Labour contractor licence: who needs one and how to apply

Who needs a contract labour licence now?

Section 45 of the Occupational Safety, Health and Working Conditions Code, 2020 applies the contract labour chapter to:

• every establishment where 50 or more contract labour are employed, or were employed on any day of the preceding twelve months; and
• every manpower supply contractor who has employed 50 or more contract labour on any day of the preceding twelve months.

A contractor to whom this applies cannot supply contract labour, or execute work through contract labour, without a licence (section 47). The old Contract Labour Act started at 20 workers; the Ministry of Labour confirms the threshold is now 50, and says the change is "for administrative ease" and does not reduce workers' protections. The fee table in the 2026 central rules starts: "No license is required up to 49 contract labour".

The chapter does not apply where the work is only of an intermittent or casual nature. Work done for more than 120 days in the last twelve months, or seasonal work done for more than 60 days a year, does not count as intermittent.

Who issues the licence?

The licence comes from the authority designated by the "appropriate government": the central government's authority for central-sphere establishments, the state's authority for state-sphere ones. A contractor who wants to work in more than one state, or across India, can apply for a single licence from the authority designated by the central government, which consults the states electronically before issuing it. Most private security, housekeeping and construction contracts with private businesses fall under the state, so check your state's rules and portal.

How do you apply under the 2026 central rules?

1. Check eligibility. Rule 85: the contractor, as an entity or an individual, must not be an undischarged insolvent, or have been convicted in the last two years of an offence punishable with more than three months' imprisonment.
2. Apply online. Rule 87: the application is made electronically on the Shram Suvidha portal in Form XXI. The Code itself requires the application to be electronic and to state the number of contract labour and the nature of the work.
3. Give security. Rule 90: before the licence is issued, a bank guarantee of ₹1,000 for each contract worker covered by the application.
4. Pay the fee from the table below. It is non-refundable.
5. Get the decision. Section 119 says the authority issues the licence electronically within 45 days; if it does not, the licence is deemed issued and auto-generated. A rejection must give reasons.

How much is the fee?

HaazriPro works this out every month from your attendance, for every staff member and site. Start 30-day free trial  →

Worked example: an agency with 80 staff on contract

An agency supplies 80 staff to client sites. It is above 49, so it needs a licence. Under the central rules it would pay a ₹1,000 fee (50 to 100 band) and give a bank guarantee of 80 × ₹1,000 = ₹80,000. The licence states the maximum number of contract labour, so if the agency grows to 120 staff it must apply to amend the licence (Form XXI again), pay the amendment fee and top up the security. The Code says the number may then be increased "by depositing such security deposit as specified in the amended licence".

What are the conditions once you have it?

• Wages at least the legal minimum, and paid as the Code on Wages requires (rules 86 and 93). If you fail to pay minimum wages, the authority can pay your workers out of your security deposit, including by invoking the bank guarantee.
• Same conditions as direct workers for contract labour doing the same or similar work as the principal employer's own workers: holidays, hours and other conditions of service (rule 93(2)).
• PF and ESI membership for all contract labour, subject to the Code on Social Security (rule 93(4)).
• Tell the government about each work order within 15 days on the Shram Suvidha portal: principal employer, address, start date, number of contract labour, duration (rule 94).
• Never charge workers a fee or commission, directly or indirectly (section 49).
• Stay within the number on your licence. It is not transferable.
• File a half-yearly return in Form XVIII within 30 days of the end of June and December (rule 98(7)).
• Issue an experience certificate on demand, in Form XXIII (rule 100).
• Keep wage records that prove all of this: days worked, rates, deductions and net pay per person. Our free wages register template is a simple start.

How do renewal, suspension and appeals work?

Renew online on the Shram Suvidha portal between 90 and 30 days before expiry. A late renewal attracts an extra 25% fee. The authority must renew within seven days, or the renewal is deemed granted. A licence obtained by misrepresentation, or whose conditions are broken, can be suspended or revoked after a 15-day show-cause notice. You can appeal an order within 30 days. A licence issued under a central labour law before the Code started stays valid until it expires and must then be taken afresh under the Code.

Remember the other side too: if a principal employer uses a contractor who needs a licence but does not have one, that employment is itself a contravention of the Code (section 54). Clients will ask for your licence copy. Security agencies also need a separate PSARA licence, and every contractor must keep the registers the rules require.

Sources

• OSH Code, 2020, sections 45 to 57 and 119 (Ministry of Labour)
• OSH and Working Conditions (Central) Rules, 2026, rules 85 to 100 (eGazette)
• Ministry of Labour: FAQs on the OSH Code (licence threshold 20 to 50)
• Shram Suvidha portal (Ministry of Labour)
• PIB, 21 Nov 2025: the four Labour Codes made effective
• Ministry of Labour: FAQs on the Labour Codes, transition of rules

This guide explains the rules in plain language. It is not legal or tax advice. Laws and rates change, so check your state's rules and portal with your labour consultant or lawyer before you act on it.