There are numerous labour rules in India that businesses must comply with. Labour laws vary from industry to industry, from region to region, and by the type of workforce. The companies that work in more than one state have to deal with central codes and state regulations. The first challenge is figuring out which laws apply based on the type of firm, leading to a high volume of labour law queries in India. In addition to that, enforcement is also inconsistent, and antiquated procedures, regulation overlaps, and innovative workforce models such as remote and freelance work usually undermine compliance.
Companies need to be proactive and vigilant to stay up to date with the ever-changing labour regulations. To make this complex landscape easier to navigate, we’ve compiled answers to the top ten most frequently asked labour law queries that businesses face.

1. What is the Minimum Wage requirement, and does it differ across states?

The Minimum Wages Act, 1948, governs India’s minimum wage and minimum wage compliance. It requires companies to pay employees a certain amount of money in such a way that it provides a minimum standard of living. It consists of basic pay plus allowance, like Variable Dearness Allowance (VDA), House Rent Allowance (HRA), or any other special allowance.

And yes, minimum wages vary widely among states and union territories, commensurate with local economic conditions, cost of living, and nature of industry. The respective state governments decide and modify their own rates of minimum wages, which can differ by level of skill (unskilled, semi-skilled, skilled, highly skilled), urban or rural area, and nature of employment.

For example, in early 2025, unskilled labour in Delhi costs around INR 695 per day, while in other states it may range from INR 250 to over INR 700 per day, based on the state and skill. Since minimum wages are revised from time to time, usually in April and October, twice a year, businesses have to keep monitoring regularly to be compliant.

2. Which businesses must comply with PF & ESI regulations, and what are the thresholds?

Provident Fund (PF) is mandatory for organizations with 20 or more workers. Small organizations can voluntarily register, but there is no compulsion according to the law. PF for employees receiving up to INR 15,000 per month is compulsory. Employees receiving above this amount can contribute voluntarily with the approval of the employer. Part-time and full-time workers are both counted in the 20-worker threshold.

Employees’ State Insurance (ESI) applies to organizations with 10 or more employees (20 employees in a few states). ESI covers employees with wages of up to INR 21,000 per month (INR 25,000 for employees with disabilities). All employees with wages up to this level need to be covered, whether on a part-time or full-time basis. Employees getting an average day wage of up to INR 176 (round figure) are exempted from employee contribution, but the employer is required to contribute.

As per PF and ESI compliance, businesses must file PF monthly returns on or before the 25th of next month and ESI returns on or before the 21st of next month.

Employer vs. employee contribution details

Contribution Type	PF Contribution	ESI Contribution
Employer Share	12% of basic wages + DA	3.25% of gross wages
Employee Share	12% of basic wages + DA	0.75% of gross wages (exempt if daily wage ≤ ₹176)
Wage Ceiling	₹15,000 per month (for mandatory PF)	₹21,000 per month (₹25,000 for disabled employees)

3. How do I comply with the PoSH (Prevention of Sexual Harassment) guidelines?

PoSH guidelines in India states that all companies having ten or more employees, full-time, part-time, interns, or contractors, are covered under the PoSH Act, irrespective of their geographic location or type of business. Businesses often raise labour law queries regarding how to properly implement these requirements. To ensure PoSH compliance, companies need to develop and implement a comprehensive policy that defines sexual harassment, outlines complaint and investigation procedures, maintains confidentiality, and outlines preventive measures.

Formation of an Internal Complaints Committee (ICC)
Organizations must have an Internal Complaints Committee (ICC) to hear and resolve complaints of sexual harassment. The ICC will be tasked with conducting investigations, ensuring confidentiality, making recommendations, and submitting an annual report on complaints and disposal.

The ICC should have at least four members:

• A presiding officer who is a senior woman employee.
• At least two other employees are committed to gender sensitization.
• One external member from an NGO or a person with knowledge about matters related to sexual harassment.

Organize and conduct regular awareness and sensitization sessions to inform employees of their rights, the PoSH policy, complaint procedures, and the value of a safe workplace.

4. What are the legal working hours and overtime rules?

According to the Factories Act, 1948, the daily working hours for an adult worker must not extend beyond 9 hours, and for a week, they must not extend beyond 48 hours (Section 51). The spread over the whole (including rest intervals) should not cover more than 10.5 hours a day, which may be extended up to 12 hours with special sanction by the Chief Inspector of Factories (Sections 51, 56). Employees should be provided with a break period of not less than 30 minutes after each 5 hours of work (Section 55). Typically, one day in a week (usually Sunday) is a holiday, but substitutions are allowed with proper notice (Section 52). In the case of night shifts that run past midnight, the day is considered from the conclusion of the shift (Section 57).

According to the Shops and Establishments Act, working hours vary by state but generally align with the Factories Act, with a maximum of 9 hours per day and 48 hours per week. Rest intervals and weekly holidays are mandated similarly.

Overtime rules
Overtime is applicable when an employee works more than 9 hours in a day or 48 hours in a week (Section 59). Overtime wages must be paid at twice the ordinary rate of wages (Section 59). The maximum permissible overtime is 4 hours per day, with a total of 48 hours per month and 75 hours per quarter (Section 65). No employee should work overtime for more than 7 consecutive days (Section 65). Overtime for female workers requires express approval from the authorities (Section 65).
The employer is required to keep a Register of Overtime (Form XXIII) that lists employee names, working hours, and calculations for overtime (Rule 79). Working hours and shift notices must be displayed and kept in accordance with Sections 58 and 108(2) of the Factories Act. Maintaining correct records ensures compliance and allows for labour authorities’ inspection.

5. How to correctly calculate Gratuity for employees?

Employees are eligible for gratuity after serving a minimum period of 5 continuous years in the same employer’s service. Gratuity can be paid on death, resignation, retirement, or termination. The tenure is rounded up to the next full year for calculation if the employee has served for over 6 months within the previous one-year period. For instance, 10 years and 7 months are equal to 11 years, whereas 10 years and 4 months are equal to 10 years.

Gratuity calculation methods:

If the employer is covered under the Gratuity Act

Gratuity = 15 X Last Drawn Salary X Years of Service /26

Here, 26 is the number of working days in a month (excludes weekends).

If he is not covered under the Act,

Gratuity = 15 X Last Drawn Salary X Years of Service / 30

Here, 30 is the total calendar days in a month.

6. What are the essential statutory registers businesses must maintain?

Register Name	Relevant Section(s)	Purpose/Details
Register of Members	Section 88	Records details of shareholders, their shareholdings, and transfers.
Register of Debenture Holders	Section 88	Contains details of debenture holders and their holdings.
Foreign Register	Section 88	For members, debenture holders, or beneficial owners residing outside India.
Register of Significant Beneficial Owners	Section 90	Identifies individuals with significant control or ownership over the company.
Register of Renewed and Duplicate Share Certificates	Section 46	Tracks reissued or duplicate share certificates.
Register of Sweat Equity Shares	Section 54	Details of sweat equity shares issued.
Register of Employee Stock Options	Section 62	Records allotment and details of employee stock options.
Register of Shares or Securities Bought Back	Section 68	Details of shares or securities repurchased by the company.
Register of Deposits	Section 74	Records of deposits accepted by the company.
Register of Charges	Section 85	Details of charges/mortgages created on company assets.
Register of Directors and Key Managerial Personnel	Section 85	Contains information about directors and KMPs, including their shareholdings.
Register of Loans, Guarantees, Security, and Acquisitions	Section 186	Records loans given, guarantees provided, and acquisitions made by the company.
Register of Investments Not Held in the Company’s Name	Section 187	Details of investments held beneficially by others on behalf of the company.
Register of Contracts or Arrangements in which Directors are Interested	Section 189	Records contracts where directors have a personal interest.

The Companies Act, 2013 and supporting rules allow digital maintenance of statutory compliance and registers, subject to the condition that they are available at the registered office and can be printed in physical form when needed. Keeping both digital and physical copies wherever possible is recommended to facilitate compliance and inspection.

Failure in the maintenance or the renewal of statutory registers, when required, can lead to fines and penalties, which vary under law but could be substantial. A default under the Companies Act can invite a fine of up to INR 1,00,000 and further fines up to INR 5,000 for each defaulting day running.

7. Is compliance mandatory for contract workers hired through vendors?

So far as contract labour compliance is concerned, the Contract Labour (Regulation and Abolition) Act, 1970 says that the contractor (vendor) is primarily responsible for providing a safe working environment for the contracted workers and for paying wages and statutory benefits.
The principal employer (business engaging the contractor) also holds significant legal responsibilities and liabilities:

• Should make sure the contractor is licensed and in accordance with labour laws, and should renew it promptly.
• Responsible for providing basic welfare amenities (drinking water, restrooms, first aid) at the workplace.
• Responsible for regular audits of the contractor’s compliance with statutory obligations such as minimum wages, timely payment, social security contributions, and safety norms.
• Handle the copies of contractor licenses, registration certificates, wage payment records, and annual returns (Form XXV) submitted by the contractor.
• Should not use contract labour for core activities reserved for permanent employees.
• Has the authority to recover unpaid wages from the contractor in case of default.
• Make surprise visits and employee interviews to monitor compliance and respond to complaints promptly.

The principal employer can be held liable to pay wages and statutory dues if the contractor defaults. The contractor and the principal employer face the risk of cancellation of licenses, affecting business continuity.

8. What happens if my business doesn’t comply with Labour Laws?

Companies can be slapped with sizable fines of INR 50,000 for initial wage breaches to as much as INR 50 lakhs for grave offences of safety or recurrent breaches under the new Labour Codes. One of the labour law penalties is that the employer may be imprisoned for a maximum of 3 years for severe violations such as withholding wages, indifference to workplace safety, or repeated violations. The operating licenses may be suspended or withdrawn, leading to the closure of businesses, especially in cases of wilful non-compliance. Employers face lawsuits, labour court proceedings, and expensive litigation by employees, trade unions, or government authorities.

Non-payment of minimum wages or overtime results in fines and interest on unpaid dues. Hazardous workplaces resulting in accidents can attract fines of up to INR 2 lakhs per offense and imprisonment for two years. Failure to keep proper employee records can invite fines of up to INR 50,000, with further penalties for defaulting repeatedly.

Example: A Maharashtra factory was fined INR 5 lakhs for not paying contract workers their minimum wages, followed by a strike by the workers. Likewise, an IT company in Bengaluru was fined INR 20 lakhs for not depositing PF contributions, resulting in lawsuits by employees.

9. Do remote or hybrid employees fall under the same labour compliance rules?

In India, remote and hybrid workers are typically subject to the same labour law compliance requirements as office-based workers. The government’s recommendation and the new Labour Codes make it clear that remote work arrangements do not exempt employers from legal obligations to provide social security, minimum wages, work safety, and working hours.

But because remote workers work in various locations – most times, their homes are across different states, the employers have to take into account the labour laws that apply where the employee physically works (i.e., his/her home state). This includes Shops & Establishments Acts, professional tax, labour welfare funds, and other state-specific rules that apply where the employee actually works.

Have a centralized system for monitoring compliance with labour laws in various states where remote employees are based. Host online training sessions on labour rights, company policies, and compliance regulations specific to remote employees.

10. How can technology simplify labour law compliance management?

Compliance technology solutions support streamlining reporting and tracking of compliance by saving as much as 40% of time being wasted on repetitive processes, as indicated by Deloitte surveys. These include notifications of regulations, overtime calculations, and tracking wage payments. Advanced software provides timely insight into the status of compliance, and also detects likely violative acts before they are found to be unlawful. These tools also help address common labour law queries by automating the notifications of regulation changes, calculation of overtime, and tracking wage payments.

With fewer fines and simpler processes, organizations employing compliance software have 30% lower compliance expenses. With fewer human errors, automation enhances reporting compliance accuracy by 25% over manual processes. There are numerous digital tools in the market, such as Zoho People, Deputy, Procloz, and many more, which make labour law compliance management easier.

Key features businesses should look for

Feature	Description
Regulatory Updates	Automated alerts for modifications in central and state-level labour laws.
Payroll Integration	Smooth integration with payroll systems to ensure wage compliance and tax deduction.
Digital Record Management	Storage of employee documents, contracts, and statutory submissions in a secure manner with easy retrieval.
Customizable Dashboards	Compliance metrics monitoring real-time dashboards across various locations.
Audit Support	Tools to generate reports and maintain audit-ready documentation.
AI-Powered Insights	Predictive analytics for detecting probable risks and suggesting rectification.
Multi-State Compliance	Support for state-specific labour laws, especially critical for businesses with dispersed employees.

Conclusion:

Compliance can be difficult due to the complexity of labour law regulations that keep changing. Businesses often face recurring labour law queries while juggling the regulatory changes. With the help of expert compliance services, including comply360°, firms can simplify the process.

comply360° helps firms navigate the complex regulatory landscape, minimize risk, and streamline compliance procedures with its extensive expertise in labour law compliance and tailored solutions. Whether it is managing day-to-day labour law queries or addressing complex compliance issues, comply360° always ensures you are a step ahead.

Partner with comply360° to prioritize employee care and corporate growth while ensuring compliance with changing labour regulations. Contact us today to protect your business and create a workplace that thrives on trust and compliance.