Labour Law Compliance Audit
A labour compliance audit checks, record by record, whether your business meets the law on registrations, wages, PF, ESI, contractors, working conditions and workplace policies. The four Labour Codes have been in force since 21 November 2025. Find the gaps before an inspector or a buyer does.
What it is
A labour law compliance audit is a review of your employment practices against the labour laws that apply to you. We look at what the law requires, what your records show and what actually happens on the floor, and report the difference.
The legal base changed on 21 November 2025, when the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020 came into force. Central rules under all four followed in May 2026. States are still finalising their own rules, and Haryana had published only draft rules by mid-2026, so the audit covers both the Codes and the older state rules that continue during the transition.
Who it applies to
Factories and manufacturers
Units with shifts, overtime, contract labour and hazardous processes carry the most obligations and the highest penalties.
Service businesses and offices
IT firms, hospitals, schools, retailers and agencies with growing headcount, often across several states.
Businesses facing a deal or audit
Investors doing due diligence, a buyer’s vendor audit, a bank’s review, or an inspection notice already on the table.
Why it matters
Liabilities surface early
Unpaid PF on allowances, short ESI coverage or missed welfare fund deposits keep adding interest. Found early, they stay small.
Contractor risk is caught
As principal employer, you can be liable for a contractor’s unpaid wages and contributions. If your housekeeping contractor skips ESI for six months, the bill can land on you. The audit checks each contractor, and whether their contract labour licence is in place.
Deals close faster
A clean audit report answers an investor’s or buyer’s labour questions in one document, with fewer special indemnities to negotiate.
Documents required
Registrations and licences
- Shop or factory registration and licence
- PF and ESI codes, Haryana LWF registration
- Contract labour registration and contractor licences
Payroll and records
- 12 months of salary registers and salary structure
- PF ECRs, ESI challans and returns, LWF receipts
- Attendance, overtime and leave records
Policies and people
- Appointment letter formats and HR policies
- POSH policy, Internal Committee order and annual reports
- List of contractors with their workers
What we check
| Area | Typical checks |
|---|---|
| Registrations | Shops Act or factory licence, PF (20 or more employees), ESI (10 or more), LWF, contract labour; details match reality |
| Wages | State minimum wages, the 50% wage definition, payment before the 7th, final dues within two working days |
| PF | Wage ceiling of ₹25,000 from 17 September 2026, coverage of new joiners, ECR by the 15th |
| ESI | Wage ceiling of ₹21,000, 0.75% and 3.25% rates, contribution by the 15th |
| Hours and leave | 8-hour day, overtime at twice wages with consent, annual leave of one day per 20 days worked |
| Contractors | Contractor licences, their PF and ESI deposits, wage payment, amenities |
| Policies | Appointment letters, POSH Internal Committee, Grievance Redressal Committee (20 or more workers), standing orders (300 or more) |
Each finding is graded by risk, with the law it breaks and the fix. Here is a catch many miss. Picture a Faridabad engineering unit that pays a low basic and a large “special allowance”. Under the 50% wage rule, part of that allowance now counts as wages, so PF and gratuity may have been worked out on too small a base. We can reset the structure with you, through our payroll compliance service, once the audit flags it.
How it works
Fix the scope of the labour law compliance audit
We list your locations, headcount, contractors and the laws that apply, and agree the review period, usually the last 12 months.
Test payroll against filings
You share documents through a checklist. We test payroll against PF and ESI filings and check registers, letters and policies.
Walk the floor
Where it helps, we visit to check notices, attendance practice and contractor records, and talk to the people who run them.
Hand over a graded gap report
You get a written report with each gap, its legal basis, risk level, estimated arrears where they can be worked out, and the fix.
Close the gaps and recheck
We help you file missing registrations, pay arrears, issue letters and set up registers, then recheck at an agreed date.
Timelines
The labour law compliance audit itself
For a single location with up to a few hundred employees, the review and report usually take two to three weeks once records are shared.
Monthly dues we test
Wages before the 7th of the next month. PF and ESI contributions by the 15th. Haryana LWF by 31 December each year.
How often to audit
Once a year for most businesses, and before any funding round, acquisition or major customer audit.
What happens if gaps go unchecked
Interest on PF and ESI arrears
Late PF carries 12% a year simple interest, and late ESI 12% a year, plus damages that rise with the length of delay.
OSH Code penalty of ₹2–3 lakh
Section 94 sets a general penalty of ₹2 lakh to ₹3 lakh, with up to ₹2,000 a day if the contravention continues after conviction.
State law fines
Haryana’s shops law fines ₹3,000 to ₹10,000 for a first violation and ₹500 a day while it continues. Late LWF carries 12% interest.
Frequently asked questions
Is a labour compliance audit mandatory?
No, no law requires a private labour audit. But every requirement the audit checks is mandatory, and inspector-cum-facilitators under the Labour Codes still review records and issue notices. Investors, banks and large buyers often ask for an audit report as well. A yearly audit is the simplest way to know where you stand.
What changed with the Labour Codes for an audit?
The checklist changed. From 21 November 2025, wages follow the Code on Wages definition with the 50% rule, appointment letters are mandatory for all workers, fixed-term staff get gratuity after one year, and factory thresholds rose to 20 workers with power and 40 without. Older state rules continue during the transition, so we audit against both. That covers you whichever way an inspector reads it.
How far back does the audit look?
Usually the last 12 months, though we can extend it. For a due diligence or a specific dispute, three years of records may be reviewed, because PF and ESI arrears can be raised for past periods with interest. We agree the period in the scope letter before we start. A longer period shows your full exposure, at a higher fee.
Can you check our contractors as well?
Yes, and you should. As principal employer, you can end up paying a contractor’s unpaid wages and, in many cases, PF and ESI dues for workers on your site. We check each contractor’s licence, wage payments, PF and ESI challans and worker lists against your gate records. Contractors with clean records then become an asset in your own audits.
What PF wage ceiling should we follow now?
₹25,000 a month from 17 September 2026, under notification S.O. 5109(E); it was ₹15,000 earlier. Employees already covered stay members. New joiners earning above the ceiling are excluded unless the employer and employee opt in jointly. The audit checks that new joiners after 17 September 2026 were classified correctly, and that PF was deducted on the right base.
What does the audit report contain?
A list of findings, each with the law it relates to, the evidence, a risk grade, estimated arrears where they can be worked out, and the corrective step. It opens with a one-page summary for the owner or board. The report is for your internal use and decisions; it is not a government certificate. Most clients use it as a fix-list for the next 90 days.
Will the audit trigger any filing or disclosure?
No. The audit is a private review between you and us, and nothing is filed with any department because of it. If we find missed registrations or arrears, we advise you on correcting them, which usually means paying dues with interest before a notice arrives. Fixing a gap yourself costs less than fixing it under a notice.
Do you represent us in labour inspections or disputes?
We prepare records, reply to inspection notices and liaise with the labour department on compliance matters. Disputes before a labour court or industrial tribunal need a practising advocate, who signs and appears; we prepare the documents and work alongside them. In most cases, an audited, corrected file means a notice is closed at the reply stage.
What are the minimum wages in Haryana now?
Haryana revised its minimum wages from 1 April 2026, and the rates differ by skill category. Check the Haryana Labour Department notification for the current table. Rates change periodically, so the audit compares each employee’s pay with the rate in force for their category at the time. We attach the rate table we used to the report.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
The audit itself has no government fee. Any arrears, interest or registration fees found during the audit are paid directly to the authority concerned.
Ready to begin?
Tell us your locations, headcount and contractors, and we will scope a labour audit that finds the gaps before anyone else does.