Factories Act 1948 and OSH Code 2020: Employer Guide to Factory Registration, Safety and Welfare Compliance in India (2026)

Do you operate a manufacturing unit in India? If your premises employs 20 or more workers with the aid of power (or 40 or more without power), your establishment is a factory under the OSH Code 2020. Operating without registration attracts a fine of up to Rs 2 lakh for a first offence. Beyond registration, the law imposes detailed obligations on working hours, safety infrastructure, welfare facilities, and hazardous process management. The OSH (Central) Rules 2026, notified on 8 May 2026, now spell out the compliance details.

The Factories Act, 1948 governed factory safety, health, and welfare in India for over 75 years. It was repealed on 21 November 2025 when the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) came into force. Every Indian manufacturer, factory owner, and occupier who previously complied with the Factories Act now operates under the OSH Code framework.

This transition matters because the OSH Code changes factory definition thresholds, lowers welfare facility triggers, increases penalties, introduces mandatory appointment letters, and consolidates 13 separate labour laws into one unified compliance regime. If you run a factory, you need to understand what changed, what stayed the same, and what new obligations apply in 2026.

This guide covers the complete factory compliance framework: the old Factories Act provisions (still relevant for understanding your obligations), the OSH Code 2020 replacements, the Central Rules 2026, and a practical compliance checklist.

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What Was the Factories Act 1948?

The Factories Act, 1948 (Act No. 63 of 1948) was enacted on 23 September 1948 and came into force on 1 April 1949. It regulated working conditions in factories across India, covering health, safety, welfare, working hours, overtime, employment of women and young persons, and annual leave with wages.

The Act applied to any premises where:

• 10 or more workers were employed with the aid of power in a manufacturing process
• 20 or more workers were employed without the aid of power

The Act defined key roles:

• Occupier: the person who has ultimate control over the affairs of the factory
• Manager: the person responsible for day-to-day compliance (named under Section 7)
• Inspector: government-appointed official with powers to enter, inspect, and enforce

What Replaced the Factories Act?

The Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) received Presidential assent on 28 September 2020 and came into force on 21 November 2025. It consolidates 13 central labour laws into a single legislation:

1. Factories Act, 1948
2. Mines Act, 1952
3. Dock Workers (Safety, Health and Welfare) Act, 1986
4. Building and Other Construction Workers Act, 1996
5. Plantations Labour Act, 1951
6. Contract Labour (Regulation and Abolition) Act, 1970
7. Inter-State Migrant Workmen Act, 1979
8. Working Journalist and other Newspaper Employees Act, 1955
9. Working Journalist (Fixation of Rates of Wages) Act, 1958
10. Motor Transport Workers Act, 1961
11. Beedi and Cigar Workers Act, 1966
12. Sales Promotion Employees Act, 1976
13. Cine-Workers and Cinema Theatre Workers Act, 1981

The OSH (Central) Rules, 2026 were notified on 8 May 2026 by the Ministry of Labour and Employment. These rules operationalize the Code and prescribe forms, thresholds, and procedures.

Factory Definition: Old vs New Thresholds

Tax Rate Chart

Summary

Factories Act: with power

10 workers

Factories Act: without power

20 workers

OSH Code: with power

20 workers

OSH Code: without power

40 workers

The OSH Code increases the factory definition threshold from 10 to 20 workers (with power) and from 20 to 40 workers (without power). Manufacturing units below these thresholds are no longer classified as factories under the Code, reducing their regulatory burden.

However, even non-factory establishments employing 10 or more workers must register under the OSH Code's general establishment provisions and comply with basic health and safety requirements.

Factory Registration Under the OSH Code

The Old Process (Factories Act)

Under the Factories Act, factory registration required a separate licence from the Chief Inspector of Factories in each state. The process involved multiple forms, physical submissions, and inspections before a licence was granted.

The New Process (OSH Code 2020 + Central Rules 2026)

The OSH Code introduces a unified digital registration system:

1. File Form I on the Shram Suvidha Portal (shramsuvidha.gov.in)
2. If authorities take no action within 7 days of a complete application, registration is deemed granted
3. Registration certificate in Form III is auto-generated
4. Late registration (after 60 days from the deadline) attracts a late fee
5. One registration replaces what was previously 6 separate registrations under different laws

Transition Deadline for Existing Factories

Factories already registered under the Factories Act 1948 must update their registration details on the Shram Suvidha Portal within 6 months of 8 May 2026 (by 8 November 2026). Failure to update does not cancel your existing registration, but you will not have a valid registration under the new framework.

Working Hours and Overtime

Daily and Weekly Limits

The OSH Code retains the core working hour limits from the Factories Act:

• Maximum 8 hours per day (Section 25 of the OSH Code)
• Maximum 48 hours per week
• Rest interval of at least 30 minutes after 5 hours of continuous work
• Spread-over must not exceed 10.5 hours in a day (inclusive of rest intervals)

Weekly Holiday (Section 26)

Every worker is entitled to one day off per week. If a worker is required to work on a holiday, the employer must provide a compensatory holiday within the same month or within 2 months.

Overtime (Section 27)

When a worker works beyond 8 hours in a day or 48 hours in a week:

• Overtime wages are paid at twice the ordinary rate of wages
• Payment must be made within the relevant wage period
• Prior consent of the worker is required for overtime
• Overtime is capped at 144 hours per quarter (roughly 11 hours per week averaged over 13 weeks)

Tax Rate Chart

Summary

Normal wage rate

1x

Overtime wage rate

2x

Quarterly overtime cap

144 hours

What Changed from the Factories Act?

Under the Factories Act 1948, the working hour provisions were nearly identical: 48 hours per week (Section 51), 9 hours per day (Section 54), overtime at double wages (Section 59). The OSH Code reduces the daily limit from 9 to 8 hours and introduces a quarterly overtime cap of 144 hours, which the Factories Act did not explicitly prescribe at the central level.

Health and Safety Provisions

Employer Duties (Chapter III of the OSH Code)

Every employer operating a factory must ensure:

• A safe working environment free from hazards
• Proper ventilation, temperature control, and lighting
• Cleanliness and proper disposal of waste and effluents
• Adequate space for workers (no overcrowding)
• Fencing of dangerous machinery and parts
• Safe handling and storage of hazardous substances
• Personal protective equipment where required
• Medical examination of workers at prescribed intervals

Hazardous Processes (Schedule I of the OSH Code)

Factories carrying on hazardous processes have additional obligations:

• The maximum permissible limits of exposure to chemical and toxic substances are prescribed by the State Government
• Workers must receive health surveillance at regular intervals
• Emergency preparedness plans must be in place
• Information about hazards must be communicated to workers and the local community

Safety Officer

Factories employing 500 or more workers must appoint a full-time safety officer. The safety officer:

• Monitors compliance with safety provisions
• Investigates accidents and near-misses
• Conducts safety training for workers
• Advises management on safety improvements
• Maintains safety records and reports

Safety Committee

Factories carrying on hazardous processes with 250 or more workers must constitute a safety committee with representatives of both the employer and workers. The committee:

• Reviews safety policies and procedures
• Investigates accidents and suggests preventive measures
• Promotes safety awareness among workers

Inspector-cum-Facilitator

The OSH Code replaces the old factory inspector role with an inspector-cum-facilitator who has a dual mandate:

• Facilitation: advising employers on compliance requirements
• Enforcement: inspecting premises, investigating accidents, and prosecuting violations

The inspector-cum-facilitator can enter any factory at any reasonable time, examine workers, require production of records, and prohibit work if workers are in imminent danger.

Welfare Facilities

The OSH Code standardizes welfare facilities across all covered establishments. For factories, the key thresholds are:

Tax Rate Chart

Summary

Canteen (old: 250 workers)

100 workers

Creche

50 workers

Welfare officer (old: 500)

250 workers

Safety officer

500 workers

Mandatory for All Factories

Regardless of size, every factory must provide:

• Adequate drinking water at convenient locations
• Washing facilities for workers
• First-aid boxes (at least one per 150 workers, with prescribed contents)
• Adequate ventilation and lighting
• Proper sanitary facilities (latrines and urinals) with separate provisions for men and women
• Sitting arrangements for workers who must work in standing positions

Canteen (100+ Workers)

Factories employing 100 or more workers must provide a canteen. Under the Factories Act, this threshold was 250 workers. The OSH Code lowers it to 100, bringing canteen access to significantly more factory workers.

Creche (50+ Workers)

Factories employing 50 or more workers must provide a creche facility at a suitable location for children under 6 years of age. The creche can be within the factory premises or at a common facility nearby.

Welfare Officer (250+ Workers)

Factories employing 250 to 500 workers must appoint at least one welfare officer. For every additional 500 workers, an additional welfare officer is required. Under the Factories Act 1948, the threshold was 500 workers. The OSH Code halves this requirement.

Rest Rooms and Shelters

Factories where workers are required to halt at night must provide adequate rest rooms with separate provisions for men and women.

Mandatory Appointment Letters

The OSH Code introduces a new requirement not present in the Factories Act: every employer must issue a written appointment letter to all workers at the time of appointment. The letter must contain the terms and conditions of employment. This applies to all factory workers, including contract workers engaged through the principal employer.

Annual Return Filing

Under the OSH Central Rules 2026, every factory must file an Annual Return in Form IX by 1 February each year. The return covers the preceding calendar year and must be filed on the Shram Suvidha Portal. Failure to file attracts penalties.

Penalties Under the OSH Code

The OSH Code significantly increases penalties compared to the Factories Act:

Comparison of Penalties

Compounding of Offences

First-time offences punishable with fine only can be compounded by paying 50 percent of the maximum fine. Offences punishable with fine or imprisonment or both can be compounded by paying 75 percent of the maximum fine. This gives employers a way to resolve minor violations without criminal prosecution.

Protection of Women and Young Persons

Employment of Women

Under the OSH Code, women can work in all types of factories, including those involving dangerous operations, subject to adequate safety measures. The Code removes the blanket night-work prohibition for women that existed under the Factories Act (which prohibited women from working between 7 PM and 6 AM). Instead, the appropriate government may prescribe conditions for night work, including adequate transportation and safety arrangements.

Employment of Young Persons

• Children under 14 years: employment in any factory is strictly prohibited
• Adolescents (15 to 18 years): may work only with a certificate of fitness from a certifying surgeon, cannot work during night hours (10 PM to 6 AM), and are subject to reduced working hour limits

Interaction with Related Labour Laws

Factory employers must comply with several related statutes alongside the OSH Code:

10-Point Factory Compliance Checklist for 2026

1. Register or update registration on the Shram Suvidha Portal (Form I) by 8 November 2026 (6 months from Central Rules notification)
2. Issue appointment letters to all workers, including existing employees who do not have one
3. Verify working hours compliance: 8 hours/day, 48 hours/week, 144 hours overtime/quarter
4. Pay overtime at double wages and maintain overtime records
5. Provide mandatory welfare facilities: drinking water, washing, first-aid, ventilation, sanitary facilities
6. Set up canteen if employing 100+ workers (lower threshold than the old 250)
7. Set up creche if employing 50+ workers
8. Appoint welfare officer if employing 250+ workers (lower threshold than the old 500)
9. Appoint safety officer if employing 500+ workers; constitute safety committee if hazardous process with 250+ workers
10. File Annual Return in Form IX by 1 February each year on the Shram Suvidha Portal

Common Employer Mistakes

1. Assuming the Factories Act Still Applies

The Factories Act stands repealed since 21 November 2025. While most compliance routines carry over, the legal framework is now the OSH Code. Using old forms, referencing old section numbers in inspection responses, or maintaining only old-format registers can create compliance gaps.

2. Missing the Transition Registration Deadline

Existing factories must update their registration on the Shram Suvidha Portal by 8 November 2026. Many factory owners assume their old factory licence is sufficient. It is valid under the savings provisions, but you need an OSH Code registration for ongoing compliance.

3. Not Issuing Appointment Letters

The mandatory appointment letter requirement is new under the OSH Code. Factories that have operated for years with informal employment arrangements must now document every worker's terms of employment in writing.

4. Using the Old Welfare Thresholds

The canteen threshold dropped from 250 to 100 workers. The welfare officer threshold dropped from 500 to 250. Factories operating between 100 and 249 workers that did not previously need a canteen now do. Check whether the new thresholds require you to set up facilities you did not have before.

5. Not Obtaining Worker Consent for Overtime

The OSH Code requires prior consent of the worker for overtime work. Mandating overtime without consent is a violation, even if you pay double wages.

6. Ignoring the Quarterly Overtime Cap

The 144-hour quarterly overtime cap is new at the central level. Factories that routinely schedule heavy overtime during peak production months must ensure they do not exceed 144 hours per worker per quarter.

State-Specific Implementation

The OSH Code is a central law, but labour is a concurrent subject under the Indian Constitution. Each state must notify its own OSH rules for state-specific provisions. As of August 2026:

• The OSH (Central) Rules 2026 apply to all central sphere establishments (factories under central government, inter-state operations)
• Most states have notified or drafted their own OSH rules
• All states except West Bengal have notified their OSHWC rules
• State rules may vary on specific thresholds, forms, and procedures

If your factory operates in multiple states, you must track the OSH rules of each state where you have premises.

Tax Implications

• Safety equipment and welfare facility expenses are deductible as business expenditure under Section 37(1) of the Income Tax Act
• Penalties and fines paid for factory safety violations are generally not deductible as business expenses
• Workers' compensation insurance premiums are deductible under Section 37(1)
• Factory owners should maintain separate accounts for safety expenditure to claim deductions during assessment

Key Takeaways

The transition from the Factories Act 1948 to the OSH Code 2020 is not cosmetic. The new framework changes factory definition thresholds, lowers welfare triggers, increases penalties, and introduces new obligations like mandatory appointment letters. The Central Rules notified on 8 May 2026 make compliance operational.

If you operate a factory: register or update on the Shram Suvidha Portal by November 2026, review your welfare facilities against the new lower thresholds, issue appointment letters to all workers, and file your Annual Return in Form IX by 1 February 2027.

For guidance on related employer obligations, see the guides on PF and ESI compliance, minimum wages under the Code on Wages, contract labour compliance, and the four labour codes overview.