Contractors & audits
Compliance risk audit services
Find your labour law compliance exposure before an inspector, a buyer or a court does. Every gap is rated for financial, prosecution and reputational risk, so the board knows what to fix first.
- Labour law compliance due diligence
- Director liability rated and closed
- Vendor and contractor checks
- 5,000+ audits completed
When it helps
Four moments that call for an audit
Financial institutions, healthcare providers, manufacturers, technology companies and retailers all need a periodic check of this kind. Four events make one urgent.
A new business or entity
A new entity needs the right registrations from its first hire. An early audit settles which labour and industrial laws apply, and what has to be in place before anyone asks to see it.
A merger or acquisition
Due diligence on the target covers its wages, PF, ESI, gratuity and bonus position. The risk is rated for the board, the independent directors, shareholders and investors before the deal is signed.
Closing an entity, factory or office
Before closure, the audit lists the wages, benefits and registrations still to be settled, so the entity does not close with liabilities left open.
Many locations, many models
Each state adds its own rules, and a mix of employees, contractors and fixed-term staff adds more. The audit tests every location against one checklist, so the gaps can be compared.
How findings are rated
Every gap rated on three kinds of risk
Each finding is rated for what it could cost, whether it could lead to prosecution, and what it would do to your reputation. The ratings set the order of the fix list. Real ratings depend on the facts of each case.
Financial risk is the money a gap can cost: arrears, interest and penalties. Prosecution risk is the exposure to legal proceedings against the company or its officers. Reputational risk is what the finding would mean to employees, customers and investors.
Employees' PF share deducted but not deposited
FinancialHighProsecutionHighReputationalHighMinimum wages not revised after a state notification
FinancialHighProsecutionMediumReputationalMediumPF wages still worked out on basic pay alone
FinancialHighProsecutionLowReputationalLowContractors' PF and ESI challans never checked
FinancialHighProsecutionMediumReputationalMediumRegistration lapsed at one branch
FinancialMediumProsecutionHighReputationalMediumStatutory registers not kept at the site
FinancialLowProsecutionMediumReputationalLow
The cost of non-compliance
The exposure an audit brings to light
The financial and prosecution ratings in our reports rest on figures like these. Each is the kind of gap an audit is designed to find.
Exposure under the law
Source
1–3 years
and a ₹1 lakh fine
01Contributions deducted, not paid
PF or ESI deducted from wages and not deposited carries imprisonment of at least one year, on top of damages of up to the arrears.
Code on Social Security, 2020, s.133(i)(a) and s.128
Up to 10×
the claim, as compensation
02Wage claims
An upheld wage claim can bring compensation of up to ten times the amount found due, recoverable as arrears of land revenue.
Code on Wages, 2019, s.45(2) and s.45(3)
₹1–10 lakh
per contravention
03Closure or retrenchment without permission
Where the Code requires permission, a closure, lay-off or retrenchment without it carries this fine.
Industrial Relations Code, 2020, s.86(1)
₹2–3 lakh
plus up to ₹2,000 a day
04OSH contraventions
The general penalty for any contravention of the OSH Code, including through a vendor engaged without a licence.
OSH Code, 2020, s.94 and s.54
Directors
deemed guilty with the company
05Liability that reaches the board
When a company commits an offence, every person in charge of its business at the time is deemed guilty with it, unless they show due diligence. So is any director whose neglect the offence is attributable to.
Code on Wages, s.55; Code on Social Security, s.135; OSH Code, s.109
Why NK One
Every filing, zero penalties.
Every gap our audit finds is closed and kept closed, and the filings we take on afterwards are made correctly and on time.
Zero-penalty guarantee
No late fees, no interest, no surprise demands on anything we file for you. Every due date is tracked by people who have done this for 20 years.
Direct partner access
Since 2007, clients speak to the partners who run NK One, not a new compliance executive learning on your account.
Scope of the audit
What the audit looks at
Four areas, from the laws that apply to you to the report your board reads.
- File01
Which laws apply
The starting point for every audit.
- Labour and industrial laws mapped to your industry and operations
- Recent updates and amendments taken into account
- Your current processes tested against a due diligence checklist
- File02
Employee benefits and liabilities
Where most of the money sits.
- Minimum wages and employee compensation
- Gratuity and bonus liabilities
- PF and ESI contributions and the wages they are worked out on
- Each calculation checked against the statutory obligation
- File03
Controls, vendors and contractors
Your own processes, and the ones you depend on.
- How well your internal controls reduce compliance risk
- Gap assessment of your vendors' processes
- Contractors' payroll compliance, including PF and ESI
- File04
Rating, reporting and course correction
What management and the board receive.
- Financial, prosecution and reputational risk rated for each finding
- Risk assessed for the company, its board, independent directors, shareholders and investors
- A detailed report of findings for management and the board
- Course-correction steps, and advice on your wider governance, risk and compliance programme
Track record
Thousands of audits behind every report
Our ISO 9001:2015 certificate (QMS/2834/1026) covers consultancy services for labour law compliance. Every client has a dedicated relationship manager, and we reply within two working hours.
- Audits completed
- 5,000+
- Establishments and factories covered
- 250+
- Our founder's experience in compliance
- 25 years
- Client retention
- 85%
FAQ
Questions about compliance risk audits
Can't find your answer? Ask us on WhatsApp and we'll reply within 2 working hours.
What is a labour law compliance audit?
It is a structured review of your practices, policies and procedures against the labour laws that apply to you. The audit lists every applicable compliance, tests how well your current processes meet it, and identifies where you fall short.
Who needs a compliance risk audit?
Any business that handles sensitive information, delivers critical services or is regulated. It is most useful when starting a business, during a merger or acquisition, and before closing an entity, factory or office. Businesses with varied models or several locations also gain from one.
How do you rate compliance risk?
Each finding is rated on three dimensions: the financial cost, the exposure to prosecution, and the effect on your reputation. We also assess the risk for the company, its board, independent directors, shareholders and investors. The ratings decide which gaps are fixed first.
How are compliance risks identified?
We look at your current operations and the laws that apply to them, and track changes in those laws. We test the internal controls meant to keep you compliant, and assess your vendors and contractors, including their PF and ESI. The findings go into a detailed report.
Does the audit cover our vendors and contractors?
Yes. Along with your own processes, we run gap assessments of your vendors and check contractors' payroll compliance, such as PF and ESI. For month-by-month checks after the audit, see our contractor and vendor compliance service.
What do we receive at the end of the audit?
A detailed report of findings for management and the board, with each gap rated and a course correction recommended. Our team can also advise on strategic decisions about labour and industrial law compliance, and on your wider governance, risk and compliance programme.
How is a compliance risk audit different from a statutory audit?
A statutory audit examines your financial statements and is carried out by a Chartered Accountant; ours is conducted by our in-house CA. A compliance risk audit examines your labour and industrial law compliance and rates the risk in each gap. Many businesses need both.
What does a compliance risk audit cost?
It depends on the number of locations, the size of the workforce and how many vendors are in scope. Send us an enquiry with those details and we will come back with a quote.
Related
Related services
Contractor & vendor compliance
Contract labour compliance for each contractor: entry and exit, registers, returns, EPF and ESI.
Labour law compliance
Shops & Establishments registration, statutory registers and returns, abstracts and notices on display.
Labour Codes advisory
Code on Wages review of HR policies, employment letters and wage structures.
Enquiry
Talk to a compliance expert
Share your states and headcount, and we will get back to you within 2 working hours.
- Call+91 98457 40938
- WhatsApp+91 98457 40938
- Emailinfo@nkonehrsolutions.com
- Head office, Bengaluru1163, 9th Main, 11th A Cross, Nagapura, Mahalakshmipuram, near Rajajinagar Metro Station, Rajajinagar 1st Block, Bengaluru, Karnataka 560086
