A licensed contractor lodges security of ₹1,000 for each contract worker its licence covers, as a bank guarantee, before the licence issues. If its workers go unpaid, the Chief Labour Commissioner can pay them out of it after an inquiry, and the contractor must restore it within fifteen days or risk suspension. It moves with the licensed number and comes back at expiry. A site's own retention under the contract is a separate thing.
What the security is, and how much
It is a bank guarantee sized to the licensed headcount, lodged with the licensing authority. Section 48(3) of the OSH Code 2020 ties the licence to the number of contract labour it names and requires security for any increase. Rule 90(1) of the OSH (Central) Rules 2026 sets the rate: before a licence is issued, the contractor deposits a bank guarantee "calculated at the rate of Rs. 1000/- for each of the contract labours to be employed", for performance of the licence conditions and compliance with the Code. Rule 90(2) caps it for the largest contractors.
| Licensed contract labour | Security | Basis |
|---|---|---|
| 50 | ₹50,000 | ₹1,000 a worker (r.90(1)) |
| 120 | ₹1,20,000 | ₹1,000 a worker |
| 500 | ₹5,00,000 | ₹1,000 a worker |
| 1,00,000 to under 1,50,000 | ₹10 crore | Fixed amount (r.90(2)) |
| 1,50,000 to under 2,00,000 | ₹15 crore | Fixed amount (r.90(2)) |
| 2,00,000 or more | ₹20 crore | Fixed amount (r.90(2)) |
Below 50 contract labour no licence is needed, and so no security (Central Rules r.90(4)). The figures above are for licences under the Central Rules; an establishment for which the State is the appropriate Government follows that State's rules [VERIFY: the security requirement under the Tamil Nadu rules for state-sphere establishments].
When it is drawn
When the contract workers go unpaid, and only after an inquiry. The Code and the Rules point to the security three times:
- Minimum wages unpaid. Rule 86(2) makes it a licence condition that if the contractor fails to pay minimum wages, the Chief Labour Commissioner (Central) or a representative pays the unpaid workers out of the security, "including by invoking the bank guarantee".
- Wages unpaid, by the contractor or the site. Section 55(4) of the Code tells the appropriate Government to order payment of a contractor's unpaid wages from its security. Rule 99(1) sets the procedure: an inquiry, a hearing for the contractor, then an order to pay from the deposit.
- The top-up. Once drawn, the contractor must re-furnish the security within fifteen days, "or else license will be liable to be suspended" (r.99(2)). Suspension follows the show-cause procedure in rule 95.
A drawing is not routine. It means a wage default has been inquired into and decided against the contractor, which is a fact a site engaging that contractor would want to know about.
Changing the number, and getting it back
The security follows the licensed number up and down, and is returned when the licence ends cleanly. Rule 96(6) says that after an amended licence issues, a proportionate part of the security is returned if the number of contract labour falls, and additional security is deposited if it rises. A contractor raising its licence from 120 to 165 lodges a further ₹45,000 before the higher number applies.
- Refund at expiry. A contractor not renewing applies electronically with the expired licence, a notice of completion of work and bank details. If there has been no breach and no forfeiture order, the authority directs the security returned; any forfeited part is deducted and the balance refunded within thirty days of the application (r.92).
- Carried into a new licence. Where a licence has expired, the authority may, at the contractor's request, adjust the existing security against an application for a new one (r.90(3)).
- Renewal. The application to renew goes in at least thirty but not more than ninety days before expiry, with a 25% additional fee if it is late (r.91).
The other deposit: what the site holds
Many sites also hold money of their own against the contractor, and the Rules recognise it. Rule 98(8) requires the principal employer to pay wages a contractor has not paid within seven days of the wage period, within fifteen days, and to recover the amount by deduction from what it owes the contractor, as a debt, "or from the security deposit lying with the principal employer". That deposit, or a retention from the bill, is a commercial term of the contract, separate from the bank guarantee lodged with the licensing authority.
| Licence security | Site's deposit or retention | |
|---|---|---|
| Held by | The licensing authority, as a bank guarantee | The principal employer |
| Amount | Fixed by rule: ₹1,000 a licensed worker, capped at the top | Whatever the contract says |
| Drawn by | The Chief Labour Commissioner, after an inquiry | The principal employer, after paying the workers itself |
| Drawn for | Unpaid wages of the contractor's workers | Recovery of wages the site has had to pay |
| Returned | On expiry, less any forfeiture (r.92) | On the contract's terms, usually at final settlement |
How the two interact on a particular default, and what the contract should say about the site's retention, are questions for the site's own counsel and its contract with the contractor.
How Velura Services helps
Our licence security is lodged at the level our licensed headcount requires and increased before any ramp takes us past it, and our wage intimations reach the site by the seventh day each month. When a site asks, we show the licence, the details of the security lodged with the licensing authority, and that nothing has been drawn against it, as part of the evidence pack.
Sources
- Occupational Safety, Health and Working Conditions Code, 2020 (Act 37 of 2020), Gazette text hosted by DGFASLI. Sections cited: s.48(3) (licence valid for the number specified; security for an increase), s.55(3)–(4) (principal employer pays unpaid wages; payment from the security deposit). Opened and read.
- Occupational Safety, Health and Working Conditions (Central) Rules, 2026, G.S.R. 345(E) dated 8 May 2026, mirrored copy of the Gazette. Rules cited: r.86(2) (minimum wages paid from the security), r.90(1)–(4) (₹1,000 per worker; fixed amounts for 1 lakh and above; adjustment for a new licence; no licence below 50), r.91 (renewal window and late fee), r.92 (refund), r.95 (suspension), r.96(6) (security adjusted on amendment), r.98(8) (site pays within fifteen days and recovers, including from the deposit it holds), r.99 (inquiry, payment from the security, fifteen-day top-up). Opened and read [VERIFY: against the e-Gazette original].