Labour Law Compliance for Indian Startups: A Simple Checklist

Labour Law Compliance for Indian Startups: A Simple Checklist

As a startup founder, hiring your first employee is a monumental milestone. It’s a sign of growth and the first step toward building a team. However, this step also brings a new set of responsibilities that are often overlooked: labour law compliance.

Navigating the web of central and state labour laws can be complex, but getting it right from day one is crucial to avoid legal risks, financial penalties, and to build a foundation of trust with your team. This guide provides a simple checklist of the most essential labour law registrations and compliances for an early-stage startup in India.

The Essential Labour Law Checklist

While there are numerous laws, here are the foundational registrations you need to consider as you start hiring.

1. Shops and Establishment Act Registration This is one of the most basic and mandatory registrations for any commercial establishment. It is governed by state-specific laws.

• What is it? It regulates the working conditions of employees, including working hours, rest intervals, holidays, and leave policies.
• Who needs it? Virtually every business, including offices, retail stores, and IT firms.
• When? You must apply for this registration within 30 days of commencing business operations.

2. Provident Fund (PF) Registration The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, is a social security scheme designed to provide retirement benefits.

• What is it? A mandatory contribution scheme where both the employer and employee contribute a portion of the employee’s salary to a fund.
• Who needs it? Any establishment with 20 or more employees. However, startups can opt for voluntary registration even with fewer employees to offer this benefit.
• Key Compliance: Monthly deposit of PF contributions and filing of monthly and annual returns.

3. Employee State Insurance (ESI) Registration This is a social security and health insurance scheme for Indian workers.

• What is it? It provides medical, sickness, maternity, and disability benefits to employees.
• Who needs it? Non-seasonal factories with 10 or more employees, and other establishments with 10 or more employees (in most states), where the employee’s monthly wage does not exceed ₹21,000.
• Key Compliance: Monthly deposit of ESI contributions and filing of half-yearly returns.

4. Professional Tax (PT) Registration This is a tax levied by the state government on professionals and salaried individuals.

• What is it? The employer is responsible for deducting Professional Tax from the employee’s salary and remitting it to the state government.
• Who needs it? All employers. The rules and tax slabs vary from state to state.
• Key Compliance: Obtaining a PT registration number, monthly deduction and remittance, and filing of periodic returns.

Other Important Considerations

While the above are the primary registrations, you should also be aware of:

• The Payment of Bonus Act, 1965: Applicable to establishments with 20 or more employees, mandating the payment of an annual bonus.
• The Payment of Gratuity Act, 1972: Applicable to establishments with 10 or more employees, providing for a gratuity payment to employees who have rendered continuous service for at least five years.

The Bottom Line

Labour law compliance is not an area where you can afford to “wing it.” Getting these foundational registrations and processes in place before you hire your first employee will protect your business from significant legal and financial risk. It sends a clear message to your team that you are a professional and responsible employer.

Feeling unsure about where to start? At InPursuit, we handle all these registrations and ensure your ongoing compliance is managed flawlessly. Contact us for a free consultation and build your team on a solid, compliant foundation.