AS | Ankit Sarawagi|Founder, CFOmatrix·August 2026·10 min read | Payroll & Labour Law |
The rulebook changed under most founders’ feet. The Factories Act, 1948, the law your consultant probably still quotes, was repealed when the OSH Code, 2020 came into force on 21 November 2025.
If you run a manufacturing unit, or you are about to lease a shed and put people and machines in it, the questions are simple: do I count as a factory now, who do I register with, and what do I owe once I am running? This guide answers all three under the current law, and flags exactly what changed from the old Act.
- When it applies
- A premises is a factory at 20+ workers with power, or 40+ without power, where a manufacturing process runs (OSH Code, 2020).
- Key thresholds
- Raised from the old 10 with power / 20 without. But safety, health and welfare duties still bite at 10+ workers.
- Where to register
- With the Chief Inspector-cum-Facilitator of your state (Directorate of Industrial Safety & Health / Factory Inspectorate).
- Filings
- Annual and half-yearly returns, plus statutory registers of workers, wages, accidents and leave.
- Penalty
- Imprisonment and/or fine under the Code for operating without registration or breaching safety provisions.
1 Are you a “factory” under the new Code?
Under the OSH Code, 2020, a premises is a factory if a manufacturing process is carried on in it and it employs:
- 20 or more workers on any day of the year with the aid of power, or
- 40 or more workers on any day without the aid of power.
These numbers are the headline change. Here is the before-and-after in one view.
| Old: Factories Act, 1948 | Now: OSH Code, 2020 | |
|---|---|---|
| With power | 10 or more workers | 20 or more workers |
| Without power | 20 or more workers | 40 or more workers |
| Approving authority | Chief Inspector of Factories | Chief Inspector-cum-Facilitator |
Kaveri Labs runs a small contract-manufacturing unit with 16 workers and powered mixing and packing lines. Under the old Factories Act it would have been a factory (over 10 with power) and needed a licence. Under the OSH Code it sits below the new 20-worker line, so no factory registration yet. But because it has more than 10 workers, it must still meet the Code’s health, safety and welfare standards. Cross to 20 workers and the licence obligation switches on.
2 Register before you switch on: plans, licence, people
Factory registration is a before-you-operate event, not an afterthought. You cannot start the manufacturing process first and regularise later. Two building blocks matter.
Approval of plans and the licence
Before construction or occupation, the building plans and layout of the factory must be approved by the Chief Inspector-cum-Facilitator of your state, the authority that most states run through the Directorate of Industrial Safety & Health (the old Factory Inspectorate). Once plans are approved and the premises is ready, you apply for registration and a factory licence before commencing operations. The licence is renewed periodically per your state rules.
The occupier and the manager
Every factory must name two responsible people, and their names go on the licence:
- Occupier: the person with ultimate control over the factory. For a company this is a director nominated by the board. The occupier carries primary statutory responsibility.
- Manager: the person responsible for day-to-day running and on-site compliance.
These are not ceremonial titles. If something goes wrong on the floor, the occupier and manager are the individuals the Code holds answerable.
3 What you owe once you are running
Registration is the entry ticket. The recurring obligations are where most units slip. They fall into three buckets.
Working hours and wages
- A working week of about 48 hours, and a working day of about 9 hours.
- Overtime paid at twice the ordinary rate of wages.
- A weekly holiday for every worker.
Health, safety and welfare
- Cleanliness, ventilation, adequate lighting, and safe drinking water.
- Sufficient latrines and washing facilities, and first-aid provision.
- Guarded machinery and safe handling of hazardous processes.
Welfare facilities by size
Bigger headcounts trigger extra facilities. The exact figures come from your state rules under the Code, but the typical lines are:
| Facility | Usually required at |
|---|---|
| Creche | 50 workers (aligned with the maternity rule) |
| Canteen | 250 or more workers |
| Welfare officer | 500 or more workers |
| Safety Committee | 500 or more workers |
| Safety officer | Larger factories (per state notification / hazardous process) |
Kaveri Labs scales its plant to 260 workers across two shifts. Three things now switch on at once: it is firmly a factory (well past 20 with power), it must run a canteen (250+), and its overtime bill doubles for every hour past the daily limit at 2x wages. Ankit’s team maps each trigger to a cost line before the hiring, so the P&L is not surprised.
4 Returns and registers
A running factory files periodic returns and keeps a paper trail the inspector can ask for at any time.
| Obligation | What it is |
|---|---|
| Annual return | A yearly summary of the factory’s operations, employment and safety record |
| Half-yearly returns | Periodic filings on employment, hours and related data |
| Register of workers | Who works in the factory, in which capacity and shift |
| Register of wages | Wages, overtime and deductions paid |
| Register of accidents | Injuries, dangerous occurrences and reportable incidents |
| Register of leave | Leave with wages earned and taken |
The OSH Code pushes towards combined online returns and registers, so several of these merge into a single web filing in states that have notified their rules. Check your state portal for the current form set.
5 What non-compliance costs
Operating a factory without registration, or breaching the Code’s safety and welfare provisions, is an offence. The Code provides for imprisonment and/or a fine, with heavier consequences where a breach causes death or serious injury, and enhanced penalties for repeat offences. The precise amounts and terms are set out in the Code and its state rules, so confirm the figure that applies to your situation rather than relying on a number quoted online.
The commercial cost usually lands first. An unregistered or non-compliant plant is a red flag in any diligence, and it can stall a funding round, a customer audit or an acquisition until the licence is in hand and the returns are filed.
6 Your registration checklist
- Count workers and note whether power is used. At 20 with power or 40 without, you are a factory.
- Below the factory line but above 10 workers? You still owe the Code’s health, safety and welfare duties.
- Get building plans approved by the Chief Inspector-cum-Facilitator before construction or occupation.
- Nominate a director as occupier and appoint a manager.
- Apply for registration and the factory licence, and do not start the manufacturing process until it is granted.
- Set up working-hour limits, 2x overtime, weekly holiday, and the health and welfare basics from day one.
- Map welfare thresholds (creche 50, canteen 250, welfare/safety officer and Safety Committee 500) into your hiring plan.
- File annual and half-yearly returns, keep the statutory registers, and renew the licence on time.
Not sure which registrations apply at your headcount?
Use our free Compliance Applicability Checker: enter your team size, state and set-up, and see exactly which labour, payroll and factory filings you owe now, and which switch on as you grow.
Check my compliances7 FAQs
What is the worker threshold for factory registration now?
Did raising the factory threshold remove worker safety protections?
Who grants factory registration and the licence?
Who is the occupier of a factory?
What returns must a factory file?
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Minimum wages and statutory registers →
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AS | Founder, CFOmatrix | Finance Strategy & Compliance CFOmatrix helps Indian startups build finance, tax and compliance functions that stand up to investor due diligence, from process and controls to the filings and the numbers behind them. |
Disclaimer: This article is general information as of August 2026 and is not legal advice. The OSH Code, 2020, its central and state rules, thresholds and deadlines can change and vary by location. Confirm your specific obligations with a qualified professional before acting.