What the principal employer can ask you for
The principal employer (the client whose site your staff work at) is not a bystander under the Labour Codes. It must provide welfare facilities to contract labour at its premises. If you pay wages late or short, it must pay the balance and recover it from you. It can also recover PF and ESI it pays on your behalf. That is why clients ask contractors for licence copies, wage payment proof, PF and ESI challans and staff lists every month.
Part of our guide: Compliance checklist for labour contractors in India
By HaazriPro Team · Last updated
Who is the principal employer?
The OSH Code, 2020 defines the principal employer by type of establishment. For example, it is the head of the office in a government department, the owner or occupier of a factory, and for other establishments the person responsible for its supervision and control. In everyday terms, it is your client: the mall, hospital, housing society, company or builder whose work your staff do.
What is the principal employer responsible for?
| Duty | What the law says | Source |
|---|---|---|
| Welfare facilities | Welfare facilities for contract labour employed in the establishment are provided by the principal employer. The central rules list toilet, washroom, drinking water, bathing facilities if required, changing room, first aid box, canteen and crèche. | OSH Code s.53; central rules r.86 |
| Unpaid or short-paid wages | If the contractor does not pay on time or pays short, the principal employer pays the full or unpaid wages and recovers them from the contractor, by deduction from bills or as a debt. | OSH Code s.55(3); central rules r.98(8) |
| Unlicensed contractors | Employing contract labour through a contractor who needs a licence but has none is a contravention of the Code. | OSH Code s.54 |
| PF for contractor's staff | PF contributions paid by the employer for people employed through a contractor may be recovered from the contractor. | Code on Social Security s.17 |
| ESI for contractor's staff | The employer pays both ESI shares for people employed through a contractor and may recover them from the contractor. | Code on Social Security s.31 |
| Annual return | Under the central rules, the principal employer files an annual return in Form XVII (Part III) by the end of February. | Central rules r.98(9) |
How quickly must the principal employer step in on wages?
Under the 2026 central rules, contract labour wages must be paid by the 7th day after the end of the wage period (for monthly wages, by the 7th of the next month), by bank transfer or electronically. If the contractor does not pay within seven days of the end of the wage period, the principal employer must pay the wages in full, or the unpaid balance, within fifteen days, and recover the amount from the contractor's bills, as a debt, or from any security deposit it holds. The same rules say the principal employer settles the contractor's bills for contract workers' dues within the timeline agreed in the contract.
The Code also requires the contractor to inform the principal employer electronically of the wages paid, and the central rules ask the contractor to display a notice of the wage period and pay date at the place of work and send a copy to the principal employer.
What documents can a client ask you for?
Because the principal employer carries these risks, expect requests like these, often as a condition of releasing your monthly bill:
- Your contractor licence, if you have 50 or more contract labour, and its maximum number. See who needs a licence.
- Proof of wage payment: bank transfer statements for each person, matching the wage register.
- PF and ESI challans with the list of staff covered. See PF and ESI registration for contractors.
- A register of the staff you deploy. For ESI the Code requires you to give it to the employer before your amounts are settled.
- Attendance for their site, to check against the bill.
- Your PSARA licence, if you supply security staff.
HaazriPro works this out every month from your attendance, for every staff member and site. Start 30-day free trial
Can a client use contract labour for any work?
Not always. The OSH Code prohibits contract labour in the core activities of an establishment, with exceptions (for example where the activity is ordinarily done through contractors). Importantly for agencies, the definition of core activity says these are not to be treated as essential or necessary activities unless the establishment is set up for them: sanitation works, "watch and ward services including security services", canteen and catering, loading and unloading, construction and maintenance, gardening, housekeeping and laundry where they are support services, and transport. A dispute about whether an activity is core goes to the appropriate government.
Do contract staff get the same conditions as the client's own workers?
Under the 2026 central rules, where contract labour do the same or similar kind of work as workers employed directly by the principal employer, their holidays, hours of work and other conditions of service must be the same as those workers'. Disputes about whether work is similar go to the Deputy Chief Labour Commissioner (Central). State rules may say this differently; check yours.
Worked example: a late salary at one site
A housekeeping contractor is short of cash and pays 25 staff at a hospital on the 12th instead of by the 7th of the next month. Under the central rules, after seven days from the end of the wage period, the hospital, as principal employer, must make sure those staff are paid within fifteen days. If it pays them, it recovers the amount from the contractor's next bill. The contractor has now lost the client's trust and probably the next renewal. The fix is boring: close attendance on the last day, run salary on the 1st or 2nd, pay by bank by the 7th of the next month, and send the client proof the same day.
How do you make client checks painless?
- Send one monthly pack per site: attendance summary, wage payment proof, PF and ESI challans and the bill. Free formats: the monthly attendance sheet, the wages register and the manpower bill format.
- Make sure the names on all four documents match exactly. Mismatched names are the first thing an auditor spots.
- Keep the same record for every site, so a client audit takes minutes, not days.
HaazriPro keeps the site-wise attendance, the salary sheet and the site bill from one record, so the pack matches by construction. It does not file PF, ESI or labour returns; your CA or consultant still does that. For the full list of obligations, see our contractor compliance checklist.
Sources
- OSH Code, 2020: sections 2 (principal employer, core activity), 53 to 57 (Ministry of Labour)
- OSH and Working Conditions (Central) Rules, 2026: rules 86, 93 and 98 (eGazette)
- Code on Social Security, 2020: sections 17 and 31 (India Code)
- Ministry of Labour: FAQs on the OSH Code
- PIB, 21 Nov 2025: the four Labour Codes made effective
This guide explains the rules in plain language. It is not legal or tax advice. Laws and rates change, so check your contract and your state's rules with your labour consultant or lawyer before you act on it.
Turn daily attendance into salary sheets and client bills
Supervisors mark attendance by tapping each staff member's face photo, even offline. The salary sheet and the client bill are ready at month end.
Start 30-day free trial