POSH Act Compliance: What Your Pvt Ltd Company Actually Owes

Key point: a POSH policy document is not compliance — the Act requires every employer to constitute an Internal Committee by written order (s.4(1)), and failure to do so is a Section 26 offence carrying a fine of up to ₹50,000.

The gap founders don't see coming

Illustrative case: a 42-employee SaaS company has an HR policy declaring "zero tolerance for sexual harassment" and a training email sent eighteen months ago. The founders consider themselves compliant.

Then a District Officer's show-cause notice arrives — a routine inspection, not a complaint. It asks for two documents: the written order constituting the Internal Committee (IC), including the external member's name, and the last annual report submitted to the District Officer. Neither exists. The company has never formally constituted an IC, never appointed an external member, and never filed an annual report. The gap between a "policy" and a functioning IC is the most common POSH failure among startups.

Who this applies to

"Every employer of a workplace shall, by an order in writing, constitute a Committee to be known as the 'Internal Complaints Committee'" (s.4(1), POSH Act, 2013). There is no ten-employee threshold in Section 4. The ten-worker reference appears in Section 6: complaints from "establishments where the Internal Committee has not been constituted due to having less than ten workers" go to the Local Committee instead — as do complaints against the employer himself.

"Employer" in a private workplace means "any person responsible for the management, supervision and control of the workplace", with management including "the person or board or committee responsible for formulation and administration of polices" (s.2(g), Explanation) — in a Pvt Ltd company, this reaches the directors and officers who run the workplace, not just the corporate entity.

And the obligation is per office: "where the offices or administrative units of the work place are located at different places or divisional or sub-divisional level, the Internal Committee shall be constituted at all administrative units or offices" (proviso to s.4(1)). A company with a Mumbai HQ and a Hyderabad dev centre needs an IC at each — even if neither office alone crosses ten employees. "Employee" is deliberately broad — regular, temporary, ad hoc, daily-wage, contract, probationer, trainee, apprentice, volunteer, paid or unpaid (s.2(f)) — and all of them count.

Section 4: what a valid IC actually needs

Section 4(2) prescribes a specific composition. A policy document that hasn't set up this committee is non-compliant regardless of wording.

The external member is the most commonly skipped requirement. Section 4(2) uses mandatory wording ("shall consist of"), so constitute the IC with all three limbs in place. The employer pays for this: the NGO member "shall be paid such fees or allowances for holding the proceedings of the Internal Committee, by the employer, as may be prescribed" (s.4(4)) — ₹200 per day plus travel costs (Rule 3, POSH Rules).

Section 21: the annual report you can't skip

The IC "shall in each calendar year prepare, in such form and at such time as may be prescribed, an annual report and submit the same to the employer and the District Officer" (s.21(1)) — calendar year, not financial year. The report covers complaints received, disposed of, cases pending beyond ninety days, workshops and awareness programmes, and action taken on IC recommendations.

Separately, "the employer shall include in its report the number of cases filed, if any, and their disposal under this Act in the annual report of his organisation or where no such report is required to be prepared, intimate such number of cases, if any, to the District Officer" (s.22).

Section 26: what non-compliance costs

First offence: "fine which may extend to fifty thousand rupees" where the employer fails to constitute an IC (s.26(1)(a)), fails to take action under ss.13, 14 and 22 (s.26(1)(b)), or contravenes any other provision (s.26(1)(c)).

Repeat offence: twice the first-conviction punishment, and additionally "cancellation, of his licence or withdrawal, or non-renewal, or approval, or cancellation of the registration, as the case may be, by the Government or local authority required for carrying on his business or activity" (s.26(2)).

Confidentiality has its own track: breach of s.16 attracts a ₹5,000 penalty recovered by the employer from the person in breach (s.17 read with Rule 12).

What to do this week

• Constitute an IC at every office or administrative unit by written order — do not apply a per-location ten-employee test; the Act requires ICs at all units.
• Appoint the Presiding Officer and two employee members per s.4(2)(a)-(b), and formalise the appointments in writing with term dates not exceeding three years.
• Appoint the external member from an NGO or a person familiar with sexual-harassment issues (s.4(2)(c)), with a formal letter — and budget the prescribed ₹200/day allowance the employer must pay.
• Display at a conspicuous place the penal consequences and the order constituting the IC (s.19(b)), and declare the names and contact details of all IC members (Rule 13(e)). Complaints themselves are made in writing (s.9).
• Run documented workshops and awareness programmes for employees and orientation for IC members (s.19(c)) — an email blast is not the statutory duty.
• Calendar the annual report by calendar year (s.21) — not alongside financial-year filings — and reconstitute the IC before the three-year term expires.
• Include case numbers and disposal in the organisation's annual report, or intimate the District Officer where no such report is prepared (s.22).

For IC documentation and external-member sourcing, speak to your company secretary or POSH adviser.

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See Also

• How TReDS invoice discounting works for a Pvt Ltd supplier
• India Design Registration under Designs Act 2000
• Trademark Examination Report: Founder Guide