Labour Welfare Fund (LWF): a state-wise guide for employers

Labour Welfare Fund (LWF) is a small statutory contribution, set by state law, that employers deduct from employees' wages and pay with their own share to the state Labour Welfare Board. Each state decides who is covered, the employee and employer amounts, and whether the contribution is monthly, half-yearly or annual. The amounts are modest, but missing a deduction month or a due date is a recurring audit finding.

This guide compares LWF across ten states and shows how to run it in a multi-state payroll. For where LWF sits among other state levies, see our guide to professional tax by state.

What is Labour Welfare Fund?

LWF is created under a state Labour Welfare Fund Act. The fund is managed by a state Labour Welfare Board and financed from three sources:

• Contributions from employees and employers, and in some states a matching government share.
• Unpaid accumulations, such as wages and other dues that employers could not pay to employees.
• Fines realised from employees, together with grants and donations.

What the fund pays for

Boards spend the fund on welfare activities for workers and their families. Typical schemes include education assistance and scholarships for workers' children, medical aid, training and skill programmes, sports and cultural activities, libraries and community facilities. The schemes, eligibility and application process are set by each Board, so employers who want employees to benefit should point them to their own state Board's website.

Who is covered by LWF?

Coverage is decided by each state Act, not by a national rule. The common pattern is:

• The Act applies to factories and to establishments above a headcount threshold, which differs by state (5, 10 or 20 persons in the states below).
• Managerial staff are usually excluded, and supervisors above a wage limit are often excluded too.
• Some Acts also exclude apprentices and part-time workers.

Read the definition of "employee" in your state's Act before assuming that everyone on the payroll contributes. Our glossary entry on LWF gives a short definition you can share with line managers.

LWF frequency: monthly, half-yearly or annual

States fall into three groups:

Frequency	How it works	States in this guide
Monthly	A deduction every month, often a percentage with a cap or a fixed amount	Haryana, Kerala (shops and establishments fund)
Half-yearly	Deducted from June and December wages for employees on the register at the end of each half-year	Gujarat, Maharashtra, Delhi, West Bengal
Annual	Deducted from December wages for employees on the register on 31 December	Karnataka, Tamil Nadu, Telangana

Uttar Pradesh is different: its fund is built from fines and unpaid accumulations, with no regular employee or employer contribution.

State-wise LWF rates and due dates

The table below uses the same figures as our state payroll guides. Amounts are per employee for the period shown. Where a figure or date needs confirmation with the Board, the table says so.

State	Frequency	Employee share	Employer share	Deduction months	Due date
Gujarat	Half-yearly	₹6	₹12	June and December	Before 15 July and 15 January
Maharashtra	Half-yearly	₹25	₹75	June and December	Before 15 July and 15 January
Karnataka	Annual	₹50	₹100 (state adds ₹50)	December	15 January
Tamil Nadu	Annual	₹20	₹40 (government adds ₹20)	December	Before 31 January
Delhi	Half-yearly	₹0.75	₹2.25 (government adds ₹1.50)	June and December	Before 15 July and 15 January
Telangana	Annual	₹2	₹5	December	Commonly with the annual return by 31 January; confirm with the Board
West Bengal	Half-yearly	₹3	Reported as ₹30; confirm	Half-years ending 30 June and 31 December	Confirm with the Labour Department
Haryana	Monthly	0.2% of wages, up to ₹35 (2026)	Twice the employee amount, up to ₹70	Every month	Before 31 December each year; monthly payment is also possible
Kerala	Monthly	₹50	₹50	Every month	Confirm with the welfare fund board
Uttar Pradesh	No regular contribution	Nil	Nil	None	Fines and unpaid accumulations transferred as the Act requires

A few state notes matter for payroll set-up:

• Maharashtra applies to establishments with five or more persons and excludes managerial staff and supervisors drawing more than ₹3,500 a month.
• Karnataka lowered its threshold from more than 50 persons to 10 or more persons from 7 January 2026, so many smaller offices contribute for the first time for calendar year 2026, payable by 15 January 2027.
• Tamil Nadu covers establishments with five or more persons and excludes supervisors drawing more than ₹15,000 a month and managerial staff.
• Telangana covers factories, motor transport undertakings and establishments with 20 or more persons.
• Haryana indexes its monthly cap each January, and charges interest of 12% a year on late payment.
• Kerala runs sector-specific funds. The ₹50 and ₹50 monthly figure is for the Shops and Commercial Establishments Workers Welfare Fund, which covers most shops, offices and IT or ITeS establishments. Factories and plantations fall under other funds.

States without LWF

Several states do not levy LWF at all, and in others the law applies only to certain sectors. Do not assume a state has no LWF because it is not in this table: check your state's labour department or welfare board for each location where you have employees. Uttar Pradesh is a good example of why: it has an LWF Act, but no payslip deduction.

How LWF works in payroll

The mechanics are simple once the rules are set up correctly.

Deduct by work location on the register date

LWF follows the state where the employee works, not where the company is registered or where head office sits. For half-yearly and annual states, the test is usually whether the employee is on the register on the qualifying date (for example 30 June and 31 December). So the payroll must read each employee's work location as of that date from an effective-dated record.

A transfer in the middle of a half-year shows why this matters. An employee who moves from Pune to Bengaluru on 15 December has Maharashtra LWF deducted in June (on the Maharashtra register on 30 June) and Karnataka LWF in December (on the Karnataka register on 31 December). Neither state's December deduction is skipped or doubled.

Leavers and joiners

For half-yearly and annual states, an employee who leaves before the register date is generally not deducted for that period, and a joiner on the register on the date is. In monthly states such as Haryana, the contribution follows the employee's presence on the register each month. If a leaver's F&F falls in a deduction month, decide in advance whether LWF is deducted in the final settlement, so the treatment is consistent. Our full and final settlement guide covers the other final-month deductions.

Unpaid accumulations and fines

Most LWF Acts require employers to transfer to the Board certain unpaid accumulations, such as wages or other dues that remain unclaimed after a set period, along with fines realised from employees. The period and the transfer process vary by state. Keep a register of unclaimed salary and F&F amounts for leavers you could not reach, and review it before each LWF filing.

Filing and payment

Most Boards now accept or require online payment. Gujarat, for example, has been online only since 1 July 2022, and Tamil Nadu takes payment through its Board's LWMIS portal. Keep the challan and acknowledgement with the payroll records for that period. Rates and portals change, so check each Board before the due date; the Karnataka Labour Welfare Board and the Haryana Labour Department publish their current notices online.

Worked example: LWF for a multi-state employer

A company has covered employees (after applying each state's exclusions) in five states. Assume the Haryana cap stays at ₹35 for the year.

State	Covered employees	Employee share for the year	Employer share for the year	Total
Maharashtra	340	340 × ₹25 × 2 = ₹17,000	340 × ₹75 × 2 = ₹51,000	₹68,000
Karnataka	220	220 × ₹50 = ₹11,000	220 × ₹100 = ₹22,000	₹33,000
Haryana	150	₹5,100 × 12 = ₹61,200	₹10,200 × 12 = ₹1,22,400	₹1,83,600
Tamil Nadu	100	100 × ₹20 = ₹2,000	100 × ₹40 = ₹4,000	₹6,000
Delhi	60	60 × ₹0.75 × 2 = ₹90	60 × ₹2.25 × 2 = ₹270	₹360
Total	870	₹91,290	₹1,99,670	₹2,90,960

The Haryana line needs a monthly calculation. Of the 150 employees, 120 earn ₹17,500 or more, so 0.2% reaches the ₹35 cap (0.2% of ₹17,500 is ₹35). The other 30 earn ₹15,000, so 0.2% is ₹30.

• Employee share per month: (120 × ₹35) + (30 × ₹30) = ₹4,200 + ₹900 = ₹5,100.
• Employer share per month: twice that, ₹10,200.
• Per month in total: ₹15,300, or ₹1,83,600 for 12 months.

Two practical points come out of this example:

• December is the heavy month. Maharashtra, Karnataka, Tamil Nadu, Delhi and Haryana all deduct in December, so the December payroll carries five LWF lines and January carries several due dates.
• The employer pays roughly twice what employees pay. In this example the employer bears ₹1,99,670 of the ₹2,90,960 total, which belongs in the annual payroll cost budget, not as a surprise in January.

Common mistakes

• Deducting by head office state instead of each employee's work location on the register date.
• Applying LWF to everyone without checking each Act's exclusions for managerial and supervisory staff.
• Missing the June or December deduction in half-yearly states because nothing is deducted in the other ten months.
• Not updating the Haryana cap when it is revised each January.
• Treating Karnataka as out of scope after its threshold fell to 10 or more persons from 2026.
• Paying the employee share only, or depositing late without the interest some states charge.
• Ignoring unpaid accumulations that the Act requires to be transferred to the Board.

FAQs

Is Labour Welfare Fund mandatory? Yes, in states that have an LWF Act and for establishments the Act covers. It is not a voluntary or company welfare scheme.

Is LWF deducted every month? Only in some states. Haryana and Kerala's shops and establishments fund are monthly; Gujarat, Maharashtra, Delhi and West Bengal are half-yearly; Karnataka, Tamil Nadu and Telangana are annual.

Which state's LWF applies to an employee who works remotely? The state of the employee's work location as recorded by the employer. Record a clear work location for remote staff and apply that state's Act.

Is there LWF in Uttar Pradesh? There is an LWF Act, but no regular employee or employer contribution. The fund is financed from fines, unpaid accumulations, grants and donations.

What happens if LWF is paid late? States charge interest or penalties under their own Acts. Haryana, for example, charges interest of 12% a year on late payment.

How NeevHR helps

NeevHR deducts LWF in the payroll run by each employee's effective-dated work location, with state LWF rules held as configurable settings, so a rate or cap change is a settings update rather than a code change. LWF challan data comes from the published payroll run, and the statutory compliance calendar tracks each state's due date alongside PF, ESI, PT and TDS.

This article provides general information for educational purposes. Statutory rules, thresholds, rates and filing requirements may change; verify with the relevant authority or a qualified professional. Last reviewed: 06 Oct 2026.