The principal employer is the person who supervises and controls the establishment where contract labour is engaged, or, where that establishment is a factory, its owner, occupier or named manager. That is section 2(1)(zz) of the Occupational Safety, Health and Working Conditions Code 2020, which replaced the Contract Labour (Regulation and Abolition) Act 1970 on 21 November 2025. Whoever fits the definition answers for the contract workforce's wages and welfare when the contractor does not.
What the Code actually says
The definition has two limbs, and a site only needs to satisfy one. The first is functional: any person responsible for the supervision and control of the establishment in which contract labour is employed or engaged. The second is positional: for a factory, the owner or occupier, and where a manager has been named under the Code, that manager. Section 2(1)(zz) [VERIFY: clause letter taken from a secondary mirror of the Act; the indiacode primary could not be opened].
Two neighbouring definitions decide who sits on the other side of the relationship. A contractor under section 2(1)(n) is a person who either undertakes to produce a given result for the establishment through contract labour, or supplies contract labour to it as mere human resource, and the term includes a sub-contractor. Contract labour is a worker hired in or in connection with the work of the establishment by or through a contractor, with or without the knowledge of the principal employer. That last phrase matters on a plant floor: a site can be the principal employer of workers it did not know a contractor had brought in.
Which threshold applies to you
The contract-labour chapter of the Code applies to an establishment that engaged 50 or more contract labour on any day of the preceding twelve months, and to a contractor who supplied that many; under the 1970 Act the figure was 20. The Ministry of Labour and Employment's own FAQ on the Code confirms the change and describes it as a licensing threshold for administrative ease that does not alter workers' entitlements.
The threshold is narrower than it looks. The Code's health, safety and welfare provisions apply to every establishment with 10 or more employees, contract or direct, and the Ministry's FAQ repeats that point three times in its first six answers. A site with 35 contract workers is below the licensing line and still inside the welfare one.
| Point of comparison | CLRA 1970 | OSH Code 2020 |
|---|---|---|
| Applicability threshold | 20 or more contract labour | 50 or more contract labour (s.45) [VERIFY: section number] |
| Contractor licence | Per establishment, per state | Single licence, valid five years [VERIFY: s.47 and validity from secondary sources] |
| Welfare when the contractor defaults | Principal employer provides and recovers (s.20) | Principal employer liable for welfare facilities (s.53) [VERIFY: section number] |
| Wages when the contractor defaults | Principal employer pays and recovers (s.21) | Principal employer pays and recovers; contractor pays electronically and informs the principal employer (s.55) [VERIFY: section number] |
| Penalty for contravention | Fine and possible imprisonment | Fine of ₹2 lakh to ₹3 lakh for the general contravention (s.94) [VERIFY: amount and section from secondary sources] |
What the principal employer answers for
Three things: welfare facilities, unpaid wages and social security contributions. Each comes with a right to recover from the contractor, and none comes with a way to leave the worker unpaid while the recovery is argued.
- Welfare facilities. The Ministry's FAQ states plainly that contract workers' welfare facilities "will now be provided by the principal employer". Canteen, rest rooms, drinking water and first aid are the principal employer's problem from the start, not a backstop for a contractor who failed.
- Wages. The contractor pays contract labour through bank transfer or another electronic mode and informs the principal employer electronically of the amount paid. If the contractor fails to pay, or pays short, the principal employer pays the wages in full and recovers the sum from the contractor, by deduction from anything payable under the contract or as a debt.
- Provident fund and ESI. Under the Code on Social Security 2020 the principal employer is liable for contributions in respect of contract labour and may recover them from the contractor; the contractor may deduct only the employee's share from wages [VERIFY: sections 17 and 31 of the Social Security Code, from secondary sources].
A fourth duty sits underneath the other three. Where the chapter applies, contract labour may only be engaged through a contractor holding a licence under the Code, and engaging an unlicensed contractor is treated as the principal employer's contravention, not only the contractor's. Asking to see the licence before the first shift is the cheapest compliance step on the list.
How far the recovery right reaches against a contractor who has closed and gone, and whether a particular arrangement keeps a principal employer clear of a specific claim, are questions for the reader's own counsel on the facts of the site.
Core activity: the line the Code redrew
Contract labour may not be engaged in a core activity of the establishment, unless one of three exceptions in section 57(1) applies. The Code defines a core activity in section 2(1)(p) as any activity for which the establishment is set up, including any activity essential or necessary to it.
- The normal functioning of the establishment is such that the activity is ordinarily done through a contractor.
- The activity does not require full-time workers for the major portion of the working hours in a day, or for longer periods.
- There is a sudden increase in the volume of work in the core activity that has to be accomplished within a specified time.
Section 57(2) gives the appropriate government a designated authority to decide whether an activity is core, on application by an aggrieved party or on the government's own reference. The exceptions are wider than the old abolition mechanism under section 10 of the 1970 Act, which required a notification to prohibit contract labour in a process. The leading authority on that mechanism, the Supreme Court in Steel Authority of India v. National Union Waterfront Workers (2001), held that abolition does not automatically absorb contract workers onto the principal employer's rolls. How far that reasoning carries into section 57 has not yet been tested in a reported judgment [VERIFY: case citation and current status].
Why this matters more each year
The Annual Survey of Industries for 2023-24 puts contract workers at 42% of the organised manufacturing workforce, the highest share since 1997-98 and roughly eight percentage points higher than a decade earlier [VERIFY: MoSPI release, figure taken from Business Standard's report of it]. The 2022-23 survey counted 5.95 million contract workers, 40.7% of the total [VERIFY: same route]. The principal employer definition therefore covers two in five people on a typical factory floor, and the share has risen every year since 2013-14.
In practice the definition turns into a monthly routine at the Management stage of an engagement. The principal employer should hold a copy of the contractor's licence, the electronic wage confirmation the Code requires the contractor to send, the provident fund and ESI challans for the contract headcount, and a record that the welfare facilities on site are in place. A contractor who cannot produce those four things on request is a contractor whose obligations the site is about to inherit.
Sources
- Occupational Safety, Health and Working Conditions Code, 2020 (Act 37 of 2020), ss.2(1)(n), 2(1)(p), 2(1)(zz), 45, 47, 53, 55, 57, 94 and the repeal provision [VERIFY: section numbers for ss.45, 47, 53, 55, 94 and the repeal section were taken from secondary mirrors; the primary PDF returned 404/403]
- Ministry of Labour and Employment, FAQs on the OSH Code, 2020 (January 2026), Q1, Q2, Q6 and Q16
- Code on Social Security, 2020 (Act 36 of 2020), ss.17 and 31 [VERIFY: section numbers from secondary sources]
- Commencement of the four Labour Codes with effect from 21 November 2025, Ministry of Labour and Employment notifications in the Gazette of India [VERIFY: notification numbers]; summarised at SCC Online
- Annual Survey of Industries 2023-24 and 2022-23, Ministry of Statistics and Programme Implementation, as reported by Business Standard, 8 September 2025 and Business Standard, 3 November 2024 [VERIFY against the MoSPI release]
- Steel Authority of India Ltd v. National Union Waterfront Workers, (2001) 7 SCC 1, Supreme Court of India [VERIFY: citation]