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Forward Contract

An agreement to buy or sell an asset with a pre-specified price and date

Written by

CFI Team

Published January 15, 2023

Updated June 28, 2023

What is a Forward Contract?

A forward contract, often shortened to just forward, is a contract agreement to buy or sell an asset at a specific price on a specified date in the future. Since the forward contract refers to the underlying asset that will be delivered on the specified date, it is considered a type of derivative.

Forward contracts can be used to lock in a specific price to avoid volatility in pricing. The party who buys a forward contract is entering into a long position, and the party selling a forward contract enters into a short position. If the price of the underlying asset increases, the long position benefits. If the underlying asset price decreases, the short position benefits.


A forward contract is an agreement between two parties to trade a specific quantity of an asset for a pre-specified price at a specific date in the future.

Forwards are very similar to futures; however, there are key differences.

A forward long position benefits when, on the maturation/expiration date, the underlying asset has risen in price, while a forward short position benefits when the underlying asset has fallen in price.

How do Forward Contracts Work?

Forward contracts have four main components to consider. The following are the four components:

Asset: This is the underlying asset that is specified in the contract.

Expiration Date: The contract will need an end date when the agreement is settled and the asset is delivered and the deliverer is paid.

Quantity: This is the size of the contract, and will give the specific amount in units of the asset being bought and sold.

Price: The price that will be paid on the maturation/expiration date must also be specified. This will also include the currency that payment will be rendered in.

Forwards are not traded on centralized exchanges. Instead, they are customized, over the counter contracts that are created between two parties. On the expiration date, the contract must be settled. One party will deliver the underlying asset, while the other party will pay the agreed-upon price and take possession of the asset. Forwards can also be cash-settled at the date of expiration rather than delivering the physical underlying asset.

What are Forward Contracts Used For?

Forward contracts are mainly used to hedge against potential losses. They enable the participants to lock in a price in the future. This guaranteed price can be very important, especially in industries that commonly experience significant volatility in prices. For example, in the oil industry, entering into a forward contract to sell a specific number of barrels of oil can be used to protect against potential downward swings in oil prices. Forwards are also commonly used to hedge against changes in currency exchange rates when making large international purchases.

Forward contracts can also be used purely for speculative purposes. This is less common than using futures since forwards are created by two parties and not available for trading on centralized exchanges. If a speculator believes that the future spot price of an asset will be higher than the forward price today, they may enter into a long forward position. If the future spot price is greater than the agreed-upon contract price, they will profit.

What is the Difference Between a Forward Agreement and a Futures Contract?

Forwards and futures contracts are very similar. They both involve an agreement on a specific price and quantity of an underlying asset to be paid at a specified date in the future. There are, however, a few key differences:

Forwards are customized, private contracts between two parties, while futures are standardized contracts that are traded on centralized exchanges.

Forwards are settled at the expiration date between the two parties, meaning there is higher counterparty risk than there is with futures contracts that have clearing houses.

Forwards are settled on a single date, the expiration date, while futures are marked-to-market daily, meaning they can be traded at any time the exchange is open.

Since forwards are settled on a single date, they are not commonly associated with initial margins or maintenance margins like futures contracts.

Although both contracts can involve the delivery of the asset, or settlement in cash, physical delivery is more common for forwards while cash settlement is much more common for futures.

Forward Contract Payoff Diagram and Example

The payoff of a forward contract is given by:

Forward contract long position payoff: ST – K

Forward contract short position payoff: K – ST


K is the agreed-upon delivery price.

ST is the spot price of the underlying asset at maturity.

Let us now look at what the payoff diagram of a forward contract is, based on the price of the underlying asset at maturity:

Here, we can see what the payoff would be for both the long position and short position, where K is the agreed-upon price of the underlying asset, specified in the contract. The higher the price of the underlying asset at maturity, the greater the payoff for the long position.

A price below K at maturity, however, would mean a loss for the long position. If the price of the underlying asset were to fall to 0, the long position payoff would be -K. The forward short position has the exact opposite payoff. If the price at maturity were to drop to 0, the short position would have a payoff of K.

Let us now consider an example question that uses a forward to deal with foreign exchange rates. Your money is currently in US dollars. However, in one year’s time, you need to make a purchase in British pounds of €100,000. The spot exchange rate today is 1.13 US$/€, but you don’t want cash tied up in foreign currency for a year.

You do want to guarantee the exchange rate one year from now, so you enter into a forward deal for €100,000 at 1.13 US$/€. At the date of maturity, the spot exchange rate is 1.16 US$/€. How much money have you saved by entering into the forward agreement?

The contract is an agreement to pay $113,000 (calculated from €100,000 x 1.13 US$/€) for €100,000.

If you had not entered into the contract, at the maturity date you would have paid €100,000 x 1.16 US$/€ = $116,000

By hedging your position with a forward contract, you saved: $116,000 – $113,000 = $3,000.

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What Is A Pronoun?

A pronoun is a word that stands in for a noun, often to avoid the need to repeat the same noun over and over. Like nouns, pronouns can refer to people, things, concepts, and places. Most sentences contain at least one noun or pronoun.

People tend to use “pronouns” to mean personal pronouns specifically, but there are many other kinds of pronouns that are just as important to English grammar. The words highlighted in bold below are all pronouns.

Examples: PronounsI asked her if the headphones were hers, but she said they belonged to someone else.

It might rain tomorrow, but there isn’t much we can do about that.

These are the days that I like best.

Which of them do you prefer? Help yourself to whichever you like.

How are pronouns used in sentences?

The main function of pronouns is to replace nouns. Because of this, they are used in sentences in similar ways to nouns.

Like nouns, pronouns commonly serve as the subject of a sentence, followed by a verb (a word expressing an action).

Examples: Pronouns as subjects



to play chess.

We have never been to Germany before.

It is difficult to stay calm in stressful situations.

A pronoun can also function as the object in a sentence—either a direct or indirect object:


direct object

is something or someone that is directly acted upon by the verb.


indirect object

is someone or something that receives the direct object.

Examples: Pronouns as direct and indirect objectsGive




Can you promise her this?

NoteA noun phrase is a noun or pronoun in combination with any determiners applied to it. Despite the name, noun phrases can just as well consist of pronouns as of nouns.

For example, the sentence “You and I saw someone else” contains two noun phrases, both headed by pronouns: “you and I” and “someone else.”

Pronoun antecedents

The antecedent of a pronoun is the noun that it refers back to. It’s usually mentioned in the text before the pronoun, but sometimes it comes just after it in a sentence. The antecedent may also be something the person you’re speaking to said. Pronoun-antecedent agreement means ensuring that the pronoun you use matches its antecedent in number, person, and gender.

Examples: Pronouns and antecedents


was late to class again because


missed the bus.

As they debated the point, the students became increasingly animated.

Person A: What do you think of Julian?

Person B: I don’t like him very much.

When you use any type of pronoun, it’s important to ensure that the antecedent is clear and unambiguous. If there is any ambiguity, use the noun instead. For example, below, “it” would be unclear, as it could refer to either the interview or the test.

Example: Ambiguous antecedent

After the interview and the written test were completed,


was checked for incomplete answers.

After the interview and the written test were completed,

the test

was checked for incomplete answers.

Note Some pronouns, such as “you” and “I,” don’t need an antecedent because it’s self-evident to whom they refer.

Pronouns vs. nouns

While pronouns constitute a relatively small class of words that tends not to change over time, nouns are a much broader class that is constantly expanding. Like pronouns, nouns refer to things, people, places, and concepts, but they do so with much greater specificity.

Like pronouns, nouns can function as the head of a noun phrase and as the object or subject of a verb. A complete sentence may consist of just a noun and a verb (“Jeremy spoke.”), just as it could of a pronoun and a verb (“He spoke.”).

Unlike pronouns, nouns are fixed in form—they don’t change spellings depending on their grammatical role in a sentence. For example, while the third-person masculine pronoun “he” becomes “him” when used as an object, the noun “man” doesn’t change.

Example: Nouns in a sentenceDanika went up several flights of stairs to reach the fifth floor, where her office was located.

Pronouns vs. determiners

Many pronouns are closely related to determiners, being spelled similarly (or identically) and expressing related meanings. For example, possessive pronouns like “yours” are closely related to possessive determiners like “your”; and demonstrative pronouns like “that” are identical to the demonstrative determiners.

The grammatical distinction between the two is that pronouns stand on their own as the subject or object of a verb, whereas determiners are only used to modify nouns, not acting as subjects or objects in their own right.

Examples: Pronouns vs. determiners


is a difficult question, but


woman knows the answer.

You have to try their lasagna! I’ve eaten a lot of lasagna in my life, but theirs is the best.

Personal pronouns (first-, second-, and third-person)

Personal pronouns are words like “he” that refer to yourself, the person you’re addressing, or other people and things. They usually refer to an antecedent but may occur without one when the reference is self-evident (e.g., “I” always refers to the person saying or writing it).

Personal pronouns can change their form based on:

Person (first-, second-, or third-person)

Number (singular or plural)

Gender (masculine, feminine, neuter, or epicene)

Case (subject, object, possessive, or reflexive/intensive)

The impersonal pronoun “one” is used in general statements about no particular person. It has fewer forms than the personal pronouns but is otherwise used in the same way.

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Demonstrative pronouns

The four demonstrative pronouns (this, that, these, and those) are used to indicate something previously mentioned or, in conversation, something that is clear from the context. For example, in the sentence “Take this,” “this” has no explicit antecedent, but it would be clear in context that it referred to whatever object you were being given.

The demonstrative pronouns give information about the relative closeness (literal or figurative) of the things they refer to, especially when they’re contrasted with each other:

The “near” demonstrative this (singular) or these (plural) indicates something close to you.

The “far” demonstrative that (singular) or those (plural) indicates something farther from you.

Examples: Demonstrative pronounsThis is an apple, and those are oranges.

That isn’t fair! I wanted to go first.

Interrogative pronouns

Interrogative pronouns are used (along with other types of interrogative words) to introduce questions. The interrogative pronouns are:

What and which, used to ask questions about things

Who and whom, used to ask about people

Whose, used to ask about ownership

Examples: Interrogative pronounsWhose is this jacket?

What were your favorite classes at school?

Whom do you admire the most?

NoteAll English interrogative pronouns can also function as relative pronouns.

Relative pronouns

A relative pronoun is used to introduce a relative clause—a phrase that usually supplies more information about the preceding noun. They have a lot in common with interrogative pronouns. The relative pronouns are:

Which(ever), that, and what(ever), used in relation to things

Who(ever) and whom(ever), used in relation to people

Whose, used to indicate ownership

Relative pronouns are often omitted in practice (e.g., “the book [that] I read”). There’s nothing wrong with doing this as long as it doesn’t create ambiguity.

Examples: Relative pronounsThe first thing that I thought of was a cloud.

It doesn’t matter whose it was; it’s ours now!

Whoever broke the chair should own up to it.

Indefinite pronouns

Indefinite pronouns are words like “somebody” that refer to an unspecified person or thing. Many of them are formed using some combination of some-, any-, every-, or no- with -thing, -one, -where, or -body.

There are also various indefinite pronouns used to describe quantity, such as “little,” “many,” “none,” and “enough.” And there are distributive pronouns like “neither” and “each” that allow you to distinguish between options.

The impersonal pronoun “one” can also be regarded as indefinite.

Examples: Indefinite pronounsTry to think of somewhere nice to go for dinner.

No one likes him, and he doesn’t like anyone.

Some are born lucky, while others have to work hard for everything they get.

Few are able to excel in such a competitive field.

Reciprocal pronouns

Reciprocal pronouns are used to indicate a reciprocal relationship between two people or things, where the members of a group each perform the same action relative to the other(s). The English reciprocal pronouns are each other and one another.

Some writers claim that “each other” should only be used to refer to groups of two and “one another” to groups of three or more. But this distinction is rejected by most style guides and not borne out in practice; you can use the two interchangeably.

Examples: Reciprocal pronounsSiblings often compete with each other for parental attention.

It’s important that we treat one another with respect.

Dummy pronouns (expletives)

A dummy pronoun (also called an expletive) is a pronoun that doesn’t have any explicit meaning but is necessary to the sentence structure. Unlike other pronouns, dummy pronouns don’t actually replace a noun.

The two words used as dummy pronouns in English are it and there. Note that both words can also fulfill other grammatical roles. Dummy pronouns are commonly used to talk about the weather, to emphasize certain elements in a sentence, or to introduce the existence of something.

Examples: Dummy pronounsIt rained yesterday, but today it’s bright and sunny.

There are thousands of different species of birds in the world.

It isn’t clear to me what you mean.

Other interesting language articles

If you want to know more about nouns, pronouns, verbs, and other parts of speech, make sure to check out some of our other language articles with explanations and examples.

Frequently asked questions Sources in this article

We strongly encourage students to use sources in their work. You can cite our article (APA Style) or take a deep dive into the articles below.

This Scribbr article

Caulfield, J. Retrieved July 10, 2023,

Cite this article


Aarts, B. (2011). Oxford modern English grammar. Oxford University Press.

Butterfield, J. (Ed.). (2023). Fowler’s dictionary of modern English usage (4th ed.). Oxford University Press.

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Garner, B. A. (2023). Garner’s modern English usage (4th ed.). Oxford University Press.

What Is A Living Wage?


If you’re considering raising your employees’ compensation to a living wage or higher, run a cost-benefit analysis to see what you can reasonably afford before running payroll with dramatically increased amounts.

What is the current minimum wage landscape in the U.S.?

Currently, the federal minimum wage is $7.25 per hour. States and localities also have their own wage legislation, sometimes mandating more than the federal standard. Washington, D.C., boasts the highest minimum wage in the U.S. at $16.10 per hour, followed closely by California at $15 per hour and Washington state at $14.49 per hour. 

On the other hand, some states maintain no minimum wage, including Alabama, Mississippi and Louisiana. In these places, the federal minimum wage applies.

However, it’s worth noting that if the minimum wage had tracked inflation since 1960, it would have been roughly $21.50 in 2023. Today, 29 states plus D.C. and more than 20 cities have raised the minimum wage beyond the federal minimum to account for the inflation-driven decline in minimum wage value.

But minimum wage doesn’t represent average wages, which have risen over time. According to the U.S. Bureau of Labor Statistics, the median annual salary of a U.S. worker in the final quarter of 2023 was $56,628 for men and $46,800 for women. For a full-time, year-round worker, that breaks down to about $27.23 and $22.50 per hour, respectively. 

The overall value of those wages, though, has remained level since the 1960s; in other words, while the nominal wage has risen for the average American worker, the purchasing power of those wages has remained largely stagnant.

Did You Know?

There’s a nationwide movement to increase the federal minimum wage to $15 per hour. More than half of U.S. states have higher minimum wages than the mandated federal minimum wage.

Should you offer a living wage?

Once the legally required minimum wage has been met, businesses can choose to set compensation at any rate they’d like. 

In general, there are two primary schools of thought: 

Let the market set compensation levels.

Strive to offer a living wage.

1. Let the market set compensation levels.

Some experts believe wages and employee compensation packages are purely a consideration of supply, demand and profitability.

“It is reasonable to assume that most employers, particularly small businesses, want to pay their employers a fair and sufficient living wage; however, with or without this motivation, this becomes a function of basic economics,” said Rob Drury, executive director of the Association of Christian Financial Advisors. “To attract, maintain and motivate quality employees, a business must compensate appropriately, and I use the term ‘appropriately’ rather than ‘fairly’ to emphasize that the living wage figure eventually comes down to a natural market equilibrium of supply and demand, rather than a subjective evaluation of ‘fairness.’”

In other words, the market will set the appropriate level of compensation. Pay too little, and you won’t be able to attract the right talent; pay too much, and you could find yourself hemorrhaging money. 

2. Offer a living wage to benefit businesses and the economy. 

Sklar and her organization believe offering a living wage (and indeed raising the mandated minimum wage) will yield the most positive outcomes for individual businesses and the economy at large. 

Sklar points to the long-term benefits of paying employees more, which she said might result in lower growth quarter over quarter but would be more effective in retaining employees, boosting morale and increasing long-term productivity.

“One of the things our business members stress is looking at the whole picture,” Sklar said. “Low pay often means high turnover, and with a reduced turnover [due to higher pay], businesses often see substantial savings in recruiting and training costs. There are also savings from managers able to spend time on more productive tasks, as well as less product waste through lower error and accident rates.”

Sklar added that customer service tends to be significantly better when wages are higher, resulting in a happier, more loyal customer base.

“We know that frontline employees often make the difference between repeat customers and lost business,” she said.


Strategies for ensuring repeat business include personalized customer service, offering freebies, and soliciting and valuing customer feedback.

What Is A Bcg Model?

What is a BCG Model?

The Boston Consulting Group (BCG) put forward a model of corporate posters of companies at different stages of their business position. It is the BCG model that charts market shares against market growth.

The BCG model, also known as the Growth-Share Matrix, is a market model which assumes that a product’s market share shows its cash generating power.

Both Market share and Market growth have high and low phases. Therefore, there are four options in terms of cash of the corporate structure in the BCG model. They are as follows −

Block 1 – Stars

The first block represents both high market shares and high growth opportunities. This block is known as ‘Stars’. Stars are self-sustaining in nature and since there is super profit and super growth, the businesses in this cell of the two cell-matrix BCG model do not need extra investment to grow.

Block 2 – Cash Cows

Cash Cows is the next block that has a high market share but low growth. The money obtained from Cash Cows should be transferred to some other projects as the growth opportunities in such a position is bleak.

Block 3 – Dogs

Dogs is the block that has both low market share and low market growth. It is the weakest cell in the BCG model and it cannot sustain competition in the market. The funds in Dogs block cannot be retrieved and the company that has a dog’s project is destined to go through a loss. Corporate firms usually want to liquidate or disinvest the ‘dogs’ products to extract the investment.

Block 4 – Wild Cats

Wild Cats is a cell that had a low market share but high market growth. The Wild Cats can go to the stars’ level if they can imbibe rapid growth by diversifying their portfolio or by other marketing policies.

BCG Model Analysis

In strategic finance, there is a policy to transfer the extra finance from Cash Cows to Wild Cats (also called question marks and problem children). It is easy to see why such a policy is popular. In the cash cow position, a company has extra cash from a high market share but its market growth is at a low rate. The transfer from Cash Cow to Wild Cats is necessary to keep the momentum of growth and profitability intact.

Cash Generation at Stars Level

Stars in the BCG model generate enough cash from the market and the companies would want to elongate the tenure in which they are at the ‘stars’ position. However, in most the cases, they end up falling into the cash cows segment due to the extra cash generated by the firm.

Changing of positions

Although most companies would like to stay in the ‘stars’ segment, it is often seen that companies keep changing their position with due course of time. A company cannot stay in the ‘stars’ block forever. It has to go to Cash Cow or Dogs block in the future.

Divest Money from Dog’s Segment

It is also a fact that no company prefers to be in the ‘Dogs’ block and so they divest money from the dog’s segment in order to regain as many funds as is possible.

Wild Cats’ Block Represents High Market Growth

The wild cats’ block represents high market growth and low market share. In this block, the growth of the company is very high and companies in the ‘Wild Cats’ segment tend to go to the ‘Stars’ segment as soon as possible.


Knowing the position in the BCG matrix helps companies realize what they should do with their firm. If there is a chance of more profitability, the firms should try to access it by making the required arrangements.

Moreover, if the company finds that there is no scope for growth or market share of a product, it must abandon the product and divest the operations.

Therefore, the BCG model is one of the most useful tools for making corporate decisions that may impact the whole organization.

2023 In Review And A Look Forward To 2023

Happy New Year to you all!

If 2023 was a year of huge change, then 2023 was more incremental, building on the foundations of 2023. I still tried lots of different things – different gigs, different projects, different tools – but I’ve found creating apps and solving data problems on the Google platform is my sweet spot of skills, experience and enjoyment.

2023 highlights: On this site

Investing so much time and effort into this site really started to pay off over the course of 2023.

Over 2,500 of you have subscribed to my email list and enjoyed a free copy of my ebook: Spice Up Your Sheet Life.

Midway through the year, I passed 100k pageviews, then 150k pageviews and am now close to 200k.

These have been the most popular posts of 2023:

In addition, this post about Google’s new data visualization and dashboard tool, Data Studio, was the most “viral” post of 2023, getting a huge (for me) number of shares and views on the day I published it:

In addition to those posts mentioned above, I also really enjoyed creating this animated data visualization of Washington D.C.’s temperatures since the 1980’s, using Google’s Visualization API:

Client highlights

Over the past year, I’ve specialized in providing G Suite and Apps Script services to clients, building dashboards, apps and tools to solve problems and save clients time. I’ve really enjoyed these projects and have worked with some great clients. I look forward to continuing into 2023 and focussing even further on custom Apps Script solutions.

In addition, I really enjoyed teaching two more data analytics courses for General Assembly in Washington, D.C.. The students were great in both groups and it’s a real privilege to teach them, and see such rapid progress in 10 weeks.

For private clients, I taught a number of data visualization workshops, focussing on Excel and Tableau, in Minnesota, Virginia and California.

I learnt a ton this year about running my own consulting business.

One of the biggest lessons was one client disappearing off the face of the earth when it came to settling their invoice. Despite repeated calls and emails, I’ve heard nothing. It wasn’t a huge amount of money, but it taught me a valuable lesson about trust, respect and how I price my services.

Want to work with me in 2023? Let me know and I’ll be in touch.

Goals for 2023

January is an exciting time of the year: a chance to set ambitious goals and a strategy for getting there.

The one big goal for last year that I failed to complete was releasing my digital course on building dashboards with Google Sheets and Data Studio. However, I’ve not stopped working on it, and it’ll be even better when I do release it. I’ve now recorded enough material that I’m confident of a launch in Q1 of 2023. Sign up to my email list for news and an early-bird offer when it launches.

Specifically, my goals for 2023:

Launch my Google Sheets & Data Studio dashboard course

Launch Edition 2 of my free ebook: Spice Up Your Sheet Life, with more interesting tips and tricks for working with Google Sheets

Launch two other digital products

Make a huge push with Apps Script, to deepen my knowledge & experience, and create detailed articles for this site. One quick way to measure this is to see what my GitHub profile looks like by the year-end, hopefully something more like this:

Continue to create in-depth articles and tutorials for this site, aiming for 1 – 2 posts a week

Continue to provide great service and solutions for my clients, in the G Suite & Apps Script ecosystem

It’s going to take hard work, focus and dedication to achieve all of these goals, but it’s as easy as ABC*

*Always Be Coding

By this, I mean being productive and efficient, always moving forwards and minimizing distractions (beware the Shiny Object Syndrome!). It’s crucial as a freelancer to create efficient workflows and systems, and to stay organized.

Well, that should do it. I better get back to work 😉

Happy New Year and all the best for 2023!


Contract Labour: Definition And Meaning

To perform certain task, employers hire employees or labours and subsequently they sign a contract. Such contract defines all the terms and conditions that need to be performed from both the sides.

What is meaning of Contract Labour?

Contract labor refers to a type of employment relationship in which an individual is hired to perform a specific task or project for a specific period of time. The individual is usually considered to be an independent contractor, rather than an employee, and is responsible for paying their own taxes and benefits, as well as providing their own tools or equipment. This type of employment arrangement is often used in industries such as construction or information technology, where the work being done is project-based and requires specialized skills.

Contract Labour Legislation

The Contract Labor Regulation and Abolition Act, 1970, provides protection for contract workers in India. A “contract worker” is defined in the act as a person who is employed by the principal employer through a contractor in connection with the work of an enterprise. While a contract supplies the organisation with contract labor, a principal employer is the individual in charge of maintaining control over the institution.

Likewise, this law was passed to control the use of contract labour in specific businesses, to outline the conditions under which it may be abolished, and to address any issues related thereto. It is applicable to all businesses that employ 20 or more contract workers, as well as to all independent contractors who do the same.

What are the types of establishments covered under the Act?

This act applies to any business where 20 or more contract workers were or are employed on any given day during the last 12 months. Whoever employs or has employed 20 or more labourers on any day in the previous year.

Applicability of the Act

It includes −

It is applicable to any business where contract labour is used to employ at least twenty workers on any one day of the accounting year.

Any contractor who currently employs or has at any time during the accounting year employed 20 or more employees is subject to it.

If the workers are engaged by the establishment as “contract labour,” the Act also applies to that establishment. According to Section 2(b) of the Act, when a worker is hired for or in connection with such work by or through a contractor, with or without the knowledge of the principal employer, he is regarded as being employed as contract labour.

Scope of the Act It includes −

Establishing the guidelines for the registration process for businesses using contract labour.

To describe the prerequisites and the contract licencing process.

To set forth the punishment guidelines for offences against the Act.

To offer suitable and livable working circumstances.

Registration under the Act for Establishments Using Contract Labor

The establishment’s major employer must submit an application to the Registering Officer for registration of the establishment in order to employ contract labor.

Applications need to be sent with a demand draft to cover the application fees.

Form I, which is used to issue certificates of registration

If the original Certificate of Registration is lost, damaged, or unintentionally destroyed, a duplicate need to be issued.

Responsibility of the Contractor

It includes −

Must provide the firm’s printed monthly invoice in exchange for payment for the work he completed beginning on the month’s first day.

Should be accountable for paying wages as required by Section 21 before the seventh of every month.

If there are more than 100 workers, it is required to offer welfare and health facilities, such as canteens, as well as drinking water, urinals, latrines, and first aid in accordance with Section 19.

After 30 days from the end of the fiscal year, send the early half-year return (June and December) in Form xxiv.

To provide identification cards for employment to every employee within three days of the commencement of work.

Infringement of the Act

The effective operation of the Act’s provisions is regulated by Section 23 of the Contract Labour (Regulation and Abolition) Act, 1970. It stipulates that anyone who breaks any of the laws or regulations governing the employment of contract labour or violates any requirement of a licence issued under this Act will be punished with up to three months in jail, a fine up to $1,000, or both.

The Act’s Penalty

These are −

Person who violates any provision of the Act, rules enacted prohibiting, regulating, or restricting the employment of contract labor; or person who violates any licence conditions: imprisonment for up to three months; a fine of up to Rs 1,000; or both.

A person who hinders an inspector from completing his duty faces a punishment of up to three months in prison, a fine of up to Rs. 500, or both.

A person who refuses to provide any records, registers, or papers requested by an inspector, or who tries to or succeeds in preventing someone from coming before the inspector, faces a punishment of up to three months in prison, a fine of up to Rs. 500, or both.


The Act is legislated by the Parliament to protect the interests of both the parties contractors and contract labours. The provisions defined in the Act clearly define the duty and liability of both the parties. In case of breach of contract, the act also defines the fine and punishment. However, the legislature should analyse the act’s flaws and make the required amendments before putting them into effect. Furthermore, the Act must be simplified for major employers and contractors, as well as improved contract worker protections and facilities.


Q1. Which act or order will prevail if there is inconsistent with the contract labour act?

Ans. The contract labour act will apply if any legislation, agreement, or standing order is unfavorable, and if any such law, agreement, or order has more favourable provisions, those provisions will take precedence over the contract labour act.

Q2. Who will be liable where the contractor fails to provide services for the welfare and health of contract labour?

Ans. If the contractor doesn’t supply necessary amenities or services, then the employer will be responsible for any harms caused to labour and has to pay the compensation.

Q3. What is the principal employer’s obligation to the contractor?

Ans. According to Section 21(2), the major employer is required to make sure that a representative is present while the contractor is paying the contract labour.

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