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How can a factory know whether its labour compliance is genuinely under control, not just documented on paper?
A factory’s compliance position depends on more than whether forms have been filed. It also depends on whether worker records reconcile, wages and statutory contributions are correct, contractors meet their obligations, and safety and welfare controls are followed in practice.
A labour compliance audit is a structured review of a factory’s applicable employment and labour obligations. It is distinct from a financial, environmental or technical safety audit, although its scope may intersect with those functions.
The best-fit labour consultant is therefore not necessarily the provider with the longest service list. It is the one that can establish legal applicability, test evidence, explain exposure clearly, and help the factory close identified gaps.
India’s registered manufacturing sector is substantial. The Annual Survey of Industries (ASI) 2024–25, released by the Ministry of Statistics and Programme Implementation, reported 266,931 factories in its survey frame and 16,653,810 workers.
These figures describe the ASI’s registered-manufacturing coverage, not every factory or worker in India. They nevertheless illustrate the scale and complexity of the environment in which factory compliance systems operate.
The Government of India announced that the four Labour Codes became effective on 21 November 2025, rationalising 29 central labour laws. The Codes cover wages, industrial relations, social security, and occupational safety, health and working conditions. The Ministry also stated that relevant existing provisions, rules, notifications and schemes would continue during the transition.
For factories, this means an audit should not simply reproduce an old checklist. It should identify the applicable Code provisions, rules, notifications and continuing requirements for the establishment. State-level applicability must be verified rather than assumed to be uniform across India.
Contract workers may be engaged through multiple contractors and work across shifts, departments or locations. This can make it difficult to reconcile worker deployment, attendance, wage payments, statutory contributions and contractor documentation.
In a February 2026 legal commentary, BTG Advaya authors Harinie Seenivasan and Arjun Paleri described the OSH Code as “placing principal employers at the centre of compliance” in relation to contract labour, including safety, welfare and working conditions.
The practical implication is that contractor compliance should be tested as part of the wider establishment audit, not treated as a separate paperwork exercise.
The precise audit scope depends on the factory’s state, workforce, activities, applicable notifications and legal status. The following matrix is a planning guide, not a substitute for a jurisdiction-specific applicability review.
| Audit area | What the consultant should examine | Example evidence |
| Factory registration and licensing | Registration, licences, renewals and required notices | Registration documents, licence records, notices and applicable approvals |
| Wages and payroll | Minimum-wage applicability, wage structure, deductions, overtime and payment | Wage registers, payslips, attendance, payroll data and payment proof |
| Working hours and leave | Shifts, weekly rest, overtime and leave records | Rosters, attendance, overtime approvals and leave records |
| Contract labour | Contractor details, worker deployment, applicable registrations or licences, wage and contribution evidence | Contractor agreements, work orders, worker lists, licences and statutory records |
| EPF and social security | Coverage, worker mapping, contribution calculations and reconciliation | UAN mapping, contribution records, challans and returns |
| ESI | Coverage and eligibility, insurance details and contribution reconciliation | Insurance numbers, wage-period records, contribution proof and accident records |
| Health, safety and welfare | Applicable risk controls, training, PPE, medical surveillance and incident reporting | Risk assessments, training logs, PPE records, medical and incident documentation |
| Registers and returns | Required records, filings, acknowledgements and retention | Statutory registers, returns, notices and filing receipts |
| POSH and workplace processes | Applicable policy, Internal Committee, training and reporting requirements | Policy, committee records, training and annual reporting where applicable |
The Labour Bureau’s Statistics of Factories 2023 reported 2,373 industrial injuries in 2023 and a frequency rate of 0.14 injuries per lakh mandays worked. The report notes that the composition of responding states may differ between years, so the figures should be read with that limitation.
This is not a contract-worker-specific statistic. It reinforces why audits should examine actual safety practices, incident records, training, and corrective-action evidence, not only whether documents exist.
Preparing records in advance allows the consultant to focus on testing compliance rather than locating documents. The final list should be tailored to the factory and agreed audit scope.
Prepare factory registration and licence records, employee and contractor worker lists, contractor agreements and work orders, attendance and shift records, wage registers and payment evidence, EPF and ESI records, statutory registers and returns, and relevant safety, training and incident documentation.
The consultant should confirm which records are legally required, the applicable retention period and the correct format for the jurisdiction.
A factory audit may identify mismatches between contractor lists, gate-entry records, attendance, payroll and statutory contribution records. Different identifiers or reporting periods can make it difficult to establish whether every deployed worker is accounted for.
Payroll and attendance may also tell different stories. Differences between recorded hours, overtime, wage calculations and payment evidence should be investigated against the applicable wage rules and actual working arrangements.
Other areas to examine include incomplete contractor documentation, expired or inconsistent licences, missing contribution evidence, safety records that do not reflect workplace practice, and audit findings that remain open without owners, deadlines or closure evidence.
These are risk areas to test, not claims that every factory has these deficiencies.
A useful way to compare providers is to assess their factory experience, legal applicability mapping, evidence-testing method, reporting quality, confidentiality controls and corrective-action support.
| Selection criterion | Questions to ask |
| Factory experience | Have you audited factories with similar processes, workforce size and contractor arrangements? |
| Legal applicability | How do you map central requirements, state rules, and relevant notifications? |
| Audit scope | Which legal areas, locations, worker categories and contractors are included or excluded? |
| Evidence testing | How do you sample and reconcile attendance, payroll, contributions and contractor records? |
| Reporting | Does the report include evidence, risk ranking, legal references and practical corrective actions? |
| Escalation | How are urgent or high-risk findings communicated? |
| Independence | How do you manage conflicts of interest and protect confidential workforce information? |
| Remediation | Is corrective-action support and closure verification included? |
| Review | Who checks the legal interpretation and final report? |
Before signing, ask the consultant to document the laws and state requirements included in the scope, how contractor records will be tested, what the final report will contain, how high-risk findings will be escalated, and whether remediation and closure verification are included.
CQUEL’s website describes a combined compliance-services and technology offering that includes factory and establishment compliance, all-laws compliance audits, contract labour management, contractor payroll and statutory documentation, PF/UAN and ESIC-related services, and compliance software with vendor support and training.
CQUEL has a presence across more than 90 cities. Treat this as a company-stated coverage claim and confirm delivery capacity for the specific factory location.
Before appointing CQUEL or any provider, confirm the audit scope, locations, team qualifications, methodology, sample deliverables, reporting format, and whether corrective-action support is included.
Planning a factory compliance audit? Contact CQUEL to discuss your establishment’s requirements and define an appropriate audit scope.
A factory labour compliance audit may review registration and licensing, wages and payroll, working hours, contract labour, social-security contributions, safety and welfare, statutory records and applicable workplace processes. The precise scope depends on the factory’s location, workforce, activities and applicable law.
Audit frequency should be based on legal requirements, operational risk, workforce changes, contractor activity and previous findings. Do not assume that one annual audit is universally mandated for every factory. Confirm the applicable requirements and establish a risk-based review schedule.
It should include contractor compliance when contract labour is within the agreed scope. The review may cover worker deployment, contractor documentation, wage and attendance reconciliation, statutory contributions and applicable safety and welfare obligations.
The four Labour Codes the Code on Wages, Industrial Relations Code, Code on Social Security, and Occupational Safety, Health and Working Conditions Code became effective on 21 November 2025. The provisions and rules applicable to a particular factory must be checked against its jurisdiction, activity, and relevant notifications.
Prepare registration and licence records, worker and contractor lists, attendance and shift records, payroll and payment evidence, EPF/ESI records, contractor agreements, applicable statutory registers and returns, and safety and incident documentation. Ask the consultant for a scope-specific document request list.
Compare factory experience, legal applicability mapping, audit methodology, evidence testing, reporting quality, confidentiality controls, and corrective-action support. Ask for a written scope and a sample anonymised deliverable before engagement.
The contents of this article are for information purposes only, and nothing in this article should be construed as legal advice.
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