Compliance checklist for labour contractors in India

What changed for labour contractors in 2025 and 2026?

Until late 2025, a contractor's compliance came from a pile of separate Acts: the Contract Labour (Regulation and Abolition) Act, the Minimum Wages Act, the Payment of Wages Act, the EPF and ESI Acts, and more. From 21 November 2025 those were replaced by four Codes: the Code on Wages, the Code on Social Security, the Occupational Safety, Health and Working Conditions (OSH) Code, and the Industrial Relations Code. On 8 May 2026, the central government notified its rules under the Codes, and the OSH (Central) Rules expressly superseded the old Contract Labour Central Rules of 1971.

Two caveats run through everything below. First, the government said the old Acts' rules and notifications continue during the transition, "to the extent these are in line with Codes", until new rules are notified. Second, most private security, housekeeping and construction contracts are regulated by the state government, and each state notifies its own rules. The figures here come from the Codes and the central rules; your state's may differ.

What is on the contractor compliance checklist?

Use this as a starting list to review with your labour consultant. Each item is covered in more detail below.

Which registers must a contractor keep?

Registers are where compliance is proved. Under the OSH (Central) Rules, 2026, every employer keeps three registers, electronically or otherwise: an employee register (Form XIII), an attendance register-cum-muster roll (Form XIV) covering days 1 to 31 with shift, in and out times and overtime hours, and a register of wages, overtime and deductions (Form XV). They must be preserved in original for five calendar years, and a wage slip goes out electronically in Form XVI. Registers kept under the Code on Wages rules count as kept under the OSH rules, so one set is enough.

The old Contract Labour Central Rules had a much longer list (Forms XIII to XXIII, including separate registers for fines, advances and overtime) and a three-year preservation period. Many inspectors and clients still use those form numbers, and state rules may still require them. The guide maps old to new so you can answer either way.

Read the full guide to contractor registers, new forms and old →

Do you need a contractor licence?

The OSH Code applies its contract labour chapter to establishments, and to manpower supply contractors, with 50 or more contract labour on any day of the previous twelve months. Below that, no licence is needed; the old threshold was 20. Under the 2026 central rules you apply online on the Shram Suvidha portal in Form XXI, give a bank guarantee of ₹1,000 for each contract worker, and pay a fee on a sliding scale from ₹1,000 (50 to 100 workers) to ₹40,000. The licence states the maximum number of contract labour, is not transferable, and is valid for five years.

The Code says the authority must issue the licence within 45 days or it is deemed issued. Renewal is due between 90 and 30 days before expiry, with a 25% extra fee if late. A contractor working in several states can take a single licence. Clients care because using an unlicensed contractor is itself a contravention by the principal employer.

Read the full guide to the contractor licence: threshold, fee and process →

What extra licence does a security agency need?

A private security agency needs a licence under the Private Security Agencies (Regulation) Act, 2005, from the state's Controlling Authority, on top of any contractor licence. You apply in Form I with background verification for each proprietor, partner or director and an affidavit, and pay ₹5,000 for one district, ₹10,000 for up to five districts or ₹25,000 for the whole state. The authority has 60 days to decide a complete application, and the licence lasts five years, with renewal at least 45 days before expiry.

After licensing you must start within six months, engage supervisors within 60 days, keep an electronic register of staff with photographs and salaries, issue photo identity cards, and keep your uniform distinct from police and armed forces uniforms. The Jan Vishwas Act, 2026 removed two provisions of PSARA from 15 May 2026, which many older articles miss.

Read the full guide to the PSARA licence: process, documents and fees →

When do PF and ESI apply to a contractor?

Under the Code on Social Security, 2020, the provident fund chapter applies to establishments with 20 or more employees and the ESI chapter to those with 10 or more. Once applicable, they keep applying even if your headcount later falls below the threshold. From 17 September 2026 the EPF wage ceiling is ₹25,000 a month (it was ₹15,000 since 2014). ESI covers staff earning up to ₹21,000 a month, with the employer paying 3.25% and the employee 0.75%, due within 15 days of the end of the month.

The Code has contractor-specific rules: a principal employer that pays PF or ESI for your staff can recover it from your bills, you may deduct only the employee's share from wages, and for ESI you must hand over a register of the staff you supplied before your amounts are settled.

Read the full guide to PF and ESI registration for manpower contractors →

What can your client, the principal employer, ask for?

The principal employer must provide welfare facilities such as drinking water, toilets and first aid to contract labour at its premises. More importantly for you, if you pay wages late or short, the OSH Code makes the principal employer pay the balance and recover it from you, and the central rules give it fifteen days to do so. It can also recover PF and ESI it pays for your staff. Using a contractor who needs a licence but does not have one is a contravention on its side.

So clients increasingly ask, every month, for your licence copy, bank proof of wage payment, PF and ESI challans with staff lists, and site attendance to check against your bill. The guide lists what to send, explains the core-activity rule (security, housekeeping and sanitation are generally not core unless the business is set up for them), and shows how to make client audits painless.

Read the full guide to principal employer obligations →

What do the Labour Codes change for contractors?

The four Codes replaced 29 labour laws from 21 November 2025, but the change for contractors is uneven: central rules arrived on 8 May 2026, while state rules arrive state by state. The headline changes are a contractor licence only from 50 contract labour, three common registers kept for five years, wages by the 7th of the next month by bank, a stronger role for the principal employer on unpaid wages, overtime at not less than twice the normal rate, and the "50% rule" that adds excess allowances back into wages for PF, ESI and other purposes.

The guide sets each change against the old position, with a worked example for a 70-person agency, and flags what still depends on your state.

Read the full guide to the new Labour Codes for contractors →

Which wage rules apply every month?

Whatever your state, these Code on Wages rules apply to every contractor every month:

• Minimum wage. Pay at least the rate notified for the category of work, skill and area. The central OSH rules make this a licence condition too. Track VDA revisions, usually once or twice a year.
• Wage period and pay day. No wage period may exceed a month. Monthly wages are paid by the 7th of the next month, daily wages at the end of the shift, and final dues within two working days of someone leaving.
• Deductions. Only those the Code authorises, such as recovery of advances, fines, damage or loss, and PF and ESI shares. Together they cannot exceed 50% of the wages for the period. See how to handle advances.
• Overtime. Hours beyond the normal working day are paid at not less than twice the normal rate of wages. The OSH Code sets eight hours a day as the standard.
• Payment by bank. The OSH Code requires contractors to pay through bank transfer or electronically, and inform the principal employer of what was paid.
• No fees from workers. A contractor must not charge contract labour any fee or commission, directly or indirectly.

Our staff salary calculator and overtime calculator help you check individual cases.

What records should you keep, and for how long?

Almost every check an inspector or a client makes comes back to four records. Keep them for at least five years, the period the 2026 central rules set for registers, and keep them consistent with one another:

1. Who works for you: one entry per person with identity details, date of joining and leaving, designation and a photograph. This is your employee register, and for security agencies it overlaps with the PSARA register.
2. Who worked where, on which day: attendance per site and per day, with shift and overtime hours. This is the muster roll. Start with our monthly attendance sheet if you are still on paper.
3. What each person earned and received: days paid, rate, overtime, deductions with their nature, and net pay, with proof of the bank transfer. Our wages register template follows the familiar layout.
4. What you billed each client: staff-days and rates per site, matching the attendance. See the manpower bill format.

The most common audit failure is not a missing register but registers that disagree with each other: a name spelled two ways, a worker paid for 26 days but marked present for 24, a bill for staff-days the muster roll does not show. Build the wage register and the bill from the attendance record instead of keying the same numbers three times, and these gaps close on their own.

How do you stay compliant across several states?

Agencies that grow past one city meet the patchwork quickly. Minimum wages are notified state by state and revised on each state's own timetable, so the same post can cost different amounts in two cities. A PSARA licence is issued by each state's Controlling Authority and covers only that state. For the contractor licence, the OSH Code lets a contractor working in more than one state, or across India, apply for a single licence from the authority the central government designates, which consults the states before issuing it. Registers, wage dates and deductions follow the Codes everywhere, but the detailed rules are the appropriate government's. Keep a one-page sheet per state listing its minimum wage notification, its rules status and your licence numbers, and review it every January and July.

What does a contractor's compliance calendar look like?

Based on the Codes and the 2026 central rules. Confirm each date for your state and your schemes.

Where does HaazriPro fit, and where doesn't it?

HaazriPro is not a statutory payroll or compliance filing service. It does not register you with EPFO or ESIC, file returns, or apply for licences. What it does keep is the record most of this checklist depends on: daily attendance at each site, marked by a supervisor tapping each staff member's face photo (no biometrics, works offline), with the time each mark was made. From that it builds the monthly salary sheet, with advances deducted, and the bill for each site. When your consultant prepares registers or a client asks for proof, the numbers agree with each other because they come from one place.

Frequently asked questions

Do the old Contract Labour Act rules still apply?

For central-sphere establishments, the OSH (Central) Rules, 2026 superseded the 1971 Contract Labour Central Rules from 8 May 2026. For state-sphere establishments, the old state rules continue where they agree with the Codes until your state notifies new rules. Ask your labour consultant which applies to each site.

I have 40 staff. Do I need a contractor licence?

Under the OSH Code, the contract labour chapter, including licensing, applies from 50 contract labour on any day of the previous twelve months. Below that, no licence is needed under the central rules. You may still need PF (20 or more employees), ESI (10 or more) and, for security work, a PSARA licence.

Can I still pay staff in cash?

The OSH Code requires contractors to pay wages by bank transfer or electronic mode, with cash allowed only where electronic payment is not practicable, as the rules prescribe. Bank payment also gives you the proof clients ask for.

How long must I keep registers?

Five calendar years from the last entry under the 2026 central rules, up from three years under the old Contract Labour Central Rules. Registers can be kept electronically.

Who pays if my company cannot pay wages?

The principal employer. Under the OSH Code, if a contractor fails to pay or pays short, the principal employer must pay the balance and can recover it from the contractor's bills or as a debt. The central rules also allow payment from the contractor's security deposit.

Does HaazriPro file PF, ESI or labour returns?

No. HaazriPro keeps attendance, the salary sheet with advances, and site bills. Your CA or labour consultant uses those records for statutory filings.

Sources

• PIB, 21 Nov 2025: the four Labour Codes made effective
• Ministry of Labour: FAQs on the Labour Codes, transition of rules
• Code on Wages, 2019 (India Code)
• Code on Social Security, 2020 (India Code)
• OSH Code, 2020 (Ministry of Labour)
• OSH and Working Conditions (Central) Rules, 2026 (eGazette)
• Code on Wages (Central) Rules, 2026 (eGazette)
• Ministry of Labour: FAQs on the OSH Code
• PIB, 16 Sept 2026: EPF wage ceiling raised to ₹25,000
• ESIC: contribution rates and due date
• ESIC: coverage and wage limit
• Private Security Agencies (Regulation) Act, 2005, as amended (India Code)
• Shram Suvidha portal (Ministry of Labour)
• Contract Labour (Regulation and Abolition) Act, 1970 and Central Rules, 1971 (Ministry of Labour)

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 every date with your labour consultant, CA or lawyer before you act on it.