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Labour Law & Compliance · Glossary

Labour Welfare Fund (LWF)

Also called: LWF, welfare fund contribution, Labour Welfare Board contribution

Definition

Labour Welfare Fund (LWF) is a statutory fund set up under individual state Acts to finance housing, medical, educational and recreational schemes for workers. In states that have one, employers deduct a small fixed contribution from eligible employees, add the employer's share, and remit both to the state Labour Welfare Board on a half-yearly or annual schedule fixed by that state.

Which states levy it

LWF is a state subject, so there is no central Act and no uniform rate. States with an operating Labour Welfare Fund include Maharashtra, Karnataka, Tamil Nadu, Gujarat, Delhi, Haryana, Punjab, West Bengal, Telangana, Andhra Pradesh, Kerala, Madhya Pradesh, Goa, Chhattisgarh, Odisha and the Union Territory of Chandigarh. Several other states and territories have no LWF at all.

The contribution is a flat rupee amount per employee, not a percentage of salary, and the employer's share is usually a multiple of the employee's. Amounts, the wage or designation threshold above which employees are exempt, and the due dates all differ by state, so read the state Act and the latest Board notification rather than a generic table.

  • Flat amounts per employee, revised occasionally by state notification
  • Frequency is typically half-yearly (often June and December) or annual, by state
  • Managerial or supervisory staff above a wage threshold are commonly exempt
  • Contributions are paid to the state Labour Welfare Board with a return or challan

How it shows up in payroll

In a contribution month the employee share appears as a deduction line on the salary slip and the employer share as a cost line in the payroll register; in other months there is no LWF line. Multi-state employers apply the rule of the state where the employee actually works, which for a facility-management or security company means the site's state, not the head office's.

Registration with the state Welfare Board is usually required before the first remittance, and some states link it to the Shops and Establishments or Factories registration. The remittance goes with a prescribed statement listing the number of employees and the amounts collected.

Common mistakes

The usual errors are deducting monthly when the state collects half-yearly, remitting only the employee share and forgetting the employer's, applying the head-office state to staff posted elsewhere, and deducting from employees the state exempts. Each is small in rupees but shows up in labour inspections and in employee grievances about unexplained deductions.

  • Put the state's contribution months into the payroll calendar
  • Map every employee to a work-location state in the master data
  • Keep the Board's registration and the remittance acknowledgements with the wage records
  • Show the deduction with a clear label so employees can reconcile their slip
A facility-management company across three states

A housekeeping contractor with 120 staff has 60 in Mumbai, 40 in Bengaluru and 20 in Gurugram. Maharashtra, Karnataka and Haryana each have an LWF with their own amount and schedule, so the payroll calendar carries three separate LWF entries. In each contribution month the relevant employees see one LWF deduction line on the payslip, the employer books its share for that state, and the accounts team remits the total to that state's Welfare Board with the statement. Staff on the Gurugram site do not follow the Maharashtra rule just because head office is in Mumbai.

Frequently asked questions

Is Labour Welfare Fund contribution mandatory?
Yes, in states that have enacted a Labour Welfare Fund Act, for the establishments and employees the Act covers. It is not a central levy, so an employer in a state without an LWF has no obligation. Check the state Act and the Welfare Board's current notification for coverage.
Is LWF deducted every month?
Usually not. Most states collect it half-yearly or annually, so the deduction appears only in the contribution months. A few states collect more frequently. Deducting a monthly amount in a half-yearly state is a common error that creates excess recoveries.
Who pays LWF, the employer or the employee?
Both. The employee's share is deducted from salary and the employer adds its own share, typically a larger amount, before remitting the total to the state Labour Welfare Board. The employer share is a payroll cost, not a deduction.
Which states do not have a Labour Welfare Fund?
Several states and union territories have no LWF Act. Rather than rely on a list that changes, confirm with the state labour department for each state where you have employees. States that do levy it include Maharashtra, Karnataka, Tamil Nadu, Gujarat, Delhi, Haryana, Punjab, West Bengal, Telangana, Andhra Pradesh, Kerala, Madhya Pradesh, Goa, Chhattisgarh, Odisha and Chandigarh.

Related terms

Professional Tax (PT)
Professional tax is a state-level tax on income from employment, profession or trade, capped by Article 276 of the Constitution at ₹2,500 per person per year. Employers in states that levy it must register, deduct the slab amount from each employee's monthly salary and remit it on the state's schedule. Several states, including Delhi, Haryana and Uttar Pradesh, do not levy it at all.
ESI / ESIC (Employees' State Insurance)
Employees' State Insurance is a statutory health and social-security scheme run by ESIC. It applies to establishments with 10 or more employees (20 in some states) in implemented areas, covering employees whose gross wages are up to ₹21,000 per month. The employee contributes 0.75% and the employer 3.25% of gross wages, payable by the 15th of the following month.
EPF (Employees' Provident Fund)
The Employees' Provident Fund is India's mandatory retirement savings scheme administered by EPFO. Employee and employer each contribute 12% of basic plus DA, with the employer's share split between the pension scheme (8.33%) and the provident fund (3.67%). The statutory wage ceiling rose from ₹15,000 to ₹25,000 per month on 17 September 2026, and monthly ECR filing and payment are due by the 15th.
Payroll
Payroll is the end-to-end process of calculating what each employee has earned in a pay period, deducting statutory and voluntary amounts, paying the net salary, and recording and remitting the deductions. In India it covers wages, overtime, LOP, EPF, ESI, professional tax, TDS and the monthly filings that follow.
Salary Slip (Payslip)
A salary slip, or payslip, is the statement an employer gives each employee for a pay period showing paid days, earnings by component, deductions by component and net pay, along with identifiers such as UAN, ESI number and PAN. Under the Code on Wages every employer must issue a wage slip, and a PDF sent through an employee app meets the requirement where the rules permit electronic form.
Payroll Register (Wage Register)
A payroll register, also called a wage register or salary register, is the employer's month-wise record of every employee's paid days, earnings by component, deductions, employer contributions and net pay. It is a statutory register under the Code on Wages and the contract-labour rules, the source from which payslips and EPF, ESI and TDS returns are prepared, and the first record an inspector or auditor asks to see.

Go deeper

Payroll compliance checklistProfessional tax slabs state-wiseSalary slip format explainedAttendance-linked payroll

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