How to Apply for a Contract Labour Licence in India Under CLRA 1970

Kaustav Chowdhury
Jun 26
5 min read

The Contract Labour (Regulation and Abolition) Act, 1970 (CLRA) regulates the employment of contract labour in India and requires both the principal employer and the contractor to obtain licences and registrations for engaging contract workers. This guide explains the legal framework, eligibility thresholds, step-by-step application procedure, required documents, and compliance obligations for contractors seeking a licence under the CLRA.

When Is a Contract Labour Licence Required

Under Section 12 of the CLRA, no contractor can undertake or execute any work through contract labour unless they hold a valid licence issued by the licensing officer. The Act applies to every establishment in which 20 or more workers are employed or were employed on any day in the preceding 12 months as contract labour, and to every contractor who employs or employed 20 or more workers on any day in the preceding 12 months. Some state governments have amended the threshold to 10 or 50 workers; contractors must check the applicable state rules.

It is important to distinguish between the two compliance obligations under the CLRA. The principal employer (the establishment that engages the contractor) must obtain registration under Section 7 by filing Form I. The contractor (the entity that supplies the workers) must obtain a licence under Section 12 by filing Form IV. This guide focuses on the contractor's licence application.

Step 1: Obtain Registration Certificate from the Principal Employer

Before a contractor can apply for a licence, the principal employer must have obtained a certificate of registration under Section 7 of the CLRA. The contractor should obtain a copy of the principal employer's registration certificate, as the registration number must be mentioned in the contractor's licence application in Form IV. If the principal employer has not registered, the contractor should request them to do so, as employing contract labour without the principal employer's registration is an offence under the Act.

Step 2: Prepare the Application in Form IV

The contractor must file an application in Form IV under Rule 21 of the Contract Labour (Regulation and Abolition) Central Rules, 1971 (or the corresponding state rules). The form requires the following details: name and address of the contractor; name and address of the establishment where contract labour will be employed; the nature and location of work to be performed; the maximum number of contract labour to be employed on any day; the registration number of the principal employer under Section 7; and the duration for which the licence is sought. The application must be submitted in triplicate to the licensing officer of the area where the work is to be performed. (Related: How to Register Under the Shops and Establishments Act in India)

Step 3: Pay the Prescribed Fee and Security Deposit

The application must be accompanied by the prescribed fee, which varies based on the number of contract workers. Under the Central Rules, the fees are: Rs 30 for up to 20 workers; Rs 60 for 21 to 50 workers; Rs 90 for 51 to 100 workers; Rs 120 for 101 to 200 workers; Rs 150 for 201 to 400 workers; and Rs 150 plus Rs 30 for every additional 200 workers beyond 400. State rules may prescribe different fee amounts. Additionally, the contractor must deposit a security amount as may be prescribed by the licensing officer, typically calculated as a multiple of the licence fee.

Step 4: Submit Documents to the Licensing Officer

Along with Form IV and the fee, submit the following documents: a copy of the principal employer's registration certificate under Section 7; proof of the contractor's identity and address (PAN card, Aadhaar, business registration documents); a list of contract workers to be employed (including names, ages, and addresses where available); details of the work contract or agreement with the principal employer; and proof of payment of the licence fee and security deposit. Many states now accept online applications through their respective labour department portals.

Step 5: Inspection and Grant of Licence

The licensing officer may conduct an inspection of the establishment or require the contractor to provide additional information before granting the licence. Under Rule 25, the licensing officer must issue the licence in Form V within 30 days of receiving the complete application (subject to satisfactory verification). The licence specifies the number of workers authorised, the establishment where work is to be performed, the nature of work, and the validity period. Licences are typically issued for a period of 12 months and must be renewed before expiry. Renewal applications in Form VI should be filed at least 30 days before the licence expires.

Obligations of the Contractor After Obtaining the Licence

After obtaining the licence, the contractor must comply with the following obligations under the CLRA and the Rules. The contractor must maintain registers of contract workers (Form XII, the Muster Roll; Form XIII, the Register of Wages; Form XIV, the Register of Deductions; Form XV, the Register of Overtime; Form XVI, the Register of Fines; and Form XVII, the Register of Advances). The contractor must pay wages within the prescribed period and in the presence of the principal employer's authorised representative. The contractor must provide welfare facilities including canteens (where 100 or more workers are employed), rest rooms, drinking water, latrines, and first-aid facilities. Non-compliance with licence conditions can result in revocation of the licence under Section 14 of the Act. (Related: How to Draft an Employment Agreement in India)

Penalties for Non-Compliance

Operating without a valid contract labour licence is an offence under Section 23 of the CLRA, punishable with imprisonment up to three months, a fine up to Rs 1,000, or both. Contravention of any other provisions of the Act or Rules is punishable under Section 24 with imprisonment up to three months and a fine up to Rs 1,000. For continuing offences, an additional fine of Rs 100 per day may be imposed. The principal employer also faces liability under Section 20 of the Act if the contractor fails to pay wages to contract workers: the principal employer becomes directly responsible for payment. (See also: EPF Registration in India: Process and Employer Obligations)

Impact of State-Level Variations

Labour is a subject in the Concurrent List of the Constitution (Entry 22 to 24), meaning both the central and state governments can legislate on it. Several states have enacted their own rules under the CLRA or modified the threshold for applicability. For example, some states have raised the threshold to 50 workers, while others have lowered it to 10. Contractors operating in multiple states must comply with the rules of each state where work is performed and obtain separate licences for each state. With the proposed implementation of the Code on Social Security, 2020, some provisions governing contract labour may be consolidated, but until the Code is notified and the Rules are framed, the CLRA remains the governing legislation. (See: Labour Codes 2020: What Employers Must Prepare For)