The Labour Welfare Fund (LWF) scheme is an initiative by the Indian government to improve employees’ standard of living in the unorganized sector. Labour welfare fund is constructed for funding activities towards employee welfare in the respective states, also calculated automatically based on the company profile and the location of its operation. This act has been implemented in 16 states out of 37 states, including union territories. LWF should be paid by each employee except those who earn more than 15,000/-.
Unlike Professional Tax, the Labour Welfare fund is not calculated based on the salary slab. It is a fixed contribution for each employee with a maximum salary threshold limit for contribution.
Based on this act, both employee & employer has to contribute a certain amount for LWF.
Navigate to Settings>Payroll settings> CTC Components > Statutory components > Click on Labor welfare fund to view the Labour welfare fund.
This scheme is applied with different rules decided by every individual state and union territory. If a company operates in multiple state locations, it must keep track of the changing rules to avoid penalties.
LWF charges differ from the state based on the employee’s work location. The deduction cycle may be monthly, half-yearly or yearly, relying upon your state, and the LWF deduction is mandatory.
All employees except those working in a managerial or supervisory capacity and drawing wages exceeding the monthly salary limit as per the respective state are included in the LWF contribution.
For example:
Establishments in Tamil Nadu with 5 or more employees should register in the scheme and need to make payment for each year at the beginning of the year before 31st January.
The amount to be payable is Rs.20/- by the employer and Rs.10/- by the employee. Thus, a total of Rs.30/- for each employee should be paid under LWF.
