Contract Labour (CLRA) Act
Last updated: 13 July 2026. General explainer, not legal or tax advice.
What the Act covers
The Contract Labour (Regulation and Abolition) Act, 1970 governs workers a company engages through a contractor rather than on its own rolls. It usually applies where the establishment or the contractor engages a threshold number of contract workers, commonly 20 or more, though some states have raised this to 50. The contractor supplies the labour, and the company using the work is the principal employer.
Licence and registration
The contractor takes a licence to supply labour, and the principal employer holds a registration for engaging it. Both keep records of who is engaged and what they are paid. Running contract labour without these where the Act applies is itself a breach, quite apart from any wage issue.
The principal employer's responsibility
The principal employer has to make sure contract workers actually receive proper wages, basic welfare facilities and timely payment, and must step in if the contractor fails to pay. This backstop duty is the heart of the Act, because it stops a company from using a contractor as a shield.
Where the labour codes take this
Under the new labour codes, contract labour is folded into the Occupational Safety, Health and Working Conditions Code, which restates and updates these duties and thresholds. The direction of travel is toward clearer principal employer accountability, so the record keeping only matters more.
Records the principal employer keeps
The principal employer's protection is its paperwork. Registration for engaging contract labour, the contractor's licence, and records of who is engaged and what they are paid are what show, if a question arises, that the workers were properly covered. Since the principal employer has to step in on a contractor default, being able to prove wages were paid is not academic.
Under the Occupational Safety, Health and Working Conditions Code these duties continue and are updated, so the record keeping is not going away. Treating the contractor relationship with the same attendance and wage discipline as direct staff is the simplest way to stay clear.
Worked example
A company engages 50 housekeeping staff through a contractor. The contractor holds the licence, the company registers as principal employer, and the company makes sure the staff are paid at least the minimum wage on time, stepping in if the contractor slips.
Related terms
Frequently asked questions
Who is a principal employer under the CLRA?
The company or establishment that engages workers through a contractor. It carries backup responsibility for their wages and basic facilities if the contractor defaults.
How many workers trigger the Act?
Commonly 20 or more contract workers, though some states have raised the threshold to 50. Check your state rule.
Do contract workers get the same benefits as staff?
The Act focuses on wages, welfare facilities and timely payment. Broader benefits depend on the terms and on the recent labour code changes.
Does the contractor need a licence?
Yes, where the Act applies the contractor takes a licence and the principal employer holds a registration.
Do the labour codes change this?
Yes. The Occupational Safety, Health and Working Conditions Code subsumes the contract labour rules and updates the thresholds and duties.
What records should a principal employer keep for contract labour?
Its registration, the contractor's licence, and records of the workers engaged and the wages paid, so it can show the workers were properly covered.
Do the labour codes remove the principal employer's duties?
No. The Occupational Safety, Health and Working Conditions Code continues and updates these duties, so the record keeping still matters.
Sources and official references
The rules and figures on this page trace to the official sources below. Statutory amounts and dates change, so confirm the current number on the source before you act on it.
How Offrd helps
Offrd is built for a company's own employees, from offer letter to exit. For that core team it keeps documents and records audit ready.