Factory Licence Under the OSH Code: Thresholds and Process

A premises engaged in manufacturing generally needs a factory licence once it crosses a worker-count threshold, and this requirement now sits under the OSH Code, 2020 instead of the standalone Factories Act 1948 - though the exact threshold you must watch depends on whether your state has notified its own rules yet.

Key facts at a glance

• The Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) consolidates roughly 13 earlier laws, including the Factories Act 1948, the Contract Labour Act and the Building and Other Construction Workers Act.
• All four Labour Codes, including the OSH Code, came into force nationally on 21 November 2025.
• Central rules under the Codes were pre-published in draft on 30-31 December 2025, with final Central rules expected around April 2026.
• Because labour is a concurrent subject, each state must separately notify its own rules before the OSH Code is fully operational there; as of mid-2026 most states have not yet fully notified.
• The historical Factories Act threshold for a "factory" was 10 or more workers with power, or 20 or more without power; several states have raised these thresholds under their rule-making powers.
• Factory licences are issued and administered at the state level, typically by the Chief Inspector of Factories or equivalent authority.
• Practical effect: the OSH Code is legally in force nationally, but operationally uneven state to state - employers should track their specific state's notification status rather than assume full applicability.

What counts as a "factory"

The core test carried forward from the Factories Act into the OSH Code is a combination of worker headcount and whether a manufacturing process is being carried out with the aid of power. Historically this meant 10 or more workers where power is used, or 20 or more where it is not.

Several states have used their rule-making authority to raise these numbers, generally in the direction of easing compliance for smaller manufacturing units. Because state notification of OSH Code rules is still incomplete in many places as of mid-2026, the threshold that actually applies to your unit right now depends on whether your state has notified revised numbers or whether the historical Factories Act threshold still governs in practice.

Why this matters for planning

If you are close to the worker-count threshold, do not assume the higher, more lenient number applies until you have confirmed your state's current position. Crossing the threshold without a licence, even briefly, exposes the business to penalty risk.

Factory licensing: old regime vs OSH Code direction

The general licensing process

While exact forms and portals differ by state, the broad process for a factory licence typically follows the same shape.

1. Confirm applicability

Check your state's current worker-count threshold and whether the premises qualifies as a factory under the applicable rules (Factories Act legacy threshold or the state's revised OSH Code threshold).

2. Site and building approval

Factory premises usually need prior approval of the building plan and site layout from the factories department, particularly where hazardous processes are involved.

3. Apply for the licence

The application is filed with the state Chief Inspector of Factories (or the equivalent OSH Code authority once notified), along with details of manufacturing process, worker strength, machinery and safety arrangements.

4. Inspection

An inspector typically visits the premises to verify safety arrangements - fire exits, machine guarding, ventilation, welfare facilities - before the licence is granted.

5. Renewal

Factory licences are generally renewed periodically (commonly annually, though this varies by state), and any material change in worker strength, machinery or process should be reported.

What to do while state rules are still catching up

Because most states have not yet fully notified their OSH Code rules as of mid-2026, the safest approach is to continue meeting your existing state factory licence obligations under whatever framework is currently enforced in your state, while watching for your state's OSH Code notification. Do not assume relief (like a higher threshold) applies until your state has actually notified it.

If you are not sure where your business stands on factory licensing and other Labour Code transition obligations, ComplianceCheck's labour code assessment gives you a clear picture in a few minutes.

Sources

• Ministry of Labour and Employment - labour.gov.in
• Respective state Labour Department / Directorate of Factories
• Occupational Safety, Health and Working Conditions Code, 2020 (as notified centrally and by states)

This guide is general information, not legal advice. Requirements vary by state, sector and headcount - confirm specifics with a compliance professional or the relevant authority.