Applicability: The 20-Worker Act and the 50-Worker Code
The Contract Labour (Regulation and Abolition) Act 1970 applied to every establishment that employed 20 or more contract workers on any day in the preceding twelve months, and to every contractor who supplied 20 or more. The Occupational Safety, Health and Working Conditions Code 2020, in force from 21 November 2025, raises that threshold to 50 contract workers for the registration and licensing provisions. Because state rules under the Code are still being notified, many establishments are operating under the Code's thresholds while continuing to use the forms and registers of the 1970 Act and its state rules.
Two clarifications avoid most confusion. First, the count is of contract workers across all contractors at the establishment, not per contractor; a factory with 30 housekeeping staff from one agency and 25 guards from another is over the 50 threshold. Second, the threshold governs registration and licence, not the principal employer's underlying duties. Even below the threshold, you remain responsible under the Code on Wages, the EPF and ESI legislation and the Minimum Wages framework for ensuring contract workers on your premises are paid correctly; the contract labour glossary entry sets out the definitions.
Some states have their own thresholds and some categories of work are covered regardless of headcount. Where you are close to a threshold, obtain registration anyway: it is cheap, and operating without it when the count crosses the line for even one day is a clear offence.
- 1970 Act: 20 or more contract workers; OSH Code 2020: 50 or more for registration and licence
- Count contract workers across all contractors at the establishment
- Thresholds govern registration and licence, not the duty to ensure correct wages and contributions
- Register early if you are near the threshold; check state variations
Registration, Licence and What the Principal Employer Certifies
The principal employer registers the establishment with the registering officer (the state labour department, or the central authority for central-sphere establishments) and obtains a certificate of registration listing the nature of work, the maximum number of contract workers and the contractors engaged. Each contractor above the threshold holds a licence for the specific establishment and work, valid for a period and renewable. Under the Code, the intent is a single licence per contractor valid across establishments, once rules are fully in place.
As part of the contractor's licence application, the principal employer issues a certificate (Form V under the central rules; state forms vary) confirming that the contractor has been engaged for the specified work and number of workers. Treat that certificate seriously: it is your statement, on record, of who is working on your premises and in what numbers. If actual deployment exceeds the certified number, both you and the contractor are exposed.
Keep a live register of contractors with licence numbers and validity dates, and check licences before renewal dates rather than after. A contractor whose licence has lapsed is an unlicensed contractor from the day after expiry, and every contract worker they supply is then being engaged in breach. Read the principal employer glossary entry for the definitional scope.
- Principal employer registers the establishment; contractors above the threshold hold licences
- The principal employer's Form V-style certificate declares the work and worker count
- Actual deployment above the certified number is a breach for both parties
- Track licence validity and renew ahead of expiry
Liability for Wages, PF and ESI When the Contractor Defaults
The contractor is responsible for paying wages to contract workers, but the principal employer must ensure payment and, if the contractor fails to pay in full or on time, must pay the wages and recover them from the contractor. The Act contemplated an authorised representative of the principal employer being present at wage disbursement and certifying it; in a bank-transfer world, the equivalent is verifying the contractor's payment evidence against the wage register each month.
EPF and ESI work the same way. Contract workers on your premises are covered employees, and if the contractor does not deposit their contributions, EPFO and ESIC can recover from the principal employer. Contractors supplying workers on a fixed monthly rate that leaves no room for 12% employer PF, 3.25% ESI, EDLI and admin charges are not paying them. Cross-check the contractor's ECR and ESI challans for your workers every month; a contractor with 40 workers at your site whose ECR shows 12 UANs is telling you something.
Minimum wages follow the same logic: the principal employer is liable to make good any shortfall. And under the Code on Wages, bonus and gratuity obligations sit with the contractor as employer but can come back to the principal employer if the contract is found to be a sham. The minimum wages compliance guide explains how to test the contractor's wage register against the notified rate.
- Principal employer must ensure wages are paid, pay them on default and recover from the contractor
- EPFO and ESIC can recover unpaid contributions for contract workers from the principal employer
- Verify contractor ECR and ESI challans monthly; match UANs and IP numbers to your gate list
- Test the contractor's rates against the notified minimum wage for the category and zone
Registers and Records: Who Keeps What
The principal employer maintains a register of contractors: name and address of each contractor, nature of work, licence details, period of contract and the maximum number of workers. The contractor maintains, for each establishment: a register of persons employed, a muster roll (daily attendance), a wage register, an overtime register, registers of fines and of deductions for damage or loss, an advances register, and issues wage slips. Under the central rules these have historical form numbers (Form XII for the register of contractors, Forms XIII to XX for the contractor's registers), but form numbers and names differ by state and are changing as state rules under the Codes are notified, so use the ones your state currently prescribes.
The contractor also files periodic returns: under the central rules a half-yearly return by the contractor and an annual return by the principal employer, with state variants. Copies of the contractor's registers and returns should be furnished to the principal employer; write that requirement into every manpower contract, with a monthly delivery date.
Records are open to inspection and must be kept at the establishment or the contractor's registered office as the rules specify, for the prescribed retention period. Increasingly, principal employers hold a copy of the contractor's attendance and wage data in their own systems, which is both a compliance safeguard and the basis for the monthly verification described next. The contract labour attendance and muster roll guide covers the muster roll design.
- Principal employer: register of contractors and the annual return
- Contractor: register of persons employed, muster roll, wage register, OT register, fines, deductions, advances, wage slips, half-yearly return
- Form names and numbers vary by state and are changing under the Codes; use current state forms
- Contract terms should require monthly copies of registers, challans and returns
A Monthly Contractor Verification Routine
Run this routine for every contractor, every month, before releasing their invoice. Reconcile headcount: the number of contract workers on your gate attendance for the month should match the contractor's muster roll; investigate anyone on one list and not the other. Reconcile days: compare days worked per worker on your record with the contractor's muster roll, and resolve differences before wages are computed. Then check the wage register: basic plus DA at or above the mapped minimum wage, overtime hours matching your record and paid at double rate, deductions within legal limits, and net paid matching the bank payment evidence.
Next, statutory evidence. Obtain the contractor's PF ECR and payment receipt and the ESI challan for the previous month, and confirm every contract worker on your site appears with the right wages. Check licence validity and that the number deployed is within the licensed and certified count. File the whole pack against the month, and record who verified it. If the contractor cannot supply any item, hold the corresponding portion of the invoice rather than the whole payment; a documented, proportionate hold is defensible and gets faster results.
Attend Mitra makes the first half of this routine mechanical: contract workers are recorded with their contractor as a field, they mark attendance at your geofenced site by face or selfie, and a contractor-wise attendance and man-hour report is exported at month end. That report is your side of the reconciliation, produced from a record the contractor did not create. The contract labour management solution page shows the setup, and how to track attendance of contract workers covers the field practicalities.
- Headcount and days reconciliation: gate record vs contractor muster roll, worker by worker
- Wage register check: minimum wage, double-rate OT, lawful deductions, net matching bank evidence
- Statutory pack: PF ECR and receipt, ESI challan, licence validity, deployed count within limits
- Proportionate invoice holds for missing items; file the verified pack per month
Gate Attendance vs Contractor Attendance: Settling the Disputes
The classic dispute: the contractor's muster roll shows 26 days for a worker, the gate register shows 23. The contractor says the worker was on an off-site errand; the security guard's register has a gap; the worker wants 26 days' pay. Without a contemporaneous record, the argument is about credibility. With a timestamped, geofenced check-in and check-out per worker, it is about facts, and the 3-day gap is either explained by an approved off-site assignment or it is not.
Agree the rules in the contract before the first invoice. Which record is primary (the principal employer's gate record is the usual choice), how off-site work is authorised and recorded, how missed punches are regularised and by whom, and by what date the contractor must raise disputes. Then apply the rules consistently. A dispute process that is written down and followed protects the worker as much as the principal employer; the worker gets paid for every verified day, and neither party can quietly adjust numbers later.
- Make the principal employer's timestamped gate record the primary attendance source in the contract
- Define how off-site work, missed punches and corrections are authorised and recorded
- Set a dispute window before invoice approval; apply it consistently
- Resolve differences per worker, not as a lump-sum adjustment on the invoice
The 'Sham Contract' Risk and Why Attendance Data Cuts Both Ways
Courts and labour authorities look through the contract to the reality. If the principal employer recruits the workers, controls their daily work, disciplines them and effectively sets their pay while the contractor merely processes wages, the arrangement can be held a sham, and the workers treated as the principal employer's own employees, with all the consequences for regularisation, benefits and back wages. The risk rises when the same workers have been on site for years through successive 'contractors', or when contract workers do the same core work as regular employees under the same supervisors.
Attendance systems record facts, and facts are neutral. If your supervisors approve contract workers' shifts, overtime and leave in your system exactly as they do for your own staff, that record can support a sham-contract argument. Structure the system to reflect the genuine arrangement: contract workers' attendance is recorded at your gate for verification, but rostering, leave approval and discipline flow through the contractor's supervisor. Keep contract workers in a separate group with contractor-wise reporting rather than mixed into your departments.
Finally, keep the commercial reality honest. Pay contractors a rate that covers the minimum wage plus statutory contributions plus a margin, verify monthly, and rotate genuine responsibilities to the contractor. Compliance on paper with control in practice is the most expensive arrangement of all when a dispute reaches a tribunal. For agencies on the other side of these contracts, the manpower supply and contract staffing attendance guide covers the same verification pack from the contractor's perspective.
- Control and supervision by the principal employer, not the label, decide whether a contract is genuine
- Route rostering, leave and discipline of contract workers through the contractor's supervisor
- Keep contract workers in separate groups with contractor-wise reports
- Price contracts to cover minimum wage plus statutory costs; verify, do not assume