Close out the outgoing contractor before its final bill is paid, open the new one before its first shift, and move each worker across on their existing UAN and ESIC number. The order matters because the site is the backstop: the OSH Code 2020 and the Code on Social Security 2020 make the principal employer pay any wages and contributions the outgoing contractor leaves unpaid, and the final bill is the only money the site still controls.
Why the site carries the handover risk
Because the law sends unpaid dues back to the principal employer, and a contractor on its way out is the one most likely to leave some. Section 55(3) of the OSH Code makes the principal employer pay wages a contractor fails to pay, and rule 98(8) of the OSH (Central) Rules 2026 gives it fifteen days to do so once the contractor has missed its seven-day deadline. Section 31(1) of the Code on Social Security makes the employer pay both ESI contributions for every employee, including those engaged through a contractor, and section 17(1) lets it recover provident fund contributions it has paid on a contractor's behalf.
Every one of those provisions gives the same route to recover: deduction from any amount payable to the contractor under the contract, or a debt. Once the outgoing contractor's last invoice is paid in full, only the second route is left. Section 31(7) of the Social Security Code backs this up for ESI: the contractor must submit its register of employees to the principal employer before the settlement of any amount the site recovers.
Closing out the outgoing contractor
Hold the final bill until each of these is evidenced, not promised.
| Item | Deadline | Source |
|---|---|---|
| Wages for the last wage period | Before the seventh day after the period ends | OSH Central r.98(2) |
| Wages for any worker it removes, dismisses or retrenches, or who resigns | Within two working days | Code on Wages 2019, s.17(2) |
| Wages in lieu of accrued leave for a worker who leaves | Before the end of the second working day | OSH Code s.32(1)(vi) |
| PF and ESI for the last month | The contractor's normal monthly due dates, with challans | Code on Social Security 2020 |
| Register of employees | Before the site settles any amount | Social Security Code s.31(7) |
| Experience certificate | On demand from any worker | OSH Code s.56 |
If the outgoing contractor ends a worker's employment rather than letting them move across, the retrenchment conditions in section 70 of the Industrial Relations Code 2020 may apply to anyone with a year's continuous service: a month's notice or pay in lieu, and fifteen days' average pay for every completed year. Section 2(zh)(iii) excludes termination on the expiry of a contract of employment, or under a term in it, so whether a particular exit is retrenchment depends on how the contractor engaged that worker. That is for the contractor's and the site's counsel.
The contractor's licence deposit is not the site's to use. Rule 90(1) of the Central rules sets it at ₹1,000 per contract worker, lodged with the licensing authority, and rule 92 returns it on application only if the contractor has not breached its licence. The government can order wages paid from it under section 55(4), but that takes an inquiry; the site's own lever is the final bill.
Opening the new contractor
Before the first shift, not after the first invoice.
- A valid licence. Section 45 of the OSH Code applies the licensing part to a site with fifty or more contract labour on any day of the preceding twelve months, and section 54 makes engaging a contractor that needs a licence and lacks one a contravention.
- The work-order intimation. Rule 94 of the Central rules requires the new contractor to report the work order on Shram Suvidha within fifteen days of receiving it, with the principal employer's name, the premises, the start date, the headcount and the duration.
- Existing PF and ESI numbers, not new ones. A worker who already has a UAN keeps it, and the new contractor links a new member ID to it; the ESIC insurance number likewise stays with the worker [VERIFY: EPFO and ESIC guidance on UAN and insurance-number portability; the official pages could not be opened]. A fresh UAN for someone who already has one splits their PF record.
- The same wage rate or better. Rule 93(1) of the Central rules sets the floor at the rates under the Code on Wages, and rule 93(2) requires the same conditions as direct employees doing the same or similar work. A crew that moves across on a lower rate is a grievance on day one.
- The wage-period notice. Rule 98(6) requires the new contractor to display its wage period and pay date and send a copy to the principal employer.
The site's own paperwork
A change of contractor is a change the site reports, in its registration now and in its annual return later. The certificate of registration under section 3 of the OSH Code records the site's contractors and their headcount, and section 3(4) requires a change in the registered particulars to be updated within thirty days [VERIFY: whether a change of contractor is a change in particulars under s.3(4) and Central r.3(8)]. At year end, Form XVII Part III under the Central rules lists each contractor month by month, so the outgoing contractor appears for its months and the new one for the rest. Tamil Nadu's 2022 draft rules ask for the same contractor detail in their unified Form IX [VERIFY: whether Tamil Nadu's final OSH rules keep Form IX as drafted].
A handover timeline
| When | Outgoing contractor | New contractor | Site |
|---|---|---|---|
| Before notice is served | Contract terms on the final bill and the evidence pack agreed | Licence, LIN and wage rates checked | Final-bill hold written into the exit terms |
| Changeover day | Leavers paid within two working days | First shift on existing UAN and ESIC numbers | Gate register split by contractor from that day |
| Seven days after the last wage period | Last wage period paid and reported to the site | — | Payment intimation checked against the gate register |
| Within fifteen days | — | Work order reported on Shram Suvidha | If the outgoing contractor has not paid, the site pays (OSH Central r.98(8)) |
| Within thirty days | — | — | Registration particulars updated |
| Before final settlement | Challans, register of employees and leaver settlements handed over | — | Final bill released, less anything the site paid |
How liability for any arrears is split between the site and the outgoing contractor on a particular engagement is a question for the contract and the site's counsel.
How Velura Services helps
We plan a contractor changeover as a hand-over: wage, PF and ESI positions reconciled, existing UAN and ESIC numbers carried across, and the crew moved without a gap in cover or contributions. Our team runs the changeover checklist with yours, so the final bill closes cleanly.
Sources
- Occupational Safety, Health and Working Conditions Code, 2020 (Act 37 of 2020), Gazette text hosted by DGFASLI — s.3(4) (change in registration particulars), s.32(1)(vi) (leave wages on leaving), s.45 (fifty-worker threshold), s.54 (unlicensed contractor), s.55(3) and (4) (principal employer liable; payment from security deposit), s.56 (experience certificate). Opened and read.
- Occupational Safety, Health and Working Conditions (Central) Rules, 2026, G.S.R. 345(E) dated 8 May 2026 — r.90(1) (₹1,000 per worker security), r.92 (refund of deposit), r.93(1) and (2) (wage floor; same conditions), r.94 (work-order intimation), r.98(2), (6) and (8) (seven-day deadline, notice, principal employer pays within fifteen days), Form XVII Part III. Opened and read from a mirrored copy of the Gazette [VERIFY: against the e-Gazette original].
- The Code on Wages, 2019 (Act 29 of 2019), Gazette text hosted by the Ministry of Labour and Employment — s.17(2) (wages within two working days of leaving). Opened and read.
- The Code on Social Security, 2020 (Act 36 of 2020), Gazette text hosted by the Ministry of Labour and Employment — s.17(1) (PF contributions recoverable from the contractor), s.31(1), (6) and (7) (ESI paid by the employer for contractor employees; recovery; register before settlement). Opened and read.
- Industrial Relations Code, 2020 (Act 35 of 2020), Gazette of India Extraordinary, 29 September 2020 — s.2(zh) (retrenchment and its exclusions), s.70 (conditions precedent to retrenchment). Opened and read.
- Occupational Safety, Health and Working Conditions (Tamil Nadu) Rules, 2022 (draft), G.O. Ms. No. 38, 11 April 2022 — Form IX (contractor details in the unified annual return). Opened and read. Draft only.