Sections 123 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 123 requires an employer to maintain records and registers, display notices, issue wage slips and file returns. Section 124 bars an employer from reducing employees' wages or benefits because the employer has to pay contributions under the Code.
Every employer must maintain records and registers (electronically or otherwise) covering persons employed, muster roll, wages and other listed particulars, display notices, issue wage slips and file returns as the appropriate Government prescribes (s.123). The Central Rules require registers to be kept for five calendar years from the last entry. Under s.124 an employer cannot reduce wages or total benefits, directly or indirectly, by reason only of the liability to pay contributions or charges.
Why it matters
Incomplete registers are the commonest reason for a finding of default, and s.133 punishes failure to produce them. Payroll teams should also know that passing on the employer's contribution by trimming pay is barred. Our payroll compliance audit service can test your registers, wage slips and deductions against these requirements. The inspection powers are in section 122.
Section 123: what the employer must do
| Clause | Duty |
|---|---|
| (a) | Maintain records and registers in the form prescribed, electronically or otherwise, with particulars of persons employed, muster roll, wages and other details |
| (b) | Display notices at the workplace in the prescribed manner and form |
| (c) | Issue wage slips, in electronic form or otherwise |
| (d) | File returns, electronically or otherwise, to the prescribed officer or authority and within the prescribed periods |
The particulars listed in clause (a)
The records must include, among other things:
- days and hours of work performed;
- wages paid;
- leave, leave wages, overtime wages and attendance;
- the employee identification number;
- dangerous occurrences, accidents and injuries for which compensation was paid, and the amount (Chapters IV and VII);
- statutory deductions from wages under Chapters III and IV;
- details of cess paid for building and other construction work;
- total employees (regular, contractual or fixed term) on the specified day, persons recruited in a period and occupational details; and
- vacancies for which suitable candidates were not available.
Two provisos on where the forms come from
- For Chapter III (provident fund), the matters under the rules go instead into the Provident Fund, Pension or Insurance Scheme.
- The forms of records, registers and returns under Chapter IV (ESI) are specified in the regulations, not the rules.
What the Central Rules prescribe: rule 53
Where the Central Government is the appropriate Government, rule 53 of the Code on Social Security (Central) Rules, 2026 provides, among other things, that:
- registers are kept for employees (Form I of the Wages (Central) Rules, 2026), attendance-cum-muster roll (Form IX), wages, overtime, advances, fines and deductions (Form IV), and women employees in Form XXII; establishments under the Code on Wages or the OSH Code are deemed to maintain the first three;
- registers may be kept electronically or otherwise, with entries in English and Hindi or the language most employees understand;
- registers are preserved in original for five calendar years from the last entry, and kept at the office or a convenient place within three kilometres;
- wage slips in Form V of the Wages (Central) Rules are issued on or before payment of wages;
- a notice at or near the main entrance names the officer authorised to receive notices; and
- employers under Chapters V and VI (gratuity and maternity benefit) upload a unified annual return in Form XXIII by the 28th or 29th of February each year, and a further return within one month of sale or abandonment, or four months of discontinuance.
Where the State Government is the appropriate Government, the State's rules apply.
Section 124: no wage reduction to fund contributions
No employer of an establishment to which the Code or any scheme applies shall, by reason only of the liability for payment of any contribution or charges under the Code, reduce, directly or indirectly:
- the wages of any employee to whom the Code or scheme applies; or
- the total quantum of benefits to which the employee is entitled under the terms of employment, express or implied.
Section 133(c) separately punishes reducing wages or benefits in contravention of the Code, and s.133(b) deducting the employer's contribution from wages; see section 133. The employee's own share deducted from wages is a different matter, governed by the provisions of Chapters III and IV.
A worked example
A logistics firm moves to the new Code and computes its employer contribution. Its finance head suggests lowering a transport allowance by the same amount "to keep the cost flat". Under s.124 this cannot be justified by the contribution alone. Separately, the payroll team checks that each wage slip is issued on or before payment, that the attendance register includes hours, and that the muster roll carries each worker's identification number. (Illustrative.)
Need help with registers, wage slips and returns?
A clean set of registers and wage slips is the main defence in an inspection. Our payroll compliance audit team can review what you keep today against the Code and the Rules and suggest fixes for gaps.
Key takeaways
- Employers must keep records and registers, display notices, issue wage slips and file returns.
- The listed particulars include days, hours, wages, leave, overtime, employee ID, accidents, deductions and cess.
- Central Rules: five calendar years preservation, Form XXII for women employees, Form XXIII annual return by end-February.
- Section 124 bars cutting wages or benefits by reason only of the contribution liability.
- Failure to produce registers is an offence under s.133.
Read next
- Section 122: Inspector-cum-Facilitator and authorities
- Section 133: Penalties for offences
- Sections 71 and 72: Duties of employer and power of Inspector-cum-Facilitator
- Compliance due dates under ESI, EPF and other statutory laws
Disclaimer: Based on the Code on Social Security, 2020 (as enacted) and, where noted, the Code on Social Security (Central) Rules, 2026 (G.S.R. 344(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.