In a major push to strengthen protections for outsourced and contractual workers, the Centre has introduced a new procurement-linked compliance framework that makes timely payment of wages and social security contributions mandatory for firms seeking government contracts.

The reforms, issued through fresh instructions by the Department of Expenditure, will apply across Central Ministries, Departments, autonomous bodies and Central Public Sector Enterprises (CPSEs).

The Ministry of Labour and Employment in a statement said the move is aimed at addressing persistent complaints of delayed wages, non-payment of provident fund and other statutory dues, and weak accountability among contractors engaged by government entities.

The new framework operationalises worker safeguards under the four Labour Codes while significantly tightening enforcement through financial penalties, debarment and blacklisting provisions for defaulting firms, as per the Ministry statement.

Under directions issued by the Procurement Policy Division on May 8, Ministries and government bodies have been instructed to ensure strict monitoring of wage payments by contractors. Drawing and Disbursing Officers (DDOs) will now be required to verify compliance every month.

The government has reiterated that under Section 55(3) of the Occupational Safety, Health and Working Conditions Code, 2020, the principal employer bears responsibility for ensuring timely wage payments by contractors.

The directions also invoke provisions of the Code on Wages, 2019, prescribing strict timelines for salary disbursal. Daily wage workers must be paid by the end of the shift, weekly wage earners before the weekly holiday, fortnightly workers within two days of the end of the fortnight, and monthly wage employees within seven days of the succeeding month, said the Ministry.

To improve transparency, all wage payments will have to be made through bank transfer or electronic mode. Contractors will also be required to electronically inform principal employers after disbursing salaries.

Government departments have been directed to incorporate penalty clauses in contracts for delayed wage payments and ensure adequate availability of funds before awarding manpower contracts. Ministries using the Government e-Marketplace (GeM) or similar procurement platforms will also have to earmark funds specifically for outsourced manpower payments.

The Centre has further tightened reimbursement timelines. Contractors must submit bills by the 10th of every month after wage disbursal, while DDOs have been instructed to clear payments by the 15th.

Principal employers have now been empowered to directly pay contract workers in cases of prolonged delay by contractors, with repeat violations attracting blacklisting and wider debarment action.

Simultaneously, as per Ministry, government has amended Rule 151 of the General Financial Rules (GFR), 2017, substantially expanding grounds for debarment from government bidding. Firms can now face exclusion from government procurement for up to three years not only for corruption or integrity violations, but also for failure to pay wages or deposit statutory social security contributions, especially where the government has had to step in to make payments on behalf of defaulting contractors.

Published on May 9, 2026