Clipped from: https://www.thehindubusinessline.com/opinion/labour-code-clears-ambiguity-over-contract-work/article70431053.ece
By prohibiting contract workers in core activities, the code requires organisations to be clear about in-house and outsourced work
Contract labour in core activities is permitted where: the work is ordinarily outsourced in the industry | Photo Credit: SUSHIL KUMAR VERMA
India’s Occupational Safety, Health and Working Conditions Code, 2020 (OSHWC Code) marks a pivotal shift in how businesses will need to structure and justify the use of contract labour. The previous Contract Labour (Regulation and Abolition) Act, 1970 (CLRA Act) was designed for a world in which contract workers were largely used as stop-gap manpower for peripheral tasks. As workforce structures became more sophisticated through engagements such as outsourcing, the applicability of the CLRA Act created uncertainty for businesses and left workers unevenly protected.
Against this backdrop, the OSHWC Code silently rewrites that outdated playbook. It raises applicability thresholds, digitises licensing and, most importantly, introduces a default prohibition on deploying contract workers in core activities. These changes are likely to nudge industry towards outcome-based service models with clearer boundaries and governance. Done well, the OSHWC Code can be less a compliance cost and more an operating system upgrade.
At the heart of the change is the OSH Code’s prohibition of “core activities”. A “core activity” is the very work for which an establishment is set up and anything essential or necessary to its functioning. However, this rule comes with realistic exceptions. Contract labour in core activities is permitted where: the work is ordinarily outsourced in the industry; the activity does not require full-time workers for most working hours; or there is a sudden, time-bound increase in core activity.
Support functions such as housekeeping, security and transport remain generally permitted.
Classification of work
The key to understanding where contract labour is now prohibited is to classify work correctly and document why each classification makes sense for your establishment and your industry. A pragmatic framework can be to segment work into three lenses “core-fixed” to cover the continuous, defining work of the business, “core-variable” to encompass core work with fluctuating intensity, and “non-core support” to include services like sanitation and security.
Analysis in this environment becomes less about legal defence and more about credible business justification: Is this pattern consistent with sector practice? Is the work truly intermittent? Is the surge in volume real and temporal?
The result is a move away from treating contract labour as a generic staffing channel and towards more deliberate choices about what work is done in-house, what is outsourced as a true service, and what is legitimate, time-bound augmentation.
Equally consequential is the OSHWC Code’s clarification of who is “contract labour” and who constitutes a “contractor”. Building on legacy definitions, the Code now excludes a contractor’s regular employees with standard employment terms and social security when deployed for any activity of his establishment. In parallel, the OSH Code clarifies that a “contractor” is one who either undertakes to deliver a specified result for the establishment through contract labour or supplies contract labour for any work of the establishment as mere human resource, thereby reinforcing the distinction between contractor-led enterprise operations and the supply of labour to the principal employer.
The critical test is the link to a particular establishment. If a contractor’s regular employee can be redeployed across sites at the contractor’s discretion, the person is typically not contract labour. Merely engaging a service provider that provides services and consequentially/tangentially employs people does not constitute contract labour arrangement. In order for an arrangement to be a contract labour arrangement, the worker must be engaged for a defined job in or connected with a specific establishment.
In practice, control is decisive. Where vendors control deployment, workflows, and supervision, the model resembles outcome-based services. Where principal employers integrate vendor staff into rosters, workflows, and line supervision, authorities are likelier to treat them as contract labour. Under the OSHWC Code, labels like “concession”, “facility management”, or “manpower supply” will not decide the nature of the arrangement. What will matter is who controls the methods and means of work.
Pooja is Partner, and Suryansh is Principal Associate, Shardul Amarchand Mangaldas
Published on December 23, 2025
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