list of labour operational in an establishment or a factory for attendance management. It is commonly known as the employee attendance register.

Penalties under the Contract Labour Act

  • The defaulter may be subjected to three months of jail terms or a monetary fine up to Rs 500 or both in case he/she is found guilty of obstructing the inspector or failing to share the register during vetting.
  • There is a provision for three months of imprisonment or a fine up to Rs. 1000/ for breaching the provisions of the Contract Labour Act.
  • Plus, the authority concerned can slap a penalty of Rs 100 per day in case of continuing contravention.


Contract Labour Act fosters labour well-being and welfare through different provisions. After being registered, the contractor becomes liable for ensuring transparent labour management. The Act also takes care of the minimum wages paid to the labour and seeks to penalize those who breach norms around it.

Read our Article:Factory License Applicability: Mandatory Facts

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