India’s new labour codes bring significant changes for contract workers, reinforcing wage safety, overtime rules, and benefits while clarifying the responsibilities of contractors and principal employers. For international trade executives managing factories, warehousing, or logistics operations in India, understanding these updates is essential for compliance and cost management.
Who is a Contract Labour?
The law defines a contract labour as someone hired through a contractor to work in connection with the business of an establishment. This includes situations where the worker may not directly interact with the principal company during hiring. Examples include housekeeping staff in a corporate office working through an agency, or a warehouse assistant engaged through a manpower supplier. Inter-state migrant workers are also recognized under this category, reflecting the large number of workers traveling for employment.
A clear distinction is drawn: if a worker is permanently employed by the contractor, receives regular increments, and has structured benefits, they may not be treated as contract labour. This classification helps ensure appropriate protections.
Core vs Non-Core Activities
One of the important features under the labour codes is the approach to contract labour in “core activities” of a business. Core activities are the main functions for which a business exists—production in a manufacturing unit, medical services in a hospital. The law provides that companies should generally avoid engaging contract workers for such core work, with certain exceptions.
The law provides that companies should generally avoid engaging contract workers for such core work, with certain exceptions built in.
These exceptions include cases where the activity is normally carried out through contractors, or where there is a sudden increase in demand, such as a factory receiving large orders during the festive season. The law also clarifies which roles are not treated as core activities:
| Non-Core Activities |
|---|
| Cleaning |
| Security |
| Canteen services |
| Maintenance |
| Transportation |
Workers in these support functions through contractors are in a normal and permitted arrangement.
Shared Responsibilities and Wage Protections
The labour codes outline more clearly the responsibilities between the contractor and the principal employer. While contractors retain primary employment duties, the principal employer now has defined obligations related to wages, benefits, and working conditions. This clarity supports better oversight and helps ensure statutory protections reach workers in a more structured manner. The framework aims to strengthen safeguards around timely pay and financial protection, although specific details in the source are truncated.
Implications for International Trade Operations
For international trade executives, these changes affect labour cost structures, compliance burdens, and operational flexibility in India. Companies using contract labour in factories, logistics hubs, and warehouses must review worker classifications, ensure proper documentation, and adjust staffing models for core activities. The seasonal demand exception allows temporary contract hires during peak production periods, but ongoing reliance on contract labour for core functions may face scrutiny. Non-compliance could lead to penalties and disruptions. Monitoring enforcement by Indian authorities is advisable.
What to watch: Implementation timelines and inspection regimes under the Occupational Safety, Health and Working Conditions Code, 2020 will determine how strictly these provisions are enforced.
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