A recent notification under India’s Occupational Safety, Health and Working Conditions Code signals a shift towards scrutinising outsourcing of core activities, prompting companies to revisit workforce strategies amid legal and operational changes.
India’s contract labour rules are moving through a quiet but important shift, and the latest sign is a notification under the Occupational Safety, Health and Working Conditions Code that could reshape how companies justify outsourcing in core operations. Although the notice currently applies only to establishments under the Central Government’s jurisdiction, it signals a broader change in the way lawmakers are thinking about contract labour and core business work.
The wider backdrop is the Occupational Safety, Health and Working Conditions Code, 2020, which consolidated 13 labour laws, including the Contract Labour (Regulation and Abolition) Act, 1970, and came into force on November 21, 2025, according to India Code and other summaries of the legislation. Unlike the older regime, which focused on regulating the use of contract labour and allowing restrictions where work was perennial and normally done by regular staff, the new framework starts from a different premise: core activities are generally meant to be kept in-house, unless a statutory exception applies.
That matters because the recent notification sets out a formal process for deciding whether an activity counts as a core function. Employers, contractors, workers and unions can seek a determination, which is first reviewed by a designated authority before the government makes a final decision after hearing the parties. In practical terms, that means outsourcing decisions are no longer just about cost, speed or flexibility; they may now also depend on whether the arrangement can survive legal scrutiny.
The author of the Business Line opinion piece says the implications are especially relevant for sectors such as banking and insurance, where unions have long challenged the outsourcing of operational work. The piece argues that this is not a new dispute, but the legal framework for assessing it is changing. It also notes that the law still preserves flexibility through fixed-term employment and exceptions that allow contract labour in some core activities, suggesting that the aim is not to abolish outsourcing altogether but to narrow its use where it conflicts with the new statutory logic.
For business leaders, the shift may require a wider review of workforce structures, especially where contract labour is embedded in functions once assumed to be safely outsourced. What used to sit mainly in the realm of labour compliance is increasingly becoming a governance issue, with companies needing to weigh legal sustainability alongside operational efficiency.
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