Employer of Record: Labour Codes, Provident Fund and POSH

Twenty-Nine Laws into Four

Until 21 November 2025, the answer to the Shahupuri trader's question depended on which statute you opened first. The Employees' State Insurance Act, 1948 would have told him one thing about his loaders, the Minimum Wages Act, 1948 another, and the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017 a third, each with its own definition of who counts as an employee and what counts as a wage. I kept a shelf for them. It sagged.

On that date the Central Government brought into force four codes that between them absorb twenty-nine central labour laws. The Code on Wages, 2019 replaces four: the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976. The Industrial Relations Code, 2020 replaces three, among them the Industrial Disputes Act, 1947, which generations of Indian lawyers learned to read before they learned to drive. The Code on Social Security, 2020 takes in nine, including the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, the Employees' State Insurance Act, 1948, the Payment of Gratuity Act, 1972 and the Maternity Benefit Act, 1961. The Occupational Safety, Health and Working Conditions Code, 2020 swallows the remaining thirteen, the Factories Act, 1948 and the Contract Labour (Regulation and Abolition) Act, 1970 among them.

The arithmetic is tidy. The substance is less so. Most of the old obligations survive inside the new codes, renumbered and occasionally reworded, and an employer who complied with the old law is not suddenly in default under the new one. Some changes are real, though. The most consequential is a single definition of 'wages' in Section 2(y) of the Code on Wages. It excludes certain allowances but adds back whatever portion of those exclusions exceeds half of total remuneration. For a company that kept basic pay deliberately low and loaded the rest into allowances, provident fund and gratuity are now calculated on a larger number. Fixed-term employees become eligible for gratuity after one year of continuous service rather than five. The codes also introduce single registration and electronic returns in place of the parallel registers that inspectors once counted by the kilogram.

Now the caveat, stated once. Labour sits in the Concurrent List of the Seventh Schedule to the Constitution, and the codes leave much of the working detail to rules framed by the Centre and by each state. At 1 January 2026 those rules are still being finalised, Maharashtra's included. Where the new rules are not yet in place, the transitional provisions preserve the existing rules and notifications to the extent they are consistent with the codes. In practice this means a Pune employer currently reads the new code for the obligation and, quite often, an old rule for the form and the fee. The Act requires compliance with both. I advise clients to keep the old shelf until the state notification arrives, and to stop treating it as history.

None of this changed the answer to the trader's question. The threshold for ESI coverage was ten employees under the old Act and remains ten under the Code on Social Security. He employed eleven loaders, two counter salesmen and a nephew who kept the accounts.

'Fourteen, madam,' he said, counting on his fingers. 'From when?'

Two Funds, Two Thresholds

The honest answer was: from the day the tenth person joined. ESI coverage attaches to the establishment once it employs ten or more persons, and it does not wait for the employer to notice. The trader worked it out on a calendar behind his counter. The tenth loader had been hired in Shravan of 2023, which made the arrears roughly two years old.

The Employees' State Insurance scheme covers employees whose monthly wages do not exceed ₹21,000. Above that line an employee falls outside the scheme, though anyone covered at the start of a contribution period stays covered until it ends. Since 1 July 2019 the employer contributes 3.25 per cent of wages and the employee 0.75 per cent, and the employer deducts the employee's share from pay and deposits both. The employee receives medical care at ESIC dispensaries and hospitals, cash benefit during sickness, maternity benefit and, after an employment injury, disablement benefit. Eleven loaders lifting bales of suiting are the people the scheme was drafted for.

Provident fund switches on later, at twenty employees. The employer and the employee each contribute 12 per cent of basic wages and dearness allowance; out of the employer's share, 8.33 per cent of wages up to ₹15,000 goes into the Employees' Pension Scheme and the balance into the provident fund account. An establishment below twenty may join voluntarily. The trader, at fourteen, was not required to, and I said so.

'Only ESI then.'

'Only ESI. For now.'

Both deposits fall due by the 15th of the following month. The provident fund contribution is paid through an electronic challan-cum-return on the EPFO portal, which also uploads each employee's wages against a Universal Account Number, the twelve-digit number that follows a worker from employer to employer. ESI contributions go through the ESIC portal against each employee's insurance number. Late payment carries interest, and both statutes allow damages on top, which under the old provident fund law ran on a graded scale that rose with the length of delay. The codes carry the substance of these provisions forward. The rules that will set the new rates are among those still awaited.

The feature I find most useful is the one employers think about least. The employee can see both accounts. Any worker with a UAN can download a passbook showing every contribution, month by month, with the name of the establishment that paid it. An insured person can look up his ESI contribution history on the ESIC portal or its app. A deduction from salary that never reached the fund is visible to the person it was taken from, and to anyone he chooses to show it to, a labour inspector included.

In 2019 a machinist from a Bhosari press shop came to see me about a home loan. His employer had deducted provident fund for seven years. His passbook showed four years of deposits and then nothing. He had not checked it because the payslip said the money was gone, and it was, just not to the fund. Under the old law, failure to deposit an employee's deducted share attracted prosecution, and the Indian Penal Code treated the retained money as entrusted property. The employer paid within the month.

The machinist kept the passbook printout folded inside the payslip that had lied to him.

The Floor Under the Payslip

Before the codes, minimum wages in India applied only to 'scheduled employments', a list of trades that each state had notified over decades and amended unevenly. A clerk in an office that appeared on no schedule had, strictly, no statutory minimum at all. Section 5 of the Code on Wages removes the list. Every employee is now entitled to the minimum rate of wages fixed by the appropriate government, and Section 9 empowers the Centre to set a national floor wage below which no state may fix its own rate. Maharashtra's rates still vary by zone and by skill category, and they are revised through a variable dearness allowance twice a year. The employer must check the current notification. The rate printed on last year's poster in the canteen does not count.

The code also fixes when wages are paid. Under Section 17, monthly wages fall due before the seventh day of the following month. An employee who is removed, dismissed, retrenched or who resigns must be paid within two working days. That last rule surprises more employers than any other. In October 2025 the owner of a small architecture practice in Kothrud told me that full-and-final settlement 'takes forty-five days, madam, everybody does like that'. Everybody may well have. The code does not.

Gratuity is the larger sum and the one employers forget to provide for. Section 53 of the Code on Social Security makes it payable when employment ends after five years of continuous service, whether by retirement, resignation, death or disablement. Death and disablement need no minimum service, and fixed-term employees, as noted above, qualify after one year. The formula is fifteen days' wages for each completed year, with a month treated as twenty-six working days. Last year a supervisor retired from the Pimpri moulding unit after twenty-two years, on last-drawn wages of ₹38,000 a month. The arithmetic ran as follows: ₹38,000 multiplied by fifteen, divided by twenty-six, multiplied by twenty-two, came to ₹4,82,308 after rounding. The statutory ceiling is ₹20 lakh. Payment is due within thirty days of the amount becoming payable, and interest runs after that. The unit had made no provision in its books, which its auditor had remarked on twice. It paid from the overdraft.

Hours sit in the Occupational Safety, Health and Working Conditions Code, 2020. Section 25 limits a worker in an establishment it covers to eight hours a day, with weekly limits and rest intervals, and overtime is paid at twice the ordinary rate of wages. Shops, offices and most service businesses in Maharashtra also answer to the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017. That Act requires registration for an establishment with ten or more workers and a simple intimation below that number. It sets daily and weekly limits, a weekly holiday, and conditions on which women may work at night with their consent and with transport and security provided. The state has amended these limits more than once, and I advise reading the version in force on the day, not the one a colleague remembers.

The trader had registered his shop under the 2017 Act in 2018, when he employed seven people. The certificate was still on the wall above the cash drawer, and it said seven.

A Committee Before the Complaint

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 is shorter than either code and more often ignored. Section 4 requires every employer to constitute an Internal Committee by written order at each office or branch with ten or more employees. The ten counts everyone: permanent, temporary, contract, trainee, intern. The presiding officer must be a woman employed at a senior level. At least two members must come from among the employees, preferably people committed to the cause of women or with experience in social work or legal knowledge. One member must come from outside, from a non-governmental organisation or someone familiar with the issues of sexual harassment. At least half the committee must be women, and no member may serve more than three years. Below ten employees, or where the complaint is against the employer himself, the complaint goes to the Local Committee constituted by the district officer under Section 6.

The Act wants the committee to exist before anyone needs it. A complaint must ordinarily be made within three months of the incident, extendable by another three. The inquiry must finish within ninety days, and the report must follow within ten. These timelines assume the forum is already in place, already trained, and already known to employees. Section 19 requires the employer to display the penal consequences of sexual harassment and the order constituting the committee somewhere conspicuous, and to hold awareness programmes at regular intervals.

In February 2023 the human resources manager of a payments software firm in Hinjewadi Phase 2 telephoned me on a Friday evening. The firm had forty-three employees. A junior developer had emailed a written complaint against a team lead that afternoon, addressed 'To the Internal Committee', and copied the HR manager because she could find no committee to send it to. There was none. The firm had grown from six people to forty in eighteen months, and nobody had thought about it. 'We have a policy, madam. It is in the handbook.' The handbook named a committee of three, two of whom had left.

We constituted the committee by board resolution the following Tuesday, with a written order under Section 4. Finding an external member at four days' notice was the hardest part. A lawyer who served on several committees in Kharadi agreed, after asking pointedly when the order had been signed. The committee was lawful from that date, and the complaint fell within time, so the inquiry could proceed. The complainant's first question to the presiding officer was whether a committee formed after her complaint could be fair to her. It was a reasonable question. The committee spent its first sitting answering it. I am not sure it fully succeeded.

The Supreme Court took a dim view of this kind of afterthought in Aureliano Fernandes v. State of Goa (2023), observing that many bodies had not constituted committees at all a decade after the Act, and directing governments and employers to comply. Section 26 sets a fine of up to ₹50,000 for failing to constitute the committee, doubled on repetition, with possible cancellation of a licence or registration.

The paper trail runs annually. Section 21 requires the committee to prepare an annual report, and Rule 14 of the 2013 Rules specifies its contents: complaints received, complaints disposed of, cases pending beyond ninety days, workshops held, action taken. The employer forwards it to the district officer. A company also states in its board's report, under Rule 8(5)(x) of the Companies (Accounts) Rules, 2014, that it has complied with the provisions relating to constitution of the committee. The Hinjewadi firm's director had signed that sentence in its 2021–22 board's report. Nobody, including the director, had checked it.

Calendar

The employer's dates run on a monthly pulse, with a few heavier beats in the year. Wages for a monthly wage period must be paid before the seventh day of the following month under Section 17 of the Code on Wages, 2019. Provident fund contributions, both the employee's share deducted from salary and the employer's own, are due by the fifteenth of the following month through the electronic challan-cum-return on the EPFO portal. ESI contributions fall due on the same day, the fifteenth, and the contribution periods run from April to September and from October to March. That second detail matters more than it looks: an employee whose wages rise above ₹21,000 during a period stays covered until the period ends.

Maharashtra adds two state obligations of its own. Professional tax deducted from salaries is paid monthly, by the last day of the month, by an employer whose liability in the previous year reached ₹50,000; smaller employers pay once, by 31 March. Labour Welfare Fund contributions are calculated on the June and December payrolls and paid by 15 July and 15 January.

The annual beats are fewer but less forgiving. Statutory bonus, for those eligible, must be paid within eight months of the close of the accounting year, which for most companies means by 30 November. The POSH annual report goes to the district officer once a year; the 2013 Rules fix no date, and district offices in Pune have in my experience asked for it on a calendar-year basis, by the end of January. The board's report carries its sentence on the Internal Committee whenever the accounts are approved. Gratuity has no calendar. It has a trigger, and thirty days to meet it.

One caution belongs here, stated once. The four Labour Codes took effect on 21 November 2025, but Maharashtra's rules under them were still being finalised when I wrote this, and some forms, portals and returns that the old Acts required have neither been abolished nor replaced. I advise clients to keep filing under the old forms until the department publicly says otherwise, and to keep the acknowledgements.

The Kolhapur trader had his answer by the end of the call. He employed eleven loaders, two shop assistants and an accountant, and every loader earned below ₹21,000. The ESI threshold is ten. He had crossed it some time in 2023 without noticing, which is how most people cross it. We registered him the following week, deposited contributions from the date of registration, and wrote to the corporation explaining the period before it. He also amended his Shops and Establishments registration. The new certificate said fourteen.

The Hinjewadi firm filed its first POSH annual report in January 2024. It ran to two pages. Under complaints received it said one; under complaints disposed of, one; under pending beyond ninety days, nil. Under workshops held it listed three, all in the eleven months after the committee was formed. The director signed it himself this time, after reading it.

The report has one other line, under a heading the Rules do not require. The firm had begun to speak of a public issue within four years, and its chief financial officer had asked me what changes when strangers can buy your shares on a Monday morning and sell them by Tuesday. I wrote his question at the bottom of my file note. The answer is the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and it is not short.