In India’s complex regulatory landscape, labour law compliance is more than a legal formality — it’s the backbone of a company’s ethical and operational framework. However, many employers, particularly startups and SMEs, often overlook critical compliance requirements. These oversights can lead to hefty penalties, damaged reputation, and even business suspension.
Here are the top 7 labour law mistakes businesses make — and how you can avoid them.
1. Not Maintaining Statutory Registers and Records
Every establishment covered under the Shops & Establishments Act, Factories Act, or Contract Labour Act must maintain statutory registers and records — including attendance, wages, leave, fines, and deductions.
Mistake: Many companies fail to maintain updated records or skip digital formats.
Impact: Non-maintenance can lead to penalties during labour inspections.
Solution: Use professional Register & Record Maintenance Services to ensure all statutory registers (Form A to Form XX) are properly updated.
2. Delay in EPF and ESIC Contributions
Timely remittance of EPF (Employees’ Provident Fund) and ESIC (Employees’ State Insurance Corporation) contributions is mandatory.
Mistake: Delaying payment or incorrect filing of Form 3A, 6A, 7Q, or 14B.
Impact: Attracts interest, damages, and penal charges from EPFO/ESIC authorities.
Solution: Outsource EPF and ESIC Compliance Services to ensure timely uploads and payments.
3. Ignoring Minimum Wages Notifications
Each state periodically revises its Minimum Wages under the Minimum Wages Act, 1948.
Mistake: Employers continue paying outdated wage rates.
Impact: Inspectors can impose back wages, fines, and even prosecution.
Solution: Regularly track state-wise minimum wages notifications and update payroll systems accordingly.
4. Misclassification of Employees
Classifying workers incorrectly — for example, labeling full-time employees as contractors — can trigger legal disputes.
Mistake: Avoiding benefits by classifying employees wrongly.
Impact: Liability for back wages, PF/ESIC dues, and penalties.
Solution: Conduct a Compliance Audit to verify employment categories and correct misclassifications.
Non-Compliance with Labour Welfare Fund (LWF)
The Labour Welfare Fund is applicable in several Indian states, and contributions must be made periodically.
Mistake: Missing state-specific LWF due dates.
Impact: Late payments result in penalties and interest.
Solution: Subscribe to a Labour Welfare Fund Compliance Service to manage filings across multiple states.
5. Ignoring Sexual Harassment (POSH) Compliance
Under the Prevention of Sexual Harassment (POSH) Act, every company with 10 or more employees must constitute an Internal Committee (IC).
Mistake: Not forming an IC or failing to conduct annual awareness sessions.
Impact: Non-compliance can attract fines up to ₹50,000 and reputational damage.
Solution: Establish a POSH Committee and file the Annual POSH Report with the district officer.
6. Skipping Periodic Compliance Audits
Labour laws evolve continuously — from PF wage ceiling changes to new social security codes.
Mistake: Businesses rely on outdated compliance frameworks.
Impact: Missed statutory filings and inspection notices.
Solution: Perform Regular Compliance Audits through professional consultants to stay inspection-ready.
7. How to Avoid These Mistakes
Partnering with an experienced compliance firm ensures you stay fully compliant with India’s evolving labour laws.
At Sankhla Corporate Services Pvt. Ltd., we specialize in:
- Labour Law Compliance Audits
- Statutory Register & Record Maintenance
- PF, ESIC & LWF Compliance
- End-to-End Payroll & HR Compliance Solutions
Final Thoughts
Compliance isn’t just about avoiding penalties — it’s about protecting your employees, your brand, and your business continuity. By addressing these seven common mistakes, your organization can build a stronger, legally sound foundation for growth.
