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CLRA Registration & Licensing

Engage contract workers above the threshold without registration, and every one of their compliance failures becomes yours.

One-time engagement · Reviewed by the EPF Buddy compliance team · Last updated 29 July 2026

Central threshold

20 contract workers (50 in several states)

Two obligations

PE registration + contractor licence

Licence renewal

Periodic — lapse means unlawful engagement

Liability flow

Contractor's defaults become the PE's

The CLRA Act requires two separate things from two separate parties: the principal employer registers the establishment (Form I), and each contractor supplying the workers holds a licence. The central threshold is 20 contract workers engaged on any day in the preceding 12 months — raised to 50 in several states, including Maharashtra.

The Act's real teeth: an unregistered principal employer can be prohibited from engaging contract labour at all, courts can treat contract workers as the principal employer's own employees, and compliance failures by your contractor — their PF, their ESI, their wages — flow up to you.

We handle principal employer registration, contractor licence applications and renewals, and the Form-level record-keeping that inspections examine — including the transition to the new Labour Codes regime, under which contractor licensing moves to a pan-India, multi-year licence as state rules go live.

Key Takeaway

CLRA creates two obligations: principal employer registration and contractor licensing, triggered at 20 contract workers (50 in several states), counted across all your contractors combined. Contractor defaults on wages, PF or ESI can reach the principal employer — registration plus vendor compliance checks are the shield.

Applicability

Does this apply to you?

Principal employers

Establishments engaging 20+ contract workers (50 in several states, including Maharashtra) on any day of the preceding 12 months. Once covered, coverage continues even if numbers fall.

Contractors

Contractors supplying workers above the threshold need a licence per engagement, supported by the principal employer's Form V certificate.

Counted across contractors

The threshold counts total contract workers across ALL your contractors — housekeeping plus security plus facility staff combined — not per contractor, which is how most establishments miscount.

The Cost of Not Doing This

What non-compliance actually costs.

Contractor defaults can land on you

Unpaid wages, PF or ESI by your contractor can become the principal employer's liability — courts have differed on how far this reaches, which makes it a fact-specific risk, not a safe assumption. Registration and periodic vendor compliance verification are the shield.

Prosecution and escalating fines

The legacy Act carries fines and imprisonment up to 3 months for contravention; under the new Labour Codes penalty framework, fines scale into lakhs as state rules go live. Unregistered engagement can be prohibited outright.

How We Handle It

The process.

1

Threshold & state assessment

Actual contract-worker counts across all contractors, against your state's 20 or 50 threshold.

2

Registration/licence filing

Principal employer registration (Form I) and/or contractor licences on the applicable portal.

3

Records & registers

The registers, notices and displays the Act requires at each site — what inspections actually examine.

4

Renewal & vendor tracking

Licence renewals and periodic contractor-compliance verification, on our calendar.

Documents we'll ask for

  • Entity documents and PAN of principal employer
  • Details of contractors and nature of contracted work
  • Contract worker counts by contractor and location
  • Contractor agreements
  • For licences: Form V from principal employer, security deposit details

Exact requirements vary by state — we confirm them for yours when you contact us.

Key Terms

Words that decide outcomes.

Principal employer
The establishment on whose premises or for whose work contract labour is engaged. It must register under Form I once the threshold is crossed, and carries fallback liability for contractors' wage and social-security defaults.
Form I / Form IV / Form V
Form I is the principal employer's registration application. Form IV is the contractor's licence application, which requires Form V — the certificate from the principal employer confirming the engagement.
Contractor licence
The licence each contractor supplying workers above the threshold must hold, historically renewed yearly per state. Under the OSH Code (as state rules go live), it becomes a pan-India licence with multi-year validity.

Questions

Asked often.

They are two obligations on two different parties. The principal employer obtains registration of the establishment (Form I). The contractor supplying the workers obtains a licence (Form IV, supported by the principal employer's Form V certificate). Most compliance failures happen because each party assumes the other's paper covers them both. It does not.
The central Act sets 20 contract workers on any day in the preceding 12 months. Several states — including Maharashtra, Gujarat and Karnataka — have amended it to 50. Which number applies depends on your state, and under the OSH Code chapter (where state rules are live) the threshold is 50. We confirm against your actual state and counts.
If total contract workers across all vendors cross your state's threshold — yes. Housekeeping and security are exactly the two categories where establishments cross the line without noticing, because the count is across contractors combined, not per vendor.
No — and doing so exposes you directly. Courts can treat the workers as the principal employer's own employees, and wage, PF and ESI liability can shift to you if the contractor defaults. Verifying every vendor's licence is part of the compliance we run.
The certificate the principal employer issues to a contractor confirming the engagement — required before the contractor's licence application can proceed. No Form V, no licence; no licence, unlawful engagement.
The honest answer: the High Courts have differed. Where the contractor holds its own independent PF code, some courts have directed recovery at the contractor; others have held the principal employer responsible regardless. The outcome is fact-specific — which is exactly why we verify every vendor's registrations and deposits rather than assuming their paper protects you.

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