Karnataka Labour Law Compliance Guide for Employers, 2026 Edition

The 4 Labour Codes, What Changed (Effective 21 November 2025)

India's four new Labour Codes, the Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health & Working Conditions (OSH) Code: came into force on 21 November 2025, consolidating 29 central labour laws into four.

What this means for Karnataka employers:

• The Codes now sit above many existing Karnataka state laws. Several state acts (Shops & Establishments, Professional Tax administration, Labour Welfare Fund) continue to operate, but increasingly within the framework of the Codes.
• "Wages" is now defined uniformly: if allowances outside basic pay, DA and retaining allowance are more than half of total remuneration, the excess is added back to wages, which changes PF, gratuity and bonus calculations for many salary structures.
• Appointment letters are now mandatory for every employee.
• Important: the Codes have been in force since 21 November 2025. Karnataka has pre-published draft state rules under the Codes, but we have not found final Karnataka rules as of 2 November 2026. Until they are notified, follow both the existing Karnataka Acts and the Codes, we track both so you stay covered.

Two practical notes. State rules under the four codes are notified state by state; for a worked example of what notified rules change, see our Maharashtra Labour Code state rules guide. And if you would rather not run payroll and attendance registers in-house, compare the top payroll outsourcing companies in India, or move to a cloud HRMS with an attendance module that keeps these records current automatically.

Last reviewed: 2 November 2026. Labour Code rules are evolving; we update this guide as new notifications are issued.

Karnataka Labour Code Rules 2026: Implementation and Key Changes

The four Labour Codes apply across India, but each state notifies its own rules under them. For employers in Karnataka, that means checking two things: the central Codes and the Karnataka rules under each Code.

• Code on Wages: state rules on minimum wages, wage payment and bonus.
• OSH Code: state rules on registration, licences, working hours and welfare facilities.
• Industrial Relations Code: state rules on standing orders, layoffs and disputes.
• Social Security Code: state rules on social security schemes and welfare boards.

What to do now: review your payroll, contracts and registers against the Karnataka rules as they are notified, and keep following the existing state acts until they are fully replaced. IT and ITES companies in Bengaluru should also check whether their existing exemptions continue under the new rules.

What small employers in Karnataka must do now

Whether you have 10 people or 100, these steps cover most of what the Labour Codes ask of a small business in Karnataka today:

• Appointment letters: give every employee a written appointment letter, including staff who joined before the Codes.
• Salary structure: check the 50% wage rule. If allowances are more than half of total pay, the excess counts as wages for PF, ESIC, gratuity and bonus.
• Pay on time: pay monthly wages before the 7th of the following month, and pay final dues within two working days of an employee leaving.
• Minimum wages: check every salary against the latest Karnataka minimum wage notification for your industry and zone.
• State registrations: keep your Shops and Commercial Establishments registration, Professional Tax and Labour Welfare Fund up to date. These Karnataka laws still apply.
• Leave: once an employee has worked 180 days in a year, allow at least one day of paid leave for every 20 days worked.
• POSH: set up an Internal Committee once you have 10 or more employees.
• Watch for the final rules: Karnataka has published draft state rules (the latest dated 23 January 2026 under the Code on Wages, Industrial Relations Code and OSH Code). We will update this guide when final rules are notified.

Karnataka-Specific Labour Laws

1. Karnataka Professional Tax

• Maximum annual PT: ₹2,500
• Employers deduct PT from salaries and pay it to the Karnataka Commercial Taxes Department every month
• Due date: 20th of the following month
• Annual return: from 1 April 2026, an enrolled person who has paid the full year's tax is treated as having filed the return (Karnataka Act 22 of 2026)

2. Karnataka Labour Welfare Fund (KLWF)

• Employee contribution: ₹50 per year
• Employer contribution: ₹100 per year per employee (total ₹150; Notification DPAL 60 SHASANA 2024, 10 January 2025)
• Due date: 15 January each year, paid online only. Late payment carries interest of 12% a year for the first 3 months and 18% after that
• Applicable to: shops and commercial establishments (including IT companies) with 50 or more workers; factories with 10 or more workers using power, or 20 or more without; and establishments with 20 or more contract workers

3. Karnataka Shops & Commercial Establishments Act, 1961

Leave and working hours under the Karnataka Shops and Commercial Establishments Act

The Karnataka Shops and Commercial Establishments Act, 1961 sets the minimum rules for shops, offices, IT companies and other commercial establishments in Karnataka. Your policy can be more generous, never less.

Source: Karnataka Labour Department (e-Karmika); Karnataka Shops and Commercial Establishments Act, 1961.

4. Karnataka Minimum Wages

Karnataka revised minimum wages by Notification KaE 411 LWA 2023 dated 22 May 2026. For shops and commercial establishments the basic wage is set by zone and grade, and a variable dearness allowance of ₹1,030.80 a month is added for 2026-27. A writ petition (WP 16145/2026) challenges the notification, but interim relief was refused, so the rates apply now.

What counts: compare only the basic wage plus the dearness or special allowance with the minimum. HRA, conveyance, overtime and bonus are paid on top and do not help you meet it.

Worked example: a 10-person team in Bengaluru

Six unskilled, three semi-skilled and one skilled employee in Bengaluru, all paid exactly the minimum:

For one unskilled employee on ₹24,407.23: PF ₹2,929 each from employee and employer (12%, wages below the ₹25,000 PF ceiling) and no ESIC, because the wage is above the ₹21,000 ESIC limit. That leaves a take-home of about ₹21,478 before professional tax, and costs you about ₹27,336 a month. PF becomes compulsory at 20 employees and ESIC at 10 in notified areas.

Minimum wage rules small employers miss in Karnataka

• ESIC often does not apply: at ₹24,407 even an unskilled Bengaluru shop worker earns above the ₹21,000 ESIC limit, so you need group health cover instead.
• PF still applies: the unskilled and semi-skilled Zone 1 wages sit near the ₹25,000 PF wage ceiling. Check each employee's PF wages, not just gross pay.
• Overtime at double rate: work beyond the normal 8-hour day, and work on rest days and holidays, is paid at twice the ordinary rate.
• Bank payment: wages must be paid by bank transfer or cheque, and rounded to the nearest 50 paise.
• Court case: writ petition WP 16145/2026 challenges the notification, but interim relief was refused, so the rates apply now.

Next change: a new VDA figure for 2027-28, or any order in WP 16145/2026. Daily rate = monthly divided by 26, rounded to the nearest 50 paise.

5. Central Laws Applicable in Karnataka

• EPF: 12% employer + 12% employee on wages up to ₹25,000 (ceiling from 17 September 2026), for establishments with 20+ employees
• ESIC: 3.25% employer + 0.75% employee for wages up to ₹21,000 a month
• Statutory bonus: 8.33% to 20% for eligible employees (Code on Wages)
• Gratuity: after 5 years of service (Code on Social Security)
• Minimum wages: Karnataka rates by zone and skill (revised from 22 May 2026)

Karnataka Compliance Calendar

Penalties for Karnataka Labour Law Violations

Special Provisions for IT/ITES Companies in Karnataka

Karnataka provides specific relaxations for IT/ITES companies:

• Flexible working hours beyond standard 9-hour limit (with conditions)
• Women employees allowed to work night shifts with transportation and safety provisions
• Relaxed overtime provisions for project-based work
• These relaxations must be correctly reflected in payroll and leave calculations

How HRTailor Manages Karnataka Compliance

• Automated Karnataka PT calculation and filing
• KLWF annual contribution management
• Shops Act registration guidance
• IT/ITES-specific compliance handling
• Zone-wise minimum wage tracking
• Regular compliance audits and documentation

FAQs, Karnataka Labour Compliance

What is the PT rate for IT employees in Bangalore?

Karnataka PT for IT employees follows the same slabs, ₹200/month for salary of ₹25,000 and above (₹300 in February), and nil below ₹25,000. There is no special IT exemption for Professional Tax.

Is KLWF mandatory for all Bangalore companies?

Not every company. KLWF applies to shops and commercial establishments, including IT companies, with 50 or more workers, to factories, and to establishments with 20 or more contract workers. It costs ₹150 per employee a year (₹100 employer + ₹50 employee), paid by 15 January.

Do IT companies get overtime exemptions in Karnataka?

Karnataka provides certain relaxations on working hours for IT/ITES companies, but overtime payments must still be made at double the ordinary rate when employees work beyond the agreed hours. The relaxation is primarily on the definition of standard hours.

What is the minimum wage in Karnataka in 2026?

Karnataka revised minimum wages from 22 May 2026 (Notification KaE 411 LWA 2023). For shops and commercial establishments in Zone 1 (Greater Bengaluru), the basic monthly rate is ₹23,376.43 for unskilled, ₹25,714.07 for semi-skilled, ₹28,285.47 for skilled and ₹31,114.02 for highly skilled workers. A variable dearness allowance of ₹1,030.80 a month is added for 2026-27, so the total for an unskilled worker in Zone 1 is ₹24,407.23. Zones 2 and 3 have lower rates.

How can HRTailor help with Karnataka compliance?

HRTailor manages complete Karnataka compliance including PT filing, KLWF contributions, Shops Act documentation, PF/ESIC monthly filing, TDS returns, and bonus/gratuity calculations. Our team has specific expertise in Karnataka IT/ITES compliance rules.

When do the new labour codes apply in Karnataka?

The four Labour Codes have applied across India since 21 November 2025. Each state also notifies its own rules under the Codes, so Karnataka employers must follow both the Codes and the state rules as they are notified. HRTailor tracks every Karnataka notification and updates your compliance as rules change.

What are the working hours under Karnataka labour law?

Under the Karnataka Shops and Commercial Establishments Act, employees can work up to 9 hours a day and 48 hours a week. Overtime is paid at twice the ordinary rate, and total work including overtime is limited to 10 hours a day and 58 hours a week. Some IT and ITES establishments have exemptions with conditions.

Has Karnataka notified final rules under the Labour Codes?

Not yet. As of 2 November 2026, the Karnataka Labour Department lists only draft state rules, the latest dated 23 January 2026 under the Code on Wages, Industrial Relations Code and OSH Code. The four Codes themselves have applied since 21 November 2025, so follow them together with existing Karnataka laws.

What should a small employer in Karnataka do first under the Labour Codes?

Start with three things: a written appointment letter for every employee, a salary structure check against the 50% wage rule, and paying on time, which means monthly wages before the 7th of the following month and final dues within two working days of an exit.

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