Sections 55 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.
Section 55 of the Occupational Safety, Health and Working Conditions Code, 2020 (the OSH Code) makes the contractor responsible for paying wages to contract labour, by bank transfer or electronic mode, and makes the principal employer liable if the contractor defaults. Section 56 requires the contractor to issue an experience certificate on demand.
The contractor must pay each contract worker's wages before the prescribed period expires, and through bank transfer or electronic mode, informing the principal employer electronically of the amount paid (55(1)–(2)). If the contractor fails or short-pays, the principal employer must pay in full or the balance and recover it from the contractor (55(3)). The appropriate Government can also order payment from the contractor's security deposit (55(4)). Every contractor must give an experience certificate on demand (56).
The sections at a glance
| Provision | Content |
|---|---|
| 55(1) | Contractor is responsible for wages to each contract worker, paid before the expiry of the prescribed period |
| 55(2) | Disbursement by bank transfer or electronic mode; contractor informs the principal employer electronically of the amount; proviso allows another prescribed manner if this is not practicable |
| 55(3) | On failure or short payment, principal employer pays the full or unpaid balance, and recovers it by deduction from any amount payable to the contractor, or as a debt |
| 55(4) | If the contractor does not pay, the appropriate Government orders payment from the security deposit under the licence |
| 56 | Contractor issues, on demand, an experience certificate in the prescribed form, giving details of the work performed |
Section 55: who pays, how and when
The first duty is the contractor's. The period is left to the appropriate Government to prescribe, so the number comes from the rules, not the Code (see below). The mode is set by the Code itself: bank transfer or electronic mode. The contractor must also tell the principal employer electronically how much was paid that way. That gives the principal employer a running record of what has reached the workers. The proviso allows a different prescribed manner only where electronic payment is not practicable.
For the Code's own definition of wages, see our article on section 2(1)(zzj). If you run payroll for contractors, a pre-audit of mode, dates and deductions is a sound safeguard; our payroll compliance audit service covers that.
The principal employer's fallback
Section 55(3) is the clause that changes commercial behaviour. If the contractor does not pay within the prescribed period or pays short, the principal employer shall be liable to pay the wages in full or the unpaid balance. The principal employer can then recover the amount:
- by deducting it from any amount payable to the contractor under any contract; or
- as a debt payable by the contractor.
The word is "shall", so this is not optional. A principal employer should therefore hold the right of set-off in its contract and check payment evidence before clearing the contractor's bill.
The security deposit route
Section 55(4) gives a second route. Where the contractor does not pay, the appropriate Government shall pass orders making payment from the security deposit the contractor placed when the licence was issued, in the prescribed manner. See sections 46–47 for the licence.
Section 56: experience certificate
Every "concerned contractor" must issue an experience certificate on demand, in the form prescribed by the appropriate Government, giving details of the work performed by the contract worker. There is no stated fee and no stated deadline in the Code; the trigger is the worker's demand. The certificate helps a worker move between contractors, and it is a useful record for the contractor too.
What the Central Rules, 2026 prescribe
The Occupational Safety, Health and Working Conditions (Central) Rules, 2026 (G.S.R. 345(E), 8 May 2026) apply where the Central Government is the appropriate Government. Where a State is the appropriate Government, use the State's rules.
Rule 98 (responsibility of payment of wages).
- The contractor fixes wage periods, none exceeding one month.
- Wages are paid before the expiry of the seventh day after the last day of the wage period.
- Payment is by bank transfer or electronically; where that is not practicable, current coins or currency.
- Wages are paid without deductions, except those specified by the Central Government.
- A notice of wage period and date and time of disbursement is displayed at the place of work, and a copy is sent electronically to the principal employer.
- The contractor sends a half-yearly return in Form XVIII electronically to the concerned Deputy Chief Labour Commissioner (Central) within thirty days of the close of each half year (January to June, July to December).
- If wages are not paid within seven days, the principal employer takes action and pays in full or the balance within fifteen days, recovering it by deduction, as a debt, or from the security deposit lying with the principal employer.
- The principal employer submits an annual return in Form XVII (Part III) electronically, to reach on or before the last day of February after the calendar year ends, except where the contract undertakes to produce a given result.
- Rule 98(3) also says the principal employer settles the contractor's bills for contract worker dues within the timeline agreed between them.
Rule 99. If the contractor or principal employer does not pay, the Chief Labour Commissioner (Central) conducts an inquiry and, after hearing the contractor, may order payment from the security deposit. The contractor must re-furnish the deposit within fifteen days, or the licence is liable to be suspended.
Rule 100. The experience certificate is in Form XXIII, issued on demand, giving the period, work performed and experience gained.
See Rules 98–99 and Rules 100–101.
Practical points
- Calendar the seventh day. Ask for bank proof on day 7 after each wage period.
- Reconcile the electronic intimation with the contractor's invoice before you pay the bill.
- Keep a set-off clause for section 55(3) recoveries.
- Issue Form XXIII promptly on request and keep a copy.
- Mark the return dates: Form XVIII within 30 days of each half year, Form XVII (Part III) by the last day of February.
Example. A contractor with 40 workers pays only 35 of them by the seventh day. The principal employer pays the five balances within the 15 days Rule 98(8) allows and deducts the amount from the contractor's next invoice. A worker who leaves asks for an experience certificate, and the contractor issues it in Form XXIII with the period and work done.
For the older framework, see our guide on half-yearly return under the Contract Labour Act.
Need help with contractor wage compliance?
Contract-worker wages often fail at the same points: the payment mode, the seventh day, and the return dates. Our payroll compliance audit team can review contractor wage files, bank evidence and the principal employer's recovery rights so exposure is clear before an inspector asks.
Key takeaways
- The contractor pays wages within the prescribed period, by bank transfer or electronic mode (55(1)–(2)).
- The principal employer must pay on default and recover from the contractor (55(3)); the security deposit is a further route (55(4)).
- The contractor must issue an experience certificate on demand (56).
- Central Rules: seventh day after the wage period, Form XVIII half-yearly, Form XVII (Part III) annually, Form XXIII certificate (Rules 98–100).
Read next
- Sections 53–54: welfare by principal employer and employment without licence
- Section 57: prohibition of contract labour in core activities
- Rules 98–99: payment of wages and payment from security deposit
- Payment of wages under the new Labour Codes
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.