Rules 85 and 86 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 85 says who cannot get a contractor licence: an undischarged insolvent, or a person convicted in the last two years of an offence punishable with more than three months of imprisonment. Rule 86 sets the conditions every licensed contractor must meet on hours, wages, amenities and intimation of work orders, and explains how unpaid minimum wages are recovered from the security deposit.
Rule 85: to obtain a licence, the contractor, as an entity or an individual, must not be an un-discharged insolvent and must not have been convicted during the last two years of an offence liable to punishment of more than three months of imprisonment. Rule 86: hours of work follow the rules relating to section 25; wages follow the Code on Wages, 2019; the principal employer provides toilet, washroom, drinking water, bathing facilities if required, changing room, first aid box, canteen and crèche where the labour works at its premises; the contractor gives all other facilities and entitlements and intimates each work order within fifteen days.
The Code provisions behind the rules
Section 45 of the Occupational Safety, Health and Working Conditions Code, 2020 (the OSH Code) applies the contract labour Part to every establishment in which fifty or more contract labour are or were employed on any day of the preceding twelve months, and to every manpower supply contractor who has employed fifty or more on any day of that period. Section 47(1) bars a contractor from supplying contract labour or executing work through contract labour except under a licence, issued after satisfying that the contractor fulfils "such requisite qualifications or criteria as may be prescribed by the Central Government". Section 47(3)(a) allows licence conditions on hours of work, fixation of wages and essential amenities. Rule 85 supplies the qualification; rule 86 supplies conditions. See our sections 46 and 47 explainer and the wider guide to contract labour under the new labour codes.
The Central Rules apply where the Central Government is the appropriate Government for the establishment. Where the State Government is the appropriate Government, the State's own OSH rules apply. A labour law compliance review can map which regime covers each of your sites and contracts.
Rule 85: who is not qualified
Rule 85 is one sentence, and it is worded as a bar. For the purposes of obtaining a licence, the contractor "as an entity or as an individual" shall not be:
| Disqualification | What the text says |
|---|---|
| Insolvency | An un-discharged insolvent |
| Conviction | Convicted at any time during the last two years of an offence which is liable for punishment for more than three months of imprisonment |
Points to note.
- Look at the offence, not the sentence actually imposed. The test is whether the offence is "liable for punishment for more than three months of imprisonment". A contractor fined for such an offence is still caught on the wording, because the question is the maximum liability of the offence.
- "Entity or individual". The rule applies to a company, firm or other entity as well as to a person. The text does not say whether the convictions of directors or partners count; it is silent on that.
- Two-year window. The rule says "at any time during the last two years". The text does not state the date from which the two years are counted (date of conviction or of application); do not assume one.
- No other qualification test. Rule 85 contains no net-worth, experience or turnover test. The text is silent on any other criteria.
The Code (section 47(2)) also speaks of a "work specific licence" for contractors who do not meet the qualifications. The Rules text we reviewed in rules 85 to 101 does not set out a separate procedure or fee for such a licence; check later notifications.
Rule 86: conditions of licence
Rule 86(1): four conditions
| Clause | Condition |
|---|---|
| (i) | Hours of work conform to the rules relating to section 25 of the Code |
| (ii) | Wages are paid in accordance with the Code on Wages, 2019 (29 of 2019) |
| (iii) | If the contract labour works at the principal employer's premises, the principal employer must provide facilities such as toilet, washroom, drinking water, bathing facilities if required, changing room, first aid box, canteen and crèche |
| (iv) | All other facilities and entitlements are provided by the contractor |
The split in clause (iii) and (iv) is the most practical part. Amenities at the work premises are the principal employer's responsibility; every other facility and entitlement is the contractor's. This matches section 53 of the Code, under which welfare facilities under sections 23 and 24 are to be provided by the principal employer.
Rule 86(2): unpaid minimum wages
If the contractor fails to pay minimum wages to contract labour, the Chief Labour Commissioner (Central) or the Commissioner's representative "shall cause such payment to be made" to the unpaid workers out of the security deposit referred to in rule 90, including by invoking the bank guarantee. The amount and form of that security is in rule 90; see our rules 89 and 90 article.
Rule 86(3): work order intimation
The contractor must intimate, within fifteen days of receiving a contract work order, the details of that work order in the manner specified in rule 94. Our rules 93 and 94 article covers that procedure.
Practical examples
Example 1. A manpower supplier's proprietor was convicted eighteen months ago of an offence for which the law prescribes up to two years' imprisonment. Under rule 85 she is within the bar for a licence, even if she paid only a fine.
Example 2. A manufacturing plant uses a contractor's workers on its shop floor. Rule 86(1)(iii) puts the toilets, drinking water, canteen and crèche on the plant, not the contractor. The contractor is still responsible for the wages and other entitlements.
Example 3. A contractor does not pay minimum wages for a month. The Chief Labour Commissioner (Central), or a representative, can cause payment out of the security deposit, including by invoking the bank guarantee under rule 86(2).
Compliance checklist
- Obtain a declaration on insolvency and convictions from the contractor before engaging it.
- Record which amenities the principal employer provides at the premises under rule 86(1)(iii).
- Pay wages in line with the Code on Wages, 2019.
- Diarise the fifteen-day window for work order intimation.
- Keep the security deposit and bank guarantee valid.
Need help with contractor licensing and amenities?
Principal employers carry real exposure when a contractor is unqualified or unlicensed, and contractors need clean paperwork before applying. Our team can help review contractor qualification, licence conditions and amenity allocation. Start with our labour law compliance service.
Key takeaways
- Rule 85 disqualifies an undischarged insolvent, or a person convicted in the last two years of an offence liable to punishment of more than three months of imprisonment.
- Rule 86(1) fixes hours, wages, amenities and entitlements; the principal employer provides listed amenities at its premises.
- Wages follow the Code on Wages, 2019.
- Unpaid minimum wages can be paid out of the security deposit, including by invoking the bank guarantee (rule 86(2)).
- Work orders must be intimated within fifteen days (rule 86(3) and rule 94).
- State rules apply where the State is the appropriate Government.
Read next
- Sections 46 and 47 of the OSH Code: designated authority and licensing of contractors
- Rules 87 and 88: contractor licence application and single licence
- Rules 83 and 84: employment of women and dangerous operations
- Contract labour under the new labour codes: what will change
Disclaimer: Based on the Occupational Safety, Health and Working Conditions Code, 2020 (as enacted) and, where noted, the Occupational Safety, Health and Working Conditions (Central) Rules, 2026 (G.S.R. 345(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.