Updated 16 October 2026. An HR compliance audit checks whether the employer’s registrations, payroll, records and practices match the laws that apply to its establishment. The audit should start with applicability—industry, headcount, location, worker categories and employment model—because the same checklist does not apply to every business.
The four Labour Codes took effect on 21 November 2025. Central rules and related directions have been published in 2026, while Kerala-specific requirements must be checked against the current State notifications and rules. Preserve the rule or notice used for each conclusion so a later review can reproduce it.
Audit method
- List each site, business activity, employee category and contractor arrangement.
- Map each potentially applicable law, code, scheme, rule, licence condition and local-body requirement to a responsible owner.
- Choose a sample of employees and payroll periods. Trace each item from appointment and attendance records through payroll, payment, filing and acknowledgement.
- Record the evidence, rule version, effective date, exception and corrective action. Give each finding a severity and due date.
- Recheck corrected items in the next payroll or filing cycle and close the finding only when evidence supports it.
Core audit checklist
| Area | Evidence to review | Audit question |
|---|---|---|
| Applicability and registrations | Establishment profile, headcount by site, activity, registration certificates, licences and portal records. | Are coverage decisions documented and based on the correct threshold, location, sector and effective date? |
| Employment records | Appointment terms, wage structure, contractor agreements, attendance, leave, overtime and exit records. | Do actual work arrangements and payroll records match the documented employment terms? |
| Payroll and wages | Approved salary changes, wage components, payslips, bank proof, deductions, reconciliations and wage registers required under applicable rules. | Are wage bases and deductions calculated consistently under the relevant rule, with employee-level evidence? |
| EPF and pension | Membership and eligibility records, wage calculations, ECRs, challans, passbook reconciliation and portal acknowledgements. | Do the contribution base, ceiling, allocation and filing match the member’s status and the period’s rules? |
| ESIC | Coverage and insured-person records, wage calculations, contribution records, challans, accident reports and benefit support records. | Are contribution wages, eligibility, monthly payment and accident reporting supported by current ESIC instructions? |
| Kerala Professional Tax and welfare funds | Local-body registration and payment records; the identity of the applicable welfare board; employee-level calculations and receipts. | Is PT calculated on the correct half-yearly income slab? Has the employer distinguished the Shops Board from the Kerala Labour Welfare Fund Board? |
| Working time, leave and safety | Attendance, shift schedules, overtime approvals, leave records, safety assessments, training and incident records required for the site. | Do records meet the applicable Kerala, Central and sector-specific requirements? |
| POSH and employee concerns | Internal Committee constitution, member training, complaint handling safeguards, meeting and annual reporting records where required. | Are the committee and reporting process current, confidential and consistent with the applicable law? |
| Tax and employee exits | Tax-year payroll calculations, TDS payments/statements, tax certificates, final settlement, benefit and separation records. | Are forms and deadlines appropriate to the tax period, including the transition to the Income-tax Act, 2025 from 1 April 2026? |
Check deadlines and forms by period
Do not rely on a copied calendar or old form name without checking the period it covers. For salary TDS relating to events on or after 1 April 2026, the Income Tax Department identifies Form 138 (earlier Form 24Q) under the Income-tax Act, 2025. For Kerala Professional Tax, the liability is assessed by half-year under the applicable schedule, while payment dates and online availability depend on the responsible local body. EPF, ESIC and welfare-fund filing details must be reconciled to the current portal and rule instructions.
For payroll evidence, a successful portal submission is not enough by itself: retain the accepted return, payment proof, challan or reference number and a reconciliation back to the employee-level calculation. If a portal rejects a filing, save the error and ticket reference and track the correction to completion.
How to report findings
Use a finding log with: requirement and source, affected site or employees, period tested, evidence, financial or employee impact, root cause, corrective action, owner, target date and follow-up result. Separate an actual breach from a documentation gap or an unverified applicability decision. Do not state a penalty amount until the exact provision, default date and any transition or extension have been checked.
Where the law specifies record retention, preserve records for that period. Avoid applying one universal retention period to all payroll, tax, safety and employee records. Restrict access to sensitive information and keep evidence in a secure, backed-up location.
Primary sources
- Ministry of Labour and Employment: Labour Codes and Kerala Labour Commissionerate updates.
- EPFO, ESIC and Income Tax Department.
- Kerala LSGD Profession Tax FAQ and Kerala Labour Commissionerate welfare boards.
This checklist is a starting point, not a determination that every listed law applies to every employer. For a structured internal review, use our labour-law audit checklist. For help assessing Kerala payroll and statutory obligations, see payroll services or contact GHR Consultancy.