Discussion on Contract

Labour(Regulation & Abolition)

Act 1970
Aniruddh Shastree

Applicability
Every industry engaging 20 or more workers
on contract basis.
Every contractor engaging 20 or more
workers.

Obtaining registration & license

Apply in form I for registration in triplicate copy
along with prescribed fees.
Apply in form IV for license in triplicate copy
along with license & security fees (per worker
Generally in all cases- Refundable) .
For license form V is given by Principal employer
to contractor.

Need for Contract Labour

Increasing competition, particularly competition from
imports has demanded
Market uncertainty (Profit/Loss)has made it difficult
to assure permanent employment of fixed number of
labourers , as each employee is a cost to company.
Focus on core tasks of the company and specialize in
primary tasks of company.
Need for continuous updation of skills has led to
downsizing of workforce with redundant skill sets.

Advantages of Contract Labourers

Use of contact workers provides a means of getting around the
labour regulations, particularly the Industrial Disputes Act(IDA),
and industrial employers have actually been adopting this means on
a wide scale.
Contract labour has been one of the principal methods used by the
employers to gain flexibility in the labour market.
Lower wages of informal workers and saving of expenditure on
worker benefits when such workers are employed help in reducing
cost and thus improving competitiveness.
These workers are brought on board for a project that is not part of
the core competency of the company hence the company can hire
specialized skills which are project specific.

Advantages of Contract labour to company

Availability of labour when work load is higher.
No responsibility of making contract labour
permanent and still workforce becomes available
when work pressure rises and discontinue their
services as per agreement.
Lesser responsibility of workforce at workplace.
Outsourcing leads to a greater specialisation in
the production of these services, with resulting
gains in efficiency and reduced costs.

Disadvantages of Contract Labour to

Labourers and society.

Creation of Joblessness and growth in economy at the same time.

Decline in loyalty from workers towards company.

Worker is taken only as machine/commodity to get work done.

Frequent rise of unemployment index of the state/country .

Unstable life of worker.

Rise in small scale businesses of contract labourers themselves in the places for
economic purpose they delve hence difficulty in getting them when needed may
happen.

Rise in theft/robbery, crime , as income related problems lead them to act in that
manner.

Labour exploitation can rise as there is absence of unionised organization to fulfill

demand .

Gradual decline in consumption of products because of lower wages.

High gap between rich and poor class.

The wages of casual workers were found to be significantly lower than that of
permanent workers.@@

Disadvantage of contract labour for

Company
No direct connect between Principal employer and Contracted
worker.
Contractor can influence work process of workers on site of
principal employer.
Impersonal outlook of workers towards principal employer.
Quality of labourers may reduce.
Limitations of time period of contract.
Principal employer is statutorily responsible for payment of wages
to contract labourers in full to the workmen if contractors fails ***
Authorities of CLA(1970) can order a prohibition on contract
labour.
Additional compliances required to be done by principal employer.
Contractor may or may not comply with all regulations, that can
create legal complications.

Disadvantages of Contract Labour to

company.
Machines can be handled by several workers, that may lead to
wear & tear of machines faster.(Chances of improper handling
increase).
Legal sanction for hiring contract labourers can be a
complicated process at times.
If the work can be done by regular workmen then contract
labourers cannot be employed on that processes.
Cost factor is reduced by judgment. Contractor to pay equal
wages as paid by principal employee to his worker doing
similar works. &&&.
Safety of workplace can reduce as workers may change and
stealing of items can happen more than what permanent
workers do.

THE CONTRACT LABOUR (REGULATION &

ABOLITION) ACT, 1970 AND THE RULES
Registration of Principal Employer
Every employer covered under this Act, shall obtain registration of the
establishment by applying to the Registering Officer in a prescribed
application form and by paying the fee prescribed.
License by the Contractor
Every Contractor covered under this Act shall obtain license from the
Licensing Officer by applying in a prescribed application and by paying
the fee prescribed.

THE CONTRACT LABOUR (REGULATION &

ABOLITION) ACT, 1970 AND THE RULES
Renewal of the License
The license obtained will be valid for one year from the date of issuance.
The contractor should obtain renewal of the license by applying before
one month in advance of the expiry of the license duly paying fee in a
prescribed form.
Changes in Registration / License
Changes should be incorporated from time to time in the registration /
license by the principal employer / contractor.

THE CONTRACT LABOUR (REGULATION &

ABOLITION) ACT, 1970 AND THE RULES
Wages to the Contractors workmen
The Payment of Wages Act and the Minimum wages Act are applicable to the
Contractors workmen.
Where the establishment is not covered under any scheduled employment
under the Minimum Wages Act, the wages prescribed by the Commissioner of
Labour under the Contract Labour Act are applicable to the contractors
workmen.
Where agreements or awards or contract specifies the wages payable to the
workmen, such specified wages are applicable to the contractors workmen
The Contractors workmen performing the same and similar nature of duties of
the regular workmen, the wages of regular workmen are payable to the
contractors workmen.

Obligation of Principal employer

Register of contractors

Form XII

Annual return Form XXV (on or before 15th

Febconsolidated return)
Notice of Commencement/ Form VI B
Completion

Obligation of Contractor

Renewal of license
Form VII
Register of workman
Form XIII
Employment Card
Form XIV
Service Certificate
Form XV
Muster Roll
Form XVI
Wages register
Form XVII
Wage slip
Form XIX

THE CONTRACT LABOUR (REGULATION &

ABOLITION) ACT, 1970 AND THE RULES
Conditions of Service

Employment Card
Hours of Work
Bar on employment of females
Bar on employment of child labour
Rest intervals
Spread-over
Extra wages for over time
Weekly rest
National Festival Holidays
Leave with wages
Maintenance of Registers
Payment of Wages
Lay off
Procedure of termination of service

Process of engaging contractor

Process of engaging Contract labour

contd
1) Considering purchase requisition for procurement of contract
labour(Prerequisites for hiring contract labour.)
2) Checking directives of Central Vigilance Commission& Laws/Rules.
3) Risk Analysis and needed measures to reduce it.
4) Invitation , acceptance and Opening of Bids from applicants supply of Contract
Labour.
5) Selection of multiple/single contractor & conducting pre-Bid negotiations.
6) Verifications of Licenses & permits of Contract labour , Principal Employer.
7) Cost benefit Analysis of the project and offered schemes of Contractors.
8) Checking & Release of contract documents.
9) Getting agreements & acceptance from Principal employer over terms of
contract.
10)Entering into agreement .
11)Handing over of Work order to contractor.
12)Distribution of Copies of contract to all related department ; (i) Contractor, (ii)
Vigilance & Legal dept. (iii) Intending Dept. (iv) finance ,department (v)
administration department.

Responsibilities of Principal employer

In case of accidents causing disability or death , Principal
employer is liable to compensate with insurance.
Sec 20 , CLA(1970) , if contractor fails to give any of
facilities , including facilities in Ch 5. to workers , then after
60 days of time given to contractor , principal employer
should provide with those facilities and later demand the
expenses from contractor. Both these tasks create additional
burden on principal employer.
If the contract turns out to be sham, bogus, camouflage then
legal proceedings may turn in favour of workers and they
can demand regularization.

Responsibilities of Contractor
To be transparent , honest in terms of
contract with company.
To pay workers at statutory rates and not to
do any illegal deductions from payments .
To maintain skills in workers and bring out
the best in them for the Principal employer.
To facilitate workers with all necessary
health ,safety, welfare provisions .
To conduct training sessions in all needful
aspects as and when necessary.

THE CONTRACT LABOUR (REGULATION &

ABOLITION) ACT, 1970 AND THE RULES
Welfare and Health of Contract Labour
Canteen
Rest Rooms
Drinking water
Latrines and Urinals
Washing facilities
First-aid facilities
If the contractor fails to provide the above facilities, the principal employer shall
provide the facilities and the expenses incurred can be recovered from the contractor.

Forms used for contract labour

(for Principal employer &
contractor)
Form No.
I
IV
V
VIA
VIB
VII
VIII

Description
Application for registration of
establishment;
Application for license
Certificate by Principal Employer
Notice of commencement / completion of
contract work (for contractor);
Notice of commencement / completion of
contract work (for principal employer);
Application for renewal of license
Application for temporary registration of
establishment

Forms continue.
Form No.

Description

Application for Temporary License

XIII
XIV

Register of workmen employed by the

contractor
Employment Card

XV

Service Certificate

XVI

Muster Roll

XVII

Register of Wages

XVIII

Register of Wages-cum-Muster Roll

Forms continued
Form No.

Description

XIX

Wages Slip

XX

Register for deduction for damages or loss

XXI

Register of Fines

XXII

Register of Advances

XXIII

Register of Overtime

XXIV

Half Yearly return to be submitted by

contractor to the Licensing Authority

XXV

Annual Return to be submitted by Principal

Employer to the Registering authority.

THE CONTRACT LABOUR (REGULATION &

ABOLITION) ACT, 1970 AND THE RULES
Penalties
Offence

Penalty

Obstruction of Inspector

Imprisonment 3 months, Fine Rs. 500/- or

with both

Refusal or non-production of
registers / records

Imprisonment 3months, Fine, Rs. 500.- or

with both

Contravention of any
provision of the Act

Imprisonment 3 months, Fine Rs. 1000/- or

with both
Rs. 100/- per day for continuing offence

Contravention of any
provision where penalty is not
provided elsewhere

Imprisonment 3 months, Fine Rs 1000/- or

with both

In case of offences, by the Companies, the person in-charge are responsible

shall be liable to be proceeded against and punished accordingly.

Applicability of other Act

Persons cover under this act will be covered under:
I)

Factory Act, 1948

II) Employees Provident Fund & Miscellaneous Provisions Act, 1952

III) Employees State Insurance Act, 1948 / Workmen Compensation Act, 1923
IV) Payment of Bonus Act, 1965
V) Minimum Wages Act, 1948
VI) Payment of Wages Act, 1936

-:SUMMARY OF REGSITERS & RECORDS TO BE MAINTAINED:-

Sr.N Act
o.
1
Factories Act

EPF & MP Act, 1952

ESI Act

Payment of Wages
Act,1936
Minimum Wages
Act,1948
Payment of bonus
Act,1965
Equal Remuneration
Act,1976
Contract Labour (R&A)

5
6
7
8

Documents to be maintained
a.
b.
c.
d.
e.
f.
g.
a.
b.
a.
b.
c.
a.
a.

Accident Register with Forms

Inspection Book
Muster Roll & Wage Register
Muster Roll for Exempted workers
Register of Adult Workers
Register of Compensatory holidays &
Overtime
Register of Leaves with wages
Register of Contribution
Inspection book
Accident Register
Register of Contribution
Inspection Book
Register of Fines, Deduction &
Advances
Wage Slip

a. Register A,B & C

a. Register in Form D
a. Register in Form 13

Conclusion:
The contingent workforce is an increasingly important
component of an integrated workforce strategy.
In terms of both spend and headcount as a percentage of the
total workforce, this category continues to grow under
business and talent market pressure.
With increased regulatory pressure and enforcement, leading
organizations are moving quickly to get ahead of this trend by
managing the inherent risks in bringing nonemployee talent
into the organization.

References
Paper by: Informalization of Industrial Labour in India: Are
labour market rigidities and growing import competition to
blame?
Bishwanath Goldar* and Suresh Chand Aggarwal$
* Professor, Institute of Economic Growth, Delhi [email:
bng@iegindia.org]
$ Professor, Department of Business Economics, University of Delhi,
South Campus, New Delhi
@@ -Sen and Dasgupta (2009) have undertaken a survey of
industrial units in a large number of clusters in
different parts of India (during 2004-05).
*** Food Corporation of India ,Calcutta V/S Tulsi Das Bauri 1997 II
LLJ 747(SC).
&&& Hindustan Steel Works Construction V/S Commissioner of
Labour ,1997,I LL J 656:1996(74)FLR 2151.