Key Labour Compliance Requirements for Businesses in India

What is the Employees Provident Fund (EPF) Compliance Requirement for Indian Businesses?

The Employees Provident Fund (EPF) is a mandatory social security scheme that requires eligible employers to contribute towards employees' retirement savings. Businesses with 20 or more employees must register for EPF and comply with monthly contribution and filing requirements.

Who must Register for EPF?

EPF registration is mandatory for every establishment that employs 20 or more employees, regardless of industry sector. This applicability is now universal under the Code on Social Security, 2020. Source: Employees' Provident Fund & Miscellaneous Provisions Act, 1952, as subsumed into Social Security Code, 2020.

EPF Contribution Rates - FY 2025 - 26

Contributor	Rate	Split / Notes
Employee	12% of Basic Salary + DA	Entire 12% goes into EPF account
Employer - EPF portion	3.67% of Basic Salary + DA	Goes into EPF (savings) account
Employer - EPS portion	8.33% of Basic Salary + DA	Goes into Employees' Pension Scheme (EPS); capped at ₹1,250/month on ₹15,000 wage ceiling
Total Employer Contribution	12% of Basic Salary + DA	Split between EPS (8.33%) and EPF (3.67%)
EPF Interest Rate - FY 2025 - 26	8.25% per annum	Calculated monthly, credited annually. Source: EPFO Central Board of Trustees

EPF Compliance Deadlines

• Monthly contribution deposit: Due by the 15th of the following month.

• ECR (Electronic Challan-cum-Return) filing: Due by the 25th of the following month.

• Annual PF return: Due by April 30 each year.

EPF Penalty for Non-Compliance

Failure to deposit EPF contributions attracts a fine of up to ₹1,00,000 (approx. USD 1,119). Wilful non-payment may result in imprisonment of up to 3 years. Source: India Briefing, Labour Codes Penalties Guide, January 2026.

What is the Employees State Insurance (ESI) Compliance Requirement for Indian Businesses?

Employees State Insurance (ESI) is a statutory social security scheme that provides medical, maternity, disability, and dependent benefits to eligible employees. Businesses meeting the prescribed employee and salary thresholds must register under ESI and make regular contributions on behalf of covered employees.

Who must Register for ESI?

ESI registration is mandatory for establishments with 10 or more employees (in most states; 20 in certain states), where at least one employee earns ₹21,000 or less per month. Source: Employees State Insurance Act, 1948; HROne ESI Contribution Guide, June 2026.

ESI Contribution Rates - FY 2025 - 26

Contributor	Rate	Wage Basis
Employee	0.75% of gross wages	Applicable only if gross wages ≤ ₹21,000/month (₹25,000 for employees with disabilities)
Employer	3.25% of gross wages	Calculated on employee's gross salary
Total ESI Contribution	4.00% of gross wages	Combined employee + employer contribution

What Does ESI Cover for Employees?

• Medical treatment for employee and dependents (no monetary cap under ESIC hospitals)

• Maternity benefit: 26 weeks of paid leave at full wages

• Disability benefit: Up to 90% of wages in case of employment injury

• Dependent benefit: 90% of wages to dependents in case of employee death from work injury

ESI Filing Deadlines

• Contribution deposit: Within 15 days of the end of each wage period.

• Half-yearly return: Filed for April - September by November 11 and for October - March by May 12.

What are the Gratuity Compliance Requirements for Indian Employers after the New Labour Codes?

Gratuity rules changed significantly under the Code on Social Security, 2020, effective November 21, 2025. These changes impact salary structure, eligibility and payout timelines. Source: Fisher Phillips LLP, India Labour Codes Analysis, March 2026; Bajaj Finserv Gratuity Rules Guide, 2026.

Updated Gratuity Eligibility - Effective November 21, 2025

Employee Type	Old Rule (Pre-Nov 2025)	New Rule (Post-Nov 2025)
Regular Employees	Eligible after 5 years of continuous service	Same - 5 years continuous service
Fixed-Term Contract Employees	Required 5 years - practically ineligible	Eligible after just 1 year of service (pro-rata)
Death or Permanent Disability	5-year rule waived	5-year rule waived - immediate eligibility

Gratuity Calculation Formula

Gratuity = (Last Drawn Wages ÷ 26) × 15 × Number of Years of Service

Critical 50% Wage Rule (New Under Code on Wages, 2019)

Basic wages must constitute at least 50% of an employee's total CTC (Cost to Company). If excluded components - such as HRA, special allowances and incentives - exceed 50% of total remuneration, the excess must be added back into 'wages' for gratuity and statutory calculations. Source: Code on Wages, 2019; Agrud Partners, December 2025.

Impact: Businesses with Basic salary structures at 30 - 35% of CTC may see gratuity liabilities increase by 25 - 50% or more after restructuring. Source: Numerica Consulting, Actuarial Analysis, April 2026.

Gratuity Payment Key Numbers

• Maximum tax-exempt gratuity ceiling: ₹20 lakh for private sector employees.

• Payment deadline: Employer must release gratuity within 30 days of employee exit.

• Penalty for non-payment: Gratuity amount + 10% simple interest per annum for delayed payment.

What are the Minimum Wages and Payment of Bonus Compliance Rules in India?

Employers in India must comply with statutory minimum wage and bonus requirements to ensure fair compensation and legal compliance. Businesses are required to pay at least the applicable minimum wage and provide statutory bonuses to eligible employees as prescribed under labour laws.

What are the Minimum Wage Requirements Under the Code on Wages, 2019?

The Code on Wages, 2019 mandates that every employer must pay wages not below the floor wage notified by the Central Government. The floor wage is reviewed periodically based on the cost of living index. State governments set their own minimum wages - which must not fall below the central floor wage. Source: Ministry of Labour & Employment.

Payment of Bonus Act - Compliance Thresholds

Criterion	Threshold / Rule
Eligible Employee Salary Ceiling	Monthly salary or wages up to ₹21,000
Minimum Days Worked for Eligibility	At least 30 working days in the financial year
Minimum Bonus Payable	8.33% of annual salary or wages (or ₹100, whichever is higher)
Maximum Bonus Payable	20% of annual salary or wages (when allocable surplus permits)
Firm Size for Bonus Applicability	Establishments with 20 or more employees
Excluded Workers	Apprentices, contractor workers, public sector employees

What are the Occupational Safety and Workplace Compliance Requirements Under India's Labour Laws?

The Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020 replaces 13 earlier laws. It introduces uniform workplace safety standards across industries. Source: OSHWC Code, 2020, Ministry of Labour & Employment.

Core OSHWC Compliance Requirements

• Written appointment letters are now mandatory for all workers - from permanent employees to contract and daily-wage workers.

• Safety committees are mandatory for establishments with 500 or more workers.

• Maximum working hours: 8 hours per day; 48 hours per week. Overtime must be compensated at double the regular rate.

• Annual health check-ups mandatory for workers above 45 years of age in hazardous industries.

• Crèche facility required in establishments employing 50 or more women workers.

OSHWC Penalties for Non-Compliance

Violation Type	Penalty
General safety violations	Fine up to ₹2,00,000 (approx. USD 2,224)
Violations resulting in serious injury or death	Imprisonment up to 1 year + fine
Operating without OSHWC registration/licence	Fine + possible closure order
Obstruction of inspectors	Fine + prosecution
Working hour breaches (persistent)	Prosecution under OSHWC Code

What are the Payroll Compliance Deadlines Businesses in India must follow?

Payroll compliance in India involves multiple statutory filings, deposits, and returns - each with its own deadline. Missing any one of these can attract penalties and disrupt business operations. Source: BCL India, Payroll Compliance Checklist 2024 - 2025.

Statutory Obligation	Deadline	Governing Law	Penalty for Non-Compliance
EPF contribution deposit	15th of following month	EPF & MP Act / SS Code 2020	₹1,00,000 fine; 3 years imprisonment (wilful)
EPF ECR filing	25th of following month	EPFO Regulations	Late fee + interest
ESI contribution deposit	Within 15 days of wage period end	ESI Act 1948	12% simple interest per annum on delayed amount
ESI half-yearly return	Nov 11 (Apr–Sep); May 12 (Oct–Mar)	ESIC Regulations	Penalty per day for delay
TDS (salary) deposit	7th of following month	Income Tax Act, 1961	1.5% per month interest; ₹200/day penalty
TDS (salary) deposit	7th of following month	Income Tax Act, 1961	1.5% per month interest; ₹200/day penalty
Professional Tax filing	Varies by state (typically monthly/annual)	State PT Acts	Varies by state government
Annual PF return	April 30 each year	EPFO Regulations	Interest + penalty
Bonus payment	Within 8 months of financial year end	Payment of Bonus Act	Fine up to ₹1,000 + prosecution

What are the Compliance Requirements for Contract Labour and Staffing in India?

The Contract Labour (Regulation and Abolition) Act, 1970 - now subsumed into the OSHWC Code, 2020 - governs businesses that use contract workers. Non-compliance is a high-risk area that attracts both financial penalties and reputational damage. Source: Ministry of Labour & Employment.

Who must Register Under Contract Labour Provisions?

• Principal Employers: Any establishment employing 20 or more contract workers in the previous 12 months must register with the registering officer.

• Contractors: Any contractor employing 20 or more workmen must obtain a licence before executing any contract work.

Key Employer Obligations for Contract Workers

• Maintain a register of contractors and contract workers in the prescribed format.

• Ensure contractors pay EPF, ESI, and minimum wages to contract workers - principal employer is jointly liable if contractor defaults.

• Provide welfare facilities: canteen (if 100+ contract workers), rest rooms, first aid, clean drinking water.

• Issue wage slips to contract workers within 2 days of wage payment.

• Written appointment letters are now mandatory for all contract workers under OSHWC Code, 2020.

What are the Compliance Requirements for Gig Workers and Platform Workers in India?

For the first time in Indian labour history, gig and platform workers are recognised as a statutory category under the Code on Social Security, 2020, effective November 2025. This affects all businesses operating through app-based, freelance or platform models. Source: Payroll Outsourcing India, Labour Codes 2025 Guide.

Obligation	Details
Social security contribution	Aggregators/platforms must contribute 1 - 2% of annual turnover to gig worker social security funds
Worker database maintenance	Maintain a database of all gig workers with identity verification records
Accident and income data sharing	Share accident reports and income data with authorities on a periodic basis
Minimum welfare coverage	Provide life insurance, disability insurance and health benefit access to eligible gig workers
Penalty for non-contribution	Delays or underpayment of the 1 - 2% contribution attract penalties and prosecution

What Statutory Registers and Records must Indian Businesses Maintain for Labour Compliance?

Maintaining accurate statutory registers is a direct compliance requirement under multiple labour laws. Failure to maintain or produce them during inspections attracts fines. Source: BCL India, Payroll Compliance Checklist 2025.

Mandatory Statutory Registers for Most Businesses

• Register of Employees (Muster Roll): Name, designation, date of joining, wages paid.

• Register of Wages: Monthly wage details - basic, DA, allowances, deductions, net paid.

• Register of Overtime: Record of overtime hours worked and overtime wages paid.

• Register of Overtime: Record of overtime hours worked and overtime wages paid.

• Register of Advances: Loans/advances given to employees, deduction schedule.

• Register of Leaves: Leave entitlement, leave availed, balance for each employee.

• Attendance Register: Daily attendance records - must be preserved for 3 years minimum.

• EPF Monthly Contribution Register: ECR details, UAN-wise contribution record.

• ESI Contribution Register: Insurance number-wise contribution details per wage period.

• Accident Register: Record of all workplace accidents - mandatory under OSHWC Code.

Digital Record-Keeping: Under the new Labour Codes, digital attendance, wage, and safety records are explicitly permitted. Businesses using payroll software that auto-generates these registers are at significantly lower risk during inspections. Source: Labour Codes 2025 Rules, Ministry of Labour.

What are the Penalties for Labour Law Non-Compliance in India?

The new Labour Codes decriminalise minor clerical errors but significantly increase monetary penalties for serious compliance violations. Directors and compliance officers now face personal liability. Source: India Briefing, Labour Codes Penalties Guide, January 2026; Payroll Outsourcing India, December 2025.

Violation Category	Penalty / Consequence	Source
Failure to deposit EPF/ESI contributions	Fine up to ₹1,00,000; 3 years imprisonment (wilful non-payment)	SS Code, 2020
Failure to register eligible employees for EPF	Fine ₹50,000 + ₹30,000/day for continuing violation	SS Code, 2020
General workplace safety violations (OSHWC)	Fine up to ₹2,00,000 (approx. USD 2,224)	OSHWC Code, 2020
Safety violation resulting in death or serious injury	Imprisonment up to 1 year + fine	OSHWC Code, 2020
Wage default (non-payment / delay)	Heavy financial penalties + prosecution	Code on Wages, 2019
Data falsification in statutory records	Criminal prosecution; director personal liability	Labour Codes 2025
Gig worker social security non-contribution	Penalty + prosecution per delayed contribution period	SS Code, 2020
Non-compliance with working hour limits (persistent)	Prosecution under OSHWC Code	OSHWC Code, 2020

How Can Voltech HR Services Help Businesses Manage Labour Compliance in India?

Voltech HR Services provides end-to-end Staffing and Payroll compliance solutions for businesses across India - from SMEs to large enterprises. Our compliance support covers the entire statutory lifecycle: registration, monthly filings, penalty avoidance and audit readiness.

Voltech HR Services Compliance Support - What We Cover

Service Area	What Voltech HR Does for You
EPF & ESI Registration	Complete registration for new establishments; updating existing registrations under new codes
Monthly Payroll Compliance	EPF ECR filing by 25th; ESI contribution deposit by 15th; TDS deposit by 7th
Statutory Register Maintenance	Digital maintenance of all 9+ mandatory registers - audit-ready format
Salary Structure Audit	Ensuring Basic + DA is ≥ 50% of CTC as mandated under Code on Wages, 2019
Contract Labour Compliance	Verification of contractor EPF/ESI compliance; principal employer protection
Gratuity Liability Assessment	Recalculating gratuity provisions under the new 50% wage rule
Compliance Audit & Risk Report	Periodic internal audit to identify gaps before government inspections
Overseas & Domestic Staffing	Compliant workforce deployment - both contract and permanent roles

Is your business fully Labour Compliant in India?

Labour compliance in India is no longer a back-office checkbox - it is a board-level risk. The four new Labour Codes, effective November 21, 2025, have unified 29 laws into a single framework that demands action on wages, EPF, ESI, gratuity, safety and contract worker management — all with tighter deadlines and higher penalties than before.

The businesses most exposed to risk are those still operating with outdated salary structures (Basic below 50% of CTC), unverified contractor compliance and manual payroll registers. A single missed EPF deposit can trigger a ₹1,00,000 fine. A persistent working-hour breach can result in criminal prosecution. A contractor's ESI default becomes your liability.

The path forward is a structured compliance calendar, digital statutory registers, salary structure realignment and a verified staffing partner who owns compliance on your behalf - so your leadership can focus on growth, not penalties.

Frequently Asked Questions on Labour Compliance in India

Q1. What is the minimum number of employees required for EPF registration in India?

EPF registration is mandatory when an establishment employs 20 or more employees. Once registered, it applies even if headcount later falls below 20. (Source: SS Code, 2020)

Q2. Is ESI applicable if only one employee earns below ₹21,000?

Yes. If the establishment has 10 or more employees and even one earns ₹21,000 or less per month, ESI registration and contribution is mandatory for all covered employees. (Source: ESI Act, 1948)

Q3. What happens if an employer does not pay gratuity within 30 days of employee exit?

The employer must pay the gratuity amount plus 10% simple interest per annum for every day of delay beyond 30 days from the exit date. (Source: SS Code, 2020)

Q4. Does the Payment of Bonus Act apply to all companies in India?

No. It applies only to establishments with 20 or more employees. Employees earning above ₹21,000/month are not eligible for statutory bonus. Apprentices and contractor workers are excluded.

Q5. Are contract workers covered under EPF and ESI in India?

Yes. Contract workers are covered under both EPF and ESI. If the contractor fails to deposit contributions, the principal employer is jointly liable to make those payments. (Source: SS Code, 2020)

Q6. What is the 50% wage rule under India's new Labour Codes?

Basic salary + DA must be at least 50% of total CTC. If other allowances exceed 50% of total pay, the excess is counted as wages for EPF, ESI, and gratuity calculations. (Source: Code on Wages, 2019)

Q7. How long must statutory registers be maintained under Indian labour law?

Attendance registers must be kept for a minimum of 3 years. Wage registers, EPF records and ESI registers must be preserved and available for inspection at any time during that period.

Related Resources for Employers & HR Leaders

Looking to strengthen your compliance, staffing and payroll operations in 2026? Explore our in-depth guides:

→ How to Ensure Compliance with Indian Labor Laws When Outsourcing Payroll - When you outsource payroll in India, your statutory liability stays with you - not your vendor. Learn what compliance ownership really means for your business.

→ Labour Inspector Visit Checklist for Indian Employers (2026 Edition) - Prepare your organization for labour inspections with a comprehensive compliance checklist covering employee records, statutory registers, wage documentation, EPF, ESI, contractor compliance, working hours, safety records and labour law documentation. Understand what inspectors typically review and how to reduce compliance risks during inspections.

→ Contract Staffing in India 2026 - HR & Business Guide - Understand how India's four Labour Codes effective November 2025 permanently changed the legal obligations of every company that engages contract workers. Learn why principal employer liability now makes your contractor's compliance failures your financial responsibility, how the 50% wage rule has increased fixed-term employee costs by 5 - 15%, why deploying contract workers in core activities is now prohibited and what the 10-point compliance framework looks like for selecting a contract staffing partner in 2026 - before signing any service agreement that exposes your company to direct legal risk.