On 21 November 2025, the Government of India brought into force the four Labour Codes. Among the most significant changes is how contract labour is regulated; specifically, the introduction of a clear statutory distinction between “core” and “non-core” activities.
For decades, the Contract Labour (Regulation and Abolition) Act, 1970 (“CLRA”) empowered governments to prohibit contract labour in certain processes, but the criteria were broad and often litigation-heavy. Courts frequently held that contract labour could not be engaged for work of a “perennial nature”; but what constituted “perennial” was often disputed.
The new regime replaces this ambiguity with a defined, statutory framework. The Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) and the Industrial Relations Code, 2020 (IR Code) now explicitly prohibit contract labour in core activities, while providing a clear list of non-core activities where contract labour remains permitted.
Here’s the hard truth: An employer cannot simply reclassify work as “non-core” on paper to bypass these rules. The Code provides an exhaustive definition of core activity and an explicit list of what constitutes non-core activity. Any attempt to arbitrarily reclassify work falls squarely within the “substance over form” principle that courts have consistently applied.
The Dual-Regime Analysis: Legacy vs. New Rules
The Legacy Regime — Contract Labour (Regulation and Abolition) Act, 1970
Under the CLRA, the regulation of contract labour operated through a prohibition-based framework under Section 10:
| Aspect | CLRA, 1970 |
| Prohibition Mechanism | Appropriate Government could prohibit contract labour in any process, operation, or work after consultation with the Central/State Board |
| Threshold for Applicability | Establishments employing 20 or more contract workers |
| Guiding Principle | Courts held that contract labour cannot be engaged for work of a perennial nature |
| State-Level Precedents | Andhra Pradesh and Telangana had already introduced amendments prohibiting contract labour in “core activities” through state-specific rules |
The legacy regime suffered from interpretive ambiguity; what was “perennial” was often decided case-by-case, leading to litigation and inconsistent application across industries.
The Active Code Regime — OSH Code & IR Code, 2020
The new regime introduces a uniform, statutory definition of “core activity” and provides an exhaustive list of non-core activities.
Definition of “Core Activity” (Section 2(p) of OSH Code / IR Code)
“Core activity of an establishment” means any activity for which the establishment is set up and includes any activity which is essential or necessary to such activity.
The “Non-Core” List — Activities That Are NOT Considered Core
The Code explicitly provides that the following shall not be considered as essential or necessary activity, unless the establishment is set up specifically for such activity:
| Sr. No. | Non-Core Activity |
| 1 | Sanitation works, including sweeping, cleaning, dusting, and collection and disposal of all kinds of waste |
| 2 | Watch and ward services including security services |
| 3 | Canteen and catering services |
| 4 | Loading and unloading operations |
| 5 | Running of hospitals, educational and training institutions, guest houses, clubs and the like; where they are in the nature of support services |
| 6 | Courier services which are in nature of support services |
| 7 | Civil and other constructional works, including maintenance |
| 8 | Gardening and maintenance of lawns and other like activities |
| 9 | Housekeeping and laundry services, and other like activities; where these are in nature of support services |
| 10 | Transport services including ambulance services |
| 11 | Any activity of intermittent nature even if that constitutes a core activity of an establishment |
The Prohibition Rule
Employment of contract labour in core activities is generally prohibited.
However, the Code creates exceptions; contract labour may be engaged for core activities if one or more of the following conditions are met:
- Ordinary practice: The normal functioning of the establishment is such that the activity is ordinarily done through contractors;
- Part-time nature: The activities are such that they do not require full-time workers for the major portion of the day; or
- Sudden increase: There is a sudden increase in the volume of work in the core activity that needs to be completed within a specified time.
The Critical Question: Can My Employer Reclassify My Work as “Non-Core” on Paper?
The short answer: NO- not without facing serious legal consequences.
Here’s why:
1. The Definition is Objective, Not Subjective
The Code defines “core activity” as any activity for which the establishment is set up and any activity essential or necessary to such activity.
If your establishment is a manufacturing unit, production is self-evidently a core activity. If it is a hospital, patient care is core. If it is an IT services company, software development and delivery is core.
An employer cannot simply label production work as “support services” and escape the prohibition; the nature of the work, not its label, determines its classification.
2. The “Non-Core” List is Exhaustive, Not Illustrative
The 11 activities listed as non-core are specifically enumerated. These are activities like sanitation, security, canteen, housekeeping, gardening, transport, and intermittent work.
If your work does not fall within this exhaustive list, it is presumptively core. An employer cannot invent new categories of “non-core” work beyond this statutory list.
3. The “Substance Over Form” Principle Applies
Indian courts have consistently held that the substance of the engagement, not its form, determines its legal character. This principle applies with full force to the core/non-core distinction under the new Codes.
If an employer:
- Reclassifies production workers as “support staff”;
- Renames core functions as “ancillary services”;
- Splits core activities into smaller components and labels them “non-core”;
…the courts and labour authorities will look through the form and examine the real nature of the work. If the work is essential to the establishment’s primary purpose, it will be treated as core; regardless of the label assigned.
4. The Designated Authority Can Determine Core Activity
The Central Government, vide notification dated 13 May 2026, has appointed a designated authority to advise the appropriate government on determining whether an activity qualifies as a core activity or not.
This means employers cannot unilaterally decide what is core or non-core; there is now a statutory mechanism for determination.
State-Specific Nuance: The Concurrent Subject Challenge
Labour is a Concurrent Subject under the Indian Constitution. While the Codes provide the central framework, State Rules can introduce variations in implementation.
| Aspect | Central Position | State Nuance |
| Core Activity Definition | Uniform definition under Section 2(p) of OSH Code / IR Code | States may issue additional guidance on classification |
| Prohibition | Contract labour prohibited in core activities (with exceptions) | States like Andhra Pradesh and Telangana had already introduced similar prohibitions under CLRA amendments |
| Threshold for Applicability | Raised from 20 to 50 contract workers | States may notify different thresholds |
| Designated Authority | Central Government has appointed a designated authority | States may have their own mechanisms |
Action Point: Employers must monitor both Central Rules and State Rules applicable to their establishments. Compliance is not “one size fits all.”
The 2026 Core Impact Filters: What Else You Must Know
1. Threshold for Applicability Raised to 50 Workers
Under the new regime, the Code applies to establishments or contractors employing 50 or more contract workers (on any day in the last one year), up from 20 under the CLRA.
Implication: This brings more firms out of the regulatory ambit. However, for establishments that do fall within the threshold, the core/non-core prohibition applies strictly.
2. Fixed-Term Employment (FTE) — A Strategic Alternative
The IR Code, 2020, explicitly provides for Fixed-Term Employment (FTE); engagement of workers on a fixed-term contract without the involvement of a contractor.
Implication: If an employer needs flexibility in core activities but cannot use contract labour, FTE provides a compliant alternative. FTEs are entitled to gratuity after just 1 year of continuous service under the Code on Social Security, 2020.
3. Gig / Platform Workers
The Code on Social Security, 2020, provides legal recognition to gig and platform workers. Aggregators are required to contribute 1-2% of annual turnover (capped at 5% of payments made to gig/platform workers) to a Social Security Fund.
Implication: The core/non-core distinction does not apply to gig workers, as they are engaged on a different legal footing (commission/fees, not wages). However, aggregators must carefully document the nature of engagement to avoid misclassification risks.
4. The 48-Hour Exit Rule & 50% Wage Rule
While these apply primarily to wage calculations, they intersect with contract labour compliance in one critical way:
- If contract labour is found to be engaged in core activities in violation of the Code, the workers may be deemed to be direct employees of the principal employer.
- This would trigger full wage (including allowances) and exit settlement obligations under the Code on Wages; including the 48-hour full and final settlement rule and the 50% wage rule for allowance structuring.
Financial / Operational Risk Analysis
The Cost of Getting It Wrong
| Risk Area | Financial / Operational Impact |
| Reclassification Risk | If contract labour engaged in core activities is found to be in violation, workers may be deemed direct employees of the principal employer |
| Back-Wage Liability | Deemed employees become entitled to all statutory benefits — PF, ESI, gratuity, bonus, leave encashment; with retrospective effect |
| Penalties | The Code provides for penalties for contravention, including fines and, in some cases, imprisonment |
| Litigation Risk | Disputes over core/non-core classification are likely to generate significant litigation, particularly in the initial years of implementation |
| Reputational Risk | Non-compliance with core/non-core rules can attract media scrutiny and regulatory action |
| Operational Disruption | If contract labour is prohibited in core activities, employers must transition to direct employment or FTE; a significant operational and financial undertaking |
The “Substance Over Form” Principle — A Reality Check
Courts and Labour Authorities will look at the substance of the work, not its label. If workers are:
- Performing work that is essential to the establishment’s primary purpose;
- Working alongside regular employees doing the same work;
- Engaged continuously over a long period;
- Not falling within the exhaustive list of non-core activities;
…they are engaged in core activities — and the prohibition applies. Period.
Core Compliance Checklist for HR / Management – FREE
Immediate Actions (Next 30 Days)
- Map All Contract Labour Engagement
- Identify every role performed by contract labour in your establishment.
- Classify each role against the statutory definition of core activity.
- Cross-check against the exhaustive non-core list.
- Verify Against the Exhaustive Non-Core List
- Confirm that any contract labour engaged in “non-core” work falls within one of the 11 enumerated categories.
- If the work does not fall within this list, it is presumptively core.
- Document the Basis for Classification
- For every contract labour role, maintain written documentation explaining why it is classified as core or non-core.
- This documentation will be critical in the event of inspection or litigation.
- Audit the Threshold
- Verify whether your establishment employs 50 or more contract workers.
- If yes, the full prohibition applies.
Medium-Term Actions (Next 90 Days)
- Review Contract Labour Agreements
- Ensure all contracts with labour contractors clearly specify the nature of work.
- Include indemnity clauses protecting the principal employer in case of misclassification.
- Explore Fixed-Term Employment (FTE)
- For core activities where flexibility is needed, consider transitioning to FTE instead of contract labour.
- Ensure FTEs receive all statutory benefits — gratuity after 1 year, PF, ESI, etc.
- Monitor State Rules
- Track notifications from the State Governments where your establishments operate.
- States may issue additional guidance on core/non-core classification.
- Train HR and Procurement Teams
- Educate teams on the new core/non-core framework.
- Build internal audit mechanisms for ongoing compliance.
Practical Examples: Core vs. Non-Core
To make this concrete, here are real-world examples:
| Establishment Type | Core Activity | Non-Core Activity |
| Car Manufacturer (e.g., Maruti Suzuki) | Production / assembly of vehicles | Canteen, security, housekeeping, gardening |
| Hospital | Patient care, medical treatment, surgery | Laundry, sanitation, transport, security |
| IT Services Company | Software development, client delivery | Canteen, housekeeping, security, transport |
| Hotel | Guest accommodation, food & beverage service | Gardening, laundry, security |
| Logistics Company | Transportation, warehousing, delivery | Security, canteen, housekeeping |
Key Insight: The test is simple — is the activity what the establishment was set up to do? If yes, it is core. If it is a support service that could be outsourced without affecting the primary purpose, it may be non-core; but only if it falls within the statutory list.
The Bottom Line
“Non-core” is not a label you can invent. It is a statutory category with a fixed list.
The Labour Codes have closed the door on the ambiguity that plagued the CLRA regime. The definition of core activity is clear, the list of non-core activities is exhaustive, and the “substance over form” principle ensures that paper reclassification will not withstand scrutiny.
If your employer is attempting to reclassify your work as “non-core” on paper to bypass the prohibition on contract labour in core activities, they are operating in high-risk territory. The designated authority, the courts, and the labour authorities will look at the real nature of the work not the label assigned to it.
The time for reactive compliance is over. Proactive, principle-driven workforce structuring is now the only path to sustainable compliance.
Disclaimer: This content is provided for educational and informational purposes only. It is based on available Central and State notifications as of the date of publication and does not constitute formal legal counsel. Labour laws are subject to frequent amendments and State-specific rules. Employers and individuals are strongly advised to consult qualified legal professionals for advice tailored to their specific circumstances. The author and publisher assume no liability for any actions taken or not taken based on the contents of this article.