India HR rules and regulations span the new Labour Codes, central Acts (EPF, ESIC, Gratuity, POSH, Maternity Benefit), state-specific Shops & Establishments rules, and tax compliances under TDS/Form 16. Every employer — from a 10-person startup to a 5,000-employee enterprise — is required to comply, with steep penalties for non-compliance. This guide covers the 16 most important rules every Indian employer must follow in 2026.
1. The Code on Wages, 2019
The Code on Wages consolidates the Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, and Equal Remuneration Act into one statute. Key employer obligations:
- Pay statutory minimum wages (state-notified)
- Pay salary by the 7th (units of 1,000+) or 10th (smaller units) of every month — see our Salary by the 7th Rule guide
- Maintain basic pay at least 50% of CTC under new wage definition — see 50% Basic Pay Rule
- Equal pay for equal work, regardless of gender
2. Provident Fund (EPF Act, 1952)
Applicable to establishments with 20+ employees. Employer + employee each contribute 12% of basic + DA. Employer’s 12% splits into 8.33% EPS + 3.67% EPF. Returns and challans due by 15th of the following month.
3. ESIC (Employees’ State Insurance Act, 1948)
Applies to non-seasonal establishments with 10+ employees earning up to ₹21,000/month (₹25,000 for persons with disabilities). Contribution: Employee 0.75% + Employer 3.25% of gross wages. Provides medical, sickness, maternity, and disability benefits.
4. Payment of Gratuity Act, 1972
Applicable to establishments with 10+ employees. Gratuity payable on resignation, retirement, death, or disability after 5+ years continuous service. Formula: (last drawn basic + DA) × 15 × number of years served ÷ 26. Capped at ₹20 lakh tax-free.
5. Sexual Harassment of Women at Workplace (POSH) Act, 2013
Mandatory for all workplaces with 10+ employees. Employer must:
- Constitute an Internal Complaints Committee (ICC) with female chairperson
- Display the policy prominently
- Conduct annual sensitization training
- Submit annual report to District Officer
Penalties up to ₹50,000 per non-compliance + cancellation of business registration on repeat offence.
6. Working Hours, Overtime & Leave
Governed by the Factories Act, 1948 and state Shops & Establishments Acts. Standard: 8 hours/day, 48 hours/week. Overtime at 2x ordinary wage. Mandatory weekly off + earned leave (annual), casual leave, sick leave per state rules.
7. Maternity Benefit Act, 1961 (amended 2017)
26 weeks paid maternity leave for women with 80+ days service in the preceding 12 months. Establishments with 50+ employees must provide crèche facilities. Adoption leave: 12 weeks.
8. Contract Labour (Regulation & Abolition) Act, 1970
Principal employers engaging 20+ contract workers must obtain registration. Contractors must obtain licence. Both share joint liability for wages, PF, ESIC. See our CLRA compliance services for full requirements.
9. Industrial Disputes Act, 1947
Governs lay-offs, retrenchment, closure for establishments with 100+ workers (300+ under new Industrial Relations Code). Prior government permission required for retrenchment. Retrenchment compensation: 15 days’ pay per year served.
10. Code on Social Security, 2020
Consolidates 9 social security laws including EPF, ESIC, Gratuity, Maternity Benefit, Employees’ Compensation. Extends coverage to gig and platform workers. Establishes a National Social Security Board.
11. Code on Industrial Relations, 2020
Merges Trade Unions Act, Industrial Employment Act, and Industrial Disputes Act. Raises threshold for prior government approval for retrenchment to 300 workers. Mandates fixed-term employment with same benefits as permanent workers.
12. Code on Occupational Safety, Health & Working Conditions, 2020
Consolidates 13 labour laws including Factories Act, Mines Act, Contract Labour Act. Single registration for establishments with 10+ workers. Mandatory annual health check-ups for hazardous occupations. Free medical examination once a year.
13. Professional Tax (State-Wise)
State-levied tax on professions/employment. Maharashtra: ₹200/month if salary > ₹10,000. Karnataka: ₹200/month if > ₹15,000. Employers must deduct and deposit monthly. Failure attracts interest + penalty.
14. Labour Welfare Fund (State-Wise)
State-specific welfare cess. Maharashtra: ₹6 employee + ₹18 employer per worker (half-yearly). Karnataka: ₹20 employee + ₹40 employer (annual). Tamil Nadu, Kerala, Gujarat, Punjab, Haryana, Delhi, WB also have LWF.
15. TDS on Salary (Income Tax Act, 1961)
Employer must deduct tax at source under Section 192 based on employee’s projected annual income and chosen tax regime. Issue Form 16 by 15th June following financial year-end. File TDS returns quarterly (Form 24Q).
16. Shops & Establishments Acts (State-Wise)
Every commercial establishment must register under the state’s Shops & Establishments Act within 30 days of starting business. Renewals annual or as per state schedule. Display registration certificate prominently. Maintain employee register.
HR Compliance Penalties — At a Glance
| Act | Penalty for Default |
|---|---|
| EPF | Up to 25% of arrears + interest 12% p.a. |
| ESIC | Up to ₹5,000 + interest 12% p.a. |
| Gratuity | Imprisonment 3 months to 1 year + fine ₹10,000–₹20,000 |
| POSH | Up to ₹50,000 per violation + business cancellation on repeat |
| Contract Labour Act | Imprisonment up to 3 months + fine ₹1,000 |
| TDS default | Interest 1.5% per month + penalty up to tax amount |
HR Compliance Calendar — Critical Monthly & Annual Dates
- By 7th of every month — Salary payment
- By 15th of every month — EPF & ESIC challan due
- Quarterly (31 July / 31 Oct / 31 Jan / 31 May) — TDS returns (Form 24Q)
- 15 June — Form 16 issuance to all employees
- 31 March — POSH annual report submission
- State-wise — Shops & Establishments renewals
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