Finance ministry links government procurement with labour law compliance
It also amended Rule 151 of the General Financial Rules (GFR) 2017 on “Prohibition of Tendering”; Under this rule, firms can now face a ban of up to three years not only for corruption or integrity violations, but also for failure to pay salaries to employees working under the contract and failure to deposit statutory social security contributions under applicable labor laws where the purchasing agency is forced to step in and make such payments due to contractor default.
In an office memorandum dated May 8, 2026, the procurement policy section of the expenditure department directed ministries, departments, autonomous bodies and CPSES to strictly ensure that contractors distribute wages within stipulated timelines and Drawing and Disbursing Officers (DDOs) verify compliance every month.
The instructions also recall Section 17(1) of the Wages Act 2019, which sets out timescales for payment of wages, as well as reiterating the principal employer’s responsibility to ensure contractors pay wages on time under Section 55(3) of the Occupational Safety, Health and Working Conditions Act 2020.
It also directed the secretaries of all ministries and departments to review the timely payment of wages to ensure effective implementation of Labor Laws.
The new procurement rules are in line with the final Rules of the four Labor Codes notified by the Ministry of Labor and Employment on Friday to ensure smooth implementation of the Rules.
The government is of the view that directly linking labor law compliance with compliance with government contracts and tenders will help prevent delays in wage payments and defaults in statutory dues affecting contract workers.
Moreover, these reform measures will also ensure timely payment of social security contributions, greater accountability of contractors and principal employers, and stronger enforcement mechanisms against labor law violations.
