Labour Law Compliances for Startups in India


December 29, 2022
Labour Law Compliances for Startups in India
Starting a new business is daunting. It takes a lot of courage, planning and endless effort to bring a business on track. That is why the government also introduced some exemptions regarding labour law compliances for startups in India.
Listen to this article

Table of Contents

Starting a business is not at all a cake walk. Even if you have plenty of experience in a particular industry, you still need to take care of numerous things regarding business, raw material, legal compliance for startups in India, and whatnot!! 

There is something on this page that could help relieve the startup owners or future entrepreneurs. One can find below the labour law compliances for startups in India. The blog below explains what type of companies are eligible for startup scheme, and its benefits. It also lays a route map of labour law exemption for startups. Get a thorough idea of startup compliance formalities in India. 


What Type of Companies are Eligible for Startup Scheme?

Before going through the labour law exemptions for startups, it is better to understand which companies fall under the definition of startups as per authorities. The types of companies eligible for startup scheme are as follows:

  • Incorporation as a Pvt. Ltd or LLP or a registered firm.
  • Turnover less than INR 100 Crore in any of the preceding financial years.
  • Considered as a ‘startup’ upto 10 years from the date of incorporation.
  • As per government orders, an entity “working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation” shall be recognized as a startup. 


Hence, a startup entity which has completed 10 years of incorporation or if its turnover exceeds INR 100 Cr in any financial year, it shall cease to be considered a startup in India. For certain benefits, the bar over startup compliance benefits limits to a turnover of INR 25 Cr only. It may be noted that for being recognized as a startup in India, there is some documentation and formalities to be taken care of with the government. Due to technicality involved, startup legal services help ease the due process.


What is the Benefit of Startup Schemes?

Starting a business is a challenging task. It's not like you start a product or service based entity and the world welcomes you with open arms. You have to make an effort at every step. There are legal compliances as well which need to be taken care of, based on which industry you enter into. 

That is why the government comes up with various schemes to ease the process of establishing a business, especially small businesses. Supporting small and middle business entities helps strengthen the economy in a longer run. Coming back to startups, given below are the benefits when it comes to startup compliance:

  • Simplified process through mobile applications
  • Reduction in costs including trademarks and patent processes
  • Easily accessible funds as venture capital
  • Tax exemptions for a limited period in the initial years
  • Eligibility to apply for government tenders without complying with the criteria related to prior experience or turnover
  • Facilities for Research and Development (R&D) sector
  • Time and money saving compliance process
  • Tax savings for startup investors 
  • Easy exit/ windup for startups from the business world

Still, there are some labour law compliances for startups in India which need to be duly complied with as required by the authorities. 


Labour Laws for Startups in India

There are various types of labour law which an organisation has to ordinarily abide by and comply with. There are some general rules which need to be taken care of even by startups which follow:


Taxation Rebate

Startups recognized by law may enjoy tax rebate under section 80 IAC of the Income Tax Act, 1961. Taxability of any organisation depends upon the industry it is indulged in, and the yearly turnover as well. 


Prevention of Sexual Harassment

Provisions of Sexual Harassment of Women at Workplace Act, 2013 are duly applicable at any organisation employing more than 10 employees regardless of the industry or location. The aim of POSH Act is to protect and redress sexual harassment of women at workplaces, which can not be avoided in established or startup organisations. That is why the labour law compliances for startups in India does not exempt or relieve POSH requirements in any way.


Minimum Wages

A start-up may be a start of the business with limited resources and team, the employees’ right to wage can not be avoided. The Minimum Wages Act, 1948 makes it mandatory to pay the minimum wages set by the state authorities to the workers before the 7th day of the following month. 


Working Hours

A startup may require a non-stop workforce struggling day and night to elevate the business to new heights. But the same can not be achieved while keeping the health of workers at stake. If an employee is forced to work beyond the usual working hours or those fixed by the government on a daily or weekly basis, employees may bring the matter in light through labour lawyers


Safety and Health

Even if it's a startup organisation, the health and safety of the employees has to be given due care. There must be safe work conditions and proper arrangements at a workplace allowing people to work in a healthy and safe environment. The labour law compliances for startups in India seek due care when it comes to health and safety measures at a workplace.


Against Discrimination 

The formula of equal pay for equal work needs to be respected everywhere regardless of whether it's a corporate office or a factory. The Equal Remuneration Act, 1976 requires employers not to discriminate among workmen based on the fact that they are males or females. Even entrepreneurs of a startup can not discriminate based on a person’s gender.


It may be noted that the list above is not exhaustive but only gives an idea of the kind of compliance for startups in India. There may be industry specific requirements as well which need to be taken care of through professionals.


Labour Law Exemption for Startups

Given below are the laws which startups are exempted from detailed compliance with the ease of process. It may be noted that these are those statutes under which, statutory compliance for companies in India needs to be conformed, and inspections are also conducted. The legal compliance for startups in India allows startups to self-certify for up to 3 years unless there is some grave and reliable complaint against them, in which case an inspection may be conducted. 


Industrial Disputes Act, 1947

As the name suggests, this Act concerns the relationship among employers and workmen in the organised sector, mainly protecting the rights of persons who are engaged in an industry except those in managerial or administrative position, among others. Since industrial employment affects hundreds of people, there are specific provisions related to layoffs, retrenchment and closure of an organisation. It also includes provisions for investigating, resolving and setting industrial disputes, unfair trade practices, etc.  


Industrial Employment (Standing Orders) Act, 1946

The purpose of this Act is to define employment conditions to the employers at an organisation employing more than 100 employees. The aim is to give the employees a clear idea of terms of employment with regards to working hours, shifts, attendance, grant of leave, and so on. 

 


The Payment of Gratuity Act, 1972

Loyalty and consistency towards an employment should be rewarded as focused upon under this Act. It lays provisions for payment of gratuity (a certain amount of money) at the termination of employment for an employee who has served for 5 or more years. 


Contract Labour (Regulation and Abolition) Act, 1970 (CLRA)

The provisions of this Act lay for the regulation and termination of contractual labour in specific circumstances. The aim is to protect the rights of employees as per Labour laws in terms of contract of employment seasonal or otherwise in nature.


Trade Unions Act, 1926

Trade unions are the representing units of workmen in an industry or organisation. It gives voice to the individual workmen against any kind of injustice or discrimination. The Act provides for due registration of the union with the government to protect and promote the interests of workers. 


Employees' State Insurance Act, 1948

In today’s uncertain times, insurance is a must for one and all. There are certain workplaces whereby employers are bound by social security laws to provide insurance for their employees. It grants protection to workers against health related contingencies like sickness, injury, maternity, etc. The labour law compliances for startups in India are also exempted from ESI provisions. 


Building and Other Constructions Workers' (Regulation of Employment and Conditions of Service) Act, 1996

The Act lays for regulation of employment and service conditions for building and construction workers in India. It affirms safety, health and welfare measures for the workers.


 Employees' Provident Funds and Miscellaneous Provisions Act, 1952

Worrying about what comes in the future is a human tendency. The Employees Provident Fund Scheme, 1952 lays future planning through employers and employees working as a team contributing towards a common account which matures after the employee retires and gives him/ her the much needed financial support at retirement. Startup compliance is exempt for a certain period as leveraged by the authorities. 


Inter-State Migrant Workmen Act, 1979

Migration is not easy when you have to leave your native place for the sake of employment ultimately aiming for survival. This Act regulates the work conditions for migrant workmen in inter-state establishments. The legal compliance for startups in India leverages strict adherence with this as well until self certification is duly followed. 



If you are planning for a startup in Kolkata, a corporate lawyer in Kolkata may assist with the procedural technicalities. This helps the founding partners to focus upon their building their business while the compliance for startups in India is taken care of by professionals.

Written By:
Abhimanyu  Shandilya

Recommended Free Legal Advices
question markCritical and persistent issue with my Honda WRV IDTEC Diesel 1 Response(s)
Dear Client, From the prolonged content of your query, it appears you are extremely aggrieved with the service of the service provider and decided to move the Court for relief. On detection of defects in the product, post-purchase is termed and defined under Sec.2(34) of the Consumer Protection Act, 2019 as "Product Liability" which means the responsibility of a product manufacturer or product seller/service centre, to compensate for any harm caused to the consumer/customer by such defective product manufactured or sold or for a deficiency in services relating thereto. Chapter VI, Section 82 to Section 87 of the Consumer Protection Act deals with product liability and So, in the given scenario, serving a strong legal notice to both Service Provider and the product manufacturer, you can file a complaint against them over alleged deficiency in service and unfair trade practices before the District Consumer Commission under Section 35 of the Consumer Protection Act, 2019 claiming replacement of the vehicle or refund of the cost of the vehicle including the expenses incurred towards repairing/servicing along with compensation for harassment and cost of litigation. As per Section 69 of the CPA, the complaint should be filed within two years from the date of the cause of action. Since you have been facing a deficiency in service since 2017 up to now, your claim is now barred by limitation. So, you have to file a petition seeking condonation of delay on the grounds of continued cause of action along with your complaint petition and lead the evidence to justify your claim before the Commission. If required, hire the service of an experienced Advocate handling consumer cases to navigate the issue in the right way.
question markLegality of selling Leather BDSM - Sex Products in India 1 Response(s)
Dear client, Selling BDSM products like masks, whips, floggers, handcuffs, and ropes is permissible in India, as long as specific legal guidelines are observed. For products made from cow/animal leather, ensure the leather is sourced ethically and not from protected species, complying with the Wildlife Protection Act, 1972, and the Prevention of Cruelty to Animals Act, 1960. Adhere to applicable import/export regulations and environmental laws. For your e-commerce platform, implement age verification to limit access to individuals 18 years and older, clearly outline terms and conditions, and comply with the Consumer Protection Act, 2019, and data protection regulations. Avoid obscene content to comply with Section 292 of the Indian Penal Code and Section 67 of the Information Technology Act, 2000. Since your products are intended for external use only, you generally do not need medical or hygiene certificates but consider obtaining voluntary certifications for quality assurance. You can market these products under the category of "Sexual Wellness Products" if they emphasize wellness and consensual use. Clearly state on your website that these products are non-returnable and non-refundable due to hygiene reasons, and include a limitation of liability clause advising responsible and consensual use. Hope our prompt support in this matter would be greatly appreciated.
question markTemporary Maid in Office-legal-labour law compliances 1 Response(s)
Dear Client, When the service of any person is hired for commercial purposes or any purposes incidental thereto in a commercial establishment, labour laws including other social security laws already prevalent or in force in the establishment are equally applicable to that person because if any unfortunate incident or mishaps happens in the course of his employment/engagement in the establishment may attract the penal provision of applicable laws and employer may face legal consequences. The time or duration of engagement is immaterial and irrelevant, in the context.
question markNRI Child Status in India 2 Response(s)
As per law father is the natural guardian of child above 5 years. Fluency in English does not mean that person is intelligent and sane. Many people like from china, Japan, USSR, Israel etc uses translator to communicate. 1. Since child is born in India hence till 18 he can have be Indian citizen or be Australian citizen and on attaining 18 child shall have option to choose citizenship of either country. 2. Yes. 3. Yes. On attaining 18 years he shall have option to choose citizenship of either country. 4. You cannot stop a person from filing case but you have right to defend and also to take precautions to save yourself from such frivolous cases.
question markForeign company registration 8 Response(s)
So you wanted to open a marketing office in India which will be subsidiary to your parent company. For that purpose your need to register a Pvt. company with a registered office India then you can apply for GST registration also. Regards Rajeev RJ Associates Trivandrum Kerala
Our Expert Lawyers in Employment and Labour Commercial Industrial Laws