Labour Welfare Fund (LWF): contribution, payment & benefits

The government of India has implemented various statutory frameworks to provide welfare schemes to workers. The Employees' Provident Fund (EPF), and Employees' State Insurance (ESI) are among the few.

One such payroll statutory component that offers socio-economic benefits to employees is the Labour Welfare Fund (LWF). It is managed by the state governments, and 16 states have enacted the Labour Welfare Fund Act thus far.

What is the Labour Welfare Fund (LWF)?

The Labour Welfare Fund (LWF) is a scheme that ensures social security and the welfare of employees. Introduced under the provisions of the Industrial Disputes Act of 1947, the LWF aims to improve labourers' working conditions and standards of living. It does so by providing medical care, housing, education, nutritious food, and recreational facilities to eligible employees and their dependents.

Since this is a state-specific statute, it is administered by the respective state government authorities. The deduction cycle can be monthly, half-yearly, or yearly depending on each state's regulations. Both the employer and the employees contribute towards this fund. The contribution rates are determined by the state legislatures.

What are the benefits of LWF?

The LWF offers perks both to workers and their employers. Here's a list of the major Labour Welfare Fund benefits for employees:

Employer liabilities

Under the Labour Welfare Fund scheme, employers of an organisation are responsible for the following:

• Registering their establishment under the Act, if their state legislature has enacted one.

• Contributing their share towards the fund.

• Collecting LWF dues from the workers.

• Remitting payments to the government based on the deduction frequency, before the submission deadline.

• Filing tax returns using the correct form.

Applicability of the Labour Welfare Fund

Each state has its own regulations and some states do not even collect LWF. This chart will give you an overview of the states that collect and don't collect LWF.

How the LWF scheme works in different states

Since the Labour Welfare Fund is under the purview of the state governments, the deduction cycles vary in each state. For the half-yearly deduction cycles, the amount that will be deducted is dependent on the salary threshold of each employee.

Here's a detailed list of the state-specific deductions, applicable employees, the deduction frequency, deadline date for paying the dues to the government, and forms for filing returns.

Andhra Pradesh

Applicable employees: All employees except those who are employed in a managerial capacity and part-time position.

Chandigarh

Applicable employees: All employees earning up to Rs. 15,000 per month.

Chhattisgarh

Applicable employees: All employees except those working in a managerial or administrative capacity or employed in a supervisory capacity earning more than Rs. 10,000 per month.

Delhi

Applicable employees: All employees except those working in a managerial or supervisory capacity earning more than Rs. 2,500 per month.

Goa

Applicable employees: All employees except those working in a managerial or supervisory capacity earning more than Rs. 1,600 per month.

Gujarat

Applicable employees: All employees except those working in a managerial or supervisory capacity earning more than Rs. 3,500.

Haryana

Applicable employees: All employees employed directly by the principal employer, including contractors. Each employee shall contribute an amount equal to 0.2% of their salary or Rs. 25 to the fund every month. The employer will contribute twice as much as the employee does.

Karnataka

Applicable employees: All employees who are employed for salary to do any work, skilled or unskilled, manual or clerical, in an organization.

Kerala

Applicable employees: All employees under the purview of the Kerala Shops and Commercial Establishments Act, 1960.

Madhya Pradesh

Applicable employees: All employees except those working in a managerial or supervisory capacity earning more than Rs. 10,000 every month.

Maharashtra

Applicable employees category 1: All employees except those working in a managerial or supervisory capacity earning up to Rs. 3,000 per month.

Applicable employees category 2: All employees except those working in a managerial or supervisory capacity earning more than Rs. 3,000 per month.

Odisha

Applicable employees: All employees except those working in a managerial or supervisory capacity within an organization.

Punjab

Applicable employees: Any person who is employed for hire or reward to do any work, skilled or unskilled, manual or clerical, in an establishment.

Tamil Nadu

Applicable employees: All employees except those working in a managerial or supervisory capacity earning above Rs. 15,000 per month.

Telangana

Applicable employees: All employees except those working in a managerial or supervisory capacity earning up to Rs. 1,600 per month.

West Bengal

Applicable employees: All employees except those working in a managerial or supervisory capacity earning more than Rs. 1,600.

*Deduction and submission is due every 6 months

How to register for the LWF scheme

You must register for the LWF scheme within 15 days of commencement of your organization. The registration process varies by state, but the information you need to submit is the same across all states. With that in mind, we'll focus on registering for the Labour Welfare Fund in Haryana as an example.

1. Go to the Haryana's Labour Department website. Under E-Services, select Hry Labour Welfare Board.
2. A new instructions page will open. Read the terms and conditions and click Submit.
3. Select the type of establishment you run and enter your Aadhaar number and establishment's email ID. Click Submit.
   • NOTE: If you're a worker from Haryana and want to register yourself for the scheme, you should select Welfare Worker from the list and proceed with registration.
4. Fill in the Basic Information form and upload your passport-sized photo. Create a password and hit Submit.
5. You will be taken to the Successfully Registered page and your login credentials will be displayed.

How to make LWF payments online

Each state uses a different website to process LWF payments online, but the standard procedure to make payments is the same:

1. Go to the state-specific Labour Welfare Fund website.
2. Select LWF Online Payment under E-seva or Online Services section.
3. Log in using your company code or establishment ID and captcha.
4. Once done, the below details will be displayed on the following screen:
   • Company name
   • Company address
   • Contact details
5. Select the payment category (whether you're paying your LWF contributions, settling unpaid accumulations, or court fines).
6. Enter the number of employees in your payroll and the following details:
   • Contribution month, year, establishment type, institution code, and owner's name.
7. Once done, click Submit. You'll be taken to the online payment gateway.
8. After successful payment, a confirmation challan will be sent to the registered email. Make a note of the challan details for future reference.

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Penalty for non-compliance

The degree of penalty for not contributing, not registering your organization under the scheme, and obstructing inspection officers from performing their duties depends on each state's Labour Welfare Fund Act.

You'll receive a notice from the authorities if you fail to make LWF payments before the deadline. Usually, states levy a simple interest of 1% of the unpaid amount for the first three months of delay. For the subsequent months, the interest rate increase to 2-3%.

Individuals who wilfully hinder state officials from performing their duties are met with severe punishments. First-time offenders are charged either with imprisonment of up to three months, a fine of ₹500, or both. For second and subsequent offences, the imprisonment term can extend to six months, a fine of ₹1,000, or both.

A quick summary

The Labour Welfare Fund, or LWF, is a payroll statute that ensures social security and improved working conditions for labourers. It offers medical care, educational support, transport, and recreational activities to the workers and their dependents. Both the employer and the employees contribute towards this fund.

Employers who have establishments in states where the LWF is implemented must register under the scheme and contribute towards the fund. The contribution rates and deduction cycles vary with each state. Non-payment or delayed payments can incur hefty fines and immeasurable loss of reputation for your company.

Implement LWF with Zoho Payroll

Staying compliant with payroll laws is crucial for running a successful company. There are many rules involved and a careless mistake could cost your firm tremendously. That's why we built Zoho Payroll—simple payroll software with completely automated statutory compliance.

• Zoho Payroll allows you to automatically calculate employer and employee LWF contributions and deduction frequency based on your work location.

• Deduct contributions from your employees' salary automatically before processing pay runs on Zoho Payroll.

• Enable LWF for your organization with a click.

• Contributions to the fund depend on employees' salary and state regulations. Enable or disable LWF at the employee level with Zoho Payroll.

• Keep your business accounting clean with real-time deduction summary and payroll cost summary graphs.

Read our new blog post to understand how payroll software can you help you simplify LWF process.