India Labour Law Compliance: Labour Codes, EPF, ESI and Professional Tax

India labour law compliance changed shape in late 2025, when the Government announced the consolidation of 29 central labour laws into four labour codes. For an employer, the codes sit on top of older habits that still matter: provident fund and insurance registrations, state professional tax, and shops and establishments rules. This overview is written for founders, finance teams and foreign owners of Indian employers. It is not legal advice: confirm each point with Indian labour counsel or your Chartered Accountant, because central and state rules are still being rolled out.

What does India labour law compliance cover for a new employer?

What the four codes change in practice

The PIB backgrounder lists these headline features:

• Wages: a statutory right to minimum wages for all employees, not only those in scheduled employments; a government-set floor wage; wage-payment protections for all employees regardless of pay level; overtime at no less than twice the normal rate; the employer, including a company or firm, is responsible for unpaid wages; and "inspector-cum-facilitator" officers who guide before they penalise.
• Industrial relations: fixed-term employment with the same wages and benefits as permanent staff; a re-skilling fund funded by 15 days' wages for each retrenched worker; a higher threshold of 300 workers for prior approval of layoffs, retrenchment and closure and for standing orders (up from 100); and work from home by mutual consent in service sectors.
• Social security: nine laws merged. ESIC is now national, without "notified areas", and establishments with fewer than 10 employees can join voluntarily. A uniform definition of wages applies, and gig and platform workers are brought into scope, with aggregators contributing 1% to 2% of annual turnover, capped at 5% of payments to such workers.
• Safety: a single registration for each establishment, appointment letters stating wages and social security, free annual health checks, and women's work at night with consent and safeguards. Contract-labour rules start at 50 workers, up from 20.
• Enforcement: first-time offences punishable only by fines can be compounded by paying 50% of the maximum fine, and a 30-day notice to comply comes before legal action under the social security framework. Records and returns may be kept electronically.

How to set up payroll registrations, step by step

1. Decide the state and location. Professional tax and shops registrations depend on where the staff work.
2. Ask for EPFO and ESIC registration at incorporation. SPICe+ can issue them with the company's other numbers. Professional tax registration is bundled for Maharashtra, Karnataka and West Bengal, and shops and establishment registration for certain locations such as Delhi.
3. Register on the Government's labour portals as your state notifies each process; the Ministry lists the Shram Suvidha Portal among its key services. Your CA or labour counsel confirms the current route for each code.
4. Issue appointment letters that state job title, wages and social security entitlements.
5. Run monthly payroll with provident fund and ESIC contributions, professional tax where it applies, and TDS on salary. See TDS and TCS for businesses.
6. Keep digital records of attendance, wages and returns.

Provident fund and insurance contributions run monthly, and the due dates are set by the schemes. The India compliance calendar tracks the income tax and GST dates alongside them.

Deadlines and penalties in practice

The Code on Social Security sets time limits on provident fund proceedings: an inquiry or recovery action must begin within five years and be completed within two years, extendable by one year, and suo-motu reopening is removed. An employer appealing an EPFO order now deposits 25% of the assessed amount, down from the earlier 40% to 70%. Offences punishable by fine can be compounded for 50% of the maximum fine, and offences with fine or imprisonment for 75%. Compounding is available only for first offences, so a pattern of non-compliance has no safety net.

Documents and information you need

• Certificate of incorporation, PAN, TAN and bank account details
• Employee list with PAN, Aadhaar-linked identity, date of joining and wage structure
• Appointment letters and policies for leave, overtime and fixed-term staff
• State registration numbers for professional tax and shops and establishments
• Records of contractors and any inter-state migrant workers

A worked example

A Bengaluru subsidiary of a St. Charles software firm hires 12 employees, two of them on one-year fixed-term contracts. The company has 10 or more employees, so ESIC applies without any "notified area" test, although the scheme's wage limits still decide which employees are covered. It requests EPFO and ESIC numbers and Karnataka professional tax registration when it files SPICe+. Appointment letters set out pay and social security. The fixed-term staff become eligible for gratuity after a year of continuous service, so finance accrues for it from day one. Overtime is paid at no less than twice the normal rate.

Mistakes to avoid

• Assuming the old state thresholds still decide ESIC coverage
• Treating fixed-term staff as outside gratuity and benefit rules
• Forgetting professional tax in states that levy it, or registering in the wrong state
• Running payroll before EPFO and ESIC numbers are in place
• Mixing up central codes and state rules without local advice

How we can help

From Aurora, Illinois, we run U.S. payroll and employer compliance and advise how Indian staff costs, bonuses and equity affect the U.S. parent's books and tax return. Your Indian Chartered Accountant or labour counsel handles EPFO, ESIC, professional tax and shops filings, and we coordinate so figures agree across countries. See payroll and employer compliance and bookkeeping and accounting. Browse the full India: Tax and Compliance section.

Frequently asked questions

General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.