By CA Surekha S Ahuja
“Compliance is not just adherence to rules — it is the strategic foundation of workforce stability, operational scalability, and business resilience.”
Introduction
The Labour Codes 2025, effective from November 21, 2025, consolidated 29 legacy laws into four unified frameworks:
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Code on Wages, 2019
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Industrial Relations Code, 2020
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Code on Social Security, 2020
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Occupational Safety, Health & Working Conditions (OSH) Code, 2020
Applicability:
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All establishments across India
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Specific thresholds: ≥10 employees for registration, ≥50 employees for creche/OSH facilities
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Existing employees: wage restructuring effective from April 1, 2026
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New hires: post-November 21, 2025, must comply immediately
This post provides a 360° procedural roadmap for lawful restructuring, digital registration, return filing, OSH compliance, social security obligations, and phased employer implementation.
Wage & Compensation Structuring
Principle: Basic + DA ≥50% of CTC; allowances above this threshold form part of wages.
Steps:
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Extract all employee CTCs.
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Audit allowances exceeding 50% of CTC.
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Reclassify HRA, special allowances, variable pay.
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Update payroll: PF, ESI, gratuity recalculation.
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Issue revised appointment letters including wage breakup, gratuity, leave entitlement, termination clauses.
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Conduct actuarial valuation (Ind AS 19).
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Communicate changes to employees.
Outcome: Audit-ready payroll, retirement benefits compliance, wage transparency.
Employee Classification & Contract Compliance
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Categorize workforce: permanent, fixed-term, contract, gig/platform, supervisory roles
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Align contracts with Labour Code obligations
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Fixed-term employees: gratuity after 1 year
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Gig/fixed-term workers: register on e-Shram for social security
Digital Registration & Return Filing
Applicability: All units with ≥10 employees
1. Shram Suvidha Portal Registration
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One PAN-based registration, valid 5 years → Labour Identification Number (LIN)
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Steps: register establishment, provide PAN/TAN, officer details, scanned MOA/CIN, obtain LIN
2. Returns & Filing Obligations
| Compliance Type | Frequency | Platform / Forms |
|---|---|---|
| Annual Return (CTC/Wages) | Annual | Unified return replacing Forms 5,7,12 |
| Muster Roll / Attendance | Monthly/Quarterly | Forms I-II |
| Wage Register | Monthly | Forms III-IV |
| Standing Orders | Once / update | Form V |
| Contractor Labour Returns | Monthly | Forms VI-VII |
| Social Security Contributions | Monthly | PF/ESI portals linked to LIN |
| Gig / Fixed-Term Worker Registration | Onboarding | e-Shram portal, UAN-linked |
Tips:
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Retain digital records for 8 years
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Reconcile payroll with PF/ESI portal monthly
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Auto-deemed approvals require internal timestamp documentation
Occupational Safety, Health & Women Compliance
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Draft standing orders: 8 hours/day, 48 hours/week, flexible schedules
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Creche for ≥50 employees
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Night shift SOPs: CCTV, transport logs, consent records
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Annual health check-ups: employees ≥40 years
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Maintain digital evidence for audits
Social Security & Gig Worker Compliance
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Register gig/fixed-term workers on e-Shram
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Allocate 1–2% of turnover to aggregator fund
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Enable UAN & Aadhaar portability for PF
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Monthly compliance tracking
Penalty Avoidance Matrix
| Violation | Fine / Penalty | Prevention |
|---|---|---|
| Missing appointment letter | ₹50K–2L | Issue Day-1, maintain digital record |
| Wage delay | 12% interest + ₹1L | Auto bank transfers & payroll calendar |
| PF/ESI shortfall | 25% damages | Quarterly reconciliation |
| Creche absence | ₹2–5L + closure | Self-certify + portal audit |
| Standing orders missing | ₹1–2L | Digitally file & update |
| Gig/social security default | 1–2% turnover | Monthly aggregation & e-Shram update |
Integrated 12-Week Compliance Roadmap (Gantt-Style)
| Week | Key Focus Area | Action Items | Outcome / Deliverable |
|---|---|---|---|
| 1 | Wage Audit & Restructuring | Audit CTC, reclassify allowances, update payroll, issue revised letters | 50% Basic compliance, audit-ready payroll |
| 2 | Digital Registration | Register all units on Shram Suvidha, obtain LIN, upload Forms I–VIII, migrate old filings | PAN-based registration, portal compliance |
| 3 | OSH & Women Compliance | Draft standing orders, creche setup, night shift SOPs, health checkups | Safety & women compliance readiness |
| 4 | Social Security & Gig Workers | Register on e-Shram, track aggregator fund, enable UAN portability | Formalized gig/fixed-term workforce |
| 5 | Payroll & Compliance Audit | Monthly payroll reconciliation, PF/ESI audit, validate muster rolls & wage registers | Errors & gaps corrected, audit-ready records |
| 6 | Payroll & Compliance Audit | Continuation & adjustments from Week 5 | Complete reconciliation |
| 7 | Payroll & Compliance Audit | Contractor compliance tracking | All contractor obligations aligned |
| 8 | Payroll & Compliance Audit | Final quarterly review | Compliance assurance |
| 9 | Monitoring & Reporting | Monthly dashboard: wages, filings, OSH, social security | Early detection of deviations |
| 10 | Monitoring & Reporting | Board-level reporting on LIN, PF/ESI, OSH | Governance & strategic visibility |
| 11 | Monitoring & Reporting | Internal escalation & remediation | Risk mitigation |
| 12 | Monitoring & Reporting | State-level amendments tracking, update policies | Continuous compliance & adaptability |
Strategic & Analytical Impact
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Financial: Short-term payroll rise 8–15%; long-term cost saving via reduced litigation & attrition
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Legal: Audit-ready digital evidence reduces inspection & penalty risk
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HR & Governance: Transparent contracts, structured payroll, workforce dispute prevention
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Strategic: ESG compliance, investor confidence, scalable operations, formalized gig economy integration
Takeaway:
Labour Code 2025 compliance is strategic, lawful, and operationally essential.
Employers following this integrated roadmap achieve audit-ready payroll, structured workforce, digital governance, and long-term business resilience.
