The Contract Labour (Regulation & Abolition) Act, 1970 has governed how Indian companies engage contract workers for over five decades. It sets the rules for registration, contractor licensing, welfare facilities, and the liability that flows back to the company when a contractor doesn’t hold up their end.
The Occupational Safety, Health and Working Conditions Code, 2020, the OSH Code changes this framework. It consolidates the CLRA and twelve other central labour laws into a single statute, and in doing so, revises several of the rules that principal employers have operated under since the original Act.
Some changes expand employer obligations. Some reduce administrative burden. A few rework the liability structure in ways that will affect how companies draft contracts with vendors and manage multi-contractor sites.
This article covers what’s actually changing, what stays the same, and what companies need to be doing before state notifications make this operational.
What the OSH Code Replaces
The OSH Code consolidates thirteen central labour laws. For most employers, the three that matter most are the CLRA, the Factories Act, and the Building and Other Construction Workers Act, all absorbed into the OSH Code with revised provisions. The compliance obligations construction companies carry under the BOCW will be reorganised under the OSH Code framework rather than run as a parallel registration track.
Understanding the OSH Code is essentially understanding what the four labour codes do to the existing compliance stack; they don’t add obligations so much as reorganise and update them. For contract labour, the reorganisation is material.
The Threshold Change: From 20 to 50 Workers
Under the CLRA Act, the Act applies to any establishment employing 20 or more contract workers on any day in the preceding twelve months. Principal employers crossing that threshold must register; contractors crossing it must obtain a license.
The OSH Code raises the threshold for principal employer registration to 50 contract workers. This is a significant change, and one that will take a number of mid-sized businesses out of the formal registration requirement entirely.
What this means in practice:
- Companies that currently register because they cross the 20-worker mark but stay well below 50 will no longer be required to do so under the OSH Code
- The reduced administrative burden for smaller establishments is a deliberate policy intention: the OSH Code is partly designed to reduce compliance load on smaller employers
- Companies currently sitting between 20 and 49 contract workers should not read this as a reason to stop tracking their obligations now, the existing CLRA applies until the OSH Code is notified, and state notifications are still pending in most jurisdictions
The contractor side also changes. Under the CLRA, a contractor needs a separate license for each principal employer establishment. The OSH Code moves toward a single national license for contractors, covering all their engagements rather than requiring fresh licensing for each client site. This is a meaningful operational simplification for manpower agencies and staffing firms that work across multiple clients and states.
What Doesn’t Change: Principal Employer Liability
The threshold for registration changes. The licensing mechanism changes. What does not change is the underlying liability structure.
The principal employer remains responsible under the OSH Code for ensuring that welfare facilities are in place when the contractor fails to provide them and for ensuring wages are paid on time when the contractor defaults. The residual liability that defines the CLRA framework is carried forward into the OSH Code in the same form.
This is the compliance reality that many companies still misread: the act of engaging a contractor does not transfer statutory risk. If the contractor fails, the obligation can flow back to you. That was true under the CLRA. It remains true under the OSH Code.
Businesses managing contract and temporary workers need to maintain contractor compliance monitoring regardless of how the registration requirements shift because the liability that triggers when a contractor defaults operates independently of whether the principal employer was required to register.
Migrant Worker Provisions Absorbed and Expanded
The Inter-State Migrant Workmen Act, 1979 is consolidated into the OSH Code. This is relevant for any principal employer whose contractors bring workers from other states common in construction, manufacturing, and logistics.
The OSH Code introduces a portal-based registration system for inter-state migrant workers and portability of welfare benefits across states. Contractors supplying migrant workers must maintain records covering home state, skill category, wages, and displacement allowance entitlements. Principal employers carry the same residual liability here: if the contractor doesn’t comply, the obligation can trace back to you.
Welfare Obligations: Revised but Still Real
The OSH Code updates welfare facility requirements for contract labour canteens, rest rooms, first aid, drinking water, washing facilities with revised thresholds and specifications. The specifics will emerge through subordinate legislation and state rules.
What doesn’t change is the duty on the principal employer to step in when a contractor fails to provide required facilities. For multi-contractor sites, tracking which contractor is responsible for which welfare provision and whether it’s actually in place remains a practical compliance task. Health and safety requirements under the OSH Code are also more detailed than the Factories Act alone, extending to a wider range of establishments and employment types including contract workers on site.
Digital Records and Simplified Returns
The OSH Code shifts toward digital record-keeping and a combined annual return, replacing the multiple registers maintained across different Acts today. For principal employers, internal records on contract worker headcount, wages, and welfare can be maintained digitally rather than in paper and contractor compliance records can be exchanged and submitted in the same format.
The format changes; the standard doesn’t. Accurate, current records of contractor EPF/ESIC filings, license status, wage disbursements, and worker headcount remain essential. What happens when statutory compliance goes wrong in real situations consistently shows that documentation gaps are what amplify liability during inspections not just the underlying violation.
The Timing Reality
The OSH Code received Presidential assent in 2020. Like the other three labour codes, it requires states to issue their own notifications before taking effect in their jurisdictions. As of now, most states have not completed this process.
This creates a transitional situation that employers need to manage carefully:
- The CLRA Act, Factories Act, and BOCW Act remain in force in states that haven’t notified the OSH Code
- Companies operating across multiple states may find themselves subject to different frameworks in different locations for a period
- The existing statutory compliance obligations don’t relax until the state notification actually happens
The practical guidance is the same as it has been on all four codes: use the transition period to audit and prepare, not to assume the existing obligations no longer apply.
What Principal Employers Should Do Now
Audit contract labour headcount by establishment. Map where you sit relative to both the 20-worker CLRA threshold (applies now) and the 50-worker OSH Code threshold (applies on notification). This determines what registration and monitoring applies at each location.
Review contractor agreements. Many vendor contracts reference the CLRA Act specifically. These need updating when the OSH Code takes effect — welfare obligations, wage payment timelines, and compliance documentation requirements all shift.
Map migrant worker engagement. If contractors supply inter-state migrant workers, build OSH Code portal registration and welfare portability requirements into your contractor onboarding checks ahead of notification.
Update records and monitoring systems. Prepare for digital record-keeping and the combined annual return format. Ensure contractor compliance documentation — EPF/ESIC remittance proof, license certificates, wage records is being collected and stored in a reviewable format.
Track state notifications. Add OSH Code notification status per operating state to your compliance calendar. When a state notifies, CLRA, Factories Act, and BOCW provisions in that state give way to the OSH Code and your compliance framework switches accordingly.
A full labour law compliance checklist review, covering both the current CLRA obligations and the forward-looking OSH Code requirements, is a useful starting point. Running it alongside a review of PF and ESIC obligations and the broader contract labour compliance framework gives a complete picture of where gaps exist and what needs to be addressed before enforcement changes.
Quick Checklist: OSH Code Readiness for Principal Employers
- Contract worker headcount audited per establishment current CLRA threshold (20) and upcoming OSH Code threshold (50) both mapped
- Contractor agreements reviewed for CLRA-specific references requiring update
- Contractor license status verified; current CLRA licensing requirements apply until OSH Code is notified
- Migrant worker engagement mapped, contractor obligations under the absorbed Inter-State Migrant Workmen Act provisions identified
- Welfare facility checklist updated against OSH Code requirements for applicable sites
- Safety committee and health record requirements assessed under OSH Code
- Digital record-keeping systems reviewed for combined annual return compatibility
- Contractor EPF/ESIC compliance monitoring maintained principal employer liability unchanged
- State OSH Code notification status added to compliance calendar
- Vendor contract update plan prepared for post-notification transition
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FAQ’s
The Occupational Safety, Health and Working Conditions Code, 2020 consolidates thirteen central labour laws — including the Contract Labour (Regulation & Abolition) Act, 1970, into a single statute. For contract labour, it revises the applicability thresholds, contractor licensing structure, welfare requirements, and record-keeping obligations while retaining the core framework of principal employer liability.
The OSH Code raises the threshold for principal employer registration from 20 contract workers (under the CLRA Act) to 50 contract workers. Establishments that engage fewer than 50 contract workers on any day in the preceding twelve months will not be required to register under the new framework once states notify the code.
The CLRA Act will cease to apply in states that have notified the OSH Code. Until then, the CLRA remains fully in force. Companies operating across multiple states may find themselves subject to both frameworks simultaneously during the transition period with the CLRA applying in states that haven’t yet notified and the OSH Code applying in those that have.
No. The residual liability structure is carried forward unchanged. If a contractor fails to pay wages on time, provide required welfare facilities, or meet statutory obligations, the principal employer remains responsible for ensuring compliance and can recover costs from the contractor but cannot avoid the underlying duty. Engaging a contractor does not transfer statutory risk.
The key steps are: audit contract worker headcount against both the current CLRA threshold and the forthcoming OSH Code threshold; review vendor contracts for CLRA-specific references that will need updating; map inter-state migrant worker engagement; assess digital record-keeping readiness for the combined annual return; and track state notification status for every jurisdiction where the business operates. Existing CLRA compliance obligations must continue uninterrupted until state notifications change the applicable framework.
