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Dos& Donts by the Principal Employer Engaging

1. At the outset, it must be ensured that there is no
notification prohibiting contract labour system by the
appropriate government for employment of contract
labour in any process. Operation or any work of the
2. Before identifying a contract, it is desirable to
advertise in classified column (which will be
economical) in the local newspaper inviting offers
from the contractors and a copy of newspaper along
with the invoice be preserved.
3. The principal employer is required to obtain
registration under section 7 of the contract Labour (R
& A) Act in form no.1 (in triplicate) to the Registering
officer of the area in which the establishment sough
to be registered is located. The said form shall be
accompanied by demand draft showing the payment
of fees for payment of registration.
4. Only those contractors be identified who have their
own independent code number under the Employees
Provident Fund & MP Act and the ESIC
5. Whenever a contractor will be having 20 or more
persons working for him, it is obligatory that licence
be taken under the Act. Accordingly the principal
employer will issue Form V (Form of certificate by the

principal employer) to the contractor for obtaining

licence. The principal employer will ensure that the
contractor is also renewing his licence every year.
6. The principal employer should ensure that if the
contract labours are employed for same or similar
kind of work as the regular employee of the principal
employer does, then the wage rates and other
conditions of service should be the same for the
contract labour as applicable to the regular
employee. For instance if the principal employer has
its own security guards and also it is decided to take
from the contractor, it would be appropriate the
security guards of the principal employer should be
promoted/re designated as security officers or
surveillance officers/personal.
7. The principal employer must ensure that it issues
certificate in form V to the contractor for obtaining
licence as provided under section 12 of the Act.
8. The principal employer should not involve himself in
selection process of the contract labour otherwise it
may lead to Sham and camouflage.
9. Principal employer should not supervise the activity
of contract labour because it may amount to sham
and camouflage and in turn the contract labour
would be declared employees of the principal
employer. In such a scenario, the industrial court has

the power to direct principal employer to absorb the

contract labour.
That the principal employer gets the registration
certificate and the contractor obtains the licence
from the competent authority as provided under
section 7 of the Act before proceeding to engage the
contract labour.
The payment of wages to the employee,
employed by the contract, is disbursed to his
employees by the contractor himself or his nominee
and principal employer has to depute his
representative to be present and sign the payment
register in token of having disbursed the salary in his
presence by the contractor.
Amongst other employees, as provided by the
contractor, there must be at least one supervisor
through whom the officials of the principal employer
could communicate, preference be given to
contractor who has such type of work at other
location also.
Discipline of the employees of the contractor in
the discharge of duties must be regulated by the
contractor and not by the principal employer.
Leave to the employees of the contractor must
be sanctioned by the contractor and not by the
principal employer.

No advance should be paid by the principal
employer to the contractors employees directly. Only
contractor must regulate the same.
Maintenance of all types of record in respect of
the employees employed by the contractor should be
his own responsibility and principal employer should
have regular check it.
If the principal employer is covered by the EPFO
and ESIC, then preference should be given to those
contractors who have their own code number under
these Acts.
The principal employer must ensure compliance
of the obligation pertaining to the various provisions
regarding amenities and benefits as prescribed under
the Act.
The principal employer must ensure the
submission of annual return to the prescribed
authority in the prescribed form under the Act.
Experience certificate should not be issued by
the principal employer to the employees of the
No Performance appraisal of any sort shall be
made by the Principal employer to the employees of
the contractor.

Principal employer should avoid any settlement
process, either bi partite or tri-partite.
Contractor should prepare and hand over the
pass book to the inter state migrant employees
under the interstate workers migrant Act 1976.
Avoid engagement of on roll and off roll
employees in same or similar job.

Licence should be displayed at the work place.

Principal employer must send annual returns by
15th February every year.
Principal employer should see that the contract
labour should not work in principal employers
establishment after termination of contract.
The colour of the uniform of the contract labour
should be different than that of employees of the
principal employer.
Canteen facilities if being provided by the
principal employer to its employees the contract
labour should be charged at little higher rate if it is
decided they can also avail such facility.
undertaking in the following of each month from the
contractor that not only the wages have been paid to
its employees but also they have enrolled under ESIC

and EPFO and the contractor has paid their

contribution (with the proof of deposit) can have
one Xerox copy of challan. Should there be any lapse
on the part of the contractor and for any reason, the
principal employer is held liable to discharge any
such monitory obligation, the contractor will be
responsible and the amount can be deducted from
his dues as payable by the principal employer.