The Complete Compliance Checklist for Manufacturing SMEs in India
A practical compliance checklist for Indian manufacturing SMEs covering the Labour Codes, factory safety, PF/ESI, pollution control and POSH for 2026.
Manufacturing SMEs in India carry one of the heaviest compliance loads of any sector - factory safety, pollution control, and a labour law framework that is mid-transition from old Acts to the new Labour Codes, all layered on the same premises.
Key facts at a glance
- All 4 Labour Codes are in force nationally since 21 November 2025, but state-level rule notification is still incomplete for most states as of mid-2026.
- EPF remains mandatory at 20 or more employees, with a Rs 15,000/month wage ceiling, unchanged under EPF Scheme 2026 (effective 29 June 2026).
- ESI is mandatory at 10 or more employees (or fewer in notified hazardous units), with a Rs 21,000/month wage ceiling.
- Engaging 20 or more contract workers through a contractor triggers principal-employer registration under contract labour law.
- A POSH Internal Committee is mandatory once total headcount reaches 10 or more employees, including shop-floor staff.
- Pollution Control Board Consent to Establish and Consent to Operate are generally required before commencing manufacturing operations.
The Labour Codes transition: what applies today
This is the area most manufacturers get wrong right now. The 4 Codes - Wages, Industrial Relations, Social Security, and Occupational Safety, Health and Working Conditions (OSH) - are legally in force nationally, but labour is a concurrent subject, meaning both the central government and each state must notify their own rules before the Codes are fully operational in that state. Central rules were pre-published in draft form in late December 2025, with final Central rules expected around April 2026, but state notification has lagged.
Practically, this means a manufacturer should check their specific state's notification status rather than assume the new Codes' provisions (on things like fixed-term employment, standing orders thresholds, or retrenchment compensation) are fully governing yet - in many states, the older Acts (Factories Act, Industrial Disputes Act, Contract Labour Act) continue to apply in practice until the transition completes locally.
Factory safety and the OSH Code
The OSH Code is designed to eventually consolidate 13 laws, including the Factories Act, 1948 and the Contract Labour (Regulation and Abolition) Act, 1970. Until a state's OSH Code rules are notified, factories should continue meeting Factories Act obligations: factory registration and licensing, safety officer appointment above prescribed worker counts, welfare facilities (canteens, restrooms, first aid), working hour limits, and mandatory registers for accidents and overtime.
Pollution control and environmental clearances
Manufacturing units, unlike pure office-based businesses, generally need environmental clearances before they can even begin construction or operation:
| Clearance | When required |
|---|---|
| Consent to Establish (CTE) | Before setting up the factory/plant |
| Consent to Operate (CTO) | Before commencing production; renewed periodically |
| Hazardous waste authorisation | If the unit generates hazardous waste |
| Fire NOC | Before occupancy, particularly for units storing flammable material |
The exact category (red/orange/green/white, based on pollution potential) determines which clearances apply and how often they are renewed - a category classification manufacturers should confirm with their state pollution control board rather than assume.
Labour compliance and contract workforce
| Requirement | Threshold | Key detail |
|---|---|---|
| EPF | 20+ employees | Rs 15,000 wage ceiling; 12% + 12% |
| ESI | 10+ employees (1+ in hazardous units) | Rs 21,000 wage ceiling; 0.75% + 3.25% |
| Contract labour registration | 20+ contract workers | Principal employer registers; contractor needs a licence |
| POSH Internal Committee | 10+ employees | Covers entire workforce including shop floor |
Manufacturing SMEs commonly under-comply on contract labour specifically - because contract workers are technically employed by a labour contractor, the principal employer sometimes assumes it has no direct obligation, but registration and oversight duties fall on the principal employer regardless.
POSH on the shop floor
POSH compliance in manufacturing is frequently treated as an office-only concern, but the Act covers the entire workforce, including shop-floor and warehouse staff. With the Supreme Court pushing for district-wise POSH audits and Internal Committee registration on the government's SHe-Box portal, manufacturers should ensure their Internal Committee is actually functional - trained members, a documented complaint process, and awareness sessions reaching shop-floor workers, not just a policy filed away in HR.
Bringing it together
Manufacturing sits at the busiest intersection of compliance categories: factory/OSH safety, pollution control, contract labour, and the standard PF/ESI/POSH stack, all while the underlying legal framework is mid-transition through the Labour Codes. The practical approach is to track your specific state's Labour Codes notification status separately from your day-to-day compliance calendar, since the two move on different timelines.
If you are not sure where your manufacturing unit stands on labour and safety compliance, ComplianceCheck's Labour Codes assessment gives you a clear picture in a few minutes.
Sources
- Ministry of Labour and Employment - labour.gov.in
- Employees' Provident Fund Organisation (EPFO) - epfindia.gov.in
- Employees' State Insurance Corporation (ESIC) - esic.gov.in
- Central Pollution Control Board / respective State Pollution Control Board
- Directorate/Department of Factories and Boilers of the relevant state
This guide is general information, not legal advice. Requirements vary by state, sector and headcount - confirm specifics with a compliance professional or the relevant authority.
Frequently Asked Questions
- Are the new Labour Codes fully applicable to manufacturing units yet?
- The 4 Labour Codes came into force nationally on 21 November 2025, but because labour is a concurrent subject, each state must also notify its own rules - as of mid-2026 most states have not fully notified theirs, so manufacturers should track their specific state's status rather than assume full applicability.
- Does the Factories Act still apply after the OSH Code?
- The Occupational Safety, Health and Working Conditions Code, 2020 is designed to eventually replace the Factories Act and 12 other laws, but until a manufacturer's state fully notifies its OSH Code rules, factories generally continue following the existing Factories Act framework in practice.
- At what factory size does a Fire NOC and pollution consent become mandatory?
- Fire NOC and pollution control board consent (Consent to Establish and Consent to Operate) requirements apply based on the nature and scale of manufacturing activity rather than a single headcount number, and are generally mandatory before a factory can commence operations, regardless of size.
- Is contract labour common in manufacturing, and does it need separate registration?
- Yes, manufacturers who engage 20 or more contract workers through a contractor generally need to register as a principal employer under contract labour law, and the contractor separately needs a licence.
- Does POSH apply to factory floor workers, not just office staff?
- Yes, POSH applies to all employees regardless of role, including factory floor and shop-floor workers, and the Internal Committee requirement is triggered at 10 or more employees across the entire establishment, not just administrative staff.
- Does EPF's Rs 15,000 wage ceiling still apply after EPF Scheme 2026?
- Yes, the EPF Scheme 2026, which took effect 29 June 2026 and aligned EPF with the Code on Social Security, kept the Rs 15,000/month wage ceiling and the 12% employee / 12% employer contribution rates unchanged.
Check your status
Labour Code Readiness
Readiness assessment for India's 4 new Labour Codes (Wages, Social Security, OSH, Industrial Relations), with implementation cost estimates.