Businesses that engage workers through contractors need to understand their labour-law obligations before starting contract work. In India, the framework governing contract labour has changed significantly following the implementation of the Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020, from 21 November 2025. The Occupational Safety, Health and Working Conditions (Central) Rules, 2026 now prescribe the central procedure for contract-labour licensing.

If your organisation engages contract labour, understanding the current labour licence requirements in India can help avoid compliance gaps and ensure that the contractor and principal employer meet their respective obligations.

What Is a Labour Licence?

A labour licence is the authorisation required by a contractor to supply or engage contract labour or undertake work through contract labour where the contract-labour provisions of the OSHWC Code apply.

Under Sections 45 and 47 of the Code, contractors to whom the contract-labour provisions apply must obtain a licence before supplying or engaging contract labour or undertaking work through contract labour. The provisions apply, among other cases, to establishments engaging 50 or more contract labour and to manpower supply contractors employing 50 or more contract labour during the preceding 12 months, subject to the statutory exceptions.

The Code also excludes establishments where only work of an intermittent or casual nature is performed, subject to the conditions specified under the law.

The labour licence registration process is therefore primarily a contractor-level requirement, while the principal employer has separate registration, welfare and other statutory responsibilities.

Who Needs a Labour Licence?

The contract-labour provisions under the OSHWC Code apply in specified cases where 50 or more contract labour are or were employed on any day during the preceding 12 months. They also apply to a manpower supply contractor that employed 50 or more contract labour during that period.

However, the 50-worker threshold should not be treated as a blanket rule that applies to every contractor or establishment. The applicability of the contract-labour provisions depends on the conditions and exceptions prescribed under the Code, including the exclusion for work of an intermittent or casual nature.

Businesses should also verify the applicable central or state framework and sector-specific provisions before relying solely on the threshold.

Contractor Requirements for Labour Licence

The contractor is responsible for obtaining and maintaining the licence where the contract-labour provisions apply. The contractor must operate within the approved worker limit, comply with applicable wage and working-condition requirements, maintain prescribed records and submit applicable returns.

The contractor must also provide the information and notifications required under the Central Rules, including changes relating to the number of contract labour or other prescribed conditions of work.

Principal Employer’s Role and Responsibilities

The principal employer is not simply a party that hires the contractor. Under the OSHWC framework, the principal employer has responsibilities relating to welfare facilities for contract labour.

Where contract labour works at the principal employer’s premises, specified facilities such as toilets, drinking water, first aid, canteen and crèche facilities, where applicable, are the principal employer’s responsibility.

The principal employer can also become responsible for payment of wages where the contractor fails to make payment within the prescribed period, subject to the requirements of the Code and Central Rules.

Labour Licence Eligibility Criteria in India

The threshold of 50 or more contract labour determines the applicability of the relevant contract-labour provisions in specified cases. In addition, the 2026 Central Rules prescribe qualification criteria for contractors seeking a licence, including conditions relating to insolvency and specified criminal convictions.

Under Rule 85, the contractor must meet the prescribed qualification requirements. These include not being an undischarged insolvent and not having been convicted during the previous two years of an offence carrying imprisonment exceeding three months.

Contractors must also provide the details required for the application, including information about the work, establishments, principal employer, number of contract labour and other prescribed particulars.

The labour licence requirements can vary depending on whether the contractor is applying under the central framework or a state-specific regime. The 2026 Central Rules provide for a single licence for contractors operating in more than one state or across India in eligible cases.

Documents Required for Labour Licence Registration

The exact labour licence documents depend on the application and the applicable authority. Under Form XXI of the 2026 Central Rules, the application captures information such as the contractor’s Labour Identification Number (LIN), PAN, establishment details, principal-employer information, work details, maximum contract-labour strength and applicable fee and security details.

Applicants should keep relevant registration details, identity and address information, establishment details, work orders and other supporting documents ready. State-specific portals and authorities may require additional documents or information.

Labour Licence Registration Process in India

The central labour licence registration process is electronic. For a contractor operating within a state, Rule 87 of the 2026 Central Rules provides for an online application through the Shram Suvidha Portal in Form XXI. Contractors seeking a single licence for multiple states or the whole of India also use Form XXI through the designated portal.

The typical labour licence process involves:

1. Determine whether the contract-labour provisions apply based on the statutory threshold, nature of work and other applicability conditions.
2. Verify that the contractor meets the prescribed qualification criteria.
3. Collect contractor, establishment, principal-employer and work details.
4. Submit the labour licence application electronically in Form XXI.
5. Pay the applicable labour licence fees and furnish the prescribed security.
6. Complete the authority’s verification and approval process.
7. Receive the licence electronically.

For a multi-state or whole-of-India single licence, the 2026 Central Rules provide a 45-day approval period, after which the licence is deemed generated if the authority has not acted within the prescribed period.

Labour Licence Fees and Validity

The central labour licence fees are linked to the maximum number of contract labour:

The notified Central Rules use the wording “exceeding 20,001 contract labour” for the highest fee band. This wording appears to leave exactly 20,001 contract labour outside the stated bands because the preceding category ends at 20,000. Contractors with exactly 20,001 contract labour should therefore verify the applicable fee with the relevant licensing authority before submitting the application.

The contractor must also furnish a bank guarantee for the prescribed security amount, calculated at ₹1,000 for each contract labour covered by the application, subject to the special security amounts prescribed for very large workforces.

The central labour licence validity is five years.

These are central-rule amounts and should not automatically be treated as the fee schedule or security requirements for every state-specific licensing regime.

Labour Licence Renewal Process

The labour licence renewal application must be submitted electronically through the Shram Suvidha Portal at least 30 days before expiry and not earlier than 90 days before expiry.

The renewal fee is the same as the grant fee. If the application is not submitted within the prescribed period, an additional 25% fee applies.

The authority is required to renew the licence electronically within seven days, failing which it is deemed issued and auto-generated in the manner prescribed under the Central Rules.

Labour Licence Compliance Requirements

Holding a licence is only one part of compliance. Contractors must ensure that wages meet applicable requirements, comply with working-condition obligations, maintain prescribed records, notify changes and submit applicable returns.

The 2026 Central Rules require contractors to intimate details of a contract work order within 15 days of receiving it. Contractors must also submit the prescribed half-yearly return electronically.

Where a contractor fails to pay wages within seven days after the wage period, the principal employer must take action and pay the unpaid amount to the workers within the prescribed 15-day period, subject to recovery from the contractor.

Contractors should also ensure that the number of contract labour engaged remains within the licensed limit unless the licence is amended through the prescribed process.

Penalties for Labour Licence Non-Compliance

Non-compliance can result in penalties under the OSHWC Code, apart from possible consequences relating to suspension, cancellation or other regulatory action.

The Code provides a general penalty of ₹2 lakh to ₹3 lakh for contraventions where no specific penalty is prescribed, with an additional penalty that may extend to ₹2,000 per day for continuing contravention after conviction. Specific provisions can apply to particular violations, so the consequence depends on the nature of the non-compliance.

Contractors and principal employers should therefore identify the specific provision involved rather than assuming that the general penalty applies to every labour-licence violation.

Conclusion

The labour licence in India framework has moved into the consolidated OSHWC Code regime. For contractors covered by the central contract-labour provisions, the current labour licence registration process is primarily electronic, with a five-year validity period, prescribed fees, bank-guarantee requirements and ongoing compliance duties.

The 50-worker threshold is an important applicability condition, but it is not the only factor determining whether a contractor can or must obtain a licence. Contractors must also satisfy the prescribed qualification requirements and comply with the conditions attached to the licence.

Because labour is a concurrent subject and different establishments may fall under central or state jurisdiction, employers and contractors should verify the applicable authority, rules and portal before filing a labour licence application. The 2026 Central Rules provide the current central framework, but state-specific requirements may still need to be checked.

FAQs About Labour Licence

Is a separate labour licence needed for each site?

Not necessarily. The 2026 Central Rules provide for single licences covering multiple states or the whole of India in eligible cases. The licence application itself captures details of establishments and works where contract labour will be deployed.

The appropriate licensing framework should be verified based on the contractor’s operations and the applicable jurisdiction.

Can the worker limit be changed on a labour licence?

Yes. A contractor can apply electronically for an amendment. Where the maximum number of contract labour increases, additional fee and security may be required. Where it decreases, the proportionate security can be returned as prescribed.

How long does it take to obtain a labour licence?

For a multi-state or whole-of-India single licence under the 2026 Central Rules, the application is to be approved or rejected within 45 days. If no action is taken within that period, the licence is deemed generated as prescribed.

State-specific processing timelines may differ.

What documents are required for labour licence registration?

The required labour licence documents depend on the jurisdiction and application. The central Form XXI requires contractor and establishment information, LIN/PAN, details of the establishments and work, maximum contract-labour strength, fee and security details, along with supporting information requested through the portal.