Employment Laws for Startups

Getting people-ops right from day one

Early hiring decisions create legal obligations. Startups that treat employment law casually often face disputes and statutory penalties later.

Contracts and classification

Every hire should have a written offer letter and employment agreement covering role, compensation, confidentiality, IP assignment and notice period. Misclassifying employees as 'consultants' to dodge statutory dues is risky and can be re-characterised by authorities.

Statutory benefits: PF and ESI

Provident Fund (PF) generally applies once you have 20 or more employees; ESI (medical insurance) applies to establishments with 10+ employees for those earning up to the wage ceiling. Even smaller startups often register voluntarily to attract talent.

ESOPs and POSH

ESOPs require a board- and shareholder-approved scheme, a defined pool, vesting schedule and exercise terms. The POSH Act (Prevention of Sexual Harassment) requires every workplace with 10+ employees to constitute an Internal Committee and run awareness programmes — a non-negotiable compliance even for small startups.