The first hire changes a business. Until now the owner, perhaps with family, did everything. Now someone else depends on the business for their income, and the business has duties under labour law.
Those duties are lighter for a business with two staff than for a factory with 200, but some apply from the first employee. India's four Labour Codes came into force on 21 November 2025 and replaced 29 older labour laws. The position below is as of October 2026. It is general information and not legal advice, and the rules your state has notified also apply.
01Before you hire
Be clear about the job
Write a short description: what the person will do, the hours, where they will work, who they report to and what you will pay. "Helper" is not enough. "Counter assistant: billing, packing, stock on shelves, 10 am to 8 pm with a one hour break, six days a week" is.
Decide the pay
Pay at least the minimum wage notified by your state for that kind of work. Under the Code on Wages, minimum wages now apply to all employees, and no state may set a minimum below the floor wage fixed by the Centre. See minimum wages basics.
Decide the structure too: basic pay and dearness allowance, and any other allowances. Under the Codes, if allowances are more than half of total pay, the excess counts as wages for PF, gratuity and other calculations. A pay structure built mostly of allowances no longer reduces those costs.
Check the registrations
- Shops and establishments registration
- under your state's law, if your shop or office is not already registered.
- Registration under the OSH Code
- for establishments employing 10 or more employees, within 60 days.
- EPF
- once you employ 20 or more people.
- ESI
- once you employ 10 or more people, in the areas and types of establishment covered.
Ask your CA which apply to you now and which will apply as you grow.
02On the first day
Appointment letter
The OSH Code requires an appointment letter for every employee. It should state at least:
- Name, designation and the date of joining
- Wages and how they are made up
- Wage period, such as monthly, and the date of payment
- Working hours and weekly off
- Leave
- Social security entitlements, such as PF and ESI where they apply
- Notice period
Give a copy to the employee and keep a signed copy.
Collect details
- Full name, address and phone number
- Date of birth and proof of age
- Aadhaar and PAN, with the employee's consent, and kept securely
- Bank account for salary
- An emergency contact
- Previous PF or ESI numbers, if any
Store these securely and share them only with those who need them. They are personal data under the DPDP Act. See the DPDP Act for small business.
03Every month
Pay on time
The Code on Wages sets deadlines by wage period:
| Wage period | Pay by |
|---|---|
| Daily | End of the shift |
| Weekly | Last working day of the week |
| Fortnightly | Before the end of the second day after the fortnight |
| Monthly | Before the end of the seventh day of the next month |
When someone leaves, all dues must be paid within two working days.
Issue a wage slip
Give every employee a wage slip, on paper or electronically, on or before the day wages are paid. See salary slip basics.
Keep the registers
The Code on Wages expects four registers, which can be kept electronically:
- Attendance register cum muster roll
- Wage register
- Overtime register
- Register of fines and deductions
Keep records for five years. See staff attendance.
Deduct only what is allowed
Deductions are limited to those the Code allows, such as for absence, recovery of advances, damage or loss and fines after the employee has been heard. Total deductions in a wage period cannot exceed half the wages.
04Display on the notice board
Display, in English, Hindi and the local language: the minimum wage rates, normal working hours, the wage period, the date of payment, and the name and address of the Inspector-cum-Facilitator.
05Hours and overtime
Working hours follow the limits in the Codes and your state's rules. Overtime for an employee whose minimum wage is fixed under the Code is paid at least twice the normal rate.
06Equal treatment
Wages cannot differ by gender for the same or similar work, and recruitment cannot discriminate on the basis of sex. Women may work in all establishments; for work before 6 am or after 7 pm, their consent and the safety measures in the rules are needed.
07Two examples
A Nashik electrical shop hiring two counter staff at ₹14,000 a month
It needs appointment letters, minimum wages, timely payment, wage slips and the registers. With two staff it is below the PF and ESI thresholds, though it can register voluntarily.
An Ahmedabad CA firm growing from 9 to 12 staff
Crossing 10 brings ESI into view for staff earning up to the ESI wage limit, and registration under the OSH Code if applicable. At 20, EPF applies. Planning a few months ahead avoids a rush.
08Keep records from day one
Keeping attendance, wages and leave in one place from the first employee makes everything easier later: wage slips, PF and ESI calculations, and any question from an inspector.
In MatruOS, you can add staff with their details, fill staff details by typing a sentence, mark attendance, and invite staff to sign in by email or with a WhatsApp or copy link.