Labour Laws and Practice · Industrial and Labour Laws Audit

Labour Audit Process, Checklists and Reporting

Updated 11 October 2026 · Fact-checked

A labour audit is a structured check of whether an establishment follows labour law. You plan the scope, verify registers, records, wage slips, notices and returns against the Codes, record gaps on a checklist, and report each non-compliance with its consequence and a corrective action.

Understand Labour Audit Process, Checklists and Reporting

A labour law audit tests facts against law. The law says what an employer must maintain, display, issue and file. The audit checks whether the employer actually did it, and whether the paperwork is true.

Start with the duty. Section 123 of the Code on Social Security, 2020 requires an employer to maintain records and registers (electronically or otherwise), display notices, issue wage slips and file returns. Section 33 of the OSH Code, 2020 imposes a parallel duty on registers, notices, wage slips and returns to the Inspector-cum-Facilitator. These two sections give you the core audit checklist.

An audit has four stages. First, planning: know the establishment, its registrations and the laws that apply. Second, verification: sample records, registers and returns and trace them to source such as muster rolls, payroll and challans. Third, checklist recording: mark each item as compliant, non-compliant or not applicable, with evidence. Fourth, reporting: state findings, the legal consequence and the corrective action.

The consequence part matters in exams. Failing to maintain a register or document, file a return or produce a record required under the OSH Code attracts a penalty under Section 96 of that Code. Section 96 attaches only to OSH Code defaults. Do not cite it for duties under the Code on Social Security, and do not cite it for wage slips. False records are a separate and more serious matter under Section 98 of the OSH Code. A good audit report separates a missing document from a false one.

For a Company Secretary the report is a management tool. It must be clear, evidence-based and practical, so the employer can fix gaps before an inspector finds them.

Key rules to remember

Employer duties under Section 123, Code on Social Security, 2020: Maintain records and registers + display notices + issue wage slips + file returns; Records cover days and hours worked, wages paid, leave and overtime, employee identification number, accidents and compensation, statutory deductions, cess on construction work, employee counts, recruitment, occupational details and unfilled vacancies. Section 96 of the OSH Code does not apply to a default under this section; check the consequence in the Code on Social Security itself.
Employer duties under Section 33, OSH Code, 2020: Register in prescribed form + notices + wage slips + return to Inspector-cum-Facilitator; The register covers work performed, normal hours, weekly rest day, wages and receipts, leave, overtime, attendance, dangerous occurrences and employment of adolescents.
Penalty for non-maintenance or non-filing, Section 96(1), OSH Code: ₹50,000 minimum to ₹1,00,000 maximum; Applies only to OSH Code defaults: failure to maintain a required register or document, to file returns, or to produce a register, plan, record, report or other document when required. It does not cover failure to issue wage slips, and it does not cover Code on Social Security duties.
Repeat conviction, Section 96(2), OSH Code: ₹50,000 minimum to ₹2,00,000 maximum; Applies where a person convicted of an offence punishable under Section 96(1) is again convicted under the same provision.
Falsification of records, Section 98(1), OSH Code: Imprisonment up to 3 months, or fine up to ₹1,00,000, or both; For a repeat conviction: imprisonment up to 6 months, or fine of ₹1,00,000 to ₹2,00,000, or both.
Registration, Section 3, Code on Social Security, 2020: Registered under another Central labour law = deemed registered under this Code; Check registration first. The proviso saves an establishment from registering again.

How to solve Labour Audit Process, Checklists and Reporting questions

Use this order for any question on the audit process, checklist or report. It keeps your answer in the provision, analysis, conclusion format.

1Identify the establishment and the Codes that apply. Note size, nature of work and whether contract labour is used.
2State the duty from the section: what must be maintained, displayed, issued or filed, and to whom.
3Plan the audit: define scope and period, list documents to request, and decide the sample.
4Verify each item against the facts given: compare register with muster roll, wage slip with payroll, return with the register.
5Classify every finding as compliant, non-compliant or not applicable, and say whether the gap is a missing document or a false one.
6State the legal consequence in plain words. Match the penalty to the Code that imposes the duty. Section 96 of the OSH Code applies only to failures to maintain registers or documents, file returns or produce records under that Code. For any other default, such as wage slips or a Code on Social Security duty, say the consequence must be checked in the penal provisions of the relevant Code, and do not cite Section 96.
7Give a corrective action with a person and a timeline, such as rebuilding a register or filing a delayed return.
8Conclude with an overall view and follow-up review.

Quickest way: Four-column checklist method

When to use it: Use this when the question gives facts about an establishment and asks you to identify non-compliance and report it.

Draw four columns: requirement, evidence seen, status, action.
Fill requirement rows from the section: registers, notices, wage slips, returns.
Tick or flag each row from the facts given.
For each flag, add the consequence and one corrective action.
Close with a one-line conclusion and a follow-up date.

Common mistakes in Labour Audit Process, Checklists and Reporting

Treating the audit as only a check of whether registers exist.
Students focus on the list of documents and forget verification.
Fix: Always say you trace entries to source records such as muster roll, payroll and challans, and check accuracy as well as existence.
Mixing up Section 123 of the Code on Social Security with Section 33 of the OSH Code.
Both deal with registers, notices, wage slips and returns.
Fix: Remember that Section 123 is social security and covers statutory deductions and employee counts; Section 33 is OSH and covers rest day, hours and adolescent employment, with returns to the Inspector-cum-Facilitator.
Citing wrong penalty amounts or applying the penalty to every failure.
Students memorise one figure without the conditions.
Fix: Quote Section 96 as ₹50,000 to ₹1,00,000, rising to a maximum of ₹2,00,000 on repeat conviction, and only for register, return or production failures.
Not separating a missing record from a false record.
Both look like poor record keeping.
Fix: Report a missing register required under the OSH Code under Section 96 of that Code. Report a knowingly false record or return under Section 98 of the OSH Code, which carries imprisonment up to three months, or fine, or both.
Reporting findings without corrective actions.
Students think the audit ends with identifying the gap.
Fix: For every finding add a corrective step, a responsible person and a timeline, then a follow-up review.
Ignoring registration status before auditing.
Students jump straight to registers.
Fix: Check registration first. Under Section 3 of the Code on Social Security, an establishment registered under another Central labour law is deemed registered.

Worked examples

Example 1

Sharma Textiles Pvt. Ltd. employs 120 workers in Surat. During a labour audit you find that the attendance and overtime register has not been maintained for the last four months and wage slips are issued only to permanent workers. Report the non-compliance and suggest corrective action.

Show the solution

Provision: Section 33 of the OSH Code requires the employer to maintain a register showing attendance and overtime and to issue wage slips to the workers. Section 123 of the Code on Social Security similarly requires records of hours and overtime and wage slips to employees.
Analysis: The missing attendance and overtime register for four months is a failure to maintain a required register. Wage slips are denied to non-permanent workers, though the duty is to issue them to the workers and employees, not only to permanent ones.
Consequence of the register default: Failure to maintain the register required under the OSH Code attracts a penalty under Section 96(1) of not less than ₹50,000 and up to ₹1,00,000. If a person convicted of an offence under Section 96(1) is again convicted under the same provision, Section 96(2) allows ₹50,000 to ₹2,00,000.
Consequence of the wage slip default: Section 96(1) covers failure to maintain registers or documents, file returns or produce records. It does not cover failure to issue wage slips, so do not apply it here. Report the default under Section 33(c) of the OSH Code and Section 123(c) of the Code on Social Security, and state that the consequence must be checked in the penal provisions of the relevant Code. Do not cite Section 96 for the Code on Social Security duty.
Corrective action: Reconstruct the register from available gate, biometric or payroll data for the four months, start daily entries immediately, issue wage slips to all workers in electronic or paper form, and review monthly.
Conclusion: Two non-compliances are reported. Both are curable by action now, and the report should record a follow-up check in the next quarter.

Answer: Report two non-compliances: an unmaintained attendance and overtime register, and wage slips withheld from some workers, under Section 33 of the OSH Code and Section 123 of the Code on Social Security. Section 96(1) of the OSH Code (₹50,000 to ₹1,00,000) applies only to the unmaintained register. The wage slip default is not covered by Section 96(1), and its consequence must be checked in the relevant Code's penal provisions. Recommend reconstructing the register, issuing wage slips to all, and a follow-up review.

Example 2

During an audit of Kaveri Engineering Ltd. you find that the accident register shows no dangerous occurrences, but the plant medical log records two injuries from machinery. The HR head says the register was 'tidied' before the audit. How should you report this?

Show the solution

Provision: Section 33 of the OSH Code requires a register containing particulars including dangerous occurrences. Section 123 of the Code on Social Security requires records of dangerous occurrences, accidents and injuries.
Analysis: The register and the medical log conflict. The statement that it was 'tidied' suggests entries were removed or altered, not merely omitted.
Distinguish: Removed or altered entries point to a false record, which is a possible falsification issue under Section 98(1) of the OSH Code. That section covers knowingly producing a false record or making a false return in connection with compliance. Section 96 would apply only if a required register was not maintained at all, or was not produced when required. Here a register exists, so do not add Section 96 for the altered entries.
Consequence: Under Section 98(1), the punishment is imprisonment up to three months, or fine up to ₹1,00,000, or both. A repeat conviction attracts up to six months, or fine of ₹1,00,000 to ₹2,00,000, or both. Whether it is false depends on the facts and knowledge, so the report should state this as a risk and not a finding of guilt.
Corrective action: Preserve the original log, restore the true entries with dates, record who made changes, escalate to senior management, strengthen controls on registers, and review whether returns filed relied on the altered register.

Answer: Report a serious non-compliance: inconsistent accident records with possible falsification. The exposure is under Section 98(1) of the OSH Code (up to three months, or fine up to ₹1,00,000, or both). Section 96 would apply only if the register had not been maintained or produced, which is not the case here. Recommend restoring true entries, escalation and a review of returns filed.

Exam tips

Answer in the order provision, analysis, conclusion. Name the section duty first, then apply it to the facts.
Use the checklist table idea in words: requirement, evidence, status, action. Examiners reward structure.
Quote penalty figures only with the right section. Section 96 is for registers and returns; Section 98 is for falsification.
Always end with corrective actions and follow-up. A report without them is incomplete.
In open-book papers, bring the section text of 123, 33, 96 and 98 marked, so you can quote the list of particulars exactly.

Practice questions from Industrial and Labour Laws Audit

Labour Audit Process, Checklists and Reporting: frequently asked questions

What are the main steps in a labour law audit?

Plan the scope and documents, verify registers, records and returns against source data, record findings on a checklist, and report non-compliance with corrective actions. A follow-up review closes the cycle.

Which registers and records should a labour audit check?

Check the records listed in Section 123 of the Code on Social Security, such as days and hours worked, wages, leave, overtime, deductions and employee counts. Also check the register under Section 33 of the OSH Code, including rest day and dangerous occurrences.

What is the penalty for not maintaining a register or filing a return under the OSH Code?

Section 96(1) provides a penalty of not less than ₹50,000 and up to ₹1,00,000. For a repeat conviction under the same provision it is not less than ₹50,000 and up to ₹2,00,000.

How is a labour audit report different from the checklist?

The checklist records what you tested and the status of each item. The report explains the findings, their legal consequences and recommended corrective actions in a form management can act on.