In today’s dynamic employment landscape, contract labour is widely used across industries to meet workforce demands. While it offers flexibility, it also requires strict regulation to protect workers’ rights and prevent exploitation. The Contract Labour (Regulation & Abolition) Act, 1970 – commonly known as the CLRA Act – plays a crucial role in achieving this balance.
In this article, we will explain the CLRA Act in simple terms for both employers and employees, covering its meaning, applicability, registration process, obligations, penalties, and compliance requirements.
What is the CLRA Act?
The Contract Labour (Regulation & Abolition) Act, 1970 is a Central Government legislation enacted to:
- Regulate the employment of contract labour in establishments.
- Provide better conditions of service and benefits to contract workers.
- Prevent exploitation through contractors or intermediaries.
This Act ensures that contract workers are treated fairly and are not deprived of wages, safety, or social security.
Who is a Contract Labour?
A contract labour is a workman hired through a contractor to perform tasks for a principal employer (company/establishment). They are not directly employed by the company.
For example: If a company outsources housekeeping or security services through a vendor, those workers are considered contract labour.
Applicability of CLRA Act
The CLRA Act applies to:
- Every establishment in which 20 or more contract workers are employed or were employed on any day of the preceding 12 months.
- Every contractor who employs or has employed 20 or more workers on any day of the preceding 12 months.
✅ Note: Some states have prescribed their own applicability thresholds, such as 5, 10, 20, or even 50 workers. Always refer to the applicable State CLRA Rules for accurate compliance.
CLRA Applicability – State and Union Territory-wise Thresholds
Below is a state-wise and union territory-wise table showing the minimum number of contract workers required for the Contract Labour (Regulation & Abolition) Act to be applicable:
| State / Union Territory | Applicability Threshold (No. of Contract Workers) |
|---|---|
| Andaman and Nicobar Islands | 50 or more |
| Andhra Pradesh | 50 or more |
| Arunachal Pradesh | 5 or more |
| Assam | 5 or more |
| Bihar | 20 or more |
| Chandigarh | 20 or more |
| Chhattisgarh | 20 or more |
| Dadra and Nagar Haveli and Daman and Diu | 20 or more |
| Delhi | 20 or more |
| Goa | 50 or more |
| Gujarat | 50 or more |
| Haryana | 50 or more |
| Himachal Pradesh | 30 or more |
| Jammu and Kashmir | 20 or more |
| Jharkhand | 20 or more |
| Karnataka | 20 or more |
| Kerala | 20 or more |
| Ladakh | 20 or more |
| Madhya Pradesh | 50 or more |
| Maharashtra | 50 or more |
| Manipur | 20 or more |
| Meghalaya | 50 or more |
| Mizoram | 20 or more |
| Nagaland | 20 or more |
| Odisha | 50 or more |
| Puducherry | 20 or more |
| Punjab | 50 or more |
| Rajasthan | 50 or more |
| Sikkim | 20 or more |
| Tamil Nadu | 20 or more |
| Telangana | 5 or more |
| Tripura | 50 or more |
| Uttar Pradesh | 50 or more |
| Uttarakhand | 20 or more |
| West Bengal | 10 or more |
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Key Definitions
| Term | Meaning |
|---|---|
| Principal Employer | The main company or organisation hiring contract labour through a contractor. |
| Contractor | A person or firm who supplies contract labour to the principal employer. |
| Establishment | Includes government offices, factories, shops, and other commercial establishments. |
Registration & License Under CLRA
1. For Principal Employer – Registration
Every principal employer must register their establishment under the CLRA Act using Form I.
Documents Required:
- PAN & GST of the establishment
- Details of contract workers
- Address proof
- Copy of agreement with the contractor
Certificate Issued:
- Form II – Certificate of Registration
2. For Contractor – License
Every contractor who employs the number of workers specified under the applicable CLRA Rules (such as 5, 10, 20, or 50 workers) must obtain a licence by submitting Form IV.
Documents Required:
- Form V (Certificate from Principal Employer)
- Address & ID proof
- Security deposit
- Licence fee (based on the number of workers)
Certificate Issued:
- Form VI – Licence to the Contractor
Duties of Principal Employer
- Ensure the contractor complies with the law.
- Pay wages in case the contractor fails to do so.
- Maintain records and registers.
- Provide basic amenities like canteen, restroom, drinking water, first aid, etc.
Duties of Contractor
- Pay wages on time (on or before 7th of the following month).
- Issue wage slips and employment cards.
- Ensure safety, hygiene, and working conditions.
- Maintain wage registers, muster rolls, etc.
- Comply with all applicable labour laws.
Prohibited Work for Contract Labour
The government may prohibit employment of contract labour in certain jobs if:
- The job is perennial in nature.
- It is necessary for the company’s core operations.
- The work is done regularly and involves significant manual labour.
Example: Sweeping, cleaning, loading, and unloading in factories have been prohibited in some regions.
Penalties Under CLRA Act
| Offence | Penalty |
|---|---|
| Violation of provisions | Imprisonment up to 3 months or fine up to ₹1,000 or both |
| Continuing contravention | Additional fine of ₹100 per day |
⚠️ Non-compliance can lead to cancellation of registration or license.
Benefits of Compliance
For Employers:
- Avoid legal penalties and reputational damage.
- Build a responsible corporate image.
- Ensure smooth contract operations.
For Employees:
- Timely payment of wages.
- Access to welfare facilities.
- Protection from exploitation.
State-Specific Rules
Each state has framed its own rules under the CLRA Act. Some examples:
- Maharashtra CLRA Rules, 1971
- Karnataka CLRA Rules, 1974
- Tamil Nadu CLRA Rules, 1975
- Telangana CLRA Rules, 1971
Check the rules applicable in your state for compliance.
Final Thoughts
The CLRA Act is a vital piece of legislation ensuring transparency and fairness in contract labour employment. Whether you are a Principal Employer, a Contractor, or a Contract Labourer, understanding your rights and responsibilities under this Act is essential.
Compliance is not just a legal formality—it ensures dignity, safety, and social justice for the working class.
FAQs on CLRA Act
Q1. Is registration under CLRA mandatory?
Yes, registration is mandatory if the establishment or contractor engages the minimum number of contract workers specified under the applicable CLRA rules. While the central Act sets the threshold at 20 or more workers, some states have prescribed lower or higher limits (such as 5, 10, or 50). Therefore, it is important to check the State CLRA Rules to determine exact applicability.
Q2. Who issues Form V?
The Principal Employer issues Form V to the contractor to enable them to apply for a license.
Q3. What is the validity of the license?
Usually 1 year, but it may vary by state and contract terms.
Q4. Can contract labour be regularised?
If they perform the same work as regular employees for long durations, they may claim permanency under certain legal conditions.
Q5. What are some examples of contract labour?
Security guards, housekeeping staff, data entry operators, drivers, loaders, etc.
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