Karnataka Labour Law Compliance Guide for Employers, 2026 Edition

India's four new Labour Codes, the Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health & Working Conditions (OSH) Code, came into force on 21 November 2025, consolidating 29 central labour laws into four.

Here is what this means for Karnataka employers:

• The Codes now sit above many existing Karnataka state laws. Several state acts, including Shops & Establishments, Professional Tax administration, and the Labour Welfare Fund, continue to operate, but increasingly within the framework of the Codes.
• "Wages" is now defined uniformly: basic pay plus dearness allowance plus retaining allowance must add up to at least 50% of total remuneration, which changes PF, gratuity, and bonus calculations for most salary structures.
• Appointment letters are now mandatory for every employee.

A couple of practical notes: state rules under the four Codes are notified state by state, so what has changed in Karnataka will not always match what has changed in Maharashtra or elsewhere. For a worked example of what notified state rules actually change, see Niyuk's Maharashtra Labour Law Compliance Guide. And if running payroll and attendance registers in-house isn't the best use of your team's time, a cloud HRMS with an attendance module can keep these records current automatically.

This guide is current as of June 2026. Labour Code rules are still evolving, and Niyuk updates these guides as new notifications are issued.

1. Karnataka Professional Tax

Professional Tax in Karnataka is administered by the Karnataka Commercial Tax Department.

Employee PT Slabs (Monthly)

Key points:

• Maximum annual PT is ₹2,500 per employee.
• Filing is done monthly with the Karnataka Commercial Tax Department.
• Monthly payment is due by the 20th of the following month.
• Annual return filing is due within 60 days of the financial year end.

2. Karnataka Labour Welfare Fund (KLWF)

Under the Karnataka Labour Welfare Fund Act:

• Employee contribution: ₹50 per year, deducted annually in December.
• Employer contribution: ₹100 per year per employee.
• Due date: 15 January each year.
• Applicable to all establishments with employees in Karnataka.

3. Karnataka Shops & Commercial Establishments Act, 1961

Key provisions:

• Registration: within 30 days of commencement.
• Working hours: maximum 9 hours a day, 48 hours a week.
• Overtime: paid at twice the ordinary rate of wages.
• Weekly holiday: one day a week, Sunday by default.
• Annual leave: 15 days for every 240 days worked.
• IT/ITES exemptions: relaxations on working hours and night shifts for women.

4. Central Laws Applicable in Karnataka

• EPF: 12% employer plus 12% employee on basic plus DA, for establishments with 20 or more employees.
• ESIC: 3.25% employer plus 0.75% employee, for workers earning up to ₹21,000 a month.
• Payment of Bonus: 8.33% to 20% for eligible employees.
• Payment of Gratuity: payable after 5 years of continuous service, using the standard formula.
• Minimum Wages: Karnataka's state-specific minimum wage rates, set zone by zone.

Karnataka offers specific relaxations for IT/ITES companies:

• Flexible working hours beyond the standard 9-hour limit, subject to conditions.
• Women employees allowed to work night shifts, with transportation and safety provisions in place.
• Relaxed overtime provisions for project-based work.

These relaxations need to be reflected correctly in payroll and leave calculations.

• Automated Karnataka PT calculation and filing.
• KLWF annual contribution management.
• Shops Act registration guidance.
• IT/ITES-specific compliance handling.
• Zone-wise minimum wage tracking.
• Regular compliance audits and documentation.

What is the PT rate for IT employees in Bangalore?

Karnataka PT for IT employees follows the same slabs: ₹200 a month for salaries of ₹25,000 and above (₹300 in February), and nil below ₹25,000. There is no special IT exemption for Professional Tax.

Is KLWF mandatory for all Bangalore companies?

Yes. Karnataka Labour Welfare Fund contributions are mandatory for all establishments with employees in Karnataka. The total cost is ₹150 per employee per year: ₹100 from the employer and ₹50 from the employee.

Do IT companies get overtime exemptions in Karnataka?

Karnataka provides certain relaxations on working hours for IT/ITES companies, but overtime must still be paid at double the ordinary rate when employees work beyond the agreed hours. The relaxation is mainly in how standard hours are defined, not in overtime pay itself.

What is the minimum wage in Karnataka?

Karnataka's minimum wages vary by zone, Zone I includes Bangalore, and by industry, and the state government revises them periodically. Niyuk tracks current rates to help ensure employees are paid at or above the applicable minimum wage.

How can Niyuk help with Karnataka compliance?

Niyuk manages Karnataka compliance end to end, including PT filing, KLWF contributions, Shops Act documentation, monthly PF and ESIC filing, TDS returns, and bonus and gratuity calculations, with specific attention to Karnataka's IT/ITES compliance rules.