What is Statutory Compliance in HR? A 2026 Guide for Indian Employers
Statutory compliance in HR means meeting every obligation Indian law places on you as an employer: correct deductions, contributions paid on time, registers maintained and returns filed. It is not one task. It is roughly a dozen separate obligations, each with its own threshold, rate and deadline, several of which are set by your state rather than by the centre.
Quick answer
What is statutory compliance in HR? It is an employer's legal obligation to follow India's labour laws when employing people — covering EPF, ESIC, Professional Tax, Labour Welfare Fund, gratuity, bonus, minimum wages, POSH and the four new Labour Codes (in force Nov 2025).
Non-compliance risks penalties and prosecution. TMS manages the full statutory-compliance calendar — registrations, monthly filings and audits — with a 20-year zero-penalty record.
What you are actually required to do
These are the obligations that apply to most employers. Thresholds matter: a rule that does not apply at nine employees applies at ten.
| Law or area | Applies to | Key rule in 2026 |
|---|---|---|
| Provident Fund (EPF) | Establishments with 20 or more employees | 12% from the employee and 12% from the employer. The wage ceiling rose to Rs 25,000 a month on 17 September 2026, up from Rs 15,000 |
| ESIC | 10 or more employees, covering those earning up to Rs 21,000 a month | Employer 3.25%, employee 0.75% of wages |
| Professional tax | Most states, not all | State-specific slabs, capped at Rs 2,500 per person per year |
| Labour Welfare Fund | 16 states and union territories | A flat amount per employee, monthly, half-yearly or annual depending on the state |
| Gratuity | Establishments with 10 or more employees | 15 days of wages for each completed year, payable after 5 years of service |
| Maternity benefit | Women employees | 26 weeks of paid leave, 12 weeks from the third child onwards |
| POSH | Workplaces with 10 or more employees | An Internal Committee is mandatory, along with an annual report |
| TDS on salary | All employers | Deduct and deposit monthly, then file the salary TDS return each quarter |
What changed under the Labour Codes
India’s four Labour Codes took legal effect on 21 November 2025 and the central rules followed on 8 May 2026. They consolidate 29 earlier laws into four codes covering wages, social security, industrial relations, and occupational safety.
The change with the largest payroll consequence is the definition of wages. Basic pay must now be at least 50 percent of total remuneration. Salary structures built on a low basic and a stack of allowances need restructuring, and because provident fund and gratuity both accrue on that basic, the cost of employment rises when you fix it. This is worth modelling before it is forced on you.
One caveat that is easy to miss: states must still notify their own rules, and they are doing it at different speeds. Check the position in each state you employ people in rather than assuming a single national switch-on date.
Why this is harder than it looks
The rules are not in one place
Professional tax is set state by state. Labour Welfare Fund applies in some states and not others, at different amounts and different frequencies. Shops and establishments registration is often municipal. An employer in four states is running four different compliance calendars.
The thresholds move as you grow
Most obligations switch on at a headcount: 10 for ESIC, POSH and gratuity, 20 for provident fund. Companies routinely cross a threshold during a hiring push and notice months later, by which point the arrears have interest attached.
Rates and ceilings change without much warning
The provident fund wage ceiling sat at Rs 15,000 for over a decade and then moved to Rs 25,000 in September 2026. Someone has to notice a change like that in the month it happens and apply it correctly in that month’s payroll.
It usually depends on one person
In most small and mid-sized companies, statutory knowledge sits with a single member of the HR or accounts team. When that person leaves, the knowledge leaves with them, and the gaps only surface at an inspection.
How to keep on top of it
- List what actually applies to you. Go state by state and headcount by headcount. Write down which obligations are live today and which switch on at your next hiring milestone.
- Register where you are required to. Missing registrations, not missed payments, are the most common finding in an inspection.
- Build one calendar. Put every due date in a single place: monthly deposits, quarterly returns, half-yearly fund contributions and annual filings.
- Keep the registers. The codes still require wage registers, attendance and leave records. These are what an inspector asks for first.
- Reconcile every month. Check what was deducted against what was deposited. Catching a mismatch in the same month is a correction; catching it a year later is a penalty.
- Review the pay structure annually. The 50 percent basic rule makes this a recurring exercise, not a one-time fix.
What non-compliance actually costs
The penalty is rarely the whole cost. Late provident fund attracts interest and damages on top of the arrears. Some defaults carry prosecution of the officers responsible, not just the company. In several states unpaid welfare fund contributions are recoverable as arrears of land revenue. Beyond that, compliance certificates are routinely asked for in tenders and in client due diligence, so a gap can cost work as well as money.
Frequently asked questions
What is statutory compliance in HR?
It is the set of legal obligations an employer must meet in relation to its employees: statutory deductions and contributions, registers and records, and the returns filed with central and state authorities.
Which compliances apply to a company in India?
Most employers deal with provident fund, ESIC, professional tax, labour welfare fund, gratuity, maternity benefit, POSH and salary TDS. Which of these apply depends on your headcount and on the states you operate in.
What is the provident fund wage ceiling now?
Rs 25,000 a month with effect from 17 September 2026, raised from Rs 15,000 where it had stood since 2014.
Are the Labour Codes in force?
Yes. They took effect on 21 November 2025 and the central rules were notified on 8 May 2026. State rules are still being notified, so the practical position varies by state.
Does statutory compliance differ by state?
Substantially. Professional tax, labour welfare fund and shops and establishments registration are all state or local subjects, with different rates, different frequencies and in some cases no levy at all.
Can statutory compliance be outsourced?
The work can. The liability cannot. The obligation stays with the employer, so a contract should be explicit about who bears the cost when a penalty results from a provider’s error.
Getting this right every month
Statutory compliance is unglamorous work where the only visible outcome is that nothing goes wrong. Team Management Services has handled payroll and statutory compliance for Indian and international employers since 2006, across multiple states and across permanent and contract workforces, with registrations, deposits and filings owned end to end.
If you want a view of where you stand, talk to the TMS compliance team, or work through the HR statutory compliance checklist first.