Labour Welfare Fund (LWF)

The Labour Welfare Fund (LWF) is a statutory contribution mandated by individual state governments in India. To fund welfare initiatives for employees in the organised sector. Governed under each state's own LWF Act, contributions are collected from employers, employees, and in some cases, the state government. And directed towards healthcare, housing, education, and social security programmes for workers.

LWF is not a central government scheme. It is state-specific, meaning applicability, rates, thresholds, and due dates all vary by state.

Which States Have LWF

Not all Indian states have enacted an LWF Act. 

LWF currently applies in: Andhra Pradesh, Chandigarh, Chhattisgarh, Goa, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Tamil Nadu, Telangana, and West Bengal.

States without an LWF Act: Delhi, Rajasthan, and Himachal Pradesh, have no contribution obligation.

State-Wise Contribution Rates

In some states, the state government also contributes a fixed amount to the fund. The employee and employer columns above reflect the payroll-facing obligations. Verify with your state Labour Welfare Board whether a government contribution applies in your state

What the Fund Covers

LWF contributions fund state-administered welfare programmes, typically including:

• Healthcare: Medical facilities and health insurance support for workers
• Housing: Subsidised housing and financial assistance schemes
• Education: Scholarships for workers' children
• Recreational facilities: Sports clubs, reading rooms, holiday homes
• Social security: Support for pension and provident fund schemes

Common Compliance Mistakes

1. Using outdated rates: Maharashtra, Karnataka, and West Bengal all revised rates between 2023 and 2025. Payroll systems that haven't been updated are under-deducting, and the arrears fall on the employer, not the employee.
2. Single registration for multi-state operations: Each state requires a separate LWF registration. A company with offices in Mumbai, Bengaluru, and Chennai needs three registrations with three separate state Labour Welfare Boards.
3. Ignoring it because the amounts are small: Maharashtra's combined rate is ₹400 per employee per year. But non-compliance attracts penalties of 10-50% of the contribution plus interest, and is routinely flagged during statutory audits.
4. Missing the deduction window: Half-yearly states (Maharashtra, Gujarat) deduct from June and December salaries. Annual states (Karnataka, Tamil Nadu) are deducted in December only. Missing the window means a delayed remittance, not a skipped one, but late filing still triggers penalties.

For companies operating across multiple states, managing separate LWF registrations, rates, and due dates alongside PF, ESI, and Professional Tax is a significant compliance overhead. An Employer of Record handles this across all applicable states. Gloroots covers LWF as part of its India EOR compliance service.

Best Practices for HR

1. Regular Training: Train HR personnel on LWF regulations and compliance practices.
2. Employee Awareness: Educate employees about the benefits of the LWF and how it supports their welfare.
3. Efficient Processes: Implement automated systems to manage deductions, contributions, and record-keeping to minimize errors and ensure compliance.