Every month, businesses across India make payroll deductions they cannot clearly explain to employees. One of those deductions — Labour Welfare Fund — confuses employers and employees alike. Many businesses do not know whether the labour welfare fund applies to them, what the LWF contribution rates are, or what happens when they miss a deposit. Moreover, since the fund follows state-specific Acts, the rules vary significantly from state to state. As a result, this guide answers all of it — who must register, what the contribution rates are, how to comply, and what penalties apply when businesses ignore it.
Need help with LWF registration or compliance? Futurex handles complete Labour Welfare Fund compliance for businesses in Noida, Delhi NCR and across India. First consultation free.
What Is the Labour Welfare Fund?
The Labour Welfare Fund is a statutory contribution that state governments in India manage. Specifically, employers and employees both contribute to this fund so workers can access welfare benefits — including housing assistance, education support, medical aid, and scholarships for employees’ children. Furthermore, state-specific Labour Welfare Fund Acts govern this fund. As a result, no single central LWF Act applies uniformly across India. Instead, each state that enacts the law operates its own fund through a Labour Welfare Board.
What Benefits Does the Labour Welfare Fund Provide?
The labour welfare fund benefits available to eligible workers include financial assistance for children’s education, medical aid for workers and their families, housing loan subsidies, skill development and vocational training, and scholarships for workers’ children including higher education in some states. However, the exact benefits depend on which state the employee works in and whether that state’s Labour Welfare Board runs an active programme.
Which States Have Labour Welfare Fund in India?
Not all states have enacted the Labour Welfare Fund Act. As of 2026, the following states and union territories carry active Labour Welfare Fund legislation: Andhra Pradesh, Chandigarh, Chhattisgarh, Delhi, Goa, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, and West Bengal.
On the other hand, states like Bihar, Jharkhand, Uttar Pradesh, and several northeastern states do not currently carry an active Labour Welfare Fund applicable to private establishments.
Why the State Matters So Much
For example, if your business operates in both Maharashtra and Karnataka, the rules, lwf contribution amounts, and payment frequency are completely different for each state. Therefore, a business with employees in multiple states must comply with each state’s Act separately. In fact, this is one of the most common compliance gaps Futurex finds when reviewing client payroll records.
Who Must Register for Labour Welfare Fund?
Applicability — Establishments Covered
The labour welfare fund applies to establishments that meet a minimum employee threshold. Importantly, this threshold varies by state — but in most states, any establishment employing 5 or more employees falls within scope. For instance, Maharashtra sets the threshold at 5 employees, while Karnataka sets it at 50 employees. Once an establishment crosses the threshold, the state Labour Welfare Board requires mandatory registration. In other words, registration is not optional — and businesses that operate without registration after crossing the threshold face penalties.
Which Employees Are Covered?
In most states, the lwf contribution covers all permanent employees below a certain wage ceiling. Additionally, contract workers, daily wage workers, and piece-rate workers fall within scope in many states. However, directors and top management generally fall outside the coverage. Furthermore, the wage ceiling for inclusion varies by state — for example, in Delhi, the fund covers employees earning up to a specified monthly wage under the employee welfare fund.
Who Is Excluded?
Employees in managerial or supervisory roles above the wage threshold typically fall outside the fund. Similarly, apprentices under the Apprentices Act do not qualify in most states. Moreover, government employees do not fall under state Labour Welfare Fund Acts. Finally, SEZ units carry specific exemptions in certain states.
LWF Contribution Rates — State by State
Both the employee and the employer share the lwf contribution. Notably, the employer’s contribution always exceeds the employee’s share. Furthermore, contribution amounts are fixed — unlike PF or ESI, they do not follow a percentage formula. Instead, each state independently fixes its own rates.
Key States — LWF Contribution Amounts
| State | Employee Share | Employer Share | Frequency |
|---|---|---|---|
| Maharashtra | ₹6/month | ₹18/month | Twice a year (June & December) |
| Delhi | ₹0.75/month | ₹2.25/month | Twice a year (March & September) |
| Karnataka | ₹20/month | ₹40/month | Annually |
| Gujarat | ₹6/month | ₹12/month | Twice a year |
| Tamil Nadu | ₹10/month | ₹20/month | Twice a year |
| Haryana | ₹31/month | ₹62/month | Twice a year |
| Telangana | ₹2/month | ₹5/month | Annually |
| Andhra Pradesh | ₹2/month | ₹5/month | Annually |
| Kerala | ₹4/month | ₹16/month | Annually |
| West Bengal | ₹3/month | ₹9/month | Twice a year |
These are standard rates. However, some states revise rates periodically. Therefore, always verify current rates with the state Labour Welfare Board before making deposits.
Who Pays — Employer or Employee?
Both parties contribute. Specifically, the employer deducts the employee’s share from salary and then adds the employer’s own contribution on top. Subsequently, the employer remits the total combined amount to the Labour Welfare Board. Importantly, the employer cannot pass the employer contribution to the employee — the law treats this as a mandatory employer obligation.
How to Register for Labour Welfare Fund — Step by Step
Step 1 — Check Applicability
First, confirm whether the state where your establishment operates carries an active Labour Welfare Fund Act. Then check whether your employee count crosses the threshold for that state. If both conditions apply, registration becomes mandatory immediately.
Step 2 — Apply to the State Labour Welfare Board
Next, apply for registration with the Labour Welfare Board of the respective state. Fortunately, most states now offer this online through the state labour department portal. You will need your establishment registration certificate, PAN, GST number, employee list, and principal employer details to complete the application.
Step 3 — Deduct Employee Contribution From Salary
Once registration is complete, deduct the employee’s LWF share from salaries each month without exception. Additionally, maintain a register of deductions — labour inspectors can ask for this statutory record during any inspection.
Step 4 — Remit Combined Contribution on Due Date
On the due date for your state, remit the combined labour welfare fund contribution — employee’s share plus employer’s share — directly to the Labour Welfare Board. Most states now accept online payment through the state labour portal. However, missing the due date attracts both interest and penalties in every state without exception.
Step 5 — File Returns
After making the contribution, file annual or half-yearly returns with the Labour Welfare Board. The return confirms the number of covered employees and the total contribution amount. Consequently, missing returns attracts late fees in most states and can trigger a full labour inspection.
LWF Compliance Calendar — Key Due Dates
Contribution frequency and due dates differ significantly by state. For instance, states with half-yearly payment — Maharashtra, Delhi, Gujarat, Haryana, and West Bengal — require contributions in June and December, or March and September depending on the state. In contrast, states with annual payment — Karnataka, Tamil Nadu, Telangana, Andhra Pradesh, and Kerala — require contribution once a year, typically in December or January.
Therefore, the safest approach is to maintain a compliance calendar that tracks lwf contribution due dates alongside PF, ESI, and TDS deadlines — all of which fall in different months. As a result, missing any single due date attracts both interest and penalties that compound quickly over time.
Penalties for Non-Compliance With Labour Welfare Fund
State Labour Welfare Boards take non-compliance with labour welfare fund rules seriously. Specifically, the consequences include financial penalties, interest on unpaid contributions, and in serious cases, criminal prosecution of the employer. Therefore, businesses must never treat LWF compliance as optional.
Failure to Register
When a business fails to register despite crossing the threshold, the state board imposes fines ranging from ₹500 to ₹5,000, plus ongoing penalties until registration is complete. Moreover, operating an establishment without LWF registration after crossing the threshold constitutes a continuing offence — consequently, every additional day of non-registration increases the total penalty exposure.
Failure to Deduct or Remit
When an employer fails to deduct the employee’s contribution, most state Labour Welfare Fund Acts treat this as misappropriation of employee funds — a serious offence. Furthermore, late remittance of contributions attracts interest typically at 2% per month. Additionally, employers who fail to maintain statutory registers face fines during inspections. Finally, employers who fail to file returns face late filing fees and risk triggering a detailed labour compliance inspection.
⚠️ Real Cost of Non-Compliance — Example
State: Maharashtra — 50 employees
Monthly employer contribution missed: ₹18 × 50 = ₹900
Late payment interest (2%/month × 6 months): ₹108
Failure to register fine: Up to ₹5,000
Failed return filing fee: Additional penalty per return
Labour inspection triggered: All payroll records come under scrutiny
One missed LWF cycle can trigger a full labour compliance inspection across PF, ESI and Minimum Wages — not just LWF alone.
LWF and Payroll — How to Handle It in Tally
In Tally Prime, the payroll module handles labour welfare fund as a deduction. First, create a payroll deduction head for LWF employee contribution under Indirect Expenses. Then create a payroll liability head for LWF employer contribution. Subsequently, deduct the employee share during monthly salary processing. Finally, at the time of remittance, pass the payment entry against both the employee deduction account and the employer contribution account.
As a result, the combined LWF liability appears clearly in your payroll liabilities report. Therefore, reconcile this against the state Labour Welfare Board payment receipt after each deposit. However, if your payroll software does not support state-wise LWF deduction tracking, address this gap before the next due date to avoid a compliance failure.
Frequently Asked Questions About Labour Welfare Fund
Is Labour Welfare Fund the same as ESI?
No. ESI is a central government scheme that provides health insurance to workers below a wage threshold. In contrast, Labour Welfare Fund is a state government scheme that provides broader welfare benefits — education, housing, scholarships — and follows state-specific laws. Furthermore, both can apply to the same employee at the same time. Consequently, missing either one creates separate compliance gaps and separate penalty exposure.
Is LWF applicable to contract workers?
In most states, yes. Contract workers that contractors engage at your establishment fall within scope if they meet the state’s wage and employment criteria. Moreover, in many states, the principal employer bears responsibility for ensuring labour welfare fund compliance even for contractual staff. As a result, this is an area where businesses frequently develop compliance gaps without realising it.
What if my business operates in multiple states?
In that case, you must comply separately with each state’s Labour Welfare Fund Act. Specifically, registration, lwf contribution rates, due dates, and return formats are all state-specific. Therefore, a business with employees in five states needs five separate LWF compliance tracks — each with its own registration, its own contribution rates, and its own due dates.
Can the employee opt out of LWF contribution?
No. The contribution is mandatory for all covered employees. Specifically, no state’s Labour Welfare Fund Act includes an opt-out provision. Therefore, the employer must deduct the contribution from every eligible employee’s salary and remit it to the state board without exception.
Does LWF apply to work-from-home employees?
Yes — but based on registration location, not work location. Specifically, the labour welfare fund Act applies based on the state where the establishment holds its registration — not where the employee physically works. For example, if your registered office sits in Maharashtra, Maharashtra LWF rules apply even when the employee works from home in another city. Consequently, this is an important distinction for businesses that have moved to hybrid or remote work models.
LWF Compliance Across States? Let Futurex Handle It End to End
Futurex Management Solutions handles complete labour welfare fund compliance — state applicability check, registration, monthly payroll deductions, half-yearly and annual contribution remittance, return filing, and statutory register maintenance. Whether you have employees in two states or ten, Futurex tracks every LWF deadline and ensures no contribution is missed, no return is late, and no penalty is incurred. We serve businesses in Noida, Delhi NCR and across India. First consultation is free.