Key takeaways
- The principal employer can be liable for a contractor's unpaid wages and statutory dues.
- Under the OSH Code, contract labour provisions apply at 50 or more contract workers.
- Monthly verification of high-headcount vendors is the most effective control.
Who is a principal employer?
The principal employer is the owner or occupier of the establishment where contract workers are deployed, typically the company that engages the contractor. Contract labour law, now part of the OSH Code, 2020, places specific obligations on the principal employer, including registration and ensuring that contract workers receive their wages and statutory benefits.
What is the principal employer liable for?
If a contractor fails to pay wages in full or on time, the principal employer can be required to pay and recover the amount from the contractor. Similar exposure exists for PF and ESI dues of contract workers. Engaging contractors without valid licences, or beyond their licensed headcount, is also an offence.
What does the OSH Code change?
The threshold for contract labour provisions moved from 20 to 50 contract workers. The Code also restricts contract labour in core activities, with specified exceptions, and continues to require principal employers and contractors to maintain records and file returns.
How can principal employers manage the risk?
- Verify licences and registrations before a vendor deploys workers.
- Check monthly, for high-headcount vendors, that wages meet minimum wages and are paid on time.
- Match PF and ESI challans against deployed worker lists.
- Grade findings by risk and track closure with procurement.
- Build compliance obligations and audit rights into vendor contracts.
Frequently asked questions
Is the principal employer liable for contractor PF?
The principal employer can be held responsible for PF dues of contract workers where the contractor defaults, and can recover from the contractor.
What is the contract labour threshold under the OSH Code?
Contract labour provisions apply where 50 or more contract workers are engaged.
How often should contractors be audited?
Monthly or quarterly for high-headcount vendors; half-yearly for others.
This article is for general information and is not legal advice. Rules change through notifications, confirm the current position for your establishment.
