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Companies Act, 2013 (India)

The Contract Labour (Regulation and Abolition) Act, 1970 requires a license for contractors who employ 20 or more contract laborers in an establishment

A Labour License is a legal requirement under the Labour Laws in many countries, specifically in India, for businesses that employ a certain number of workers. It is issued to ensure the protection of workers’ rights, safety, and welfare in the workplace. The license is typically required for establishments like factories, construction sites, and industries that engage a significant number of workers.

A private limited company is a business entity where ownership is restricted to a small number of shareholders, and shares cannot be publicly traded. Here the shareholder liability is limited to their investment in the company and can have up to 200 shareholders. The shares are not publicly traded. The company’s registration and operations are governed by the Register of Companies (ROC). The directors have to submit their Director Identification Number (DIN) and Digital Signature Certificate (DSC) for incorporation. Documents like the Memorandum of Association (MoA) and Articles of Association (AoA) have to be submitted in the MCA portal. Post registration, the Ministry of Corporate Affairs (MCA)will provide the incorporation certificate and will display the company’s details on the website.

Legal Compliance

A Labour License ensures that businesses comply with labor laws, reducing the risk of legal disputes, penalties, or shutdowns for non-compliance with labor-related regulations.

Worker Protection

It helps protect workers' rights, ensuring they work in safe and healthy environments, and receive proper wages, benefits, and working conditions.

Avoiding Exploitation

A Labour License helps prevent exploitation, such as child labor or unfair treatment of workers, by enforcing legal standards for employment.

Reputation and Trust

Companies that hold a Labour License demonstrate their commitment to ethical business practices, enhancing their reputation and gaining trust from workers, clients, and the public.

Workplace Safety

Ensures that employers follow occupational health and safety standards, reducing accidents, injuries, and ensuring the welfare of employees on the job.

Government Contracts

A Labour License is often required for businesses to participate in government contracts, tenders, or public sector projects, which can lead to more opportunities.

Eligibility Criteria for Labour License

The eligibility criteria for obtaining a Labour License typically depend on the number of workers employed and the nature of the business. Below are the general eligibility requirements for obtaining a Labour License under the Contract Labour (Regulation and Abolition) Act, 1970 (in India)

Number of Employees

Contractors: A Labour License is required if a contractor employs 20 or more workers for carrying out contract labor work.
Factories/Establishments: In some cases, the number of employees required for a Labour License may vary based on the nature of the work and the jurisdiction, but it generally applies to businesses employing a significant number of workers.

Type of Business

Contract Labor: Businesses that engage workers through contractors, such as construction sites, security agencies, or maintenance services, must obtain a Labour License if the worker count exceeds the threshold.
Factories or Construction Projects: Employers in industries like manufacturing, construction, and mining that hire a substantial number of workers need to apply for a Labour License.

Nature of Work

The business must be involved in activities that require the engagement of workers for work that could be classified as “contract work” or involves hazardous tasks where worker safety and welfare regulations need to be maintained.

Compliance with Safety Standards

The business must ensure compliance with safety regulations such as maintaining safe work environments, proper facilities for workers, fire safety, sanitation, etc.

Registration with Government Authorities

The business or contractor must be registered with the appropriate local or regional labor department or government authority to apply for the license.

Financial Standing

Some jurisdictions require proof of financial stability to ensure that the business can provide the necessary welfare and compensation for workers.

Valid Work Contracts

The employer must have valid contracts or agreements for the workers, detailing wages, terms of employment, working hours, and other essential terms.

Checklist for Labour License

Application Form

Complete the official Labour License application form provided by the local labor department or regulatory authority.

Business Registration Documents

Proof of Establishment: Copy of business registration documents (e.g., Certificate of Incorporation, GST Registration, or Trade License).
Address Proof: Provide proof of business premises or site location.

Number of Employees

List of Workers: Provide a detailed list of workers employed under the contract labor agreement, including their names, designations, and the nature of work they perform.
Employee Count: Ensure that the number of employees exceeds the required threshold (usually 20 or more workers).

Contract Documents

Copy of Employment Contracts: Submit contracts or agreements with contractors or workers detailing wages, working hours, job roles, and employment terms.
Work Assignment Details: Provide details of the contract work being performed (e.g., construction, maintenance).

Proof of Compliance with Health & Safety Regulations

Fire Safety Certificate: Ensure the premises meet fire safety standards and have necessary fire safety equipment.
Workplace Safety Measures: Submit documents confirming adherence to safety regulations (e.g., protective equipment, safety training for workers).

Wages & Benefits

Wage Payment Records: Provide proof of timely and fair payment of wages to workers (e.g., payroll records).
Employee Welfare: Submit documents showing compliance with statutory employee welfare programs such as insurance, health benefits, etc.

Worker Training Records

Training Certifications: Proof of training provided to workers on safety measures and handling hazardous work (if applicable).
Health and Safety Compliance: Ensure all workers have received the necessary health and safety training for the tasks they perform.

Inspection and Site Evaluation

Premises Inspection: Be prepared for an inspection of your premises by labor authorities to check compliance with safety, health, and welfare requirements.
Vehicle Compliance (if applicable): If transporting workers or goods, ensure that vehicles meet safety and regulatory standards.

Payment of Fee

Application Fee: Pay the required application fee as prescribed by the local labor authority or government agency.

Registration with Authorities

Labor Department Registration: Ensure that your business is registered with the local labor department or relevant authority to process the Labour License application.

Compliance with Local Laws

Local Authority Permissions: Ensure that your business complies with local labor laws, zoning laws, and industrial regulations in the area where the workers are engaged.

Necessary Documents for Labour License

To obtain a Labour License, you will need to submit the following documents, depending on the nature of your business and the local labor authority’s requirements

Business Registration Documents

Certificate of Incorporation or Trade License: Proof of business registration.
GST Registration Certificate: If applicable.
PAN Card of the Company/Owner: For tax and identity verification.
Proof of Premises: Lease agreement, property tax receipt, or utility bills for business address verification.

Employment Details

List of Workers: A detailed list of employees, including their names, roles, and job descriptions.
Employment Contracts: Copies of contracts or agreements signed with employees or contractors.
Nature of Work: A brief description of the type of work performed by the laborers.

Compliance Proof

Wage Payment Records: Proof of payment of wages to workers (bank statements, payroll records).
Employee Benefits Records: Documents showing compliance with statutory benefits such as ESI (Employee State Insurance), EPF (Employee Provident Fund), or other welfare schemes.
Health & Safety Compliance: Documentation proving adherence to workplace safety norms and fire safety regulations.

Site-Related Documents

Address Proof of the Worksite: If the laborers are deployed at a specific location, provide its address and related documents.
Fire Safety Certificate: Issued by the local fire department.
Site Plan or Layout: If applicable, provide a blueprint or layout of the worksite.

Financial Proof

License Fee Payment Receipt: Proof of payment of the Labour License application fee.
Bank Statements: To show financial stability, if required by the authority.

Identification Documents

Aadhar Card/PAN Card of the Employer/Owner: For identity verification.
Passport-Sized Photographs: Recent photographs of the employer or contractor.

Contractor Agreement (if applicable)

If the work is being carried out by a contractor, provide the contract agreement between the contractor and the employer/business.

Additional Documents (if applicable)

Previous Licenses or Certificates: If you are renewing the Labour License.
Authorization Letter: If the application is being submitted by an authorized representative.
Environmental Clearance Certificate: For industries requiring environmental compliance.

Documents necessary for filing SPICe+ form (INC-32) for the registration of a private limited company are outlined as follows:

A. For Indian Nationals serving as directors and subscribers:

Affidavit on stamp paper: a declaration by all subscribers affirming their intention to become shareholders of the company
Office address proof like the Rental Agreement or Ownership Deed
Electricity bill, water bill and other utility bills of the last two months
Copy of approval if required
Trademark registration details
NOC from property owner
Proof of identity and address

B. Required Documents For Foreign Nationals serving as directors/Shareholders

Passport: Proof of identity
Address proof: Accepted documents include a driving license, residence card, bank statement, or government-issued identification with a valid address.

Types of Labour License

Labour licenses are generally categorized based on the nature of the work, the type of industry, and the number of workers involved. Below are the main types of labour licenses

Contractor Labour License

This license is issued to contractors who engage 20 or more workers for specific contract-based work, such as construction, maintenance, or security services. It ensures compliance with the Contract Labour (Regulation and Abolition) Act, 1970 and safeguards workers' rights.

Building and Other Construction Workers (BOCW) License

Applicable to businesses or contractors involved in construction projects like buildings, roads, and bridges. This license ensures the welfare and safety of workers in the construction industry under the BOCW Act, 1996.

Factory Labour License

Required for factories employing a certain number of workers (generally 10 or more with power or 20 without power). It is issued under the Factories Act, 1948, ensuring compliance with safety, health, and welfare provisions for factory workers.

Characteristics of Labour License

A Labour License is an important regulatory requirement designed to protect workers’ rights and ensure compliance with labor laws. Below are the key characteristics

Statutory Compliance

Ensures businesses and contractors comply with labor laws such as the Contract Labour (Regulation and Abolition) Act, 1970 or the Factories Act, 1948.
Mandates adherence to regulations regarding wages, working conditions, safety, and welfare.

Worker Protection

Safeguards the rights of workers by ensuring fair wages, timely payments, and proper working hours.
Prevents exploitation of workers by enforcing statutory benefits like health insurance, provident fund, and paid leave.

Work-Specific

Labour licenses are issued based on the type of work being performed, such as construction, factory operations, or contract labor.

Employment Threshold

Required when businesses or contractors engage a certain minimum number of workers, generally 20 or more employees for contract work or other industries as per law.

Validity and Renewal

Labour licenses have a defined validity period and must be renewed periodically to continue operations legally.

Accountability and Transparency

Promotes accountability by ensuring contractors and businesses maintain accurate records of wages, attendance, and compliance with safety norms.
Encourages transparency in employer-worker relationships.

Safety and Welfare Compliance

Mandates the implementation of health and safety measures such as fire safety, protective equipment, and sanitation facilities at the workplace.

Register for a Labour License

Determine Eligibility

Confirm that you meet the eligibility criteria for obtaining a Labour License (e.g., engaging 20 or more workers).
Identify the type of Labour License applicable (e.g., Contractor, Factory, or Construction).

Gather Required Documents

Proof of business registration (e.g., Trade License or GST Certificate).
List of employees and employment contracts.
Payment records and compliance documents (e.g., ESI/EPF).
Proof of workplace safety compliance (e.g., Fire Safety Certificate).

Fill the Application Form

Obtain the Labour License application form from the local Labour Department or its official website.
Complete the form with accurate details about your business, the nature of work, and the number of employees.

Submit the Application

Submit the completed application form along with all required documents to the relevant Labour Department or Regional Authority.
Pay the prescribed application fee (amount varies based on jurisdiction).

Inspection by Authorities

The Labour Department may conduct an inspection of the workplace or site to verify compliance with safety, welfare, and legal requirements.

Approval and Issuance

If the application and inspection are satisfactory, the Labour Department will issue the Labour License.
The license will specify the scope of work, the validity period, and the number of workers allowed.

Maintain Compliance

Regularly maintain records of wages, attendance, safety compliance, and welfare provisions to ensure ongoing adherence to labor laws.

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50,000+ businesses incorporated since 2011

Get ₹1000 cashback* upon your incorporation with our banking partners offer. T&C*

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Not sure about the packages?

Companies Act, 2013 (India)

Legal Compliance

Worker Protection

Avoiding Exploitation

Reputation and Trust

Workplace Safety

Government Contracts

Eligibility Criteria for Labour License

Checklist for Labour License

Necessary Documents for Labour License

Documents necessary for filing SPICe+ form (INC-32) for the registration of a private limited company are outlined as follows:

A. For Indian Nationals serving as directors and subscribers:

B. Required Documents For Foreign Nationals serving as directors/Shareholders

Types of Labour License

Contractor Labour License

Building and Other Construction Workers (BOCW) License

Factory Labour License

Characteristics of Labour License

Register for a Labour License

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