Principal employer liability mitigation in construction industry

The construction industry in India, employs more than 49.5 million people1. This labour intensive industry has contracted labour as its integral part, employed through contractors and sub-contractors, working for completion of job. The involvement of sub-contractors, nature of work, nature of contracts and most important, the high number of contracted labourers, exposes the principal employer to liability. In the article below, we look at a major issue which could result in principal employer liability and it’s possible solution.

Biggest Challenge

The construction industry completely varies from any other industry. There are no fixed premises where the construction work is to be carried out. The changing premises forces the establishment to hire different labourers at different sites. The type of work at a construction site adds to the number of contracted labourers, as construction at site comprises of various activities, performed by different individuals with varying skill sets. All these activities are performed for a limited period; thus the labourer might come to the site for a limited period only. The churn of labourers is also an issue well known in the industry. The heavy movement of labourers at various sites could result in loosing track of labourers. According to the Contract Labour (Regulation & Abolition)[CLRA]1970, the principal employer is liable for each and every labourer, even if they don’t have any knowledge of their employment in connection to the work in their establishment. The labour laws are applicable to labourers employed by sub-contractors also. The lost track of contracted labour could result in principal employer liability, even when all the necessary measures are in place. Therefore, missing data is the biggest challenge for organisations engaged in construction.

Data Collection

As per the labour laws the principal employer cannot directly control or supervise the contracted labour but can manage the labourers allocated to them. Therefore, the principal employer has to keep their books in a manner such it does not imply direct supervision and control. A possible way to do so is to collect the data straight from contractors.

This data collection should follow a well defined structure and procedure. The contractors allocate the labour and share the information with principal employer.  This ensures that no labourer's information goes missing. The CLRA,1970 also obligates principal employer to witness disbursement of wages to contracted labourers. Also, it is the duty of principal employer to ensure that contracted labour is paid as per the applicable minimum wages. To meet both the requirements principal employer shall ask the contractor to use the marked attendance and allocation to generate payslips and share the payment details. These payslips could further be used a proof of statutory requirement fulfilment .

If a structure such as the one discussed is developed, information will flow from contractor to principal employer. This information will cover all labourers, ensure no direct supervision and control, introduce transparency and will cover all the bases to shield principal employer from possible exposure to principal employer liability. 


Saralweb's WFM assists principal employers in mitigating principal employer liability through distributed compliance automation.