Labour law compliances for startups in India

June 26, 2019
By Advocate Chikirsha Mohanty

With Start-up storm gripping the nation and the tremendous potential that it promises for country’s growth, the Ministry of Labour & Employment has issued an advisory to the States/UTs/Central Labour Enforcement Agencies for a compliance regime based on self-certification and regulating the inspections under various Labour Laws. The move is to promote the Start-Up ecosystem in the country and incentivizing the entrepreneurs in setting up new start-up ventures.

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It has been suggested that if such start-ups furnish self-declaration for compliance of nine labour laws for the first year from the date of starting the start-up, no inspection under these labour laws, wherever applicable, will take place.

Exemptions granted -

Start-ups have been exempted from inspection by labour inspectors for up to 3 years if they give a self-declaration for compliance to the nine labour laws. It has also been recommended that if such startups furnish self-declaration for compliance of the required nine labour laws for the first year from the date of starting the business, no inspection under these labour laws, wherever applicable, will take place for such start-ups.

Labour Law relaxations provided to startups -

Startups shall be allowed to self-certify their compliance (through Mobile App) with 9 Labour Laws and Environmental Laws. However, startups may be inspected on the basis of a written complaint filed for violation subject to approval of at least 1 level senior to the Inspecting officer.

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In case of environmental laws, startups which fall under the “white category” would be entitled to certify and only random checks would be conducted once in a while.

This significant exemption shall be available with respect to the following labour laws -

  • Building and Other Constructive Workers (Regulation of Employment & Conditions of Service) Act, 1996

  • Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979

  • Payment of Gratuity Act, 1972

  • Contract Labour (Regulation and Abolition Act), 1970

  • Employee’s Provident Funds and Miscellaneous Provisions Act, 1952

  • Employees’ State Insurance Act, 1948

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From the second year onwards, up to 3 years from the setting up of the units, such startups are required to furnish self-certified returns and would be inspected only when credible and verifiable complaint of violation is filed in writing and approval has been obtained from the higher authorities.

The labour minister further stated that the advisory to state governments is not to excuse the startups from the ambit of compliance of these labour laws but it is to provide an administrative mechanism to regulate inspection of the startups under these labour laws, so that startups are encouraged to be self-disciplined and adhere to the rule of law. 


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