A labour licence for contractors now comes under the Occupational Safety, Health and Working Conditions Code, 2020, in force since 21 November 2025. The Code applies to an establishment with fifty or more contract labour, and to a manpower supply contractor who has employed fifty or more; the licence is valid for five years and can cover one state or the whole of India. It replaced the Contract Labour (Regulation and Abolition) Act, 1970, under which a labour licence was required the moment you employed twenty or more workmen as contract labour, under Section 12. Under that Act you applied in Form IV to the licensing officer of the area where the site sat, and the application only moved if your client signed a Form V certificate saying they had engaged you. Fees and the security deposit were set by each state, not by the central Act, and the licence named one principal employer and one job, which is why a new client usually meant a new licence. Licences issued under the old Act stay valid until they expire.

Most contractors meet this rule in the wrong order. The work is won, the men are mobilised, and somebody at the client’s office asks for the licence number before the second running bill. By then the application has not been made, and the one document that would let it move has to be requested from the very client who is now asking for it.

The sequence matters more than the paperwork. Here is what the Act actually demands, and where contractors lose time.

What changed on 21 November 2025: the OSH Code replaced the 1970 Act

The Contract Labour (Regulation and Abolition) Act, 1970 was repealed by section 143(1)(h) of the Occupational Safety, Health and Working Conditions Code, 2020, which the government brought into force on 21 November 2025 (Press Information Bureau release of that date). The Code keeps the idea of a contractor’s licence and changes almost every number around it.

Point 1970 Act (repealed) OSH Code 2020
When the licensing rules apply 20 or more workmen as contract labour (Section 1(4)) An establishment with 50 or more contract labour, or a manpower supply contractor who has employed 50 or more, on any day of the preceding twelve months (Section 45(1))
How you apply Form IV, in triplicate, to the licensing officer of the area (state rule 21) Online in Form XXI on the Shram Suvidha portal (Central Rules, rule 87)
Client’s certificate Form V, signed by the principal employer No principal-employer certificate in the Central Rules
Area a licence covers The area of one licensing officer One state, or a single licence for more than one state or the whole of India (Section 47(3)(b); rule 88)
Validity A fixed period under state rules, then renewal Five years for the number of contract labour it names (Section 48(3))
Security and fee Set by each state’s rules Central Rules: Rs 1,000 security per contract labour; fee nil up to 49, Rs 1,000 for 50 to 100, rising by slab (rule 90)
Licence issued before 21 November 2025 Issued under the old Act Valid for the period it was issued for, then obtained afresh under the Code (Section 119(5))

Two cautions before you act on that table. The Occupational Safety, Health and Working Conditions (Central) Rules, G.S.R. 345(E) of 8 May 2026, apply where the Central Government is the appropriate government: central government establishments, railways and metro railways, mines, major ports, central public sector undertakings and their contractors, among others. Work for a state department or a private client falls under the state’s own rules, and the states are notifying theirs on their own timetable. Until a state’s new rules replace its old contract labour rules, section 143(3) keeps the old ones in force to the extent they do not contradict the Code, and the government said at commencement that existing rules would continue during the transition. So a state labour office may still ask for a Form IV and a Form V. Ask which forms it is using before you file.

The rest of this article explains how the 1970 Act’s process worked. It still matters for licences issued under it before 21 November 2025, which stay valid until they expire, and in states still running the old forms.

When a labour licence is actually required

The OSH Code draws the line at fifty. Section 45(1) applies the contract labour Part to “every establishment in which fifty or more contract labour are employed or were employed on any day of the preceding twelve months through contract”, and to every manpower supply contractor who has employed fifty or more. The counting method explained below, any single day in the preceding twelve months, carries over unchanged. The 1970 Act drew the line at twenty, and this is how it worked.

Section 1(4) of the 1970 Act sets the trigger twice over. It applies to every establishment in which twenty or more workmen are employed as contract labour, and to every contractor who employs twenty or more workmen. Read that second limb slowly, because it is the one contractors miss: the obligation attaches to you directly, not only to the site you are working on.

The count is of workmen engaged as contract labour on any day of the preceding twelve months. It is not your payroll headcount, and it is not an average. One month of a twenty-five man gang puts you inside the Act for the year even if you are back to eight men by the time anyone asks.

Section 12 then states the prohibition in plain terms: no contractor to whom the Act applies may undertake or execute any work through contract labour except under and in accordance with a licence issued by the licensing officer. There is no grace period written into the section, and no concept of applying later.

A few states notified lower thresholds under their own rules made under the 1970 Act, so twenty was the central floor rather than a national certainty. Check your state before assuming a fifteen-man gang is outside the net, and ask whether its rules under the Code have been notified yet.

The two documents, and why one of them is not yours

Under Rule 21(1) of the state rules made under Section 35 of the 1970 Act, every application by a contractor for the grant of a licence is made in triplicate, in Form IV, to the licensing officer of the area in which the establishment is located. That much is within your control.

Rule 21(2) is the one that catches people. Every application for the grant of a licence must be accompanied by a certificate by the principal employer in Form V. Form V is headed “Form of Certificate by Principal Employer” and runs: “Certified that I have engaged the applicant (name of the Contractor) as a contractor in my establishment. I undertake to be bound by all the provisions of the Contract Labour (Regulation and Abolition) Act, 1970 and the rules…”

Read what that does. Your licence application depends on a signature from your client, and in signing it the client accepts being bound as principal employer. This is why the licence is not a general trading permit. It is granted against one principal employer and one piece of work, and it names them. Win a job with a different client and you are back at Rule 21(1) with a fresh Form IV.

It also explains a delay contractors blame on the department when it belongs to the client. A Form V has to go up to somebody at the client with authority to bind the company, and that person is rarely the site engineer who gave you the work order.

The Code’s Central Rules dropped this step: the online Form XXI goes to the licensing authority with no certificate from the principal employer. Where a state still runs the old forms, the Form V conversation is still the one that sets your timeline.

What the Form IV application actually asks for

Form IV is short, and reading it in advance saves a rejection. The application asks for the following.

Item What the form asks
1-2 Name and address of the contractor, with father’s name and date of birth for individuals
3 Particulars of the establishment where contract labour is to be employed: name, address, and type of business or trade
5 Whether any licence was held or applied for earlier, within the preceding five years
6 Whether any order revoked or suspended a licence, or forfeited a security deposit, on an earlier contract, and its date
7 Whether you worked in any other establishment in the past five years, with principal employer and nature of work
8 Whether the principal employer’s certificate in Form V is enclosed
9 Amount of licence fee paid, with treasury challan number and date
10-11 Security deposit: any amount requested to be adjusted, and the balance deposited, with treasury receipt numbers

Items 5, 6 and 7 are a track record check. A previous suspension or a forfeited deposit has to be declared, and the declaration at the foot of the form makes a false entry your problem rather than an oversight. If you have had a deposit forfeited somewhere, say so and be ready to explain it.

Items 9 to 11 tell you the fee is paid before the application is filed, by treasury challan, and that the number goes on the form. Turning up to file without the challan means turning up twice.

Fees and the security deposit: why nobody can quote you a number

Section 35(1) gives each state government the power to make rules to carry out the Act, and the fee schedule and security deposit sit in those state rules rather than in the central Act. Tamil Nadu’s rules date from 1975, other states have their own, and every one of them has been revised since.

The Code has not produced a single all-India figure either. For central-sphere work, rule 90 of the Central Rules fixes a security of Rs 1,000 for each contract labour to be employed, and a licence fee that is nil up to 49 contract labour, Rs 1,000 for 50 to 100, Rs 2,000 for 101 to 300, Rs 3,000 for 301 to 500, Rs 5,000 for 501 to 1,000 and Rs 10,000 for 1,001 to 5,000. State-sphere work follows the state’s schedule.

So anyone quoting you a single all-India labour licence fee is guessing. The figure moves with the state and with the number of workmen you are applying for, which is why Form IV asks for the headcount and the challan in the same breath. Ask the district Labour Commissioner office where the site sits for the current schedule, and get it in writing.

The security deposit is not a fee. It is your money, held against your compliance, and the state rules provide for refund of the balance after adjustment when the licence ends. That is worth tracking the same way you track earnest money on a tender, because it goes missing for the same reason: nobody writes it down.

Renewal, registers and the licence lapsing

A licence under the Code is valid for five years for the number of contract labour it names, and a contractor who needs more men applies to amend it (Section 48(3)). A licence taken under the 1970 Act before 21 November 2025 stays valid for the period it was issued for and then “shall have to be obtained afresh” under the Code (Section 119(5)), so diarise that expiry now: it is a fresh application, not a renewal.

Under the old state rules, a licence runs for a fixed period and is renewed on a separate application, in the renewal form the state rules prescribe, before the current one expires. There is no automatic rollover. If it lapses you are applying fresh, and in the gap the work is being executed without a licence, which is what Section 12 prohibits.

Alongside the licence, Section 29 requires registers of the contractors and workmen engaged. Keeping them is cheap while the work is running and impossible to reconstruct afterwards, and an inspection that finds no registers will not accept that the men were paid correctly.

The wider point is that the labour licence is one of several registrations a working contractor carries at once. Udyam, GST and the state PWD list each sit on their own rule book and their own renewal cycle. If you are still assembling that file, the guide to Udyam registration for contractors and the one on PWD contractor registration cover two of the others, and BOCW registration covers the building-worker side.

The money it protects

Contractors treat the licence as a compliance cost. It is closer to a payment protection.

Liability under the Act travels upward. If you fail to pay wages, the principal employer can be made to pay them and recover the amount from what is due to you. The Code keeps that rule in Section 55(3), and Section 54 goes further: a principal employer using a contractor who should hold a licence and does not is itself treated as contravening the Code. A client who understands that checks the licence before the first bill, and holds money when it is missing. The licence is therefore the document that keeps your running bill moving, which puts it in the same category as the registers and the labour cess deducted from your bills rather than in the category of forms you file and forget.

If labour supply is the business itself rather than a part of it, the economics of that trade are covered in how to become a labour contractor, and current site wage levels in daily labour rates in India.

If you sub-let part of the job, write who holds the licence and who pays which wages into the subcontractor agreement, because the liability above runs up through you as well.

The Form V signature has a mirror image on the client’s side of the fence. The establishment itself has to be registered before it can lawfully use contract labour at all, and principal employer registration works through what Sections 7, 8 and 9 put on whoever runs the site.

One more licence sits alongside this one and is missed more often than any other. If the crew is recruited in one state to work in another, the Inter-State Migrant Workmen Act applies a separate licence, along with a displacement allowance and both journey fares.

Start the labour licence process when the work order arrives

Count the workmen honestly. If fifty is in sight, or twenty in a state still running the old rules, start the licence application, and the Form V conversation with your client where the state still asks for one, on the day you get the work order rather than the day the department asks. The Form IV, the challan and the deposit are a week’s work. The certificate from somebody else’s head office is what sets the timeline, and it is the only part of the process you cannot do faster by trying harder.

Machines and men arrive on the same site under different rule books. If you are sizing the equipment side of the same job, our equipment finance options and the live work listed under tenders and opportunities are the places to start.

Rates, schemes, specifications and prices change, and the OSH Code is applied through central and state rules that differ and are still being notified. Confirm current thresholds, fees and forms with the district Labour Commissioner office or an official source before deciding.