Yes. A contract worker is a worker employed in the establishment, and section 32 of the OSH Code 2020 entitles every such worker who has put in 180 days in a calendar year to paid annual leave, at one day for every 20 days worked. The contractor is the employer and pays it. But if the contractor does not, the principal employer is on the hook under section 55, so a site cannot treat leave as purely the contractor's problem.
What the Code entitles a worker to
Leave with wages, once a worked-days threshold is crossed. Section 32(1) sets two figures a site should know by heart: a worker qualifies once they have "worked one hundred and eighty days or more" in the calendar year (clause (i)), and they earn "one-day leave for every twenty days of work" (clause (ii)). Adolescent workers and workers below ground in a mine earn at the faster rate of one day for every fifteen days worked.
Nothing in that clause turns on whether the worker is on the establishment's payroll or a contractor's. Section 32(1) opens with "every worker employed in an establishment", and a contract worker is employed in the establishment whoever cuts the cheque. The entitlement is the worker's; the question of who discharges it comes later.
What changed from the Factories Act
Two things, and both make leave easier to reach. Under section 79 of the Factories Act 1948, a worker needed 240 days in a year to qualify; the OSH Code lowered that to 180. And under the old Act the leave was allowed "during the subsequent calendar year" — you earned it one year and took it the next. Section 32 drops the wait: the entitlement is "for leave in a calendar year", earned and available in the same year.
How much it comes to, and carrying it forward
Leave is paid at the daily wage, and for a monthly-paid worker the daily wage is one twenty-sixth of the monthly wage (OSH (Central) Rules 2026, rule 69(3)). Take a monthly Code wage of ₹15,600 — a round figure chosen to divide cleanly, not a rate this site quotes for anything. That is ₹600 a day. A worker who put in 300 days on a six-day week earns 15 days of leave, worth ₹9,000 if encashed; a worker who just crossed the line at 180 days earns 9 days, worth ₹5,400.
| Days worked in the year | Leave earned (1 per 20) | Value at ₹600/day |
|---|---|---|
| 180 (the threshold) | 9 days | ₹5,400 |
| 240 | 12 days | ₹7,200 |
| 300 (typical six-day week) | 15 days | ₹9,000 |
Unused leave does not simply lapse. Section 32(1)(vii) lets a worker carry forward untaken leave, capped at 30 days in total; but leave the worker applied for and was refused carries forward with no cap at all. On top of that, the worker can demand encashment of leave at the end of the calendar year (clause (viii)), and must be allowed to encash any balance above the 30-day carry-forward ceiling (clause (ix)). A site that never lets contract workers take leave does not extinguish the liability — it converts it into an uncapped, encashable one.
What is owed when a worker leaves
Accrued leave is paid out on exit, fast, and even to a worker who never qualified to take it. Section 32(1)(vi) says a worker who is discharged, dismissed, quits, is superannuated or dies is entitled to wages in lieu of the leave accrued "immediately before" that event, calculated at the same one-per-twenty rate, "even if such worker has not worked for the required period" of 180 days [VERIFY: the reading that a sub-180-day leaver still gets pro-rata leave wages rests on the wording of clause (vi); it is worth counsel's eye on a large exit run].
The timing is tight and specific. Where the worker is discharged, dismissed or quits, the payment must be made "before the expiry of the second working day" from that date; where they are superannuated or die, within two months. On a contract crew with real churn, that two-working-day rule is the one most often missed, because the final settlement is treated as a payroll-cycle item rather than an on-exit one. It is not the payroll cycle's to keep.
Who actually pays it
The contractor, as the worker's employer, provides and pays the leave and keeps the record — the leave-with-wages register in Form XX under rule 76. But the principal employer is not insulated. Where a contractor fails to pay wages due to a contract worker, section 55(3) makes the principal employer liable to pay them in full, recovering the amount from the contractor by deduction or as a debt. So on the site's own facts the split usually runs like this:
| Contractor | Principal employer | |
|---|---|---|
| Grants the leave and pays it | Yes — the worker's employer under s.2(27)(d) | No, unless the contractor defaults |
| Keeps the leave register | Yes — Form XX, rule 76 | Verifies it as part of the monthly pack |
| Liable if wages go unpaid | Primarily | On the hook under s.55(3), recovers from the contractor |
| Pays the on-exit settlement in time | Yes — within two working days (s.32(1)(vi)) | Exposed if the contractor misses it and it is treated as wages |
Whether leave encashment and leave wages fall within "wages" for the section 55 fallback, and how the liability is allocated on a particular engagement, are questions for the site's own counsel and the contract, not for a blog post. What is not in doubt is that a site which never checks the contractor's leave register has no way of knowing the size of a liability that can land on it. The practical control is the same one that catches PF and ESI gaps: reconcile the leave register against the gate register each month, and hold the contractor to the two-working-day settlement on every exit.
How Velura Services helps
We track days worked for every worker, accrue leave at the statutory rate and pay leave wages through our payroll, including on exit. The leave register is kept to the Code's standard and shared with workers once a year, so the site has a record of leave paid, worker by worker.
Sources
- Occupational Safety, Health and Working Conditions Code, 2020 (Act 37 of 2020), Gazette text hosted by DGFASLI — s.32(1)(i) (180 days), (ii) (one day per 20 worked; 15 for adolescents and below-ground mine), (vi) (wages in lieu on exit and the two-working-day rule), (vii) (30-day carry-forward and uncapped carry of refused leave), (viii) and (ix) (encashment); s.2(27)(d) (employer includes contractor); s.2(zzl) (worker); s.55 (contractor's responsibility for wages and the principal employer's fallback under s.55(3)). Opened and read.
- Occupational Safety, Health and Working Conditions (Central) Rules, 2026, G.S.R. 345(E) dated 8 May 2026 — rule 69(3) (daily wage of a monthly-paid worker is one twenty-sixth of the monthly wage), rule 76 (register of leave with wages, Form XX). Opened and read from a mirrored copy of the Gazette [VERIFY: against the e-Gazette original].
- The Factories Act, 1948, section 79 — the earlier 240-day qualifying threshold and leave taken "during the subsequent calendar year", now superseded by the OSH Code [VERIFY: confirmed via the reproduced bare text at indiankanoon.org; the OSH Code repealed the Factories Act 1948 on its commencement on 21 November 2025]