The HR Generalist Guide to Compliance & Risk : Staying Out of Court

Welcome to Chapter 15 of The HR Generalist’s Blueprint: A Complete Operational Guide.

In Indian HR, "Compliance" is often viewed as paperwork. It is not. It is risk management.

One disgruntled employee who knows the law better than you do can shut down your operations. If a Labour Inspector walks into your office today and asks for your "Form F" or "Register of Wages," and you hand them a mess of papers, you are in trouble.

As an HR Generalist, you are the Compliance Officer. You must know the difference between the Shops & Establishments Act (State law) and the Maternity Benefit Act (Central law). Ignorance is not a legal defense.

Key Takeaways:

• The Big Three: Mastering Wages, Leaves, and Sexual Harassment (POSH) laws.

• The New Codes: Preparing for the "50% Basic Rule" under the upcoming Labour Codes.

• The Audit: How to self-audit your "Statutory Registers" before the government does.

15.1 Labour Law 101: The Indian Survival Kit

You cannot memorize every section of the Indian Labour Code, but you must memorize the ones that get companies sued.

A. Wage & Hour (The Minimum Wages Act)

• Minimum Wage: This changes by state and "Zone" (Zone A = Metro, Zone C = Rural). You must update salary bands twice a year (April/October) when VDA (Variable Dearness Allowance) is revised.

• Overtime (OT): Under the Shops & Establishments Act, any employee working beyond 9 hours a day or 48 hours a week is entitled to OT at twice the ordinary rate of wages.

  • The Risk: Startups often ignore this. If an employee logs their hours and sues later, you will owe huge back pay.

B. Leave Laws & Maternity

• Maternity Benefit Act (The Gold Standard): India has one of the most generous maternity laws in the world.

  • 26 Weeks of fully paid leave for the first two children.

  • Creche Facility: Mandatory for establishments with 50+ employees.

  • The Trap: You cannot fire a woman while she is on maternity leave. It is illegal and will result in immediate reinstatement with full back pay.

C. Anti-Discrimination & POSH (Prevention of Sexual Harassment)

• The IC (Internal Committee): If you have 10+ employees, you must have a constituted IC with an external member (NGO/Lawyer).

• The Annual Report: You must file a POSH Annual Report with the District Officer every year. Failure to do so can lead to cancellation of your business license.

15.2 Record Keeping: The "Two-Folder" Rule

In the age of the DPDP Act (Digital Personal Data Protection Act), you cannot just stuff papers into a cabinet. You need a retention strategy.

The "2-Folder" System:

Never keep everything in one file. If a manager asks to see an employee's file for a performance review, they should not see their medical history.

Folder Type	What Goes Inside?	Who Has Access?
1. Personnel File (The "Public" File)	Resume, Offer Letter, Performance Reviews, Disciplinary Warnings.	HR & The Direct Manager.
2. Confidential File (The "Private" File)	Medical records, Background Check results, Bank Account details, POSH complaints, Aadhaar/PAN copies.	HR ONLY. Never show this to a Manager.

15.3 Audits: The Mock Inspection

Do not wait for a notice from the Labour Commissioner. Conduct a "Mock Audit" of your Statutory Registers every Quarter.

The Checklist for "Statutory Registers":

Ensure you can generate these from your HRMS instantly:

1. Register of Wages (Form B): Proof that you paid salaries.

2. Register of Attendance (Form D): Proof of working hours.

3. Register of Fines/Deductions: Proof that you didn't arbitrarily cut salary.

15.4 The New Labour Codes: Preparing for the Big Shift

The Indian Government has consolidated 29 central labour laws into 4 Codes (Wages, Social Security, IR, and OSH). While the implementation date is pending, the impact will be massive. You must prepare your management now.

A. The "50% Basic" Rule (Code on Wages)

This is the biggest financial impact.

• The Rule: The "Basic Salary" (plus retention/DA) must be at least 50% of the CTC.

• The Current Reality: Most Indian companies keep Basic low (30-40%) to reduce PF liability and increase HRA flexibility.

• The Impact:

  1. Lower Take-Home Pay: Because PF is calculated on Basic, a higher Basic means higher PF deduction.

  2. Higher Gratuity Cost: Gratuity is also calculated on Basic. Your company's long-term liability will jump by 20-30%.

  3. Action: You need to audit your salary stacks. If anyone has a Basic Salary < 50% of CTC, flag it to Finance immediately.

B. The "2-Day" FnF Settlement

• The Old Way: Companies take 30-45 days to process Full & Final (FnF) settlement.

• The New Code: FnF wages must be paid within 2 working days of resignation/termination.

  • Operational Shift: You will no longer have time to wait for "Asset Clearance." Your offboarding process (Chapter 14) needs to be lightning-fast.

C. Fixed-Term Employment (FTE)

• The new codes formalize "Fixed Term Employment."

• The Change: FTEs will now be eligible for Pro-Rata Gratuity even if they work less than 5 years (e.g., if they work 1 year, they get 15 days' salary as gratuity).

Chapter 15 Summary Checklist

This concludes the operational chapters. Before you finish the book, secure your foundation:

• [ ] The IC Check: Is your POSH Internal Committee valid? Has the external member's contract expired?

• [ ] The File Audit: Go to your filing cabinet/Drive. Are medical records separated from performance records?

• [ ] The New Code Audit: Pull a payroll report. How many employees have a Basic Salary that is less than 50% of their CTC?

• [ ] The FnF Speed: Can your current process clear an exit in 2 days? If not, start redesigning the workflow for the New Codes.

You have now built, managed, paid, and protected your workforce. You have the complete blueprint. In the Conclusion, we will wrap up with a final word on the future of the HR Generalist role and how to stay relevant in an AI world.

By HR Mit - A HR Professional