A manpower supply contract cannot change who the law makes liable, but it decides whether the site can see a default coming and recover the cost. At a minimum it should cover the contractor's licence and headcount cap, the wage basis, monthly proof of wages, PF and ESI, the site's right to set off unpaid dues against the bill, the split of welfare facilities, sub-contracting, and what is handed over at exit. Your counsel drafts the wording.
Why the contract matters when the law already decides
Because the Codes make the site pay first and recover later, the contract is where recovery is set up. The principal employer pays wages a contractor leaves unpaid, within fifteen days of the missed payday (OSH Code s.55(3); OSH Central r.98(8)). It stays responsible for PF contributions (EPF Scheme 2026, para 20(4)) and is first in line for ESI (Code on Social Security s.31(1)). The law gives the site a right to recover each of these from the contractor. The contract decides how fast, from what, and on what evidence.
Rule 98(3) of the OSH (Central) Rules 2026 hands one term straight to the parties: the principal employer settles the contractor's bills "within timeline as per the terms and conditions agreed". A contract that is silent on the bill timeline, or on what evidence comes with each bill, leaves the site paying before it knows the crew was paid.
The clauses, and the rule behind each
| Clause | What it should say | Statutory hook |
|---|---|---|
| Licence | Contractor holds a valid licence for this work, with a cap covering the agreed headcount and any peak; gives a copy at signing and at renewal; tells the site at once if it is suspended | OSH Code s.47, s.54; r.89(2) |
| Work-order report | Contractor reports this work order on Shram Suvidha within 15 days and shares the acknowledgement | r.94 |
| Wage basis | Wages not below the notified minimum or any higher agreed rate; parity of hours, holidays and conditions where the crew does work similar to direct staff | r.89(2)(iv); r.93(1)–(2) |
| Payday and proof | Wages paid by bank transfer within the statutory period; wage-period notice and payment intimation sent to the site | r.98(2), (4), (6) |
| PF and ESI evidence | Form XI by the 10th; ECR, PF challan and ESIC challan each month; every eligible worker enrolled before the first shift | EPF Scheme 2026, para 27(3); r.93(4) |
| Register before settlement | No bill settled until the contractor produces its register of the workers supplied | Code on Social Security s.31(7) |
| Set-off | The site may deduct from any bill, or recover as a debt, anything it pays for wages, PF or ESI the contractor should have paid | SS Code s.17(1), s.31(6); r.98(8) |
| Facilities | Which welfare facilities the site provides on its premises and which the contractor provides; who supplies each item of PPE | OSH Code s.53; r.86(1)(iii)–(iv) |
| Sub-contracting | No sub-contracting without the site's written consent | OSH Code s.2(n) |
| Exit and hand-over | Final bill held until leavers are paid and register copies, challans, UAN and ESIC numbers are handed over | r.72 (five-year records); Code on Wages s.17(2) |
The two clauses that do the most work
The evidence clause and the set-off clause. Between them, the site sees a problem in the month it happens and has money in hand to fix it. Each month the evidence clause delivers four documents the site can check against its gate register: the payment intimation, Form XI, the ECR with its challan, and the ESIC challan. A headcount that does not match is the earliest warning a site gets.
The set-off clause turns the statutory right of recovery into something usable. Section 17(1) of the Code on Social Security already lets the site recover PF it paid for a contractor's workers "by deduction from any amount payable to the contractor" or as a debt, and section 31(6) does the same for ESI. Rule 98(8) adds the security deposit as a source for unpaid wages. Writing these into the contract, with the order the site may use them in, saves an argument at the worst moment.
What no contract can do
No contract can move a statutory duty off the site, or onto the worker. Four limits come up often:
- It cannot remove the site's liability. An indemnity from the contractor helps the site recover; it does not stop the authorities or the workers pursuing the site (EPF Scheme 2026, para 20(4); OSH Code s.55(3)).
- It cannot charge the worker the employer's share. A contractor may not recover the employer's PF or ESI contribution from wages, "notwithstanding any contract to the contrary" (Code on Social Security s.17(3)).
- It cannot keep the crew out of facilities the site must provide on its premises: toilets, washrooms, drinking water, canteen, crèche, first aid (r.86(1)(iii)).
- It cannot pay below the minimum. A wage rate under the notified minimum breaches a licence condition (r.89(2)(iv)), whatever the contract says.
This post describes where the law bites; it is not a template. The wording of each clause, the indemnity and how they fit your other contracts are for the site's own counsel to draft.
How Velura Services helps
Our engagement terms already carry these clauses: licence and cap, wage basis, monthly evidence with Form XI and challans, register production before settlement, set-off rights, the facilities split, no sub-contracting without consent, and an exit hand-over. We share them for your counsel to review before anything is signed, and adapt them to your site's own contract terms.
Sources
- Occupational Safety, Health and Working Conditions Code, 2020 (Act 37 of 2020), Gazette text hosted by DGFASLI. Sections cited: s.2(n) (sub-contractor), s.47 (licence), s.53 (welfare facilities by the principal employer), s.54 (unlicensed contractor), s.55(3) (principal employer pays unpaid wages). Opened and read.
- Occupational Safety, Health and Working Conditions (Central) Rules, 2026, G.S.R. 345(E) dated 8 May 2026. Rules cited: r.72 (records five years), r.86(1)(iii)–(iv) (facilities split), r.89(2) (licence conditions), r.93(1), (2), (4) (wage floor, parity, EPFO and ESIC membership), r.94 (work-order report), r.98(2), (3), (4), (6), (8) (payday, bill settlement as agreed, bank transfer, wage notice, principal employer pays and recovers). Opened and read from a mirrored copy of the Gazette [VERIFY: against the e-Gazette original].
- Code on Social Security, 2020 (Act 36 of 2020), Gazette text hosted by the Ministry of Labour and Employment. Sections cited: s.17(1) and (3) (recovery of PF from the contractor; no recovery of the employer's share from the worker), s.31(1), (6), (7) (ESI: principal employer liable, recovery from the contractor, register before settlement). Opened and read.
- Employees' Provident Funds Scheme, 2026, G.S.R. 525(E) dated 29 June 2026, mirrored copy of the Gazette. Paras cited: 20(4) (principal employer remains responsible), 27(3) (Form XI by the 10th). Opened and read [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. Section cited: s.17(2) (wages within two working days of leaving). Opened and read.