India — Hiring & Payroll Setup

An establishment hiring employees in India triggers two principal payroll-registration obligations when it crosses specified employee thresholds: Employees' Provident Fund (EPF) registration under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and Employees' State Insurance (ESI) registration under the Employees' State Insurance Act, 1948. Both are administered centrally but impose distinct contribution, registration, and compliance burdens from the first month of coverage.

## EPF registration: 20-employee threshold

The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act) applies to every establishment that is a factory engaged in any industry specified in Schedule I of the Act and employing 20 or more persons, and to any other establishment employing 20 or more persons or class of establishments that the Central Government notifies by gazette (Section 1(3)(a) and (b)). Once an establishment employs 20 or more persons on any single day, coverage is mandatory; the employer must register with the Employees' Provident Fund Organisation (EPFO) and begin deducting and remitting monthly contributions for all eligible employees.

The 20-employee count is assessed across all branches and departments of the establishment, whether co-located or geographically separate. Section 2A of the EPF & MP Act declares that where an establishment consists of different departments or branches in the same or different places, all such units are treated as parts of a single establishment for threshold purposes. The obligation persists even if headcount later falls below 20; Section 1(5) provides that "an establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty."

Registration is completed online through the EPFO Unified Portal (unifiedportal-emp.epfindia.gov.in) or the Shram Suvidha Portal (shramsuvidha.gov.in), a common gateway for both EPF and ESI registration. The employer provides establishment details (name, PAN, address, incorporation documents, factory license if applicable, and MSME or Startup India registration details if relevant) and uploads digitally signed documents. Upon verification, EPFO issues a unique 17-digit Establishment Code Number (the PF code), which the employer uses for all subsequent monthly Electronic Challan-cum-Return (ECR) filings and contribution remittances. There is no registration fee.

Contribution mechanics are governed by Sections 6, 6A, and 6C of the Act. The employee contributes 12% of "basic wages, dearness allowance, and retaining allowance" (if any), and the employer contributes 12% of the same wage base—of which 8.33% is diverted to the Employees' Pension Scheme (EPS) under Section 6A and the remaining 3.67% credited to the employee's EPF account. The employer also contributes up to 0.5% to the Employees' Deposit Linked Insurance (EDLI) Scheme under Section 6C (the precise percentage is set by Central Government notification; historically 0.5%). Monthly contributions and the ECR are due by the 15th of the following month; late remittance attracts interest under Section 7Q and damages under Section 14B.

## ESI registration: typically 10 employees, state notifications vary

The Employees' State Insurance Act, 1948 (ESI Act) mandates registration for factories and establishments once they meet a specified employee threshold. Under the central framework and most state notifications issued under Section 1(5) of the ESI Act, the threshold is 10 or more persons employed; however, the Act permits state governments to notify different thresholds or covered establishment classes, and some states retain a 20-employee threshold or apply ESI only to certain classes of establishments. Employers should verify the applicable threshold in the state where the establishment is located by consulting the official ESIC area notifications (published on esic.gov.in). Coverage applies to employees earning up to ₹21,000 per month in gross wages (₹25,000 for persons with disabilities). ESI provides medical, sickness, maternity, disablement, and dependent benefits; it is administered by the Employees' State Insurance Corporation (ESIC), an autonomous body under the Ministry of Labour and Employment.

The employee count triggering ESI liability is assessed on any single day in the preceding 12 months. If the establishment crossed the applicable threshold even for one day, ESI registration becomes mandatory within 15 days from that date (this timeline is specified in ESIC procedural guidance and reflected in the online registration portal). Non-registration can trigger backdated liability: ESIC may demand contributions from the date the Act first became applicable, plus interest and penal damages for the gap period.

ESI registration is conducted online through the Shram Suvidha Portal or the ESIC employer portal (esic.gov.in). The employer logs in, selects "Registration Under EPF-ESI" if using the common portal, and completes the employer registration form (referred to in ESIC materials as Form 01). Upon verification and submission, ESIC issues a 17-digit ESI Code Number and a C-11 registration certificate by email, which serves as proof of registration.

Contribution rates are set by the ESI (Central) Rules: the employer contributes 3.25% of gross wages (up to the ₹21,000 ceiling per covered employee) and the employee contributes 0.75%. Monthly contributions are due by the 15th of the following month. Half-yearly Return of Contributions (RC) filings are due by November 12 (for the April–September contribution period) and May 12 (for the October–March period). Late or non-payment attracts 12% per annum simple interest on each day of delay; willful default or false reporting can result in imprisonment up to two years and fines up to ₹10,000 under Sections 85 and 85-A of the ESI Act (these penalty sections are referenced in ESIC compliance materials and codified in the ESI Act).

## Common registration portal and contractor compliance

Since 2016, both EPF and ESI registrations have been integrated into the Unified Shram Suvidha Portal, allowing a single online submission for establishments subject to both laws. The employer selects "Common Registration for EPFO & ESIC," completes the common form, and uploads the same set of establishment documents (PAN, incorporation certificate, address proof, factory license or Shops and Establishment Act registration if applicable, GST certificate, and Memorandum and Articles if a company). Digital Signature Certificates (DSC) are mandatory for online submission and for all subsequent ECR and challan filings under EPF; ESIC also permits e-Sign via Aadhaar in certain workflows.

Employers must distinguish principal employer obligations from contractor obligations where contract labor is engaged. Under both the EPF & MP Act and the ESI Act, the principal employer is responsible for ensuring that contractors enroll and remit contributions for contract employees. The principal employer should verify contractor compliance monthly via the Establishment Search tool on the EPFO website (epfindia.gov.in, under "Our Services > For Employers > Establishment Search") before releasing contractor invoices.

Voluntary registration below the threshold is permitted under both Acts. Establishments with fewer than 20 employees (EPF) or fewer than the state-notified ESI threshold may apply directly to EPFO or ESIC for voluntary coverage. Section 1(4) of the EPF & MP Act allows the Central Government to apply the Act to any establishment by notification if the employer and majority of employees agree. Voluntary coverage, once granted, typically cannot be withdrawn.

Geographic scope: ESI coverage is limited to notified areas—establishments in regions where the ESI Act has not been implemented are exempt even if they exceed the employee threshold. EPF coverage is nationwide without geographic limitation. ESIC publishes state-by-state area notification details on its website; employers should confirm local applicability.

For a first-time employer in India, EPF and ESI registration—alongside GST registration, Professional Tax registration in applicable states, and state Shops and Establishment Act compliance—constitute the foundational payroll compliance layer. Missing or delayed registration exposes the employer to retrospective contribution liability, compounding interest, and penalties that can exceed the face value of the contributions owed.

Source: Employees' Provident Funds and Miscellaneous Provisions Act, 1952, Sections 1(3)(a), 1(3)(b), 1(4), 1(5), 2A, 6, 6A, 6C, 7Q, 14B, 17 Source: EPFO — For Employers: Applicability and Registration (Factories and establishments engaging 20 or more employees)

A foreign company hiring employees in India must carefully assess whether such hiring gives rise to a permanent establishment (PE) or a "business connection" under Indian tax law, thus triggering domestic tax filing and registration obligations. As of April 1, 2026, there have been two material developments practitioners must note:

1. Amendment to Section 9(1)(i) of the Income Tax Act Section 9(1)(i) continues to deem income as accruing or arising in India if it arises, directly or indirectly, through or from any business connection in India. However, the Finance Act, 2026 has inserted a new proviso to Explanation 2A, stating: "Provided that the transactions or activities of purchasing goods in India for the purpose of export shall not constitute significant economic presence in India." This provision is effective for assessment year 2026–27 onward. While this exclusion does not affect most employer–employee scenarios, it may narrow business connection exposure for foreign companies whose only in-country activity is purchasing goods for export (and not hiring staff to deliver services or conduct other business).

2. Withdrawal of CBDT Circular No. 1/2004 Previously, Circular No. 1/2004 provided extensive interpretative guidance on when IT-enabled BPO units and agent arrangements could constitute a PE or business connection. As of September 28, 2024, this Circular has been formally withdrawn by the Central Board of Direct Taxes (CBDT). Practitioners should no longer rely on its bifurcation of BPO scenarios or its attribution analysis. PE analysis now must revert to statutory language, relevant Double Taxation Avoidance Agreement (DTAA) definitions, and case law. The Section 9/Section 92F(iiia) frameworks for 'fixed place' and 'dependent agent' remain, but narrative examples or implied safe harbors from the withdrawn Circular are no longer controlling authority.

Statutory position (post-2026)

• Section 9(1)(i): Nonresident income is taxable if it arises through a "business connection" in India. The Income Tax Act does not define "permanent establishment" (PE) for all purposes; it defines PE at Section 92F(iiia) solely for transfer pricing.
• If a tax treaty (DTAA) applies, the PE definition in Article 5 of the treaty supersedes domestic law (Section 90(2)). Treaty-based 'service PE' clauses frequently attach on the basis of days worked in India, but the statute is silent on specific day-count tests—practitioners must consult the DTAA.
• The threshold for PE remains fact-specific: having an employee with a fixed place of business in India or who acts as a dependent agent (habitually concluding contracts or securing orders) can establish a business connection or PE, but the legal test is rooted in the specific DTAA and Section 9, absent further contemporary circular guidance.
• Service PE or Employer of Record (EOR) arrangements are not explicitly addressed by statute. The 2026 amendment does not affect employee hiring but confirms that simple purchase-for-export does not create sufficient nexus for income tax exposure.

Authoritative sources Source: Income Tax Act, 1961, Section 9(1)(i)—amended by Finance Act, 2026 Source: Withdrawal of CBDT Circular No. 1/2004 (Circular No. 5/2004, dated 28 September 2024) Source: Income Tax Act, 1961, Section 92F—definition of permanent establishment (transfer pricing only)

Human confirmation: Not yet human confirmed. This update reflects statutory and administrative developments through June 2026. Practitioners must interpret PE/business connection in India by direct reference to the post-2026 statute and the controlling DTAA, as no current CBDT interpretative circular applies.

Update as of June 2026:

The statutory requirement under Section 6(1)(f) of the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code), for every employer to issue a written appointment letter to all employees, remains in force. A regulatory clarification was issued with the notification of the Occupational Safety, Health and Working Conditions (Central) Rules, 2026 on May 8, 2026.

Key compliance points per OSH Code and Central Rules:

• Appointment letter requirement: Section 6(1)(f) of the OSH Code requires every employer to provide each employee a written appointment letter stating the terms of employment.
• Prescribed format and content: The Central Rules, 2026 prescribe a format and minimum content for such appointment letters (including employee identification, term, wage details, and other material terms), effective for all central-sector establishments and serving as a model until state-specific rules are notified.
• Timing of issuance: As per the Rules, the appointment letter must generally be issued prior to the employee commencing work.
• Retrospective duty: Employees already engaged before OSH Code commencement (November 21, 2025) should be issued letters in the prescribed form within the transition period stated in the Rules.
• Universal scope: All covered establishments, regardless of size, must comply. Employers in states without notified local rules are expected to follow the Central format until superseded.

Penalties for non-compliance are provided in OSH Code §93 and may include imprisonment or fine.

Summary: The OSH Code Section 6(1)(f) appointment-letter obligation is live; the 2026 Central Rules remain the current prescribed authority for format and timing in the absence of state-specific rules.

Source: Occupational Safety, Health and Working Conditions Code, 2020, Section 6(1)(f) Source: Occupational Safety, Health and Working Conditions (Central) Rules, 2026, Rule 6 and relevant Schedule

Material update as of May 2026:

The Code on Wages, 2019 (enforced nationwide from July 1, 2022 by S.O. 2795(E)), remains the foundational statute for wage compliance, requiring universal minimum wage, statutory wage structure, and detailed payroll record-keeping for all Indian employers. However, on 8 May 2026, the Indian Government officially notified the Code on Wages (Central) Rules, 2026, which now operationalize, specify, and in some areas expand compliance requirements for all covered employers. These Central Rules are in force from their notification and must be read in conjunction with the 2019 Code.

## Key changes and statutory obligations post-2026

1. Minimum wage fixation and calculation methodology clarified: The 2026 Central Rules establish detailed procedures for fixing, reviewing, and revising minimum wages (including cost-of-living allowance indexation, skill/occupation category mapping, and special allowances). The wage period must not exceed one month, and detailed conversion formulas (monthly to hourly/daily rates) are now mandatory in payroll calculations. Minimum wage notifications—both central and state—must be monitored on the Ministry of Labour & Employment portal, with employers bound to apply the higher rate in cases of overlap (Section 8(4) of the Code, reaffirmed by Rule 11 of 2026 Central Rules).

2. Wage structure: 50% wage composition rule enforced The Section 2(y) wage definition and minimum 50% "basic wage" content rule remain enforced. However, the 2026 Rules clarify wage breakup and define which payments are included/excluded with examples, closing potential loopholes around allowances and CTC structuring. Employers must strictly ensure that excluded allowances (HRA, bonus, etc.) do not exceed 50% of total remuneration—any excess is automatically added back to "wages" for Provident Fund, gratuity, and ESI calculations. Central and state authorities have been directed to align enforcement and inspection to these rules.

3. Payslip and electronic record-keeping expanded Rule 59 and Form V (updated in the 2026 Rules) reiterate the obligation to issue payslips on or before wage payment date, with detailed fields covering all wage components, deductions, and leave. The 2026 Rules require all wage records to be maintained electronically (or physically as prescribed), with minimum content standards for registers and full accessibility to inspectors for at least three years from creation (Rule 56). There is no small establishment carve-out—all entities with even one employee must comply.

4. Penalties, enforcement, and e-claims clarified Section 56 penalties (up to ₹50,000 for first violation, ₹3 lakh for repeat offenses) continue, but the 2026 Rules now require designated authorities to accept electronic wage non-payment/non-issuance claims via the central e-filing labour portal. Wage authorities must rule on claims within timelines prescribed by these new rules (typically 90 days for wage claims), enhancing speed of redressal.

Obligation summary: All employers must now comply with the Code on Wages, 2019 as clarified and expanded by the Code on Wages (Central) Rules, 2026, including new wage calculation, payroll structuring, payslip, and recordkeeping standards. Failing these duties exposes the employer to updated penalties and higher compliance risk.

Source: Code on Wages, 2019 — Minimum wage, wage definition and payroll record requirements, Sections 2(y), 6, 8, 50, 53, 56, 57 Source: Code on Wages (Central) Rules, 2026 — Wage calculation, structure, payslip and record formats, new enforcement mechanisms Source: Central Wage Code Rules, 2021 — historical wage slip format and pre-2026 recordkeeping duties

Professional Tax (PT) is a statutory payroll obligation levied by most Indian states and union territories under their respective Professional Tax Acts or State Finance Acts. There is no central statute: every state sets its own slab rates, registration triggers, exemptions, and remittance deadlines. A foreign or domestic employer hiring its first employee in India must check the PT status in the establishment's state—PT applies in, for example, Maharashtra, Karnataka, West Bengal, Tamil Nadu, Telangana, Gujarat, Madhya Pradesh, Odisha, Andhra Pradesh, and several others, but not in Delhi, Haryana, Uttar Pradesh, or Rajasthan as of 2026.

## Who is liable: employer registration threshold and coverage

Employers are required to register for PT when they hire their first salaried employee in a state where PT is in force, regardless of the size or constitution of the business (company, LLP, partnership, branch, or even as an employer-of-record). Registration is usually mandatory within 30 days of first liability (date of first salary payment). Professional Tax is deducted monthly from employee wages by the employer at state-notified slab rates (often varying by salary band and capped at ₹2,500 per annum, as per Article 276 of the Constitution), and the employer must remit the collections to the state government. In addition to deducting employee PT, many states also assess a fixed annual PT on the employer entity itself, requiring a separate "Enrollment Certificate" (EC, for the entity) and a "Registration Certificate" (RC, for deducting and remitting employee PT).

## Example process: Maharashtra

In Maharashtra (Bombay Shops and Establishments Act, as amended; Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975), an employer with one or more employees in Maharashtra must obtain:

• A Registration Certificate (RC) within 30 days of employing the first salaried worker (Section 5(1), Form I).
• An Enrollment Certificate (EC) within 30 days for the entity/PT payer itself (Section 5(2), Form II).

PT is deducted and remitted monthly for employees earning above the notified exemption threshold (as of 2026, typically ₹7,500 per month for women, ₹10,000 for men; max annual deduction per employee: ₹2,500). The employer pays flat PT for the entity (₹2,500 per annum for most registered bodies). Returns and payments are made through the Maharashtra Goods and Services Tax Department portal. Delay in registration, deduction, or payment invites penalty interest (1.25% per month) and flat penalties under Section 5(5), Section 6(3), and Section 6(6). Similar frameworks apply in most states but with local detail (thresholds, forms, due dates).

## Registration workflow: documents and portal

• Register online with the applicable State Commercial Taxes/Professional Tax department.
• Submit business PAN, proof of constitution (incorporation certificate, partnership deed), address proof, employer/authorized person ID, and employee details (names, salaries).
• Obtain RC (for employee PT deduction) and EC (for entity PT liability, if applicable).
• Deduct PT from the first payroll cycle after registration and remit by the notified due date (often the 20th of the following month).
• File monthly/annual returns as prescribed by the state, with demand for late payment or returns strictly enforced at state level.

Absence of central coordination or harmonization means cross-border employers must consult the specific statute/rules and official tax portal of the state where their Indian workforce sits. As of June 2026, most states operate digital registration and e-payment portals with downloadable state acts, rules, and notifications.

Source: Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975 — Section 5 registration, Section 6 employer obligations (mahatmapro.gov.in))/user/manuals?frmname=Provisions_Profession_Tax_Act.pdf)

Every employer making salary payments in India—whether a domestic company or a foreign entity hiring directly—must register for a Tax Deduction and Collection Account Number (TAN) and, in most cases, a Permanent Account Number (PAN) to comply with withholding (TDS) and remittance obligations under the Income Tax Act, 1961. Failure to observe these prerequisites exposes the employer to interest, penalties, and risks under Sections 192, 203A, and 201(1A).

## PAN and TAN: Statutory basis, who must register

Section 139A of the Income Tax Act requires every person (including a company or firm) who is liable to deduct tax at source to apply for a PAN if not already allotted one and a TAN under Section 203A "before making any deduction." TAN is mandatory for any employer required to deduct TDS—including foreign corporations with a branch/permanent establishment in India making salary payments. Without a TAN, deposited TDS will not be properly credited to employee accounts: Rule 114A requires all TDS returns, challans, and certificates to quote the employer's TAN.

Employers hiring via an Employer of Record (EOR) model do not obtain their own PAN/TAN for payroll purposes; the EOR, as legal employer, is responsible for TDS compliance using its own registrations. This market practice is not specified in the Act but is widely followed.

## TDS withholding, deposit, and reporting workflows

Section 192 requires employers to deduct income tax at prevailing Finance Act slab rates from salaries at time of payment, after allowing for eligible deductions. The tax is calculated annually and withheld each month pro rata.

• Deposited TDS must reach the Central Government by the 7th day of the following month (Section 200; Rule 30), except for March, which is due by April 30.
• Quarterly returns detailing all deducted and deposited TDS (Form 24Q; Rule 31A) are due by the end of the month after each quarter.
• Each employee must receive a TDS certificate (Form 16; Rule 31) by June 15 following the financial year-end.

## Penalties and consequences

Late or failed deduction attracts interest: 1% per month for delay in deduction, 1.5% per month for late deposit (Section 201(1A)), plus penalties under Sections 271C and 272A. Persistent default can trigger prosecution under Section 276B.

The obligation to withhold, deposit, and report TDS is absolute: operational or technical delays in obtaining PAN/TAN do not relieve liability under the Act.

Source: Income Tax Act, 1961 — Sections 139A, 192, 200, 201(1A), 203A, 271C, 272A, 276B Source: Income Tax Rules, 1962 — Rule 30, Rule 31, Rule 31A, Rule 114A

Material updates as of June 2026:

Several major Indian states have enacted or notified significant amendments to their respective Shops and Establishments Acts since mid-2025. These amendments have altered core registration triggers, workflow, and employer obligations in key payroll jurisdictions. Key changes are summarized below; practitioners must confirm the precise statutory text, notification date, and applicability in the relevant state/language before relying on any specific requirement.

1. Repeal and replacement regimes

• Bihar: The Bihar Shops and Establishments Act was repealed via ordinance effective June 1, 2026, with registration and compliance now governed by the Occupational Safety, Health and Working Conditions (OSHWC) Code, 2020 and associated Central/State Rules. Separate Shops registration is no longer required where the OSHWC Code applies.
• Maharashtra: As of April 30, 2026, establishments covered by the OSHWC Code are deemed compliant for registration; separate S&E Act registration is no longer required for these businesses, but establishments below the OSH Code employee threshold (typically <10 employees) must still file an intimation under the state Act.

2. New and revised registration triggers

• Delhi: The threshold for mandatory Shops and Establishments Act registration has increased from "any" establishment to 20 or more employees under the Delhi Shops and Establishments (Amendment) Act, 2026 (effective March 11, 2026). Establishments below this threshold are now exempt from registration but remain subject to other obligations if they opt to register.
• Haryana: The 2025 Amendment Act (notified February 5, 2026; effective November 12, 2025) codified fully digital registration and mandates all employers to obtain registration upon commencement regardless of employee count. Digital renewal and stricter registration documentation have been codified; penalties for non-registration are increased.

3. Amended workflow, obligations, and penalties

• Gujarat: Via the 2026 Amendment Act (effective December 16, 2025), digital registration became mandatory, triggers were revised, and working hour/overtime rules were updated. Employers must use the updated state portal and provide enhanced documentation.
• Rajasthan: Revised by amendment effective December 17, 2025, with new definitions for "adult," "child," daily hour limits, overtime rules, and a streamlined compliance workflow.

4. Cross-state obligations and national registration There is no nationally harmonized Shops and Establishments registration—every state continues to operate its own act, portal, and regulatory regime, despite the operationalization of the central OSHWC Code in some states. Practitioners must still check both central (OSHWC Code, for larger establishments) and state law (for smaller, non-factory, or sectorally-excluded workplaces) in every jurisdiction.

5. Recommended current process (June 2026)

• Confirm the relevant statute and notification in each state. If the establishment is above the local OSH Code threshold, verify if the Shops and Establishments Act has been repealed/replaced (as in Bihar or Maharashtra for larger workplaces).
• For other states (including Karnataka, Tamil Nadu, Telangana, West Bengal, and most others), the underlying trigger ("first hire," "commencement of business," or specific thresholds) and documentation for online registration largely follows the pattern described in the prior version, but users must check the local statute and latest notifications for any post-2025 change.

Failure to register, renew, or update details within the prescribed period (typically 30 days of commencement/hiring/trigger) continues to attract fines and compounding penalties, with amounts and enforcement varying state by state.

Sourcing for major regimes: Source: Unable to confirm official gazette link for Bihar repeal/OSHWC notification as of 2024-06-17. Source: Maharashtra Govt. S&E/OSH registration overlap—Labour Dept. RTS services portal Source: Delhi Shops and Establishments Act, 1954, as amended—official Labour Department page Source: Unable to confirm relinked Haryana, Gujarat, and Rajasthan Labour Department statutes as of 2024-06-17—review local notifications/portals for latest text.

This section has been materially revised for jurisdiction-specific accuracy as of June 2026. See above for any citation that could not be relinked due to unavailable or reorganized primary-official URLs as of this update.

Establishing a legally recognized entity remains the foundational requirement for any foreign or domestic employer intending to hire direct employees in India (outside of the Employer of Record/EOR model). The default route is registration of a private limited company under the Companies Act, 2013. Core employer registrations (PAN, TAN, GST, bank account) can only be secured post-incorporation, using the workflow set by the Companies (Incorporation) Rules, 2014, as administered through the MCA’s SPICe+ online form and services.

Updated stepwise incorporation and documentation process (as of June 2026):

1. Digital Signature Certificate (DSC): Every proposed director must hold an active Class 3 DSC, obtained from a government-licensed Certifying Authority and renewed as per prevailing IT Act/Certifier rules (Rule 8, Companies (Incorporation) Rules, 2014).

1. Director Identification Number (DIN) and revised Director KYC: At least one first director must have a DIN, allotted via the SPICe+ incorporation form. Material amendment (March 31, 2026): MCA amended Rule 12A of the Companies (Appointment & Qualification of Directors) Rules (G.S.R. 943(E), 2025), replacing the prior annual DIN KYC with a single mandatory KYC intimation every three years (or as otherwise notified). This change eliminates the previous annual KYC filing cycle for all DIN holders.

1. Name reservation (SPICe+ Part A): Reserve a unique company name via SPICe+ Part A. Name must comply with Rule 8 standards of distinctiveness and not infringe existing companies or trademarks.

1. SPICe+ Part B — Incorporation application & documents:

• Drafted Memorandum of Association (MOA) and Articles of Association (AOA)
• Proof of registered office (lease/sale deed, recent utility bill <2 months old)
• Self-attested ID/address proof and passport photo for all proposed directors
• NOC from property owner (if not owned by the company)
• Digital signatures per protocol. All documents must be uploaded in prescribed electronic format.

1. PAN and TAN: Application for company PAN and TAN is integrated into SPICe+; numbers are issued by the Income Tax Department alongside the Certificate of Incorporation (per Sections 139A and 203A of the IT Act, 1961).

1. GST registration: Optionally included in SPICe+ if projected turnover exceeds GST threshold or inter-state supplies are anticipated. Requires additional company and director KYC proofs reviewed post-approval (GST Act, 2017, Section 22).

1. Opening employer bank account: Enabled with Certificate of Incorporation, issued PAN, and company constitutional documents. Bank documentation is governed by Reserve Bank of India and individual bank KYC policy; not directly prescribed by the Companies Act.

Once incorporation is completed online, the employer entity can proceed to state-level registrations (Professional Tax, Shops and Establishments) and labour registrations (EPF/ESI) as detailed in other sections of this guide.

LLP incorporation path: Limited Liability Partnerships follow a parallel route via the LLP Act, 2008, with a distinct workflow and document set. See the MCA portal for current detail.

As of June 2026, the above process incorporates all statutory and regulatory amendments relevant for first-time employer entity setup, including the shift in director KYC obligations to a once-in-three-years cycle.

Source: Companies Act, 2013; Companies (Incorporation) Rules, 2014 — Incorporation procedure and document requirements Source: Ministry of Corporate Affairs — SPICe+ Guide and Services workflow, including integrated PAN/TAN/GST application Source: Companies (Appointment & Qualification of Directors) Amendment, G.S.R. 943(E), December 31, 2025 — Director KYC cycle

The Payment of Gratuity Act, 1972 imposes a statutory obligation on covered Indian employers to pay a lump-sum gratuity benefit to employees who leave service after at least five years of continuous employment. For any business setting up payroll in India, understanding the coverage trigger, payment formula, and registration duties under the Act is critical: non-compliance exposes the employer to penalty interest and prosecution under Sections 7 and 9.

Applicability and coverage triggers Section 1(3) provides that the Act applies to every factory, mine, oilfield, plantation, port, and railway company, and to "every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months." Once the 10-employee threshold is crossed on any single day in the past twelve months, the Act applies. Section 1(3A) states that coverage continues even if the number of employees later falls below ten—this is a reading of the law, not an explicit guarantee. The Act applies to full-time, part-time, piece-rate, and fixed-term employees. It does not explicitly address Employer of Record arrangements or foreign companies, but the statutory obligation attaches to the entity recognized as the employer under Indian law for the covered establishment.

Registration requirement Every employer to whom the Act applies is required to submit an application for registration to the designated controlling authority (usually the State Labour Commissioner or, for central establishments, the Regional Labour Commissioner) in the prescribed form (Form A, Payment of Gratuity (Central) Rules, 1972). The Act requires this registration to be completed within 30 days of the Act becoming applicable to the establishment (Rule 3(1)). Central and State rules/processes may vary; the cited rule and form are for central establishments.

Gratuity payment formula and timing Section 4(2) prescribes that gratuity is payable on termination of employment after five years of continuous service (waived in the case of death or disablement per Section 4(1)), calculated as: gratuity = 15 days’ wages for each completed year of service (or part in excess of six months), with “wages” defined to include basic and dearness allowance. There is a maximum cap as notified by the Central Government from time to time; the precise rupee amount should be checked against the current notification, as the Act does not fix a figure. Payment must be made within 30 days from the date it becomes payable (Section 7(3)); Section 7(3A) requires payment of simple interest at the rate as notified by the central government for any delay.

Consequences of non-compliance Failure to pay gratuity is an offence punishable under Section 9, with imprisonment up to two years and/or fine up to ₹100,000 for avoiding or denying payment. The controlling authority is empowered under Section 7 to direct payment, order interest, and enforce compliance; such orders are executable as court decrees.

Source: Payment of Gratuity Act, 1972, Sections 1, 4, 7, 9 Source: Payment of Gratuity (Central) Rules, 1972 — Registration and Form A (Rule 3)

The Maternity Benefit Act, 1961 (as amended) creates a binding obligation for every employer in India with ten or more employees in any shop, establishment, or factory to provide statutory paid maternity leave and comply with specific recordkeeping and reporting requirements. The Act applies to direct hires, and to workplaces employing workers through contractors, regardless of entity form. Coverage begins once the establishment reaches the threshold of ten or more persons “employed on any day of the preceding twelve months” (Section 2), and remains in force even if headcount later drops below this level. The Act operates alongside the Employees’ State Insurance Act, 1948 (ESI Act): where ESI applies and the employee qualifies for ESI maternity benefit, those rules prevail; otherwise, the Maternity Benefit Act takes precedence (Section 2(2)).

Employers must:

• Grant paid maternity leave as provided by Section 5 (26 weeks for eligible women; 12 weeks if two or more surviving children).
• Maintain registers and records in the prescribed form and manner (Section 11), available for inspection by the appointed inspector (Section 14). Forms and record formats are published in the statutory schedules and vary by state government rule.
• Submit required reports and returns, including the annual return in Form K and notices in Forms I and J, as required by Section 7 and relevant rules. The precise schedule and submission method is set by the appropriate government (state or central) and detailed in rules rather than the central Act itself.
• Give notice to employees of their rights under the Act as prescribed (Section 19).

Employers should review the full text of the Act and any state-specific rules for precise documentation and reporting instructions. The Act itself does not create a unified online registration requirement; reporting obligations are met via the prescribed registers and submissions defined in rules by each state or the central government.

Failure to comply—including non-payment of maternity benefit, failure to maintain registers, or non-submission of returns—exposes the employer to penalties of up to one year imprisonment and/or a fine up to ₹5,000, as set in Section 21.

Source: Maternity Benefit Act, 1961, as amended — Sections 2, 5, 7, 11, 14, 19, 21, and associated Forms

Every employer in India with ten or more employees—irrespective of entity type, sector, or presence of female employees—must comply with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH Act”). The POSH Act mandates constitution of an Internal Committee (formerly known as Internal Complaints Committee) to receive, investigate, and report on complaints of sexual harassment by women employees at the workplace. Failure to set up an IC is a statutory offence that can expose an establishment to regulatory penalties and complaints.

Threshold and timing: Section 4(1) of the POSH Act requires every workplace employing ten or more employees (full-time, part-time, fixed-term, contract, trainees, or interns—Section 2(f) and (m)), at any point in the preceding twelve months, to constitute an IC. This applies regardless of the gender composition; the obligation exists even if no female employee is currently on roll. The IC must be constituted within a reasonable time of reaching the threshold, and must be reconstituted if members leave or the chairperson is unavailable (Section 4(4)). The Act applies to all private-sector establishments, government offices, non-profits, and any place of work as defined under Section 2(o).

IC composition and procedural rules: Section 4(2)–(3) prescribes the IC’s structure:

• Presiding Officer: a senior woman employee.
• Minimum two members from employees (committed to women’s welfare).
• One external member (from an NGO or someone with experience in women’s issues or legal knowledge).
• At least half the IC members must be women. The term is three years, and replacements are mandatory on attrition.

Once constituted, IC details must be communicated to all employees, and the IC must conduct itself in accordance with the procedures laid down in Sections 9–11 (complaint intake, inquiry, and reporting).

Employer duties: Section 19 lists key obligations:

• Display the consequences of sexual harassment at conspicuous places at the workplace.
• Organize training and awareness workshops at regular intervals.
• Submit annual report (Section 21) detailing complaints received, resolved, pending, and actions taken. For companies, the annual POSH compliance declaration is now a prerequisite for many state Shops and Establishments and Labour Welfare Board renewals; non-filing can trigger inspection (per Ministry of Women & Child Development guidance; individual state rules may specify online reporting, as in Maharashtra and Karnataka—always verify locally).
• Provide necessary facilities and resources to the IC to conduct inquiries and maintain confidentiality (Section 16). No employer retaliation is permitted against complainants or witnesses (Section 18(1)).

Consequences of non-compliance: Section 26 provides for fines up to ₹50,000 for first-time failure to constitute an IC or comply with the Act’s mandates, with higher penalties on repeated violations, and possible cancellation of license to operate for persistent default.

Registration/filing workflow: There is no central online registry for IC constitution. Employers must document the IC appointment order and keep it ready for inspection by labour authorities. Most states publish prescribed IC constitution templates and model workplace policies on their Labour Department portals. In Maharashtra and Karnataka, shops and commercial establishments may be required to upload IC details as part of licence renewals, per state notifications and online portal practices—verify the current workflow for your location as these details may change.

Cross-border context: Foreign employers hiring through a local entity or through an Employer of Record (EOR) are equally bound. The EOR, as statutory employer, must constitute an IC (if headcount threshold is met) and provide POSH compliance to deployed workers; the foreign client is not directly liable but should review the EOR’s compliance status as part of onboarding.

Source: Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 — Sections 2, 4, 9–11, 16, 18, 19, 21, 26

Effective May 8–9, 2026, significant changes under India’s labour regime directly affect statutory registration and wage compliance triggers for inter-state employee transfers and remote/hybrid work arrangements. The Ministry of Labour & Employment has notified the final Central Rules under all four Labour Codes—the Code on Wages, 2019, Social Security Code, OSH Code, and Industrial Relations Code. These rules operationalize a central, unified registration regime and introduce new obligations for employers with staff deployed outside their principal establishment’s state.

1. One Central Registration system and multi-state compliance The Central Rules implement a 'One Central Registration' model for all covered establishments, permitting unified online registration, licensure, and return filings through the Shram Suvidha Portal. Multi-state employers must complete electronic registration of every establishment (including branch office, project site, or any place where persons are employed) via Form I with supporting documents. The new regime eliminates duplicative state registrations under the four Labour Codes, but does not override state-level Shops & Establishments, Professional Tax, or sectoral acts—employers may face dual registration until states fully harmonize with the Central system. For remote/hybrid work, if an employee is routinely based in a location outside the principal establishment’s state, the location is treated as a branch or unit for central registration unless the arrangement is casual or occasional; the rules require tracking of all places of work for wage and social security compliance.

2. OSH Central Rules: specific provisions for inter-state work and remote deployments The OSH Central Rules (2026) expand establishment registration to cover any site or place where employees work (including remote office/home-office nodes when used as the principal work location). For inter-state migrant workers—defined as employees recruited and deployed in a state other than their home state—employers must now provide journey allowances and maintain a register of all inter-state deployments, with details available for labour inspector scrutiny. Appointment letters, annual health check protocols, and closure/displacement notifications are now universal for all establishments, regardless of inter-state activity level. Unambiguous statutory language clarifying whether a single employee’s remote home office requires separate registration is still lacking; central and state rules should both be checked in every case, and enforcement practice may still diverge until harmonization is complete. "Unable to confirm as of 2026-06-17" applies to statutory bright-line triggers for home office registration, but central registration for any routinely used remote site is now best practice.

3. Wage compliance and professional tax Code on Wages, 2019, Section 8(4) continues to mandate that the higher of central or state minimum wage rates apply to multi-state deployees; wage slips and payroll must reflect work location. Professional Tax remains a state subject; statutory clarity on remote/hybrid triggers is still state-specific—employers must check each state’s PT statute and notifications. The one-central-registration system streamlines—but does not eliminate—separate PT and Shops & Establishments registration where still required by state law.

Update summary:

• Material regime change: Central Rules under four Labour Codes and One Central Registration effective May 2026.
• Online Shram Suvidha registration now mandatory for all covered inter-state and remote deployments.
• Practical guidance favors registering any fixed remote work site used as a principal base.
• Bright-line triggers for remote/home office remain ambiguous in state statutes; central practice and best-practice compliance moving towards universal registration.

Source: OSH Central Rules, 2026 — Establishment registration, remote/hybrid definitions and inter-state worker protocols Source: India Labour Ministry — Notification of Central Labour Codes Rules, 2026 Source: One Central Registration System FAQ & workflow, Shram Suvidha Portal Source: Code on Wages, 2019, Section 8(4)

Labour Welfare Fund (LWF) registration remains a mandatory, state-level statutory requirement for employers hiring employees in several Indian states. There is no central LWF: each state’s regime is governed by its own act, with separate registration, thresholds, contribution rates, and remittance deadlines, as amended by local government notification. Material statutory updates have occurred in several major states, detailed below, and any prior guidance using older rates or thresholds should be updated.

## Coverage triggers and registration process (updated)

• Maharashtra: As of March 18, 2024 (Maharashtra LWF Amendment Act, 2024), every employer who becomes liable under the Maharashtra Labour Welfare Fund Act, 1953—including by hiring a single employee—must register with the Welfare Board and annually remit half-yearly contributions for all employees working in the state. Registration continues via the Board portal.
• Karnataka: Per the Karnataka Labour Welfare Fund (Amendment) Act, 2025, effective January 7, 2026, the LWF applies to establishments employing 10 or more persons (threshold lowered from 50), and mandates registration with the state Board within 30 days of liability.
• Haryana: Government Notification dated May 8, 2026 raised the monthly employee LWF contribution ceiling from ₹34 to ₹35 and employer’s from ₹68 to ₹70, effective for wages paid from January 1, 2026; the CPI-adjusted mechanism remains.
• Tamil Nadu: Remains applicable to all establishments covered by the state Act, with employer registration required on hiring employees (no recent threshold or rate change found through June 2026).
• Other states: No material changes found for Delhi, Uttar Pradesh, Rajasthan, or others as of June 2026. If a state is not cited above and no statute or board notification is locatable, statutory applicability is unconfirmed: Unable to confirm as of 2026-06-17.

## Contribution quantum and deadlines (updated)

• Maharashtra (per Amendment Act, 2024 Section 6BB): Employee contributes ₹25 and employer contributes ₹75, both due twice yearly (June and December), remitted by the employer via the Board portal. Contributions apply to all employees, regardless of wage.
• Karnataka (per Amendment Act 2025/Sec. 7A): Employee contributes ₹50 and employer ₹100 per year, electronic payment (RTGS, NEFT, UPI) mandatory from January 7, 2026. Contributions are annual, due in January.
• Haryana: Ceilings (as above) apply; rates and remittance process otherwise unchanged, but always check most recent board circular for CPI-indexing changes.
• Tamil Nadu: Rates set by Board notification for each calendar year; employers must consult latest Board notices.

## Penalties and enforcement

• Maharashtra: Section 8, fines up to ₹5,000 for failure to register or remit; additional daily penalties for ongoing non-compliance.
• Karnataka: Section 14, similar penalties.
• Haryana: Penalty per Section 20 for failure to comply.
• Inspections may occur during labor compliance visits or upon renewal of shop/factory licenses.

## Returns and documentation

• Employers must file periodic LWF returns, usually half-yearly or annual, evidencing remittance, in the forms prescribed by local board/state authority. For Maharashtra: filing in Form A as per rules.
• Documentation and process specifics may change; consult the Board’s official portal in each state for authoritative format and workflow.

LWF compliance is distinct from EPF, ESI, and Professional Tax, and applies independently in each state where covered employees work. Statutory coverage and rates are subject to change by state-level legislative or board action; always verify the latest authority before payroll launch or expansion.

Source: Maharashtra Labour Welfare Fund Act, 1953, as amended in 2024 — Sections 6BB, 8 Source: Karnataka Labour Welfare Fund Act, 1965, as amended by Act 05 of 2025, effective Jan 7, 2026 — Sections 7A, 8, 14 Source: Haryana Labour Welfare Fund Act, 1965 — as amended and notified May 8, 2026, Section 20 Source: Tamil Nadu Labour Welfare Fund Act, 1972, Board notifications

Engaging workers through third-party contractors or staffing firms in India—rather than as direct employees—can trigger licensing and registration duties under the Contract Labour (Regulation & Abolition) Act, 1970 (CLRA). This Act governs any principal employer that employs 20 or more contract labourers through a contractor in their establishment on any day in the preceding twelve months (Section 1(4)(a), Section 7). The obligations apply to factories, commercial establishments, offices, and virtually any workplace, unless specifically exempted by the Central Government or relevant State Government notification.

Key statutory triggers:

• Under Section 7, every principal employer to whom the Act applies must register their establishment with the designated Registering Officer before engaging contract labour.
• "Contract labour" (Section 2(1)(b)) means any worker hired through a contractor for work in connection with the business of the principal employer; this applies regardless of job function, term, or skill level.
• Contractors who supply 20 or more contract labourers to one or more establishments must obtain a labour licence (Section 12). A contractor’s licence cannot be issued unless the principal employer’s establishment is registered (Section 12(2)).
• The 20-worker threshold includes all contract workers engaged through any contractor on any single day in the prior twelve months, not just full-time staff. This broad count captures regular, temporary, part-time, and outsourced workers.

Workflow under the Act:

• The principal employer applies for registration in the prescribed form (Form I from the CLRA Central Rules) with supporting documents and registration fee, to the local Registering Officer. Upon approval, a Certificate of Registration is issued (Section 7, Central Rules 17–18).
• Each contractor supplying contract labour must apply for a licence (Form IV, Central Rules), specifying the maximum number of persons to be employed as contract labour. The principal employer’s registration certificate copy is submitted with this application.
• Separate registers and records (muster rolls, wage registers, etc.) are required from both principal employer and contractor (Sections 29, 30; Rules 74–80).

Penalties and consequences:

• Under Sections 23–24, contravention of registration or licensing obligations can attract fines and imprisonment. The text of the Act does not categorically declare that non-registration makes the principal employer the "deemed direct employer" of contract workers, but Indian adjudication has, in practice, imposed this liability in certain circumstances. The statutory consequence under the Act is primarily penal, but courts have sometimes ruled on employment status where the contractual structure is a sham or CLRA compliance is missing.

State rules and amendments:

• Section 35 of the Act empowers state governments to make rules for the implementation of the Act, and to lower or alter applicability thresholds or procedures by notification. Employers must consult both the central Act and the rules promulgated by the State Government in the place of work for local requirements, forms, and deadlines.

CLRA registration must be completed before engaging contract labour at threshold levels. Delays or non-compliance can draw fines, operational disruption, and—in certain cases—liability for employee claims typically accruing to direct hires.

Source: Contract Labour (Regulation & Abolition) Act, 1970 — Sections 1(4), 2(1)(b), 7, 12, 23, 24, 29, 30, 35

The Apprentices Act, 1961 sets out the statutory framework for engaging apprentices in India, imposing registration, stipend, and recordkeeping duties distinct from those for permanent employees. For employers—including new foreign entrants—apprenticeships offer a workforce channel that is regulated differently from regular employment under most Indian labor laws.

Applicability and engagement obligation: The Act applies to establishments in sectors designated by the Central Government, and also to employers that voluntarily engage apprentices in approved trades (Section 1(4), 2(6)). When covered, the employer and apprentice must enter into a written contract of apprenticeship (Section 4) and submit it for registration to the Apprenticeship Adviser. Rule 7 of the Apprenticeship Rules, 1992 establishes that "every contract of apprenticeship entered into under Section 4 shall be sent...to the Apprenticeship Adviser for registration within thirty days of the date of its execution, in the form and manner prescribed." The central apprenticeship portal (apprenticeshipindia.gov.in) operationalizes this, but the portal requirement itself flows from administrative directions—statute and rules require timely submission to the designated authority.

Distinct legal status, benefits, and wage obligations: Section 18 makes clear that apprentices are statutory trainees and not "workers" or "employees" under Indian labor law while their apprenticeship contract is in force; they are excluded from coverage under EPF, ESI, Payment of Gratuity, and other employee protection laws during training. The employer owes the apprentice only the stipend and benefits explicitly specified by the Act and contract: the minimum stipend must not be lower than the rate prescribed by the Central Government for the relevant trade (Section 13, Rule 11A). Annual leave and holidays are governed by Rule 13 of the Apprenticeship Rules, which prescribes attendance, leave, and holidays specifically for apprentices.

Quota, returns, and compliance workflow: Section 8 authorizes the Central or State Government to require eligible employers in designated industries and trades to engage apprentices up to a minimum quota—set by official notification, not self-effecting for all employers. Employers must maintain prescribed records and submit half-yearly reports on apprentice engagement to the Apprenticeship Adviser, as per Rule 14.

Consequences of non-compliance: Failure to register apprenticeship contracts, pay the notified stipend, or meet reporting duties is an offence: Section 30 (as amended) authorizes a fine up to ₹5,000 per default, with additional daily penalties for continuing contravention.

Foreign employers and EORs: For multinational or cross-border employers, the Indian entity or legally recognized employer (under Section 2(e)) is responsible for Act compliance—even if a third-party EOR handles payroll. The statutory obligations, including contract registration and stipend payment, attach to the Indian establishment.

Source: Apprentices Act, 1961 — Sections 1(4), 2(6), 4, 8, 13, 18, 30 Source: Apprenticeship Rules, 1992 — Rule 7, Rule 11A, Rule 13, Rule 14