Introduction:

Labour forms an essential part of every business entity, giving rise to a trilateral relationship between the employer, the employees, and, where applicable, their trade unions. Since the interests of these stakeholders may not always align, a legal framework becomes necessary to regulate their interactions and safeguard the rights of workers. Labour law is a significant instrument developed by the government of India to foster good industrial relations between labor and management. It not only maintains harmonious relations between the employers and employees but also promotes and protects the worker’s rights and legal demands by preventing them from exploitation by owners.[1] To simplify and modernize the regulatory framework, the Indian government introduced four comprehensive labour codes in 2020[2]: the Code on Wages, 2019 (Code on Wages), the Industrial Relations Code, 2020 (Industrial Relations Code), the Code on Social Security, 2020 (Social Security Code), and the Occupational Safety, Health and Working Conditions Code, 2020 (OSHWC Code). The existence of labour laws, however, is only the beginning of the story. A right recognised in law carries little meaning if it is not translated into practice, it is at this point that the idea of labour compliance assumes significance, serving as the bridge between what the law requires and what the workplace delivers. Labour law compliance in India refers to adhering to a wide spectrum of laws and regulations enacted by both central and state governments to govern the relationship between employers and their workforce. However, an entrepreneur incorporating a private limited company in Mumbai in September 2026 does not become subject to Indian labour law by virtue of incorporation. Incorporation is a corporate-law event administered by the Registrar of Companies under the Companies Act, 2013[3]. Labour-law obligations attach to an “establishment” and, more precisely, to the employer’s act of engaging persons for wages within that establishment. The gap between these two moments, incorporation and the hiring of the first employee, is where most compliance failures of new businesses originate, because founders conflate “my company exists” with “my company is labour-law compliant.”

This paper is written specifically for that employer: the person who has registered an establishment and must now decide, in practical sequence, what has to be done before the first employee joins, what happens the day the tenth employee joins, what happens the day the twentieth joins, and what changes altogether once the establishment crosses fifty, one hundred and three hundred employees.

Elucidating terminologies:

A.    Conceptualising the Newly Registered Establishment

Precision in terminology is not merely an exercise in academic pedantry, it determines the legal identity of the regulated entity, the applicability of particular labour statutes, the occurrence of compliance-triggering events and, consequently, the point from which registration, contribution, record-keeping and other statutory obligations may arise. For a newly established business, the distinction between the date of incorporation, the date on which business operations commence, the date on which employees are engaged and the date on which a statutory threshold is crossed is therefore critical.

B.    Employer, Employee & Worker

One of the significant conceptual changes introduced by the Labour Codes is the movement away from the terminology of the earlier labour-law framework, particularly the expression “workman” under the Industrial Disputes Act, 1947[4], towards the distinct statutory categories of “employee” and “worker.” The change is not merely terminological. The classification of a person determines the applicability of particular provisions relating to wages, social security, industrial relations, occupational safety, standing orders and other employment protections.[5]

Under the earlier regime, the question whether an individual qualified as a “workman” frequently turned upon the actual nature of duties performed rather than the designation assigned to the post. The Supreme Court repeatedly emphasised this principle. In Burmah Shell Oil Storage & Distribution Co. v. Burmah Shell Management Staff Association,[6] the Court examined the dominant nature of the employee’s duties in determining workman status. Similarly, in May & Baker (India) Ltd. v. Their Workmen[7], the Court distinguished employees performing managerial, administrative or supervisory functions from those falling within the statutory definition of “workman”. In S.K. Maini v. Carona Sahu Co. Ltd.,[8] the Court reiterated that designation alone is not decisive and that the substantive nature of the duties performed must be examined.[9]

The Code on Wages adopts a broad definition of “employee”, covering a person employed on wages to perform skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work.[10] The definition of “worker”, however, is narrower and covers specified categories of persons performing manual, unskilled, skilled, technical, operational or clerical work, as well as supervisory work subject to the statutory conditions and exclusions. Persons employed mainly in managerial or administrative capacities and certain supervisory employees falling within the prescribed wage condition are excluded from the definition of “worker”. This distinction should not, however, be treated as an absolute proposition applicable identically across all four Labour Codes. The precise definition and exclusions must be examined under the particular legislation governing the obligation in question.

The expression “employer” is likewise defined broadly within the Labour Codes. Under the Code on Wages, an employer includes a person who employs, directly or through another person, one or more employees in an establishment. The definition further identifies, depending upon the nature of the establishment, persons such as the occupier of a factory, the person having ultimate control over the affairs of an establishment, a manager or managing director entrusted with such affairs, a contractor and the legal representative of a deceased employer.[11]

The significance of this definition is functional. Labour-law responsibility may attach to a person because of that person’s relationship with the employment, control over the establishment or statutory position, and not merely because that person is the registered owner of the business.

For a newly registered establishment, the identification of the employer, employee and worker is therefore a necessary preliminary step to determining the applicable compliance obligations. Before calculating any statutory threshold, the establishment must ascertain:

1. who constitutes the employer for the relevant statutory purpose;

2. who falls within the definition of employee;

3. who falls within the narrower category of worker, where that expression is used; and

4. which statutory definition and exclusions govern the particular obligation being examined.

Thus, workforce classification should precede threshold computation.

C.    Establishment

The expression “establishment” is similarly important but is not employed in precisely the same manner across all labour legislation. The relevant definition depends upon the statute and the regulatory purpose for which the term is used.

The Code on Social Security, 2020 adopts a broad conception of establishment encompassing, among other things, places where industry, trade, business, manufacture or occupation is carried on, together with specified categories of undertakings. The Occupational Safety, Health and Working Conditions Code, 2020 (“OSH Code”), meanwhile, employs a threshold-oriented definition and separately regulates factories, mines, contract labour, inter-State migrant workers and other categories of establishments.

Accordingly, “establishment” should be understood primarily as a functional statutory concept, rather than as a synonym for a company, LLP, partnership or other legal entity. Incorporation creates or recognises the relevant legal entity; whether that entity constitutes an establishment covered by a particular labour enactment depends upon the statutory definition and the factual circumstances of its operations.

The same legal entity may, therefore, operate one or more establishments, while the applicability of a particular labour provision may depend upon the nature, location, workforce and activities of the establishment.

D.    Newly Registered Establishment

The expression “newly registered establishment” is not, by itself, a uniform statutory category under the Labour Codes. For the purposes of this paper, it is therefore adopted as a working analytical term.

A newly registered establishment may be understood as a business undertaking which:

1. has acquired its relevant legal or business identity through incorporation, registration or constitution;

2. has commenced, or is in the process of commencing, operations giving rise to the possibility of labour-law coverage;

3. is required to obtain, or has obtained, establishment-level registrations, licences, intimations or other approvals applicable to its nature of activity; and

4. is within the initial phase of its operations, during which employee strength, nature of work, contractual arrangements and other statutory characteristics are still developing.

This formulation deliberately avoids treating registration as a single event. A newly incorporated company, for instance, may exist as a legal person before it has commenced business operations or engaged any employee. Conversely, the commencement of operations may trigger labour-law obligations independently of the date of incorporation.

E.    Incorporation, Commencement of Business, Commencement of Operations and Commencement of Employment

Four events must be distinguished when analysing the compliance position of a newly established business: incorporation or constitution, commencement of business, commencement of establishment operations, and commencement of employment.

First, incorporation or constitution creates or recognises the relevant legal or business entity. In the case of a company, incorporation is governed by the Companies Act, 2013. It does not, however, by itself determine the applicability of every labour statute.

Second, commencement of business has a specific company-law dimension. Section 10A of the Companies Act, 2013[12] provides that a company incorporated after the commencement of the Companies (Amendment) Act, 2019 and having share capital cannot commence business or exercise borrowing powers unless the prescribed declaration regarding payment of share capital has been filed and the registered office has been verified in accordance with the Act.

Third, commencement of establishment operations is relevant because several labour statutes regulate an undertaking once the activities falling within their respective statutory definitions begin. The precise triggering event, however, is statute-specific and may be expressed by reference to commencement of operations, opening of an establishment, employment of workers, or satisfaction of a prescribed threshold.

Fourth, commencement of employment concerns the actual engagement of persons in an employment relationship. It may trigger obligations relating to wages, records, social security, working conditions and other protections, but the precise legal trigger varies between statutes. It is therefore preferable not to treat “first employment” as a universal commencement date for all labour-law compliance.

The practical consequence is that incorporation date, business commencement date, operational commencement date and employment commencement date should be recorded separately in a compliance framework.

F.     Registration Is a Layered, Not Singular, Process

For a newly established undertaking, the expression “registration” may conceal several legally distinct processes.

These layers are not interchangeable. Entity registration does not automatically constitute establishment registration; establishment registration does not itself establish coverage under every social-security provision; and the engagement of employees does not eliminate the need to examine separate registration, licensing or reporting requirements.

Consequently, the date of registration with one authority cannot automatically be treated as the compliance commencement date under another statute.

Stage One: Foundational Entity Registrations

Before any labour-law obligation can meaningfully attach, a newly registered establishment must complete a set of foundational corporate and tax registrations. These obligations arise irrespective of employee strength and are triggered purely by the act of incorporation or commencement of business.

A.    Incorporation and the Certificate of Commencement of Business

Under Section 10A of the Companies Act, 2013, inserted by the Companies (Amendment) Ordinance, 2018[13] and given statutory form by the Companies (Amendment) Act, 2019, every company incorporated with share capital on or after 2 November 2018 is required to file a declaration in Form INC-20A[14] with the Registrar of Companies within 180 days of incorporation, confirming that every subscriber to the memorandum has paid for the shares agreed to be taken and that the company is ready to commence business. The declaration must be certified by a practising Chartered Accountant, Company Secretary or Cost Accountant, and, where the company’s activities require sectoral regulatory approval, such as from the Reserve Bank of India or the Securities and Exchange Board of India, that approval must be annexed to the filing. Companies incorporated without share capital, and other business vehicles such as LLPs, partnerships registered under the Indian Partnership Act, 1932, and sole proprietorships, are outside the scope of Form INC-20A, but each is nonetheless required to obtain a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department, both of which are ordinarily generated concurrently with incorporation through the Ministry of Corpoate Affairs’ SPICe+ portal for companies,[15] and separately for other entity forms.

B.    Other First-Instance Corporate Compliances

1.     Convening the first Board meeting within 30 days of incorporation[16] and appointing the first auditor within 30 days;[17]

2.     Opening a current bank account in the company’s name and depositing subscription money before Form INC-20A can be filed;

3.     Issuing share certificates to subscribers within 60 days of incorporation and maintaining statutory registers: Register of Members, and Register of Directors and Key Managerial Personnel under the Companies Act, 2013;[18]

4.     Displaying the registered office name-board, and painting or affixing the company's name and registered office address outside every office or place of business.[19]

C.    Goods and Services Tax (GST) Registration

The Central Goods and Services Tax Act, 2017 (CGST Act)[20] requires a person to obtain GST registration upon crossing the prescribed aggregate-turnover threshold, which is generally ₹40 lakh for suppliers of goods and ₹20 lakh for suppliers of services, subject to applicable State-specific thresholds and exemptions.[21] In addition, Section 24 of the CGST Act requires registration in specified circumstances irrespective of turnover, including certain persons making inter-State taxable supplies and specified suppliers making supplies through e-commerce operators, subject to the exemptions and exceptions prescribed under the applicable notifications.[22] While GST registration is a tax rather than a labour compliance, it is frequently requested as ancillary proof when a new establishment applies for a current bank account, for registration under the Shops and Establishments Act in several States, and for Professional Tax, and is therefore treated in practice as part of the foundational compliance bundle.

Stage Two - State Registration: The Shops and Establishments Act

The Shops and Establishments Act (known by various titles and, in Maharashtra, colloquially as the “Gumasta” licence) is a state subject, and every commercial establishment operating from a physical or virtual place of business is ordinarily required to register under the Act of the State in which it operates, regardless of the size or structure of the entity, subject to State-specific exemptions.

A.    Registration Timelines

The general rule across states is that an establishment must apply for registration within 30 days of commencing business, the clock runs from the date business commences, not from the date the first employee is hired or a revenue threshold is crossed.

B.    Documentation

Across States, the recurring documentary requirements for Shops and Establishments registration are: proof of business premises such as a registered lease deed, ownership document, or no-objection certificate from the landlord; PAN of the proprietor or entity; identity proof of the proprietor, partners or directors; a recent utility bill; details of the number of employees, disaggregated by gender; and, increasingly, ancillary registration proof such as the GST certificate and, for food and beverage establishments, an FSSAI registration.

The Shops and Establishments certificate, once obtained, functions in practice as one of the primary documents of proof of legal business existence required by banks to open a current account, and is a common prerequisite for several of the labour registrations.

Stage Three: Labour and Social Security Registrations

A.   Employees' Provident Fund (EPF) Registration

Under Section 1(3) of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, EPF registration becomes mandatory for every establishment in a class listed in Schedule I to the Act, on the date the establishment employs twenty or more persons.[23] Registration must be completed within thirty days of first crossing the twenty-employee threshold, through the Shram Suvidha / EPFO employer portal, following which the employer must file a monthly Electronic Challan-cum-Return (ECR) and remit contributions within fifteen days of the close of each month.[24] The statutory wage ceiling for mandatory individual coverage is basic wages plus dearness allowance of ₹15,000 per month, with contributions from employer and employee each computed at 12% of covered wages - in practice, employer cost is commonly cited at approximately 13% once the Employees' Deposit Linked Insurance (EDLI) contribution of 0.50% and administrative charges of 0.50% are added.

Two errors recur among newly registered establishments: first, counting only "on-roll" employees and excluding contract or agency personnel from the twenty-employee threshold computation, which understates coverage and exposes the establishment to retrospective assessment; and second, assuming that dropping below twenty employees after registration relieves the establishment of the obligation, whereas once EPF coverage attaches it continues irrespective of a subsequent fall in headcount.[25] A default identified during inspection may result in the determination and recovery of outstanding provident fund dues under Section 7A, together with interest under Section 7Q. The employer may also be liable to damages under Section 14B, read with Paragraph 32A of the Employees’ Provident Funds Scheme, 1952, at rates ranging from 5% to 25% per annum depending upon the period of default, in addition to potential criminal liability under the Act.[26]

The provident fund framework previously governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 has been incorporated into Chapter III of the Code on Social Security, comprising Sections 14–23. The coverage threshold for the Employees’ Provident Fund remains 20 or more employees, as provided in Part I of the First Schedule. The Code also defines “employee” to include persons employed directly or through a contractor, while expressly providing that, for determining whether an establishment crosses the coverage threshold under Chapter III, employees drawing wages above the notified wage ceiling are also taken into account.[27]

The Code further introduces an express “once covered, always covered” rule. Under Section 1(8), once a Chapter of the Code becomes applicable to an establishment, it continues to apply even if the number of employees subsequently falls below the threshold prescribed in the First Schedule. This gives statutory recognition to the continuity principle that had previously operated in relation to EPF coverage through Section 1(5) of the EPF Act and its judicial interpretation.[28]

The financial consequences of default have also been carried forward into the Code. Section 127 provides for interest on amounts due, and the Central Government, by Notification S.O. 2698(E) dated 29 May 2026,[29] has specified simple interest at 12% per annum, with the notification deemed to have come into force from 21 November 2025. Section 128 provides for the levy and recovery of damages for specified defaults, and Notification S.O. 2699(E) dated 29 May 2026[30] authorises specified officers of the Employees’ Provident Fund Organisation to levy and recover such damages in respect of establishments covered under Chapter III. The corresponding offences and penalties are consolidated in Chapter XII: Section 133 deals with failure to pay contributions, Section 134 provides for enhanced punishment for repeat convictions, Section 135 deals with offences by companies, and Section 136 addresses cognizance of offences.[31]

B.    Employees' State Insurance (ESI) Registration

The Employees' State Insurance Act, 1948 mandates registration for factories and specified classes of establishment including shops, hotels, restaurants, cinemas and road-transport undertakings in most States, once they employ ten or more persons.[32] Coverage extends to employees earning a gross monthly wage not exceeding ₹21,000 (₹25,000 for persons with disability).[33] As with EPF, the ten-employee threshold is computed on an inclusive basis: contract and agency workers deployed at the establishment’s premises count toward the threshold, and, importantly, the principal employer bears a secondary liability for ESI coverage of contract workers even where the immediate obligation to register those workers lies with the contractor.[34] Registration must be completed promptly on crossing the threshold, and, as with EPF, liability is computed by the Employees' State Insurance Corporation from the date the threshold was actually crossed, not from the date of eventual registration, meaning that delay in registering only com pounds rather than reduces the employer's financial exposure.

The registration, coverage and principal-employer liability framework under the Employees’ State Insurance Act, 1948 is restated in Chapter IV of the Code on Social Security, 2020. The 10-employee threshold is retained under Part II of the First Schedule. Interest on delayed remittance is now governed by the common mechanism under Section 127, at the rate of 12% per annum, as discussed above, rather than under the separate mechanism previously applicable under Section 85B of the ESI Act.

The retrospective-liability principle noted in this section remains unaffected by the transition. It continues to operate under Chapter IV of the Code, read with the assessment and recovery machinery contained in Chapter XI (Sections 122-132).

C.    Professional Tax (PTEC and PTRC)

Professional Tax is a State-level direct tax, levied under State enactments and capped by the Constitution at ₹2,500 per person per annum.[35] It is in force in Maharashtra, Karnataka, West Bengal, Telangana, Andhra Pradesh, Gujarat, Tamil Nadu and several other States, though notably absent in Delhi, Haryana and Uttar Pradesh, and is levied on income earned through employment, profession, trade or calling.[36] Two distinct registrations arise: a Professional Tax Enrolment Certificate (PTEC), obtained by the establishment itself as a legal entity and by self-employed professionals, business owners, partners and directors to discharge tax on their own income or, in the case of a corporate entity, a flat annual liability of approximately ₹2,500; and a Professional Tax Registration Certificate (PTRC), which is the mandatory employer registration authorising and obligating the establishment to deduct Professional Tax from employee salaries each month, remit the deducted amount to the State Government, and file periodic returns. Because Professional Tax liability is fixed by the State in which the employee's place of work is located rather than by the State of the employer's incorporation or the employee's residence, a newly registered establishment that opens offices or hires remote employees across multiple Professional-Tax States must obtain a separate PTRC in each such State within the applicable window, typically thirty days of commencing operations there.

Professional Tax is a State tax levied under Article 276 of the Constitution and does not form part of the subject matter of the four central Labour Codes. Accordingly, PTEC and PTRC registration remain outside the scope of the Labour Codes. The only indirect intersection is computational: the uniform definition of “wages” under Section 2(y) of the Code on Wages, may alter the allocation between basic pay and other allowances reflected in an employee’s payslip, which may, in turn, affect the base on which certain States calculate the applicable Professional Tax slab. This is therefore a relevant knock-on effect for payroll teams, even though Professional Tax itself remains unaffected by the Labour Codes.

D.    Labour Welfare Fund

A number of States (including Maharashtra, Karnataka, Gujarat, Tamil Nadu, Delhi and West Bengal, among others) additionally levy a Labour Welfare Fund contribution, payable half-yearly or annually by both employer and employee at nominal, State-prescribed rates, to finance welfare schemes for the workforce.[37] As with Professional Tax, the obligation is State-specific and must be separately assessed for each location at which the establishment operates.

Stage Four: Statutory Welfare Legislation

A.    Minimum Wages Act, 1948 and Payment of Wages Act, 1936

The Minimum Wages Act, 1948[38] obliges every employer, without any employee-strength threshold, to pay wages at not less than the rate notified from time to time by the appropriate (Central or State) Government for the relevant scheduled employment, with rates revised periodically and varying by State, zone and skill classification. 

The Payment of Wages Act, 1936[39] complements this by regulating the timely disbursal of wages and prohibiting unauthorised deductions; historically applicable to employees drawing wages below a prescribed monthly ceiling, its protections have, over successive amendments, been extended to cover a wide band of the workforce.

Both obligations apply from the very first employee hired and are among the earliest compliance duties a newly registered establishment assumes, well before any of the registration-based thresholds discussed above are triggered.

Both the Minimum Wages Act, 1948 and the Payment of Wages Act, 1936 are restated in the Code on Wages, with minimum wages dealt with under Chapter II (Sections 5-14) and payment of wages and deductions under Chapter III (Sections 15-25). The applicability of the minimum-wage framework from the first employee is preserved. Two changes are particularly noteworthy: (i) Section 9 introduces a national floor wage, below which no minimum rate of wages may be fixed by the appropriate Government, a concept that was absent from the Minimum Wages Act, 1948; and (ii) the Code removes the historical wage-ceiling limitation under the Payment of Wages Act, 1936, making Chapter III applicable irrespective of the employee’s wage level. The Code also introduces a requirement for payment of wages due to an employee upon separation, resignation or termination within two working days under Section 17(2), a timeline that did not exist under the Payment of Wages Act, 1936.

B.    Payment of Bonus Act

The Payment of Bonus Act, 1965[40] applies to every establishment employing twenty or more persons (ten or more, in the case of a factory using power), and entitles every employee who has worked for at least thirty working days in the accounting year and draws basic wages plus dearness allowance of ₹21,000 per month or less to an annual bonus, payable at a statutory minimum of 8.33% and a maximum of 20% of the employee's salary or wages, computed with reference to the establishment's allocable surplus, on a salary base subject to the ceiling in Section 12 of the Act (₹7,000 or the applicable minimum wage, whichever is higher), and payable within eight months of the close of the accounting year.[41]

Notably, only basic wages and dearness allowance are reckoned for bonus computation; allowances such as house rent allowance and overtime are excluded. Employees dismissed for fraud, riotous or violent behaviour, theft or sabotage may be disqualified from the bonus, but, as a matter of settled practice, only where the dismissal has been preceded by a properly documented domestic enquiry consistent with principles of natural justice and any applicable standing orders.

The law relating to bonus is restated in Chapter IV of the Code on Wages, 2019 (Sections 26-41).[42] The applicability threshold of 20 or more employees, and 10 or more employees in the case of a factory where power is used, is retained under Section 41(2).[43] Under Section 26(1),[44] the minimum bonus is prescribed at 8.33% of wages or ₹100, whichever is higher, and is payable irrespective of whether the employer has an allocable surplus. The maximum bonus of 20% under Section 26(3)[45] and the provisions relating to allocable surplus and its computation under Sections 31-37, including the special treatment of banking companies at 60% and other establishments at 67% of the available surplus, are substantially carried forward from the Payment of Bonus Act, 1965.[46]

The wage ceiling for eligibility and the wage ceiling for computation, which were previously specified under Sections 2(13), 8 and 12 of the Payment of Bonus Act, 1965, are under the Code to be prescribed by the appropriate Government through notification rather than being fixed in the statute itself.[47] Accordingly, the earlier figures of ₹21,000 for eligibility and ₹7,000 for computation should be treated as the position under the previous legislation unless and until the corresponding limits are notified under the Code. The requirement to pay bonus within eight months from the close of the accounting year, previously contained in Section 19 of the Payment of Bonus Act, 1965, is retained under Section 39 of the Code. Section 39(1) additionally provides for payment by credit to the employee’s bank account, introducing a specific procedural requirement for payment.[48]

C.    Payment of Gratuity Act, 1972

The Payment of Gratuity Act, 1972 applies to every factory, mine, oilfield, plantation, port and railway company, and to every shop or other establishment in which ten or more persons are or were employed on any day in the preceding twelve months, and, once applicable, continues to apply even if the headcount subsequently falls below ten.[49]

Gratuity becomes payable to an employee on termination of employment after continuous service of five years or more, occasioned by superannuation, retirement, resignation, death or disablement (the five-year condition being waived in the case of death or disablement), and is calculated as fifteen days' wages for every completed year of service, subject to a statutory ceiling (currently ₹20 lakh).[50] Newly registered establishments that anticipate crossing the ten-employee threshold are, as a matter of prudent practice, well advised to obtain an actuarial valuation and consider a gratuity trust or insured gratuity scheme at an early stage, since the liability accrues silently from the date of joining of each employee, irrespective of whether the employer has made contemporaneous provision for it.

The law relating to gratuity is restated in Chapter V of the Code on Social Security, 2020 (Sections 53-58). The applicability threshold of 10 or more employees is retained, as is the continuing-applicability principle. The latter, which was previously contained in Sections 1(3) and 1(3A) of the Payment of Gratuity Act, 1972, now operates through the common Section 1(8) “once covered, always covered” rule discussed in Part 5.1 above, rather than through a gratuity-specific saving provision.

The requirement of five years of continuous service, the formula for calculating gratuity at fifteen days’ wages for every completed year of service, and the provision relating to compulsory insurance are carried forward under Sections 53 and 57, respectively. The monetary ceiling for gratuity remains a figure to be prescribed and revised by notification, rather than being permanently fixed in the statute itself. Accordingly, establishments should verify the applicable ceiling through the Ministry of Labour and Employment’s official portal rather than treating the earlier ₹20 lakh ceiling as a permanent statutory figure.

D.    Maternity Benefit Act, 1961

The Maternity Benefit Act, 1961, as amended in 2017, applies to establishments employing ten or more persons and entitles a woman employee to twenty-six weeks of fully paid maternity leave for her first two children (twelve weeks for subsequent children), together with additional protections including a prohibition on dismissal during pregnancy or maternity leave and a right to nursing breaks after resumption of duty.[51] Establishments with fifty or more employees carry the additional obligation to provide crèche facilities, with the mother permitted a minimum number of visits to the crèche during the working day.[52]

Maternity Benefit is restated in the Code on Social Security 2020, Chapter VI (ss 59-67). The 10-employee applicability threshold, the 26-week/12-week leave entitlements, the dismissal protection and the nursing-break right are all retained in substance. The 50-employee crèche obligation (formerly s 11A of the 1961 Act) continues under the Chapter VI crèche provisions; the precise section number for this specific sub-obligation should be confirmed once the relevant State Rules are notified, as it is one of the points on which secondary commentary has not yet converged.

Workplace Conduct, Safety and Industrial Relations Obligations

A.    Prevention of Sexual Harassment of Women at Workplace (POSH) Act, 2013

Every employer with ten or more employees - a threshold understood to include contract workers, interns and apprentices, and, for the purposes of coverage as complainants, even visitors to the workplace must, under Section 4 of the POSH Act, constitute an Internal Complaints Committee (ICC) at every office or branch that independently crosses the ten-employee mark; a single, head-office-level ICC does not suffice for a multi-location establishment.[53] In certain districts, such as Mumbai City, local administrations have additionally directed private establishments to register their Internal Committees with the district authority.[54] The ICC must comprise no fewer than four members: a Presiding Officer who is a senior woman employee, at least two internal members, and one external member drawn from an NGO or association working on women's issues or a person with relevant legal knowledge, with women constituting at least half of the total membership, and each member holding office for a term not exceeding three years.[55] Beyond constituting the ICC, the employer must adopt and prominently display a written anti-sexual-harassment policy and conduct periodic awareness workshops and orientation programmes for ICC members. The ICC must in turn prepare an annual report on the complaints received and their disposal for submission to the employer and the District Officer under Section 21, and the employer must disclose the same in its own annual report (or, where no such report is required, inform the District Officer) under Section 22, obligations that independent commentators suggest are frequently overlooked, particularly by start-ups and MSMEs.[56] Non-constitution of the ICC attracts a fine of up to Rs. 50,000 for a first offence, doubling on a repeat offence, together with the risk of cancellation of the business's operating licence or registration.[57] The Supreme Court's decision in Aureliano Fernandes v State of Goa (2023) has been widely cited by practitioners as a renewed direction to all employers to audit and verify their ICC constitution and broader POSH compliance.[58]

The POSH Act, 2013 is one of the very few employment statutes that the 2019–2020 codification exercise left untouched. It is not among the twenty-nine Acts subsumed by the Code on Wages, the Industrial Relations Code, the Code on Social Security or the OSH Code, and no provision of any Code refers to, amends, or displaces it. Every obligation described in this section – the 10-employee threshold, the four-member ICC, the s 21/s 22 reporting duties and the s 26 penalty – therefore continues to apply exactly as enacted in 2013, with the sole caveat that the inclusive, contractor/intern-encompassing method of counting employees mirrors the definitional approach the Codes have now adopted elsewhere. Employers should not assume that POSH compliance has been “absorbed” into the new Labour Code architecture.

B.    The Factories Act, 1948

Where the newly registered establishment engages in a manufacturing process employing ten or more workers with the aid of power, or twenty or more workers without the aid of power, it falls within the definition of a "factory" under the Factories Act, 1948,[59] and must obtain prior approval of factory plans, a licence to operate and, thereafter, comply with an extensive regime addressing health, safety, welfare, working hours, and the employment of women and young persons on hazardous processes. Establishments of this description fall outside the Shops and Establishments Act and are governed instead by the Factories Act and, prospectively, its consolidation into the OSHWC, which restates the factory thresholds at twenty workers (with power) and forty workers (without power).[60]

The Factories Act, 1948 is restated in the OSH Code 2020. The definition of “factory” now appears at s 2(1)(w), with the threshold raised from 10/20 workers to 20 workers (with power) / 40 workers (without power) – a materially higher bar than under the 1948 Act, meaning some establishments currently registered as factories may fall outside the OSH Code's factory chapter once State Rules give full effect to the new figures. Separately, the multiple pre-commencement approvals under the 1948 Act (plan approval and licensing) are consolidated by the Code's “one establishment, one registration” principle at s 3, to be obtained within sixty days of the Code's applicability or such other period as the Rules prescribe.

C.    Contract Labour (Regulation and Abolition) Act, 1970

A newly registered establishment that engages twenty or more workmen as contract labour whether directly through a licensed contractor or a staffing agency is required, as principal employer, to register itself under the Contract Labour (Regulation and Abolition) Act, 1970, and to ensure that the contractor independently holds a valid licence. The principal employer bears residual statutory responsibility for payment of wages to contract labour where the contractor defaults,[61] reinforcing the theme, already observed in relation to EPF, ESI and POSH, that an establishment's use of a contractor or staffing intermediary does not extinguish its own compliance exposure.

The Contract Labour Act, 1970 is restated in the OSH Code 2020, with the applicability threshold raised from 20 to 50 or more contract workers, a significant liberalisation for establishments with a modest contract workforce.[62] The principal employer's residual wage-liability principle is carried forward in substance under the Code's contract-labour chapter, read together with the common employer/contractor definitions. Establishments currently registered under the 1970 Act at the 20-worker mark should note they may now fall below the applicable OSH Code threshold, though this does not retrospectively extinguish accrued obligations.

D.    Industrial Employment (Standing Orders) Act, 1946

Industrial establishments employing 100 or more workmen (50 or more in certain States that have lowered the threshold) are required to frame and certify Standing Orders governing matters such as classification of workmen, shift working, leave, and disciplinary action, under the Industrial Employment (Standing Orders) Act, 1946, and must submit draft Standing Orders for certification within six months of the Act becoming applicable.[63] Standing Orders operate alongside the dispute-resolution and retrenchment machinery of the Industrial Disputes Act, 1947, both of which are now restated in the Industrial Relations Code, 2020. [64]

The Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947 are restated in the Industrial Relations Code, 2020. Standing Orders are dealt with under Chapter IV (Sections 28-39), with the applicability threshold increased from 100 to 300 or more workers, thereby excluding many mid-sized establishments from the mandatory Standing Orders regime. Section 29 further empowers the Central Government to frame Model Standing Orders, which apply on a temporary, deemed basis to an establishment until its own Standing Orders are certified.

The conciliation, adjudication, and lay-off, retrenchment and closure mechanisms under the Industrial Disputes Act are consolidated across Chapter VII (Mechanism for Resolution of Industrial Disputes, Sections 43-49), Chapter VIII (Strikes and Lock-outs), and Chapter IX (Lay-off, Retrenchment and Closure). The Code also introduces a worker re-skilling fund under Chapter XI in cases of retrenchment, creating a new employer obligation that had no corresponding provision under the Industrial Disputes Act, 1947.

Findings and Recommendations

A.    Principal Findings

a.      Employer compliance for a newly registered Indian establishment is not a single event but a staged, threshold-triggered process spanning corporate, State-registration, labour, social-security and workplace-conduct law.

b.     Employee-count thresholds are counted inclusively across almost every statute examined (contract, agency and, in several cases, intern labour count toward the relevant threshold), meaning that headcount-based compliance planning must look beyond the direct payroll register.

c.      Liability for delayed registration is, in every major statute examined, computed retrospectively from the date the threshold was actually crossed rather than from the date of eventual registration, converting delay into compounding financial exposure rather than a static, one-time penalty.

d.     The transition to the four Labour Codes, formally effective from 21 November 2025 but subject to uneven State-level rule notification through 2026, has created a genuine, if temporary, dual-compliance environment that

e.      Newly registered establishments must navigate with active monitoring rather than a one-time compliance exercise.

f.      State-level variation in registration thresholds, timelines and digital infrastructure is material and growing, such that a genuinely national compliance strategy must be built State by State rather than assumed to be uniform.

B.    Recommendations for Newly Registered Establishments

g.     Commission a compliance-threshold map at the time of registration, projecting anticipated headcount growth against the 1-, 10-, 20-, 50- and 100-employee thresholds identified in this paper, so that registrations (EPF, ESI, POSH ICC, Bonus, Gratuity, Standing Orders) are completed proactively rather than reactively.

h.     Treat contract and agency workforce as part of the compliance headcount from the outset, given the inclusive counting rules under EPF, ESI and POSH, and build contractor-compliance verification (licence validity, wage payment proof) into vendor onboarding.

i.       Establish a rolling, State-specific compliance calendar for every location at which the establishment operates, given the independent registration and renewal cycles under the Shops and Establishments Act and Professional Tax Act of each State.

j.       Undertake an early compensation-structuring review against the Code on Wages' 50% basic-pay rule, given credible reporting that this provision is already operative notwithstanding incomplete rule notification.

k.     Institutionalise POSH compliance (ICC constitution, policy display, annual reporting) as a day-one obligation once the ten-employee threshold is anticipated, rather than a reactive response to a complaint, given the elevated post-Aureliano Fernandes scrutiny of employer compliance.

l.       Engage professional (company secretarial, tax and labour-law) advisory support at the point of registration rather than at the point of first inspection, given the retrospective and compounding character of the liability regime documented in Part X

m.   When assessing any single threshold in this paper, cross-check it against Part VIII-A before relying on it: several thresholds have moved up or down under the Codes, and a compliance map built solely on the legacy figures

[1]Srijan Pateriya & Harsha Sahu, A Brief Study on Challenges Concerning Labor Laws in India, 45(1)(IV) Sambodhi 160 (2022), https://doi.org/10.6084/m9.figshare.20523465.v1.

[2] Ministry of Labour & Employment, Government of India, Government Makes the Four Labour Codes Effective to Simplify and Streamline Labour Laws, Press Information Bureau (Nov. 21, 2025), https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2192463&reg=48&lang=2.

[3] Companies Act, 2013, No. 18 of 2013 (India), Ministry of Corporate Affairs, https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/acts.html?act=NTk2MQ==

[4] Industrial Disputes Act, 1947, No. 14 of 1947 (India).

[5] Ananya Sarkar & Pratishtha Sharma, Distinguishing “Employee” and “Worker” under the New Labour Law Regime, Reina Legal (Apr. 16, 2026), https://reinalegal.com/publication/distinguishing-employee-and-worker-under-the-new-labour-law-regime/.

[6] Burmah Shell Oil Storage & Distribution Co. of India Ltd. v. Burmah Shell Management Staff Ass’n, (1971) 2 S.C.R. 758.

[7] May & Baker (India) Ltd. v. Their Workmen, A.I.R. 1967 S.C. 678.

[8] S.K. Maini v. Carona Sahu Co. Ltd., A.I.R. 1994 S.C. 1824.

[9] Mahadevaiah, Understanding Employer, Employee & Worker Under the New Labour Codes, LinkedIn (2025), https://www.linkedin.com/pulse/understanding-employer-employee-worker-under-new-4-mahadevaiah-lsajc/.

[10] Code on Wages, 2019, No. 29 of 2019, § 2(k) (India).

[11] Code on Wages, 2019, No. 29 of 2019, § 2(l) (India).

[12] Companies Act, 2013, No. 18 of 2013, § 10A (India).

[13] Companies (Amendment) Ordinance, 2018, Ministry of Corporate Affairs, Government of India (Nov. 2, 2018), https://ca2013.com/notifications/companies-amendment-ordinance-2018-dated-02-11-2018/.

[14] Ministry of Corporate Affairs, Government of India, Form INC-20A - Declaration for commencement of business, https://www.mca.gov.in/bin/ebook/dms/getdocument?doc=MTA3MDg=&docCategory=Forms&type=open.

[15] Ministry of Corporate Affairs, Government of India, MCA e-Filing Portal, https://www.mca.gov.in/content/mca/global/en/foportal/fologin.html.

[16] Companies Act, 2013, No. 18 of 2013, § 173(1) (India).

[17] Companies Act, 2013, No. 18 of 2013, § 139(6) (India).

[18] Companies Act, 2013, §§ 56(4)(a), 88(1)(a), 170(1).

[19] Companies Act, 2013, § 12(3)(a)-(b).

[20] Central Goods and Services Tax Act, 2017, No. 12 of 2017 (India).

[21] Central Goods and Services Tax Act, 2017, No. 12 of 2017, § 22 (India); Notification No. 10/2019–Central Tax, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs (Mar. 7, 2019).

[22] Central Goods and Services Tax Act, 2017, § 24(i), (ix)–(x).

[23] Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, No. 19 of 1952, § 1(3) (India).

[24] Employees’ Provident Funds Scheme, 1952, ¶ 38 (India); Vakilsearch, Employee Provident Fund Registration Online, https://vakilsearch.com/pf-registration.

[25] Incorpx, EPF Registration Process for New Employers in 2026, https://www.incorpx.io/blog/epf-registration-process-new-employers-2026

[26] GoLegal Consultancy, EPF Penalty Calculation 2026: Section 14B & Para 32A, https://golegalconsultancy.com/epf-penalty-calculation-2026-section-14b-para-32a/.

[27] Code on Social Security, 2020, No. 36 of 2020, §§ 14–23, § 2(26), First Schedule, pt. I (India).

[28] Code on Social Security, 2020, No. 36 of 2020, § 1(8) (India).

[29] Ministry of Labour and Employment, Government of India, Notification S.O. 2698(E) (May 29, 2026), https://www.labour.gov.in/static/uploads/2026/06/730db9e9a2b244dba77b741b37fd842d.pdf.

[30] Ministry of Labour and Employment, Government of India, Notification S.O. 2699(E) (May 29, 2026), https://www.labour.gov.in/static/uploads/2026/06/4d53198a6dd2438b89b7639657728a2b.pdf.

[31] Code on Social Security, 2020, §§ 133–136.

[32] Employees’ State Insurance Act, 1948, No. 34 of 1948, §§ 1(5), 2(12) (India).

[33] HR Tailor, PF & ESI Rules Explained: Everything Employers Need to Know, https://hrtailor.com/pf-esi-rules-explained-everything-employers-need-to-know/.

[34] Employees’ State Insurance Act, 1948, No. 34 of 1948, §§ 2(9), 41 (India).

[35] Constitution of India, art. 276(2).

[36] Treelife, Professional Tax Compliance in India: State-wise Rates, Rules, and Risks for Startups, https://treelife.in/taxation/professional-tax-compliance-in-india/.

[37] Bombay Labour Welfare Fund Act, 1953 (India); Karnataka Labour Welfare Fund Act, 1965 (India);

Gujarat Labour Welfare Fund Act, 1953 (India); Tamil Nadu Labour Welfare Fund Act, 1972 (India);

West Bengal Labour Welfare Fund Act, 1974 (India).

[38] Minimum Wages Act, 1948, No. 11 of 1948 (India).

[39] Payment of Wages Act, 1936, No. 4 of 1936 (India).

[40] Payment of Bonus Act, 1965, No. 21 of 1965 (India).

[41] Payment of Bonus Act, 1965, No. 21 of 1965, § 19 (India).

[42] Code on Wages, 2019, §§ 26–41.

[43] Code on Wages, 2019, § 41(2).

[44] Code on Wages, 2019, § 26(1).

[45] Code on Wages, 2019, § 26(3).

[46] Code on Wages, 2019, §§ 31–37

[47] Payment of Bonus Act, 1965, §§ 2(13), 8, 12; Code on Wages, 2019.

[48] Code on Wages, 2019, § 39(1).

[49] Payment of Gratuity Act, 1972, No. 39 of 1972, § 1(3)(a)-(b) (India), https://www.zoho.com/in/payroll/academy/taxes-and-compliances/statutory-compliance.html.

[50] Payment of Gratuity Act, 1972, No. 39 of 1972, § 4(1)-(3) (India).

[51] Maternity Benefit Act, 1961, No. 53 of 1961, §§ 2(1), 5(3), 11, 12 (India).

[52] Maternity Benefit Act, 1961, No. 53 of 1961, § 11 A (India).

[53] Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, No. 14 of 2013, §§ 2(a), 2(f), 4(1), 6(1) (India).

[54] King Stubb & Kasiva, Mandatory Constitution and Registration of Internal Committee under the POSH Act, 2013, June 2, 2025, https://ksandk.com/newsletter/mandatory-constitution-and-registration-of-internal-committee-under-the-posh-act-2013-compliance-directive-for-private-establishments-in-mumbai-city-district/.

[55] Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, No. 14 of 2013, § 4(2)-(3) (India).

[56] Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, No. 14 of 2013, § 21-22 (India).

[57] Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, No. 14 of 2013, § 26 (India).

[58] Aureliano Fernandes v State of Goa (Supreme Court of India, decided 12 May 2023)

[59] Factories Act, 1948, No. 63 of 1948, § 2(m) (India).

[60] Occupational Safety, Health and Working Conditions Code, 2020, No. 37 of 2020, § 2(1)(w) (India).

[61] Contract Labour (Regulation and Abolition) Act, 1970, No. 37 of 1970, § 21(4) (India).

[62] Occupational Safety, Health and Working Conditions Code, 2020, No. 37 of 2020, § 45 (India).

[63] Industrial Employment (Standing Orders) Act, 1946, No. 20 of 1946, § 1(3) (India).

[64] Industrial Disputes Act, 1947, No. 14 of 1947 (India); Industrial Relations Code, 2020, No. 35 of 2020, § 104 (India).