Bengaluru is the easiest city in India to find good engineering talent. It is also one of the more demanding cities to be compliant in, because Karnataka has been quietly tightening enforcement of the Shops and Establishments Act, Professional Tax filings and PoSH committee constitution. Founders who are casual about this in years one and two get a stern letter in year three.
The registrations you need
Before your first hire's first salary date, you typically need five things in place — five if you stay below the PF and ESI thresholds, seven once you cross them:
- Karnataka Shops and Establishments registration for your principal place of business — applied online via the Labour Department portal, usually issued within a week if your documents are clean.
- Karnataka Professional Tax (Employer) registration — a one-time enrolment certificate plus monthly returns once you have employees on payroll.
- TAN (Tax deduction Account Number) — needed before you deduct TDS on the first salary or contractor invoice.
- PAN of the company — usually already in place from incorporation.
- GSTIN if applicable — for any company doing business above the threshold, and immediately for SaaS startups regardless of revenue.
- EPF registration once you cross 20 employees (or voluntarily earlier) — your engineering team will appreciate it.
- ESI registration once you cross 10 employees and have anyone earning below the ESI wage ceiling.
What gets deducted in Karnataka
Karnataka Professional Tax is a flat per-month deduction at salary bands set by the state. Above the highest band, every salaried employee in Karnataka pays a fixed PT each month and the employer remits monthly. PT is small in absolute rupee terms but irritating to recover — the field offices issue notices for tiny shortfalls because the system is automated.
PF is the employer's 12% contribution on basic wages plus the employee's matching 12% deducted from their salary. ESI applies to employees earning at or below the ESI wage ceiling — the employee share is 0.75% and the employer share is 3.25%. Once your team is full of senior engineers above the ESI ceiling, your ESI footprint shrinks even though your headcount grows.
Your dedicated consultant runs the registrations for you
On every FastLegal plan, your dedicated consultant pulls the Karnataka Shops Act application, files PT enrolment, registers TAN if you do not already have one, and lines up PF and ESI ahead of the thresholds you are about to cross. You do not interpret the state portals — they do, and we send you what to sign.
The employment contract: what to actually put in it
Most early-stage offer letters are too short and lack the clauses founders later wish they had. The minimum set that holds up under scrutiny:
- Designation, reporting line, place of work, joining date and a clean compensation breakdown showing basic, HRA, allowances and any variable pay.
- Probation duration (typically 3–6 months) and the notice period during and after probation.
- Confidentiality and intellectual-property assignment — the IP your engineers create during their working hours belongs to the company by clear contract, not by hopeful default.
- Non-solicitation of customers and employees for a reasonable post-employment period. Non-compete clauses are difficult to enforce in India but non-solicit is enforceable when reasonable.
- Place-of-jurisdiction clause — Bengaluru courts, governed by Indian law.
- A clean termination clause, including for cause and without cause, with payment in lieu of notice if you want the option.
- Reference to the company's PoSH policy and employee handbook, both of which the employee acknowledges by signing.
PoSH: the compliance most founders forget
Once you have ten or more employees of any gender combination, you must constitute an Internal Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act. The committee needs a presiding officer (a senior woman employee), at least two internal members, and one external member from a non-governmental organisation or with legal expertise. You also need a written policy, an annual training programme, and an annual report filed with the District Officer.
Founders consistently underestimate PoSH because there is no monthly filing pinging them. Then a complaint or an investor due-diligence finds them without an Internal Committee constituted, and the situation becomes much harder than it needed to be.
PoSH set-up included in higher-tier plans
We constitute your Internal Committee, supply policy templates that have been tested across hundreds of startups, run the annual training session for your team, and file your annual return with the District Officer. PoSH stops being a vague worry and becomes one line in your compliance calendar.
Your first 90 days
- Open your bank account, get your PAN and TAN, and apply for Karnataka Shops Act and PT enrolment before you make your first offer.
- Settle on a salary structure that is Code on Wages compliant — basic at least 50% of wages, the rest split across HRA, LTA, food, telecom and a balance allowance.
- Use a clean, founder-friendly employment contract template with the clauses listed above. Have a labour-law-aware lawyer review it once and reuse it.
- Stand up a PoSH-compliant policy and committee before you hit 10 employees — not the day you hit 10.
- Pick a payroll system that runs PF, ESI, PT, TDS automatically and that has a real human consultant when something edge-case happens. (We are biased, but you should not run this on a spreadsheet by month six.)
Frequently asked questions
Do I need to register under the Shops Act on day one?+
Karnataka requires registration within 30 days of starting business. In practice, founders apply the moment they sign a lease for an office or begin hiring. Coworking-only setups still require registration if you have employees on the books in Karnataka.
When does PF become mandatory?+
Once your headcount crosses 20 employees including contract workers. Many startups voluntarily register earlier because senior engineering candidates expect it and a UAN history matters when they switch jobs again.
Can I treat early hires as consultants to avoid all of this?+
Only if they are genuinely contractors — they bill you with a GST invoice, set their own working hours, and serve multiple clients. Calling a full-time employee a consultant on paper to skip PF and ESI is a classic mistake that catches up at investor due-diligence and tax scrutiny.
What does FastLegal cover for a Bengaluru startup?+
We handle your Karnataka Shops Act, PT enrolment, monthly PT, PF and ESI filings, full payroll with TDS, contractor invoicing, PoSH committee setup and annual return, and your Form 16 issuance. The dedicated consultant in your plan is your single point of contact for all of it.
Stop reading circulars. Start running clean payroll.
Every FastLegal plan ships with a dedicated payroll consultant — a real human who runs your PF, ESI, PT, TDS and Form 16 issuance, configured to your salary structure, your state, and your hiring plan. You sign off. We do the rest.