AI-Driven compliance automates labour law adherence in modern workplaces

India’s regulatory landscape is extremely complex. More than 200 labour statutes, dozens of central and state tax laws, sectoral rules and a growing number of environmental, social and governance (ESG) requirements create a compliance maze for enterprises. Many businesses still depend on manual registers, paper filings and fragmented spreadsheets.

India’s workforce remains dominated by small organisations. Of the registered micro, small and medium enterprises (MSMEs), around 97% are micro enterprises, only 2.7% are small and just 0.3 % are medium. Yet the MSME sector contributes roughly 29% of GDP and employs over 60 % of the workforce. Recent analysis highlights that more than 90% of India’s workforce is employed in the informal economy, which still generates almost half of the country’s gross domestic product. These figures underline why digital, scalable and affordable compliance solutions are essential. In India, most enterprises lack compliance departments and rely on owners or accountants juggling multiple obligations.

AI driven compliance platforms can ease this burden by automatically interpreting laws, collecting data and filing returns. Such platforms are well-equipped to ensure that workers receive statutory protections as well.  

The Compliance Burden in India

India’s labour laws alone require businesses to maintain over 800 registers and file 200 plus returns across national and state statutes. Companies operating in multiple states face at least 22 approvals, and 19 different authorities can inspect them without notice, creating significant uncertainty. National legislation such as the Factories Act, Payment of Wages Act and the new Labour Codes coexist with state specific rules. Corporate, tax and finance laws (such as the Companies Act, Income tax Act and Goods and Services Tax law) add additional layers. Sector specific obligations apply to industries ranging from food processing to mining; and new frameworks such as the Digital Personal Data Protection Act and proposed AI regulations require technical compliance expertise.

Micro enterprises and unorganised firms often operate outside formal systems. According to government data, over 94% of informal sector workers registered on the e-Shram portal earn less than ₹10,000 a month. Only half of salaried workers have access to social security benefits. Consequently, enforcement has traditionally focused on large employers, leaving millions of workers without coverage. To improve labour rights and build investor confidence, India needs a compliance architecture that can scale down to micro enterprises and informal workers, offering simple checklists, automated filings and intuitive dashboards.   

Lessons from Global Leaders

Several countries have pioneered technology enabled compliance regimes that India can learn from. Singapore’s Central Provident Fund (CPF) is a compulsory savings and social security system that ensures employees and platform workers receive pension and medical benefits. In 2023 the city state introduced a bill requiring platform operators (ride hailing, delivery and other gig platforms) to make CPF contributions and provide work injury compensation for their workers. The policy uses digital platforms to link contributions directly to earnings, demonstrating how a centralised API driven system can provide universal coverage for gig workers.

The UK’s tax authority, HM Revenue & Customs, has embarked on an AI-powered transformation. It is deploying generative AI assistants and call summarisation tools to guide caseworkers, automatically extract details from calls and generate synthetic data for risk modelling. These technologies aim to reduce manual processing, improve risk targeting and provide real time insights to taxpayers.

In the US and parts of Europe too, AI driven payroll systems are being integrated with time tracking, tax filing and compliance modules. These examples share a few common features - centralised data, APIs linking employers, workers and regulators, automated calculations and user-friendly dashboards.

Analysing these models, India can design a home-grown architecture that respects its federal structure yet offers uniform standards. Apart from employment and labour law, a robust compliance platform needs to cover corporate and financial law, ESG, information security and cyber security.    

Base and Learning Engine

At the core of an AI driven platform is a self-learning knowledge base that codifies statutes, rules and case law across sectors. It continuously ingests updates from government portals (MCA, EPFO, GSTN, state labour departments) via APIs. An inference engine answers natural language queries like ‘What registers do we need for a 50-employee factory in Tamil Nadu?’ or ‘When is the next GST return due?’, and thereby empowering non specialists to achieve compliance. It also produces variance and anomaly reports summarising data patterns and risk areas.

Last-Mile Connectivity

India’s unorganised sector and rural enterprises often lack internet access or digital literacy. An effective platform therefore pairs digital tools with human compliance facilitators. Accredited consultants or local service centres can assist micro entrepreneurs in onboarding, capturing documents and filing returns. API integration with eShram, MUDRA, Kisan Credit Card and other government portals enables seamless data exchange. Such a hybrid model ensures that the benefits of AI reach the grassroots.

India’s Path Forward:

To realise the full benefits of AIdriven compliance, India must pursue a multipronged strategy:

• Policy Alignment and API Infrastructure – Regulators should publish clear API specifications for filings and notifications. India could develop standardised digital interfaces for the EPFO, ESIC, GSTN and state labour departments, enabling AIdriven compliance platforms to submit filings automatically.
• Simplification and Harmonisation – Consolidating similar forms, rationalising inspection procedures and reducing redundancies across central and state rules will make automation feasible. The draft Labour Codes aim at simplification; similar consolidation is needed in corporate law, ESG standards and cyber regulations.
• Digital Inclusion – Programmes must ensure that micro enterprises and informal workers can access digital compliance tools. Subsidised smartphones, community internet centres and vernacular user interfaces will be critical. Local service centres, similar to Singapore’s CPF kiosks, can provide assisted filings.
• Trust and Data Protection – AIdriven systems must protect personal and financial data. Adhering to frameworks such as the Digital Personal Data Protection Act and using secure computation techniques will build trust among enterprises and workers. Transparent algorithms and audit trails will also reassure regulators.
• Skilled Workforce and Advisory – Compliance automation does not eliminate human roles. Instead, it demands new skills in compliance advisory, data analysis and AI oversight. Training programmes for accountants, HR managers and regulators will ensure that technology augments rather than replaces human judgment.

Conclusion

India stands at a crossroads. With more than 90% of its workforce in the informal sector and millions of micro enterprises juggling dozens of laws, the manual approach to compliance is unsustainable. Countries such as Singapore, the UK and the US show how AIenabled platforms can simplify contributions, tax filings and worker protections. Developing a selflearning knowledge base, integrating with government APIs and providing lastmile support, AIdriven compliance can protect workers, improve corporate governance and boost India’s ease of doing business.

-By Pratik Vaidya, Managing Director and Chief Vision Officer, Karma Management Global Consulting Solutions Pvt. Ltd.