👉 It is prudent that the Contracts Managers and administrators to familiarize with the statutory requirements for the disputere solution / avoidance purposes.

There are statutory requirements in relation to construction contracts in terms of:

(a) Labour (i.e. the legal status of those working on site as employees or as self-employed sub-contractors);
(b) Tax (payment of income tax of employees); and/or
(c) Health and Safety

(a) General Requirements:

👉 All construction contracts must satisfy the requirements of the Indian Contract Act, 1872 to be legally enforceable.

(b) Labour:

👉 The onus of complying with such labour laws falls upon an employer or a contractor, depending on the legislation.

👉 Labourers (workmen) are afforded legal recognition through the definition of the word “workman” under the Industrial Disputes Act, 1947 (Federal legislation), which entitles them to various statutory benefits and fair treatment at the hands of their Employer/ contractor.

👉 Further, the Payment of Wages Act, 1936, read with the Amendment Act, 2017, ensures that the employees receive wages on time and without any unauthorised deductions.

👉 The Code on Wages, 2019 (“Wages Code”) seeks to consolidate and replace four Acts: the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act, 1965; and the Equal Remuneration Act, 1976.

(c) Tax:

👉 Under the Income Tax Act, 1961, a person responsible for paying any sum to a contractor for carrying out any work (including supply of labour for carrying out any work) is required, at the time of payment, to deduct a tax commonly known as Tax Deducted at Source (“TDS”). The Works Contract Tax is applicable to contracts for labour, work or service.

(d) Health and Safety:

👉 Social security legislation, such as the Employee’s Compensation Act, 2009, the ESI Act, the Maternity Benefit Act, 1961, the Payment of Gratuity Act, 1972, the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, and the Sexual Harassment at Workplace (Prohibition, Prevention and Redressal) Act, 2013, mandatorily applies to all employers and contractors hiring labourers or workmen in the construction industry.

👉 The Code on Social Security, 2020 seeks to amalgamate and replace legislation such as: the Employee’s Compensation Act, 2009; the ESI Act; the Maternity Benefit Act, 1961; the Payment of Gratuity Act, 1972; the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952; and the Sexual Harassment at Workplace (Prohibition, Prevention and Redressal) Act, 2013.

👉 Further, the Code on Occupational Safety, Health and Working Conditions, 2020 mandates compliance with the occupational safety and health standards declared under the Code or the rules, regulations, bye-laws or orders made under the Code.