A section by section checklist across the Code on Wages, the Industrial Relations Code, the Code on Social Security, the OSH Code, and the POSH Act

Most HR teams find out their compliance has a gap only after an inspector points it out, or worse, after an employee files a complaint. That is the wrong time to learn it. A labour code compliance audit done today, before the notice arrives, is the difference between a small correction and a legal headache.

Quick answer

A labour code compliance audit is a structured review of your wage records, employment contracts, statutory registrations, safety practices, and welfare policies against India's four Labour Codes, the POSH Act, and related rules. In 2026, with all four Codes in force and state rules being notified rapidly, employers need to check at least 25 specific areas, each tied to a specific section or chapter, to stay compliant.

This blog gives you that exact checklist, with the section or chapter of the relevant law noted against each point so your team can trace it back to the actual law, not just a summary of it. Simple language, no legal jargon, and organised the way a real audit is done, code by code. Whether you run a factory in Gujarat, a shop in Delhi, or a services company with offices spread across five states, the same 25 checkpoints apply to you, only the specific state rule underneath each one changes.

Keep a notepad handy while you read this. Most employers who go through this list find at least four or five points where their current practice does not fully match what the law now requires.

Why 2026 Is Not a Year to Ignore Compliance

The four Labour Codes came into force from 21 November 2025, and since then, state governments have been notifying their own rules one after another. Rajasthan, Ladakh, Andhra Pradesh, Gujarat, West Bengal, and several union territories have all published fresh notifications through 2026. What this means practically is that the compliance ground keeps shifting under your feet even if your policies were fine last year.

Labour departments across states are also more active now. Inspector cum Facilitator visits, online return filings through the Ministry of Labour and Employment, and digital tracking through portals like Shram Suvidha and Shram Setu have made non compliance far easier to catch than before. A wage register that used to sit safely in a cupboard is now expected to match data the government already has from your PF and ESI filings.

An audit is not about ticking boxes for the sake of it. It protects you from penalties, protects your employees' rights, and honestly, it just makes running the business less stressful.

How the 2026 Rules Differ From the Old Law

A few of the numbers that mattered under the old laws have changed under the new Codes. This is where most outdated policies trip up.

What Changed	Under The Old Law	Under The 2026 Codes
Monthly wage payment deadline	7th day for establishments under 1000 workers, 10th day for larger ones (Payment of Wages Act)	One uniform 7th day deadline for every establishment (Section 17, Code on Wages 2019)
Standing Orders threshold	100 or more workers (Industrial Employment Standing Orders Act)	300 or more workers (Section 28, Industrial Relations Code 2020)
Prior permission for layoff, retrenchment, closure	100 or more workmen (Industrial Disputes Act)	300 or more workmen (Chapter X, Industrial Relations Code 2020)
Contract labour licensing threshold	20 or more workers (Contract Labour Act)	50 or more workers (Chapter XI, OSH Code 2020)
Gratuity for fixed term employees	Not specifically addressed, five year service generally expected	Pro rata after one year (Section 53, Code on Social Security 2020)
Written appointment letter	Not mandatory under central law	Mandatory for every employee (Section 6, OSH Code 2020)
Definition of wages	Varied across four separate wage laws	One uniform definition, basic plus DA at least 50 percent (Section 2(y), Code on Wages 2019)

The 25 Point Labour Code Compliance Checklist for 2026

Here is how the 25 checks break down across the five areas this audit covers.

Cat	Code	Checks	What It Covers
A	Code on Wages, 2019	6	Minimum wage, wage definition, timely payment, bonus, equal pay, deductions
B	Industrial Relations Code, 2020	5	Standing Orders, fixed term contracts, grievance redressal, layoff, trade unions
C	Code on Social Security, 2020	6	EPF, ESI, gratuity, maternity benefit, employees compensation, gig workers
D	OSH Code, 2020	6	Appointment letters, registration, working hours, welfare, contract labour, migrant workers
E	Cross Cutting Compliance	2	POSH Internal Committee, data handling under the DPDP Act

A. Code on Wages, 2019

1. Are your minimum wage rates matched to the latest notification?

Section 5, Section 6 and Section 9, Code on Wages 2019

Every state revises minimum wages periodically, often twice a year through Cost of Living Allowance or Variable Dearness Allowance notifications, and these sit on top of the central floor wage fixed under Section 9. Check that your payroll reflects the current rate for each category of worker, in each state you operate in. Paying last year's rate is a common and easily avoidable violation.

2. Does your wage definition follow the new 50 percent rule?

Section 2(y), Code on Wages 2019

The Code introduced a uniform definition of wages where basic pay plus dearness allowance must equal at least 50 percent of total remuneration, and anything paid beyond that limit under heads like house rent or conveyance gets added back into wages for calculation purposes. This affects how PF, gratuity, and bonus are worked out. Many CTC structures built years ago still use old formulas, and this is one of the first things an auditor checks.

3. Are wages being paid on time?

Section 17, Code on Wages 2019

The Code sets one uniform deadline for every establishment, regardless of size. Monthly wages must be paid before the 7th day of the following month, weekly wages on the last working day of the week, and daily wages at the end of the shift. Workers who are removed, dismissed, retrenched, or who resign should get their dues within two working days. Delayed payroll cycles are a red flag.

4. Is your bonus eligibility and calculation correct?

Section 26 onward, Chapter IV, Code on Wages 2019

Confirm which employees fall under the bonus provisions, whether the minimum 8.33 percent and maximum 20 percent limits are applied correctly, and whether bonus is actually paid within eight months of the close of the accounting year as the Code requires.

5. Is there equal pay with no gender based wage gap?

Section 3, Code on Wages 2019

Review your pay bands to make sure employees of every gender, including transgender employees, doing the same or similar work are paid equally. This is both a legal requirement and something regulators are watching more closely now.

6. Are deductions kept within permissible limits?

Section 18, Code on Wages 2019

Total deductions from an employee's wages in any wage period cannot exceed 50 percent. Check loan recoveries, damage recoveries, and other deductions against this cap.

Bottom line: get your wage definition and payment timeline right first, since mistakes in those two points quietly cascade into PF, gratuity, and bonus errors everywhere else.

B. Industrial Relations Code, 2020

7. Have you confirmed your Standing Orders status?

Section 28, Industrial Relations Code 2020

Establishments employing 300 or more workers on any day in the preceding twelve months need Standing Orders covering classification of workers, leave, termination, and disciplinary procedure, based on or adapted from the Central Government's Model Standing Orders. Check whether your establishment crosses this threshold in your state and whether your Standing Orders are actually certified, not just drafted.

8. Have your Fixed Term Employment contracts been reviewed?

Section 2(o) and Section 30, Industrial Relations Code 2020

If you hire on fixed term contracts, confirm that these employees get the same wages, hours, and statutory benefits as permanent employees doing comparable work, and that the contract terms are clearly documented in writing.

9. Is your Grievance Redressal Committee in place?

Section 4, Industrial Relations Code 2020

Establishments with 20 or more workers need a functioning Grievance Redressal Committee with equal representation from employer and employee sides, and adequate representation of women. Confirm it exists on paper and that it actually meets, since it must dispose of complaints within 30 days.

10. Have you followed the correct layoff, retrenchment, and closure process?

Chapter IX and Chapter X, Industrial Relations Code 2020

If you have gone through any workforce reduction, check that notice periods and compensation calculations under Chapter IX (which applies once an establishment has 50 or more workers) were followed correctly, and that prior government approval was obtained wherever Chapter X applies, which is only for non seasonal establishments with 300 or more workmen.

11. Are your trade union and negotiating council records in order?

Section 6 and Section 14, Industrial Relations Code 2020

Where a trade union exists, confirm registration is proper and that recognition as a sole negotiating union or the constitution of a negotiating council has been handled correctly where more than one union is active in the establishment.

Bottom line: your Standing Orders and Grievance Redressal Committee are usually the two IR Code items most likely to have gone stale since your last review, since neither has a monthly filing to remind you.

C. Code on Social Security, 2020

12. Is your EPF registration and ECR filing up to date?

Chapter III, Sections 14 to 23, Code on Social Security 2020

Confirm every eligible employee has an active UAN, KYC is seeded correctly, and your Electronic Challan cum Return is filed and paid without delays each month.

13. Is your ESI registration and contribution verified?

Chapter IV, Sections 24 to 52, Code on Social Security 2020

Check coverage thresholds, contribution rates, and whether all eligible employees, including those recently crossing the wage ceiling, are correctly enrolled.

14. Is your gratuity policy and payment timeline correct?

Chapter V, Sections 53 to 58, Code on Social Security 2020

Confirm your gratuity calculation matches the current formula, that fixed term employees who complete even one year get proportionate gratuity, that eligible exiting employees are paid within 30 days, and that adequate provisioning or a gratuity trust is in place.

15. Have you checked maternity benefit and crèche facility compliance?

Chapter VI, Sections 59 to 72, Code on Social Security 2020

Review the 26 week paid leave for the first two children, the crèche facility requirement for establishments with 50 or more employees, and work from home provisions where the nature of work allows it.

16. Is your Employees Compensation coverage confirmed?

Chapter VII, Sections 73 to 99, Code on Social Security 2020

Make sure workers not covered under ESI have valid Employees Compensation insurance, especially in sectors with higher physical risk, and that the presumption of injury for listed occupational diseases is factored into your policy.

17. Have you registered unorganised, gig, and platform workers where applicable?

Sections 113 and 114, Chapter IX, Code on Social Security 2020

If your business engages gig or platform workers, check whether eShram registration is complete and whether your organisation, as an aggregator, is contributing the prescribed percentage of annual turnover toward the social security fund.

Bottom line: EPF and ESI tend to stay compliant because they are filed monthly, while gratuity, maternity, and gig worker provisions are the ones that quietly drift out of date.

D. Occupational Safety, Health and Working Conditions Code, 2020

18. Have appointment letters been issued to every employee?

Section 6, Occupational Safety, Health and Working Conditions Code 2020

This is now mandatory for every employee, including fixed term staff, probationers, and daily wagers, not optional and not limited to permanent staff. Many smaller establishments still onboard people without a formal letter. A missing appointment letter is one of the easiest things for an inspector to flag.

19. Is your establishment registered under the new single registration system?

Chapter II, Occupational Safety, Health and Working Conditions Code 2020

The Code replaces multiple separate licenses with a single registration, license, and return system. Check whether your existing registrations have been migrated or whether a fresh registration is due, especially if you cross the 10 worker (with power) or 20 worker (without power) threshold.

20. Are working hours, overtime, and weekly off records maintained correctly?

Section 25 and Section 27, Chapter VII, Occupational Safety, Health and Working Conditions Code 2020

Confirm the standard 8 hour working day and the weekly working hour limit are respected, that no worker works more than 6 days a week without a rest day, and that overtime is paid at double the ordinary wage rate. Keep this separate from earned leave, which accrues at one day for every 20 days worked under a different provision, since the two are often mixed up in payroll registers.

21. Are welfare facilities available as per the threshold?

Chapter VI, Occupational Safety, Health and Working Conditions Code 2020

Canteen, crèche, restroom, drinking water, and first aid facilities are mandated once you cross specific employee count thresholds, and separate facilities are now required for male, female, and transgender employees. Physically verify these exist, do not just assume the policy document is enough.

22. Is your contract labour licensing in order?

Chapter XI, Part I, Occupational Safety, Health and Working Conditions Code 2020

The applicability threshold for contract labour provisions has moved to 50 workers. If you engage contract workers, confirm the contractor holds a valid license, that wages are disbursed through bank transfer, and that you as the principal employer are monitoring the contractor's statutory compliance.

23. Are interstate migrant worker records maintained?

Chapter XI, Part II, Occupational Safety, Health and Working Conditions Code 2020

If you employ interstate migrant workers, check that the annual lump sum journey allowance, suitable working conditions, and proper registers are in place, and that ESI or PF benefits are extended to them on par with local workers.

Bottom line: appointment letters and welfare facilities are usually the first two things an inspector checks on a physical site visit, so start there if you are short on time.

E. Cross Cutting Compliance

24. Is your POSH Internal Committee and annual report in order?

Section 4, Section 19 and Section 21, Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

Confirm your Internal Committee is properly constituted with the required external member from an NGO, that at least 50 percent of members are women, that the annual report has been filed with the District Officer, and that awareness workshops under Section 19 are documented.

25. Has your data handling readiness been reviewed?

Digital Personal Data Protection Act, 2023

Review how employee personal data, salary details, health records, and identification documents are stored, shared, and secured. This is increasingly treated as part of a complete compliance review, not a separate exercise anymore, since payroll and HR systems handle personal data covered under this law.

Bottom line: POSH and data handling are not optional extras anymore, they are now a standard part of any complete compliance review.

Check Your State's Notification Status Before You Act

Everything above is the national law, but a good part of it only takes practical effect once your specific state notifies its own rules. The four Codes came into force centrally from 21 November 2025, and the Central Rules under all four were notified on 8 May 2026. Even so, only 5 of 37 states and union territories have notified rules for all four Codes as things stand, 7 have notified at least one, and the remaining 25 have not notified anything yet. Wherever a state has not notified, its earlier labour laws continue to apply there instead.

This is not a small detail for this checklist. Standing Orders formats, contract labour license formats, and OSH single registration timelines are all set by state rules, not by the central Code text alone. Before you change a policy on the strength of this article, check where your specific state actually stands today.

Praans Consultech tracks this centrally on the Labour Codes 2026: State Wise Implementation Status Tracker, updated state by state and code by code as gazette notifications happen.

Documents You Should Keep Ready For Your Audit

An audit moves much faster when the paperwork is organised before the review begins. Here is what you should have on hand.

Payroll registers and salary slips for at least the last twelve months, current appointment letters and employment contracts for every employee including contract and fixed term staff, PF and ESI challans along with the ECR filing history, gratuity and bonus calculation sheets, leave and attendance registers, the POSH policy along with Internal Committee constitution details and past annual reports, Standing Orders if applicable, and copies of all current state and central registrations including Shops and Establishments, PF, ESI, and any state specific licenses.

If your records are scattered across different people, different drives, and a few physical files sitting in a cupboard somewhere, that itself is worth fixing before you even get to the actual checklist. A missing register is treated the same as a wrong register during an inspection.

How Often Should You Run a Compliance Audit

Once a year is the bare minimum, but honestly, given how frequently states are notifying new rules under the Labour Codes right now, a half yearly review makes more sense for 2026. If you operate across multiple states, each state rule notification is effectively a mini trigger point for a fresh check on that specific location.

A good rule of thumb: audit whenever you cross a new employee headcount threshold, whenever you enter a new state, and whenever a state notifies new rules under any of the four Codes.

Common Mistakes We See During Audits

A few patterns show up again and again when we audit employers across sectors.

Companies often update their PF and ESI compliance regularly since those filings are monitored monthly, but let their Standing Orders, Grievance Redressal Committee, and POSH Internal Committee go stale for years. These do not have a monthly filing to remind you, so they get forgotten.

CTC structures are another repeat issue. HR teams built these structures years before the Code on Wages came into effect, and nobody revisited the basic plus DA ratio once the Section 2(y) rule kicked in. This quietly affects PF, gratuity, and bonus calculations across the entire workforce without anyone noticing.

Multi state employers frequently apply one state's minimum wage or welfare rule across all their locations out of convenience. Each state has its own notification, its own revision cycle, and sometimes its own additional requirement like a Labour Welfare Fund contribution that a neighbouring state does not have.

Finally, welfare facilities like crèche or first aid rooms often exist as a line item in a policy document but not as an actual physical space. Auditors, and inspectors, check both.

Frequently Asked Questions

1. What is a labour code compliance audit?

It is a structured review of your wage, employment, safety, and welfare records against the requirements of India's four Labour Codes and related laws like the POSH Act.

2. Which laws does a 2026 compliance audit cover?

The Code on Wages 2019, the Industrial Relations Code 2020, the Code on Social Security 2020, the Occupational Safety, Health and Working Conditions Code 2020, plus the POSH Act 2013 and, increasingly, the Digital Personal Data Protection Act 2023.

3. Who should conduct a labour code compliance audit?

It can be done internally by an experienced HR compliance team, or externally by a labour law consultancy. External audits tend to catch more gaps.

4. What happens if my company fails a compliance audit?

Nothing happens from the audit itself. The value is in finding and fixing gaps before an inspector or an employee complaint finds them for you.

5. Do small businesses also need to comply with the Labour Codes?

Yes, though specific obligations vary by employee count. Even a small establishment has minimum obligations around wages, appointment letters, and basic registers.

6. How long does a full compliance audit take?

For a single establishment, a thorough review typically takes one to two weeks. Multi state audits take longer since each state has its own notified rules.

7. Is a compliance audit only about avoiding penalties?

No. It also protects employee trust, reduces dispute risk, and makes due diligence smoother during a funding round or an acquisition.

8. What is the appointment letter rule under the new Codes?

Section 6 of the Occupational Safety, Health and Working Conditions Code 2020 makes it mandatory for every employer to issue an appointment letter to every employee, including contract and fixed term staff.

9. When do Standing Orders become mandatory?

Under Section 28 of the Industrial Relations Code 2020, establishments employing 300 or more workers on any day in the preceding twelve months must prepare certified Standing Orders.

10. Is POSH compliance part of a labour code audit?

Yes. Even though the POSH Act 2013 is a separate law, most compliance audits, including ours, review Internal Committee constitution and annual reporting alongside the four Labour Codes since both are workplace obligations.

Talk To Praans Consultech

If reading through this checklist made you pause on even three or four points, that is exactly the sign a proper audit is due. Praans Consultech runs full labour code compliance audits across all four Codes, POSH, and data handling practices, covering every state you operate in. We tell you exactly where the gaps are, which section of the law they fall under, and how to close them, in plain language, without the legal jargon.

Beyond the audit itself, we also run an AI driven compliance software that tracks every central and state gazette notification for you and flags exactly which of these 25 points changes when a new rule is notified, instead of you finding out during an inspection. It is the same tracking that powers the state wise tracker linked earlier in this article, built into your own compliance dashboard.

And beyond the audit and the software, our team also handles PAN India statutory registrations, ongoing compliance outsourcing including register preparation and monthly statutory filings, legal advisory opinions on specific workforce questions, and litigation support when a dispute actually reaches a labour authority or tribunal.

Book a Free Compliance Audit | See the Compliance Software

Call: 9050576838 | Email: info@praansconsultech.com

About The Author

Sandeep Kumar is the Co Founder and Labour Law Consultant at Praans Consultech, India's labour law compliance platform. He holds a B.Sc., LLB, LLM, and PGCHRM from XLRI, and is currently pursuing his PhD. With over 16 years of experience in labour law compliance, he has guided employers across sectors through statutory registrations, compliance audits, and the transition to India's new Labour Codes.

Sources

1. The Code on Wages, 2019

2. The Industrial Relations Code, 2020

3. The Code on Social Security, 2020

4. The Occupational Safety, Health and Working Conditions Code, 2020

5. The Sexual Harassme of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

6. The Digital Personal Data Protection Act, 2023

7. State Labour Code Rules notified by respective state governments through 2025 and 2026

Disclaimer

This article is prepared for general awareness only and does not constitute legal advice. The content is based on a good faith reading of the bare acts and publicly available government notifications referenced above. Employers should consult a qualified labour law professional before making compliance decisions specific to their establishment.

Labour Code Compliance Audit 25 Things Every Employer Must Check in 2026

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