Overview of the Contract Labour (Regulation & Abolition) Act, 1970
The Contract Labour (Regulation and Abolition) Act, 1970 (CLRA) is a central labour legislation that regulates the employment of contract workers and prescribes conditions for their welfare. The Act aims to prevent exploitation of contract labour while providing a regulatory framework for establishments that engage workers through contractors.
In India, contract labour is widely used across manufacturing, IT, construction, and service sectors for non-core activities such as housekeeping, security, canteen operations, and project-based work. The Act places dual responsibility on both the Principal Employer (the establishment engaging contract workers) and the Contractor (who supplies the workers).
The Act applies to every establishment and contractor employing 20 or more contract workers on any day in the preceding 12 months. Some states have varied this threshold—for example, certain state amendments apply it to establishments with 10 or more contract workers.
Dual Obligations: Principal Employer & Contractor
Principal Employer (PE)
- • Registration: Must obtain registration (Form I) from the Registering Officer before engaging contract labour
- • Welfare facilities: Ensure canteen, rest rooms, first aid, drinking water, latrines are provided
- • Wage supervision: Ensure the contractor pays timely wages at or above minimum wages
- • Subsidiary liability: If contractor defaults on wages, PE must pay and recover from contractor
- • Records: Maintain Register of Contractors (Form XII)
Contractor
- • License: Must obtain license (Form IV) before supplying contract labour
- • Wage payment: Pay wages by 7th/10th of following month, not below minimum wages
- • Wage slips: Issue to every worker
- • Registers: Maintain Form XIII (worker register), muster roll, wage register, overtime register
- • Returns: File half-yearly return (Form XXIV)
Registration & Licensing Process
Step 1: PE Registration
The Principal Employer applies in Form I to the Registering Officer (usually the Assistant Labour Commissioner) with prescribed fees and details of the establishment and nature of work performed by contract workers. Registration is granted in Form II.
Step 2: Contractor License
The contractor applies in Form IV with a security deposit. The license (Form V) is granted for a specified period and can be renewed. License conditions include the number of workers, nature of work, and the principal employer's establishment.
Step 3: Compliance Setup
Both PE and contractor must set up statutory registers, display notices (abstract of the Act, wage rates, work hours), and ensure welfare facilities are in place before work commences.
Mandatory Welfare Facilities
Canteen
Mandatory if 100+ contract workers at the establishment
Rest Rooms
Required for night-shift workers; separate for men & women
First Aid
First-aid boxes accessible; trained personnel for large workforce
Drinking Water
Safe drinking water within the workplace
Toilets
Adequate number, clean, separate for men & women
Safety Equipment
As per nature of work and applicable safety laws
Penalties for Non-Compliance
- • Operating without registration/license: Imprisonment up to 3 months or fine up to ₹1,000, or both
- • Contravention of provisions: Imprisonment up to 3 months or fine up to ₹1,000, or both
- • Obstructing inspector: Imprisonment up to 3 months or fine up to ₹500, or both
- • False statements: Imprisonment up to 3 months or fine up to ₹1,000, or both
- • Continuing offence: Additional daily fine for ongoing violations
- • License/registration cancellation possible for repeated violations
Compliance Checklist for Principal Employers
- ✓ Obtain PE registration before engaging any contract labour
- ✓ Verify contractor holds a valid license (Form V)
- ✓ Supervise wage payments—ensure contractors pay at least minimum wages on time
- ✓ Ensure all welfare facilities are operational
- ✓ Maintain Form XII (Register of Contractors) and inspect contractor records periodically
- ✓ File annual return (Form IV-A) within 30 days of year close