Compliance
Failing to set up an Internal Committee or file the required annual report can attract a fine of up to fifty thousand rupees and, on repeat, double the penalty plus possible licence cancellation, threatening a small business’s ability to operate.
Check your DPDP readiness — free More on the blogThe Sexual Harassment of Women at Workplace Act obliges every employer with ten or more workers to form an Internal Committee. This requirement applies regardless of how the workers are engaged, whether on payroll or on contract. The committee must include a designated external member, and its role is to receive complaints, conduct inquiries and recommend actions. Non‑compliance triggers the penalty provision that can cripple a business financially and operationally.
A fine is imposed when an employer fails to constitute the Internal Committee, ignores the committee’s recommendations, does not file the annual report with the District Officer, or breaches any other provision of the Act. Each of these breaches falls under the same penalty clause, meaning that a single lapse or a combination of lapses can attract the maximum monetary sanction.
The law allows a fine of up to fifty thousand rupees for each contravention. If the same breach occurs again, the punishment may be twice the original amount, effectively raising the ceiling to one hundred thousand rupees. In addition to the higher fine, authorities may cancel or refuse to renew any licence or registration that the business needs to continue trading, creating a non‑financial barrier to operation.
Many small enterprises misinterpret the employee count, looking solely at payroll records. The law treats all persons working at the premises as employees for the purpose of the ten‑person rule. This broader definition means that even part‑time or gig workers push the business into the compliance zone, and the Internal Committee must be set up accordingly. Another frequent error is the superficial creation of a committee without the required external member, who must be a woman not connected to the employer. The external member brings an independent perspective and satisfies the statutory composition. Without her, the committee is deemed invalid, exposing the employer to the fine. Filing the annual report is not a discretionary task. The report summarises the committee’s activities, complaints received and actions taken during the year. It must be submitted to the District Officer. Failure to file is treated as a separate contravention, attracting the same fine as not forming the committee, and it adds to the cumulative risk of repeat offences. When a repeat offence occurs, the penalty can double, and the authorities gain discretion to cancel or withhold any licence or registration required for the business. This step can effectively shut down operations, as many small firms rely on specific trade licences to sell goods or provide services. The threat of licence cancellation therefore represents a cost far beyond the monetary fine. To avoid these costs, businesses should conduct a headcount that includes all categories of workers, appoint a fully compliant Internal Committee with the external member, ensure the committee meets regularly, and file the annual report on time. Maintaining records of meetings and reports helps demonstrate compliance if the matter is examined by authorities. In summary, the financial exposure for non‑compliance is a fine up to fifty thousand rupees, potentially rising to double that on a repeat breach. More critically, the risk of licence cancellation can halt trading altogether, making the compliance cost far higher than the fine alone. Small businesses that overlook these obligations may find their operations jeopardised.
The law imposes a fine of up to fifty thousand rupees for failing to constitute the required Internal Committee. If the breach recurs, the fine can be doubled and the business may face licence cancellation or non‑renewal, which can stop trading.
An Internal Committee must be formed in any workplace that has ten or more employees, counting all workers regardless of the form of their engagement.
Yes, filing the annual report with the District Officer is a statutory requirement. Not filing it is a separate contravention that attracts the same fine as other breaches under the penalty provision.
On a repeat offence, the fine may be twice the original amount, and authorities can cancel or refuse to renew any licence or registration needed for the business, potentially halting its operations.
Founder & CEO at VidhiSar. I have watched four companies pay for the same mistake, and it was never the mistake anyone expected. VidhiSar is software, not a law firm: every answer names the section it relies on so you can check it, and anything turning on your specific facts is worth putting to a professional. More about who builds this