Compliance
Not forming the required Internal Committee can cost a business up to ₹50,000 and risk licence cancellation on repeat offences, making compliance a financial and operational priority.
Check your DPDP readiness — free More on the blogAny employer whose workplace has ten or more workers must create an Internal Committee by written order. The count includes full‑time, part‑time, contractual, probationary, ad‑hoc and workers engaged through a contractor. The rule applies regardless of the nature of the work or the length of the employment contract, ensuring that even small enterprises with mixed staffing are covered by the Act.
The committee must be chaired by a senior‑level woman employee. It should have at least two members who are either committed to women’s welfare or possess legal or social‑work experience. Crucially, one member must be an external representative from a non‑governmental organisation or association familiar with sexual‑harassment issues, and women must constitute at least half of the total members.
Many small firms miscount employees, considering only payroll staff and ignoring contract or part‑time workers, which can keep them below the ten‑person threshold incorrectly. Another frequent error is omitting the external NGO member, rendering the committee invalid. Some businesses also issue informal orders instead of written ones, and they skip the mandatory annual report even when there are no complaints, both of which breach the Act. The law requires a nil report to be filed each year under section 21. Failure to submit the report or to maintain proper minutes can attract additional scrutiny during inspections, even if no complaint has been received. Maintaining written records demonstrates good faith and protects the business from allegations of non‑compliance.
If an employer does not constitute the Internal Committee as mandated, the penalty can be a fine of up to ₹50,000 under section 26. On a repeat violation, the fine may be doubled and the licensing authority can cancel or refuse renewal of the licence or registration needed to operate the business, leading to potentially severe revenue loss. Beyond the direct fine, the indirect costs include legal fees, loss of reputation, and possible disruption of operations if the licence is suspended. Small businesses often underestimate these hidden expenses, which can quickly exceed the initial fine and affect long‑term viability. To avoid these costs, businesses should draft a clear written order, verify the employee count, appoint the required external member, and ensure the committee meets the gender‑balance rule. Regular training and documentation help maintain compliance and demonstrate a proactive stance on workplace safety.
The requirement kicks in when a workplace has ten or more workers, counting full‑time, part‑time, contractual, probationary, ad‑hoc and contractor‑engaged staff together.
Yes, the law mandates at least one member from a non‑governmental organisation or association familiar with sexual‑harassment issues; without this member the committee is not valid.
A business can be fined up to ₹50,000, and on a repeat breach the fine may be doubled with possible cancellation or non‑renewal of the licence required to operate.
A nil report is still required each year under section 21; failing to submit it is a breach of the Act even when no complaint has been received.
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