Quick answer: The contract labour act usually means the Contract Labour (Regulation and Abolition) Act, 1970, or CLRA Act, which governed workers supplied to you through a contractor. Since 21 November 2025 its rules sit in the OSH Code, 2020. They apply once an establishment uses 50 or more contract workers on any day of the preceding 12 months.
- The threshold rose from 20 to 50 contract workers, for principal employers and for contractors.
- A contractor with 50 or more contract workers needs a single licence valid for five years.
- Contractors can apply for one common licence covering several states or all of India.
- Contract labour is barred from core activities, subject to three statutory exceptions.
What counts as a core activity under the OSH Code?
Anything your establishment is set up to do, plus work essential to it. That is broad. Section 2 of the OSH Code on Court Book lists support work that is not core unless you were set up for it.
| Non-core category | What it covers |
|---|---|
| Security | Watch and ward |
| Facilities | Sanitation, housekeeping, laundry, gardening |
| Food | Canteen and catering |
| Logistics | Transport including ambulance, courier, loading and unloading |
| Works | Civil and construction work, including maintenance |
| Intermittent work | Any activity that is not regular |
Core work through contractors is banned. Section 57 allows three exceptions. The work is ordinarily done through contractors, it does not need full-time workers for most of the day, or a sudden surge must be finished in a set time.
Work that is truly intermittent falls outside the chapter. It stops counting as intermittent once it runs past 120 days a year, or 60 days for seasonal work.
What does a principal employer owe contract workers?
A backstop on pay and a set of new entitlements. If the contractor defaults on wages, you pay.
EY’s alert on the 2026 central rules adds the detail. Contractors must pay wages by the 7th day after the wage period.
Regularly employed contract workers get an annual increment of at least 2%. They can ask for an experience certificate too.
Bonus follows the same logic. The central wage rules make the principal employer pay the minimum bonus when a contractor fails to.
Foreign-owned Indian entities slip here. They treat vendor-supplied staff as the vendor’s problem, sign a cheap manpower contract and never check the vendor’s PF challans.
Long-term vendor staff who take daily direction from your managers can also raise employee misclassification questions. Review how the work actually runs. Paper proves little.
How is contract labour different from an EOR or staff augmentation?
An EOR employs your team directly on its own payroll, with appointment letters and full statutory cover. A contractor in the OSH Code sense supplies workers to your establishment, while you act as principal employer.
Staff augmentation can fall on either side, depending on who employs the people and where they work. Our comparison of an employer of record and a staffing agency in India sets out the practical differences.
How does Remunance keep your India staffing model clean?
Remunance employs India teams directly through its own Indian entity, so your people sit on an Indian payroll with EPF, ESIC and gratuity handled. For genuine freelancers, it runs contractor engagement and compliance instead. To test whether your vendor set-up crosses the 50-worker line, audit your contract staffing model with us.
What else do people ask about the CLRA Act?
Is the CLRA Act still in force?
Not as a separate Act. It was one of 13 laws folded into the OSH Code on 21 November 2025, and its rules now sit in the Code and the 2026 central rules.
When is a contract labour licence required?
When a contractor employed 50 or more contract workers on any day of the preceding 12 months. The single licence lasts five years, and it sits alongside your wider statutory compliance calendar.
Can contract workers do core work?
Generally not. The OSH Code allows it only where the work is ordinarily done through contractors, needs no full-time workers for most of the day, or covers a sudden surge.