Labour Licence

Labour Licence


We need better laws for protecting the interests of independent professionals so the government has introduced, an Act to regulate the use of contract labour in certain establishments, provide for its abolition in certain circumstances, and deal with related issues.

Since 1970, the Indian legislature has enacted the Contract Labour (Regulation and Abolition) Act. The act aims to prohibit the use of contract labour in certain circumstances and to regulate contract labour's working conditions while employed.

The Contract Labour Act, which applies in India, is examined in-depth in this article. It covers any business where twenty or more contract workers are employed on any given day during the accounting year. It is applicable to any contractor who employs or has employed twenty or more workers on any day during the accounting year.

A contractor is a person who, other than supplying goods or services of manufacture to the establishment, takes over the responsibility for producing a specific result for the establishment through contract labour, or a person who provides contract labour for any work done by the establishment, and includes a subcontractor.

Table of Contents
  • Eligibility Checklist
  • Benefits/Advantages of Labour Licence
  • Disadvantages of Labour Licence
  • Documents Required for Registration of a Labour Licence
  • Capital Required to start a Labour Licence
  • Registration Process of a Labour Licence in India
  • Compliances for a Labour Licence
  • Frequently Asked Questions (FAQs)
Eligibility Checklist
  • It covers any business where twenty or more contract workers are employed on any given day during the accounting year.
  • It is applicable to any contractor who employs or has employed twenty or more workers on any day during the accounting year.
  • It also doesn't apply to businesses where work is done on a part-time basis.
  • If any work is not performed for more than one hundred and twenty days in a year, it does not apply to the establishments.
  • It does not apply to businesses in the SEZ (SEZ).
  • If any work is done in a seasonal nature for more than sixty days in a year, it does not apply to the establishments.
  • Benefits/Advantages of Labour Licence
    • Industrial Disputes are kept to a minimum

    Because contract labour is not typically unionised, there are fewer industrial disputes in the workplace.

    • Keeping harsh restrictions, including penalties, out of the equation

    The Contract Labour Act of 1970 has rigorous non-registration rules that can be evaded by obtaining a contract labour licence within the stipulated time frame.

    Disadvantages of Labour Licence

    If an institution that is needed to be enrolled under Section 7 is not recorded within the time frame set forth in that section, the punishment will be imposed according to Section 36.

    If the contractor, primary employer, or any other person violates the Act's provisions, the contractor, principal employer, or any other person faces penalties. Most offences are punishable by imprisonment for up to 3 months or a fine of up to Rs 1000/-, or both, with an extra Rs 100/- every day if the offence continues.

    The legislation further stipulates that anybody who obstructs or disrupts an inspector's inspection or refuses to deliver any papers, approvals, or registers as requested would face a penalty of imprisonment for up to three months and a fine of up to Rs 500/- or both.

    If any person violates any provision of this Act or any regulation issued under it for which no extra punishment is prescribed, he will be punished by imprisonment for a period not exceeding three months, a fine not exceeding one thousand rupees or both.

    Documents Required for Registration of a Labour Licence
    • Any organisation's registration certificate, such as a certificate of incorporation, a partnership deed, a GST registration certificate, or a trade licence.
    • Rent agreement and any utility bill for the organisation's registered office address.
    • The organisation's PAN card, as well as the Directors/Partners/PAN Proprietor's cards.
    • The organisation's bank statement (with current transactions) and one cancelled cheque
    • The applicant's/authorised signatory's digital signature.
    • Employee strength in total
    • Employees' fundamental information, such as their Aadhar number, name, father's name, DOB, and residence as listed on their Aadhar card
    • Salary information for employees (break up of salary with respect to basic salary and other details including holiday lists)
    • Principal Employer's Form V
    • Principal Employer's Work Order
    Capital Required to start a Labour Licence

    1. The Payment of Bonus Act of 1965 regulates the payment of bonuses to employees in specific enterprises based on profits, output, or productivity, as well as topics related to it. The Payment of Bonus Act of 1965 mandates the payment of a bonus to employees of companies and enterprises with a workforce of 20 or more people (with the exception of certain employees defined in Section 32 of the Act). A minimum bonus of 8.33 per cent is awarded to qualifying employees under Section 10 of the Act. Employees who enter into an agreement or settlement with their employer for payment of an annual bonus linked to production or productivity in lieu of a bonus based on profits payable under this Act are entitled to receive a bonus under such an agreement, but not in excess of 20% of their salary/wages earned during the relevant accounting year, as per Section 31 A of the Act.

    2. The Payment of Bonus Act of 1965 also establishes two limits for bonus payment: an eligibility ceiling and a calculation ceiling, as described in sections 2(13) and 12 of the Act, respectively. The table below shows how the eligibility limit/calculation limit has changed over time.

    Year Eligibility Limit Calculation Limit
    1965 Rs. 1600/- p.m. Rs. 750/- p.m.
    1985 Rs. 2500/- p.m. Rs. 1600/- p.m
    1993 Rs. 3500/- p.m./td> Rs. 2500/- p.m
    • The Current Status

    Bonuses are paid under the Payment of Bonus Act of 1965. As defined by the Act, employees. "Employee" is defined in the Act as any salaried or hourly employee (not including apprentices). In any industry, a salary of not more than Rs.3500 per month is required to do any work. Manual, supervisory, managerial, and administrative jobs, both skilled and unskilled hired or compensated for technical or clerical work, however, In accordance with Section 12 of the Act, a bonus is paid to an employee whose salary or compensation exceeds a certain threshold.

    If your monthly wage is more than Rs. 2500, you'll get a bonus. Employee's salary or wages will be calculated as Rs. 2500/- p.m. The above wage ceilings under Sections 2 (13) and 12 of the Act were last revised in 1995 by an amendment to the Payment of Bonus (Amendment) Ordinance, 1995, which was brought into effect on April 1, 1993.

    Registration Process of a Labour Licence in India

    Every business that intends to hire contract workers must first get a certificate of registration from the appropriate government agency.

    The steps for registering a business that uses contract labour are outlined here.

    • The employer should submit an application for registration in Form No. I to the Registering Office, accompanied with a receipt indicating payment of the stipulated fee.
    • The registering officer can register the establishment and issue a copy of the registered certificate in Form-II if the application for registration is complete in all aspects.

    The following information will be included on every registration certificate:

    • The establishment's name and address.
    • The maximum number of workers in the establishment that can be hired on a contract basis.
    • The sort of company.
    • If there are any other vital details, please include them.
    Compliances for a Labour Licence

    Labour compliance refers to the set of laws and regulations that all businesses must adhere to. These are the rules and regulations that govern employment. Industry economies and working cultures have changed and evolved over time, while labour law compliance regulations are still 50-100 years old.

    Labour is an organisation's most valuable asset, and labour laws are enforced to guarantee that their rights are safeguarded and that they are not exploited. It governs businesses, employees, and labour unions. Noncompliance with the legislation will result in retaliation against the company.

    Any contractor who employs twenty or more people on any given day of the month is required to get a licence before contracting contract labour for any firm.

    The licence will be issued by the authorised licensing officer in accordance with the provisions of section 12.


    Because there was no previous regulation dealing with contract labour, the Contract Labour (Regulation & Abolition) Act of 1970 was enacted to prevent the exploitation of contract labourers. Certain flaws in the Act, however, must be addressed by the legislature, and required amendments should be made and implemented. Furthermore, the Act should be simplified and made easier to understand both principal employers and contractors, as well as provide stronger protections and benefits to contracting labourers.

    The registration process is lengthy and involves several steps. Such requirements necessitate a substantial amount of knowledge and experience. This can be extremely beneficial and protective to those who want to avail a licence. As a result, seeking professional advice from our Free Tax Filer team is always a good idea.

    Frequently Asked Questions (FAQs)

    1. What jurisdictions are covered by the Act?

    It applies –

    a. to any establishment that employs 20 or more contract workers (through one or more contractors) or has employed 20 or more contract workers on any day over the previous 12 months.

    b. To any contractor who employs or has employed 20 or more workers on any day during the previous 12 months.

    2. Who is necessary to obtain a Certificate of Registration?

    A Registration Certificate is necessary for every major employer who employs 20 or more contract workers or has employed 20 or more contract workers on any day in the previous 12 months.

    3. Who needs to apply for a licence?

    Every contractor who employs 20 or more workers in any establishment, or who has employed 20 or more people on any day in the previous 12 months, must get a licence for each such establishment.

    4. Who can apply for a Registration Certificate?

    The proprietor/partner/director/CEO/HOD or any other officer duly appointed/authorised by the board of directors of the major employer's establishment to act as a principal employer.

    5. Who is the principal Employer?

    • In the case of an office or the department of government or the local authority - the head thereof or the specified person.
    • In the case of a factory -the owner or occupier or the person named as manager thereof.
    • In the case of other establishments - the person responsible for the supervision and control of the establishment, is the principal employer under Act

    6. What is the procedure for obtaining a Registration Certificate and a Licence?

    Online registration certificates and licences have been issued, and services are available through the e-district Delhi portal. The principal employer/contractor who requires a registration certificate/licence must first create a user ID and password by going into the website, and then fill out the needed information in the Performa provided on the website and upload the appropriate documents.

    7. When is it possible to have a Registration Certificate/Licence revoked?

    On any misrepresentation or omission of a significant fact, as well as any breach of the terms and conditions of the licence.

    8. Where can I file an appeal?

    Before the Labour Commissioner, Government of the National Capital Territory of Delhi, 5 Shamnath Marg, Delhi-54

    9. What are the contractor's and principal employer's responsibilities and liabilities?

    a. The contractor is responsible for providing welfare and health benefits to its employees in accordance with the Act and Rules enacted thereunder, as well as making timely wage payments (not less than the notified minimum wages) via account payee cheque/ECS and uploading statutory records to its website.

    b. If the contractor fails to comply with (a) above, the primary employer is obligated under sections 20 and 21 of the Act to supply the same. If the contractor does not have its own website, the principal employer is responsible for uploading the contractor's statutory records to its own website.

    10. What are the consequences/penalties for breaking the Act's provisions?

    Imprisonment for a period of up to three months, or a fine of up to Rs. 1000, or both.

    In the event of a repeat violation, an extra punishment of up to Rs. 100 will be imposed for each day that the infraction continues after conviction.

Srk Vangala
Developer @ TCS

FreeTaxFiler is quick and convenient. All you need to do is a phone call or Email or Visit Website and they care of the rest! Highly Recommended

Raju Reddy
Team Lead @ Infosys

Tax Manager Chandu has been helping us file our business taxes for the last 3 years and this year I have also started filing my personal taxes with him. He ensures you the best service.

Sangavi CH
Hr @ Amazon

Filing my taxes with them from last 3 years and never had an issue. Providing prompt services is the Best part of the company with reasonable pricing. Highly recommended...!

Salman Md
Sales Manager @ Tanishq

I was concerned because my taxes were not straight forward. I was pleasantly surprised at how easy they guided me to clear all my tax queries. I highly recommend this to anyone. Quick and efficient. Will definitely go with them again.

Swathi D
Associate Manager @ Uber

I have been using FreeTaxFilerfor over 4 years. Every year I think I need to file my taxes - which get more complex annually. Surprisingly every year, but This People makes it easy for me to e-file. Thanks Shankar for making this a less painful event. I highly recommend it to you!