The process of obtaining a labour license in India can be overwhelming and time-consuming, but it is essential for both business owners and contractors who intend to engage in hiring contract labour. The Contract Labour (Regulation and Abolition) Act regulates the employment of contract labour and aims to ensure their working conditions are fair. In this blog post, we will provide detailed information on the applicability and requirements of the Contract Labour Act in India, as well as the necessary steps to obtain a license for engaging contract labour. Let’s dive into the world of labour licensing in India!
I. Overview of Labour License in India
Definition of a labour license
A labour license is a certificate that certifies an establishment’s right to hire contract laborers. The Contract Labour (Regulation and Abolition) Act, enacted in India in 1970, regulates the employment of contract laborers and establishes regulations for their working conditions. The act applies to any establishment that employs 20 or more contract laborers on any day of the accounting year or any contractor that employs 20 or more workers. The act, however, does not apply to establishments that conduct casual or irregular work. A contractor is defined as a person who produces a given result for an establishment through the use of contract labor or provides contract labor for any work of the establishment. The definition of a labor license covers establishments that hire contract labor for their work and require a certificate of registration from the appropriate government. A contractor who has employed 20 or more workers on any day of the month must obtain a contract labor license. Compliance with labor laws is especially important in obtaining a labor license, and it is essential not to violate any of its provisions and regulations. Obtaining a labor license has various benefits, including the prevention of contract labor exploitation and the introduction of better working conditions.
Importance of obtaining a labour license
Obaining a labour license in India is a crucial aspect for establishments and contractors hiring contract labour. The Contract Labour (Regulation and Abolition) Act is applicable to entities such as establishments with more than twenty contract workers and contractors who employ twenty or more workers. It ensures that proper working conditions are provided to contract labour during employment and prohibits the employment of contract labour in certain circumstances. The importance of obtaining a labour license cannot be stressed enough as it brings about several benefits. It ensures compliance with labour laws and helps avoid penalties for non-compliance. It also helps in building trust and credibility among stakeholders such as employees, clients, and partners. It is mandatory to obtain a certificate of registration from the appropriate Government for establishments that propose to employ contract workers. The required documents for approval include a copy of legal status, PF code allotment document, insurance policy receipt, and security deposit challans. Non-registration within the specified time period under Section 7 can attract penalties as per Section 36. Therefore, obtaining a labour license not only helps in fulfilling the legal requirements but also serves as a valuable asset for the smooth functioning of the establishment or contractor.
II. Applicability and Requirements of the Contract Labour Act
Entities covered by the act
The Contract Labour (Regulation and Abolition) Act of 1970 in India applies to certain entities, including establishments and contractors. Here are the entities that are covered by the Act:
– Establishments with 20 or more workmen employed on any day of the accounting year as contract labour
– Contractors who employ or employed 20 or more workers on any day of the accounting year
There are some exemptions to the Act, including work performed in an intermittent nature, work not performed for more than 120 days in a year, and work performed in a seasonal nature for more than 60 days in a year. The Act also does not apply to establishments in special economic zones.
A contractor under section 2 of the Act is defined as a person who takes over the responsibility to produce a given result for the establishment other than a supply of goods or services of manufacture to such establishment through contract labour. The Central and State Advisory Contract Labour Boards play a significant role in the administration of the Act, and every establishment that intends to employ contract workers must obtain a certificate of registration from the appropriate government.
Definition of a contractor
A, according to the Contract Labour (Regulation and Abolition) Act, is a person or entity that takes on the responsibility of producing a given result for an establishment through contract labor. This can also include the person who provides contract labor for any work of the establishment and includes a sub-contractor. The Central Advisory Contract Labor Board, under the authority of the central government, is responsible for regulating the employment and working conditions of contract labor. The State Advisory Contract Labor Board, under the authority of the state government, is responsible for representing government, industry, contractors, workers, and any other sectors with the opinion of the state government. It is mandatory for every contractor who employs 20 or more workers in any establishment to obtain a license for engaging contract labor. The authorized licensing officer will issue the license as per the provisions under section 12 of the Contract Labour Act. The certificate of registration is an essential document that contains the name and address of the establishment, the maximum number of workers to be contracted as contract labor, and any other essential particulars. Registration ensures compliance with labor laws and ensures the welfare and health of contract laborers.
Role of the Central and State Advisory Contract Labour Boards
The Contract Labour (Regulation and Abolition) Act of 1970 mandates the establishment of Central and State Advisory Contract Labour Boards. These Boards are responsible for overseeing the administration of the act and advising on related issues. Both Central and State Boards have different compositions and roles to play. The Central Board advises the Central Government on matters related to contract labour, including the framing of rules and regulations. It also evaluates the functioning of the state boards and ensures the uniform implementation of the act across the country.
The State Board comprises representatives from various sectors, including government, industry, contractors, and workers. Its responsibilities include advising the state government on policy matters related to contract labour and ensuring that establishments follow the provisions of the act. The State Board also registers establishments that employ contract workers and grants licenses to contractors hiring contract labour.
Both the Central and State Advisory Contract Labour Boards play crucial roles in regulating the employment of contract labour. They ensure compliance with the act’s provisions and protect the interests of workers and employers alike.
III. Registration of Establishments Employing Contract Labour
Certificate of registration
In accordance with the Contract Labour (Regulation and Abolition) Act of 1970, any establishment that employs twenty or more workers as contract labour in any financial year must obtain a certificate of registration. This certificate is required to be renewed annually, and the establishment must keep it prominently displayed. Notably, contractors who employ or have employed twenty or more workers in any financial year must also obtain a certificate of registration. Temporary certificates of registration and licenses can be granted to establishments and contractors whose employment of contract labour is not for more than fifteen days. The application process for registration is straightforward and can be done online, end-to-end. Required documents include various forms related to the establishment, contractor, and their labour force, along with an affidavit. Ensure that you comply with the CLRA Act by filling out the necessary forms, providing the requisite information and details, and submitting your application to the appropriate Government registering officer, who will review your application to determine if it complies with the law. Obtaining a certificate of registration provides you with several benefits, such as protection from legal implications, compliance with labour laws, and an opportunity to improve your establishment’s productivity, efficiency, and profitability.
Procedure for registering an establishment
One of the first steps in complying with the Contract Labour (Regulation and Abolition) Act 1970 is to register the establishment that employs contract labor. This process requires the principal employer to make an application to the registering officer appointed by the appropriate government. The application must be made within the period fixed by the government, and if the registering officer is satisfied that there was sufficient reason preventing the application, he may entertain the application even after the fixed period expires.
The procedure for registering an establishment involves filling out a form with the appropriate details and submitting it to the registering officer. Some of the required documents include a copy of the premises’ PAN card, MOA or partnership deed, and proof of address. It is essential to ensure that all documentation is accurate and up-to-date to avoid any delays or issues during the registration process.
Once registered, the establishment must comply with the various compliances related to the CLRA Registration/Licensing, including providing an employment card to each worker within three days of employment and submitting a half-yearly return as per Form XXIV by the contractor. Overall, it is crucial to follow the proper procedure for registering an establishment to comply with the law and ensure a smooth and efficient process.
Required documents for approval
When it comes to obtaining a labour license in India, there are a number of documents that are required for approval. These documents are essential to ensure compliance with the Contract Labour (Regulation and Abolition) Act, 1970. To apply for a Contract Labour License, the establishment that employs contract workers must submit the following:
1) Form IV with Form V (issued by the Principal Employer)
2) Receipted Challan
3) Prescribed Security Deposit
4) Covering letter to the Licensing Officer concerned
Additionally, the contractor must submit an application in Form VI to obtain a Certificate of Registration. This application should be fulfilled along with the following documents:
1) Memorandum of Association
2) Articles of Association
3) Certificate of Incorporation
4) Evidence of payment of Income Tax
5) Bank Guarantee
6) Proof of financial status
It’s important to note that these documents may vary depending on the state in which the establishment is located, and it’s essential to stay up-to-date with changes in requirements. Failing to provide the required documents may result in the rejection of the application. Obtaining a labour license is essential for businesses employing contract labour, and the necessary documents must be submitted to obtain the appropriate approvals.
IV. Licensing for Engaging Contract Labour
License requirement for contractors
Contractors who employ twenty or more workers on any day of the accounting year are required to obtain a labour license. This license is mandatory for contractors to engage contract labour working for any establishment. According to the Contract Labour (Regulation and Abolition) Act, an establishment in which twenty or more workmen are employed on any day of the accounting year as contract labour must also apply for a certificate of registration. The required documents for approval include a copy of the report showing the legal status of the firm, the document showing allotment of PF Code No., receipt/cover note/insurance policy received, and challans showing remittance of security deposit. To apply for a license, the contractor must deposit a security amount of Rs. 20 and submit a certificate by the principal employer stating that the applicant employs the contractor concerning its establishment. The licensing officer will then grant the license according to the provisions under section 12. It’s important for contractors to comply with the regulations and obtain a labour license as it ensures the protection of contract workers and regulates their working conditions.
Grant of license procedure
When applying for a labour license in India, the grant of license procedure involves a few steps to follow. First, the employer must fill out an application for a Certificate of Registration, which is available online. The employer must then submit the required documents for approval, such as proof of the establishment, identification of the employer, and proof of employment of workers.
Once the documents are submitted, the application is reviewed by the Central and State Advisory Contract Labour Boards. After reviewing the application, the Board decides whether to grant the license or not. If the license is granted, the employer will receive a Certificate of Registration, which is valid for a prescribed period.
In addition, contractors must also obtain a license for the recruitment of migrant workers. The license application process is fully online and includes digital signatures for authentication. The grant of license procedure for contractors follows similar steps and requirements as for employers. It is important to comply with labour laws and regulations to operate legally and ensure the safety and protection of workers. Obtaining a labour license provides benefits such as legal protection and eligibility for certain government schemes.
V. Online Services for Obtaining a Labour License
Application for Contract Labour License
Applying for a Contract Labour License has become much easier and hassle-free these days, thanks to the advent of online job application systems. The Gujarat government has launched an initiative called Online Job Application System (OJAS), which allows job seekers from the state to register and apply for jobs online. This system is an end-to-end online processing that includes status updates and SMS alerts. The license for recruiting migrant workmen under Inter State Migrant Workman Act can also be obtained online through a completely digital signature-enabled process.
The Contract Labour (Regulation and Abolition) 1970 Act applies to any establishment where there are twenty or more workmen employed as contract labour on any given day of the accounting year. The same applies to any contractor who employs twenty or more workers on any day of the accounting year. Any contractor with more than twenty laborers working under them has to apply for obtaining a labor license for contractors.
To apply for a labor license online, you can go to the official e-portal of your state labor office and register yourself through your mobile number. This mode of application submission is recommended as it saves time and enables easy tracking of the application. The offline mode of application submission is also available, but applying online has become much more convenient these days. Having a labor license not only ensures compliance with the labor laws, but also helps contractors to maintain their reputation and credibility as trustworthy employers.
Registration and Licensing
To compliance with labour laws, every organization or establishment in India that proposes to employ contract workmen is required to obtain a certificate of registration from the appropriate government body. The registration process involves filing an application and paying the appropriate fees, following which the registering officer can issue a registration certificate. The certificate will contain details such as the name, address, and nature of the business establishment, along with the maximum number of workmen to be involved under the contract labour.
To obtain a contractor license, the contractor has to file an application with the licensing authority, pay a security deposit, and attach the receipt for the fees paid to the licensing officer. The principal employer also has to file an application with the licensing officer stating that the applicant is employed as the contractor at the establishment. Once the paperwork and investigations are completed satisfactorily, the licensing officer will grant a license that should be renewed annually before the expiry date of the license.
Responsibilities of establishments using contract labour include applying for registration, using workmen only through licensed contractors, displaying a notice with all relevant details, retrieving expenses from the contractor by way of bills payable, and maintaining various registers and reports. Similarly, contractors are responsible for obtaining necessary approvals, complying with all relevant regulations, and maintaining various registers and reports. Failure to comply with the appropriate regulations can result in imprisonment, fines, and other penalties.
Importance of complying with labour laws
Complying with labour laws is crucial for any organization to ensure that the rights of the employees are safeguarded and they are protected against any exploitation. Laws exist to regulate not only the workers but also the trade unions. In India, these laws are set by both the State and the Central Government. For every big or small company, abiding by these laws is essential to keep their businesses secure from any legal trouble. Non-compliance with these laws can lead to penalties, fines and even lawsuits which can hurt the reputation of the organization. These laws are not just about filing returns; they serve as evidence for the compliance of the laws and must be produced to the authorities in case of any discrepancies. Failure to adhere to these laws can result in the closure of the business. Complying with labour laws not only strengthens the credibility of an organization but also provides a healthy and safe work environment for the employees. It also ensures that the proper labour practices are followed and helps in building a trustworthy relationship between the employer and the employees.
VIII. Benefits of obtaining a labour license
Obtaining a labour license is essential for establishments and contractors who hire 20 or more contract workers. The benefits of obtaining a labour license are numerous and significant, including the following:
1. Legal Compliance: Obtaining a labour license ensures that establishments and contractors comply with the Contract Labour (Regulation and Abolition) Act of 1970, thus avoiding penalties for non-compliance.
2. Avoidance of Disputes: The regulation of contract labour employment minimizes industrial disputes, resulting in a better work environment.
3. Increased Efficiency: Employment of contract labour allows establishments and contractors to focus on their core business activities, often resulting in increased efficiency and productivity.
4. Flexibility: Employment of contract labour enables establishments and contractors to adjust their workforce based on business requirements, providing flexibility in labour management.
5. Higher Profitability: Efficient labour management often leads to higher profitability and a competitive advantage for establishments and contractors.
6. Improved Skills and Knowledge: The use of contract labour provides access to a pool of skilled workers with diverse skills and knowledge.
In conclusion, obtaining a labour license benefits establishments and contractors in multiple ways, enabling them to remain legally compliant while providing flexibility, efficiency, and access to skilled workers.
VIII. Documentation Required for Shop and Establishment License in India
The documents required for obtaining a Shop and Establishment License vary slightly from state to state. However, the following documents are typically needed:
1. Proof of address of the establishment
2. Proof of identity of the establishment owner or manager
3. Pan card of the establishment owner or manager
4. Proof of incorporation (in case of a registered entity)
5. Registration proof for GST, if applicable
6. Building or property tax receipt
7. Fire safety certificate
8. Health and sanitation certificate
9. Police verification certificate
10. Employees’ undertaking
11. Affidavit on non-employment of child labour
12. Bank account details
IX. Process of getting Shop and Establishment License in India
The process of obtaining a Shop and Establishment License involves the following steps:
1. Visit the official website of the respective state and fill out the application form for Shop and Establishment License.
2. Attach all necessary documents mentioned in the form.
3. Verify the details once again and pay the fee as mentioned.
4. Submit the application online or at the designated office.
5. After successful submission, the authorities will verify the documents and conduct a physical inspection.
6. If the inspection passes and the documents are valid, the license will be issued within a stipulated time.
X. Disadvantages of Shop and Establishment License in India
1. Additional compliance cost: The process of obtaining and maintaining the license can be quite costly, especially for small businesses.
2. Time-consuming: The entire process can take a considerable amount of time, leading to delays in starting operations.
3. Limited flexibility: The license puts limitations on the working hours of employees, including the closure of establishments on specific days.
4. Difficulty in expansion: Obtaining separate licenses for every branch or outlet can be cumbersome, which can adversely affect the expansion plans of businesses.
5. Endless compliance requirements: Aspects such as display of licenses, maintenance of registers, and the like can be a regular source of compliance requirements.
XI. Frequently Asked Questions about Labour License in India
1. Who is eligible to apply for a Shop and Establishment License in India?
Ans: Any business establishment that provides goods or services to customers needs to obtain a shop and establishment license.
2. What is the validity period of a Shop and Establishment License in India?
Ans: The duration of the license varies from state to state, but in general, it ranges from 1-5 years.
3. What is the penalty for operating without a Shop and Establishment License in India?
Ans: The penalty varies from state to state, but in general, it involves a fine or imprisonment.
4. Is online application for Shop and Establishment License available in India?
Ans: Yes, many state governments have launched online portals for the application of Shop and Establishment License.
5. Can a business operate without obtaining a Shop and Establishment License?
Ans: No, it is mandatory for all businesses to obtain this license as it is essential for legal compliance