India HR Information

Updated on: 2025/08/04 14:03 (UTC)

Overview

Employment relations in India are governed by the constitution, treaties, statutes, collective and individual contracts and judicial precedents. There are approximately 165 pieces of labor legislation, including 55 central (federal) and 110 state laws.

Any term or condition of an individual or collective contract in violation of law is void and cannot be enforced.

Applicability of various legislation to an industry or a particular establishment depends on various factors, including the ultimate control of the establishment, its ownership, the nature of its business activities, its location, the number of its employees and its salary structure.

In India, most labor and employment laws apply primarily to the “workman.” As defined in the Industrial Disputes Act, 1947, a “workman” is a person who is employed to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, excluding a person who:

• is employed mainly in a managerial or administrative capacity or
• is employed in a supervisory capacity, draws a salary exceeding 10,000 rupees per month or exercises functions mainly of a managerial nature.

An employee is classified as a “workman” based on the nature of duties performed and not on the basis of designation and salary.

Note: The government has consolidated 29 existing federal laws into four codes with the aim of making it easier to do business in India. While the codes have been enacted they are not yet in force. The new codes are:

• Code on Wages, 2019
• Code on Social Security, 2020
• Occupational Safety, Health and Working Conditions Code, 2020
• Industrial Relations Code, 2020

Hiring

Employment Contracts

An employer can establish medical fitness prerequisites for hiring. There is no law governing blacklisting, and some employer associations provide lists of blacklisted candidates to their members. Providing an employer with false educational records is grounds for termination.

While Indian employment law (with the exception of some state statutes) does not require that employment contracts be in writing, employers typically communicate the terms and conditions of employment to new employees through a written letter at the beginning of employment.

Employment contracts or letters commonly include the following information:

• name and address of the employer and the employee;
• title of the job or nature of the work (or a job description);
• place of work;
• probationary period, if any, and its terms;
• date of commencement of employment;
• salary and benefits;
• type of contract (permanent or fixed-term);
• notice required for termination of employment;
• leave entitlement and
• conditions under which the employer can terminate the contract.

Restrictions on Hiring

The minimum legal age for employment in India is 14.

Recordkeeping

Various federal labor-related laws require businesses employing more than a specified number of workers to maintain “registers” with specified records. For example, the Delhi Shops Act requires employers to keep records of hours worked and the amount of leave taken by employees. In 2017, India reduced the number of labor registers that employers must maintain from 56 to five.

Background Checks

There is no law governing background checks in India. Employers should obtain consent from candidates before conducting background checks if the information sought is personal or sensitive.

Noncompetition Agreements

Under Indian law, noncompetition agreements that operate during the employment relationship are valid and enforceable, but those that extend beyond the employment relationship are not. Nevertheless, it is common practice to include noncompetition clauses in employment contracts that cover both pre- and post-termination.

Reference Citations

Restrictions on Hiring: Child Labor Prohibition Act, 1986, No. 61

Recordkeeping: The Delhi Shops Act, 1954, § 33; Ease of Compliance to Maintain Registers Under Various Labour Laws, 2017, (Hindi & English)

Noncompetition Agreements: Indian Contract Act, 1972, No. 9, § 27

Immigration and Work Permits

In General

Employment visas are issued to highly skilled foreign nationals not taking a job for which there are qualified Indians available and earning an annual salary of at least $25,000. Business visas are available for individuals planning to establish a business in India and for employees attending business meetings, meeting with suppliers or providing technical guidance to Indian clients.

Generally, employment visas can be valid for up to two years and allow multiple entries. Employment visas can be extended on a year-to-year basis for up to five years.

Visas and Work Permits

Business visas are issued to foreign nationals who:

• want to establish a business in India;
• plan to sell or purchase industrial products;
• will be attending technical or business meetings;
• will be meeting with suppliers to monitor quality, provide specifications or negotiate future orders or
• will be monitoring the progress of ongoing projects, providing technical guidance or meeting with Indian customers.

When applying for a business visa, an individual must provide:

• a valid travel document (e.g., a passport) and a reentry permit,
• proof of financial standing and of technical expertise in the appropriate field and
• documentation of a business connection in India.

Generally, business visas can be valid for up to five years and allow multiple entries, although no individual stay in India may exceed six months. U.S. nationals, however, can qualify for business visas valid for up to 10 years.

Employment visas are issued to highly skilled foreign nationals who:

• will be working on a contract or employment basis with an Indian firm,
• will not be taking a job for which there are qualified Indians available,
• will be earning an annual salary of at least US$25,000 and
• can provide documentation of a business connection in India.

The salary threshold of $25,000 is based on taxable income, whether actual salary or benefits.

When applying for an employment visa, an individual must provide:

• a valid travel document (e.g., a passport) and a reentry permit,
• proof of an employment contract with an Indian employer,
• proof of educational and professional qualifications and
• proof of his or her employer’s valid business presence in India.

Generally, employment visas can be valid for up to two years and allow multiple entries, although IT professionals may be granted visas valid for three years. Employment visas can be extended on a year-to-year basis for up to five years by a state government, a foreigners regional registration officer (FRRO) or a Foreigners Registration Officer (FRO) if the employee submits proof of continued employment and of income tax filing.

Family members of business or employment visa holders can apply for an X visa to accompany the employee. An X visa’s expiration date will be the same as the business or employment visa’s. Spouses of authorized workers on dependent visas can convert their visas to employment visas within India, subject to the following conditions:

• all the conditions laid down for grant of an employment visa are fulfilled and
• prior approval from the Ministry of Home Affairs is obtained.

India also has a tourist-on-arrival program available to business visitors. The program is valid for 30 days from the date of arrival, non-extendable and cannot be used for visiting Protected/Restricted and Cantonment Areas. It is valid for two visits per calendar year.

Post-Entry Requirements

Workers entering India on an employment or business visa valid for more than 180 days must register with the appropriate FRO/FRRO within 14 days of arrival. The FRO/FRRO will issue a residential permit to the employee valid for the length of stay allowed by the visa.

The PAN card is the Indian equivalent of the U.S. Social Security card and is used as an individual identifier for tax purposes.

The employee must surrender his or her certificate of registration to a registration officer or an immigration officer before leaving the country.

Reference Citations

Visas and Work Permits: Foreigners Act

Nondiscrimination

In General

Employers may not discriminate against employees or prospective employees on the basis of religion, race, caste, sex, descent, place of birth, place of residence, or disability. Indian law does not address discrimination based on age.

Disability Discrimination

Under the Rights of Persons with Disabilities Act, which took effect in 2017, employers must develop an equal employment opportunity policy, register it with the Commissioner for Persons with Disability, and provide barrier-free access in buildings. The law provides for incentives to employers to ensure that at least 5 percent of their workforce is composed of persons with “benchmark” disabilities (not less than 40 percent of a certain disability certified by a state- or district-level panel constituted by the state government for this purpose).

Businesses employing fewer than 20 persons must mention in their policy the facilities and amenities provided to persons with disabilities “to enable them to effectively discharge their duties in the establishment.” Those employing 20 or more persons must also include the following details in their policies:

• positions identified as suitable for persons with disabilities,
• the manner of selection of persons with disabilities for various posts,
• post-recruitment and pre-promotion training,
• preference in transfer and posting,
• special leave and preference in allotment of residential accommodation and any other facilities, and
• provision of assistive devices and barrier-free access.

Businesses with 20 or more employees must also appoint a liaison officer to look after recruitment of persons with disabilities and the provision of facilities to them.

All employers must maintain records for disabled employees covering terms of employment, accommodations provided, and other information the government may require.

Employers cannot discriminate against employees who are HIV positive or who are living or have lived with a person who is HIV positive. Employees cannot be compelled to disclose their HIV status without a court order. Employers that maintain HIV-related records of employees must use data protected measures to ensure confidentiality of information.

Gender Discrimination

The Equal Remuneration Act provides for equal compensation for men and women and prohibits discrimination in employment on the basis of sex (except for certain sectors such as mines).

In 1997, the Supreme Court of India in the case of Vishaka v. State of Rajasthan held that sexual harassment of women in the workplace violates their fundamental right of “gender equality,” the “right to life and liberty,” and the right “to carry on any occupation, trade or profession,” which depend on the availability of a safe working environment. The Supreme Court established guidelines with respect to sexual harassment that had to be observed by all employers. The ruling also required employers to take direct action to prevent or deter sexual harassment in the workplace, including the implementation of an anti-sexual-harassment policy and anti-sexual-harassment training and the establishment of committees for the resolution, settlement, or prosecution of acts of sexual harassment.

In 2013, the Indian Parliament passed the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, which focusses on prevention of sexual harassment and provides a redressal mechanism. The act covers all women, irrespective of age and employment status.

“Sexual harassment at the workplace” covers circumstances of implied or explicit promise or threat to a woman’s employment prospects, the creation of a hostile work environment, or humiliating treatment, which can affect her health or safety. “Workplace” includes private and public sector organizations; hospitals and nursing homes; educational institutions; any sports institute, stadium or sports complex and any place visited by the employee in the course of employment, including transportation. “Employee” means a person employed at a workplace for any work on a regular, temporary, ad hoc or daily basis, either directly or through an agent, including a contractor, with or without the knowledge of the principal employer, whether for remuneration or not and working on a voluntary basis or otherwise, whether the terms of employment are express or implied, and includes a co-worker, contract worker, probationer, trainee, apprentice or an employee called by any other name.

The act mandates that an employer employing 10 or more employees in a workplace form an internal complaints committee (ICC) to look into complaints relating to sexual harassment.

Complaints from workplaces employing fewer than 10 employees or when the complaint is against the employer (rather than another employee) will be looked into by the local complaints committee (LCC) at the district level. In the absence of an ICC, a complaint can be made to the LCC.

An aggrieved woman is required to make a complaint in writing within three months of the incident, which may be extended another three months by the ICC or the LCC if the aggrieved woman can prove that grave circumstances prevented her from meeting the shorter deadline. The ICC/LCC is required to complete the inquiry within 90 days and send a report to the employer within thirty 30 days of that. The employer must take action on the report within 60 days of its receipt. The employer can appeal the ICC/LCC ruling within 90 days.

If the aggrieved woman is willing, the matter can be settled through conciliation, although monetary benefits cannot be the basis of any conciliation.

Pending disposal of the complaint and at the request of the aggrieved woman, the ICC or LCC can issue interim instructions, including granting leave or transfer.

The act prohibits disclosure of the identity or address of the aggrieved woman, her alleged harasser, her employer or any witnesses.

Under the act, an employer is required to:

• provide a safe working environment,
• form an ICC at all workplaces,
• adopt a written policy prohibiting sexual harassment in the workplace,
• organize workshops and awareness programs at regular intervals to educate employees about the provisions of the act and other issues involving sexual harassment,
• provide facilities to the ICC/LCC and assistance in conducting investigations,
• treat sexual harassment as misconduct and take disciplinary action against a harasser,
• monitor annual ICC reports and comply with reporting obligations,
• conspicuously display at the workplace the legal consequences of sexual harassment and the order constituting the ICC and
• provide assistance if the aggrieved woman wants to file a complaint against her alleged harasser under the Indian Penal Code.

Pay Discrimination

The Equal Remuneration Act guarantees men and women equal pay for the same work or work of a similar nature and prohibits discrimination in employment or recruitment on the basis of sex.

Reference Citations

Nondiscrimination: Constitution of India, 2007, §16(1)

Disability Discrimination: Rights of Persons with Disabilities Rules, 2017, §§ 8-10 (Hindi & English)

Gender Discrimination: Equal Remuneration Act, 1976, No. 25, § 4; Sexual Harassment of Women at the Workplace, 2013, No. 14

Pay Discrimination: Equal Remuneration Act, 1976, No. 25, § 4

Employee Privacy

Employee Data

Under Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011, employers must put in place a privacy policy covering the collection, receipt, processing, storage, and handling of personal data and post the policy on their websites. Employers cannot collect personal information except with the subject’s prior consent in writing and must inform the subject of the right not to provide the information.

The privacy policy must describe what information is collected, the purpose for which it is collected, to whom and how it might be disclosed, and the security practices followed to safeguard it. The information should be used by the employer only for the purposes for which it was obtained. The employee has a right to review the information to ensure that it is correct and complete, and the employer is required to appoint a grievance officer.

Employee Monitoring and Surveillance

Video surveillance is regulated by the common law principle of “reasonable expectation of privacy,” and courts have held that employers cannot conduct surveillance in personal spaces, such as bathrooms and locker rooms. On the other hand, courts have ruled that employers have a right to monitor employees when it is within reasonable limits and for the purpose of protecting the legitimate interests of the employer.

Similarly, an employer can monitor employees’ phone calls and e-mails in order to protect its business interests and ensure discipline in the workplace. However, the monitoring must be limited to a work phone and cannot be performed on an employee’s personal phone.

Reference Citations

Employee Data: Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011

Compensation

Hours of Work

The typical six-day working week is Monday through Friday, 9:30 a.m. to 5:30 p.m., with a half-day on Saturday, although in some large cities such as Mumbai businesses start working earlier to avoid congested traffic while commuting. Normally lunch is for one hour, between 1:00 and 2:00 p.m.

Under the Factories Act 1948, daily work hours cannot exceed nine, weekly work hours 48. Some state governments allow only eight working hours per day.

In the case of shops and commercial establishments, working hours are governed by the state-specific Shops and Establishments Act and in the case of manufacturing facilities by the Factories Act.

Meal or rest breaks of half an hour to an hour are required for employees working a continuous period of five hours. Employees must have 12 hours free between shifts and one rest day per week.

Working mothers are entitled to two nursing breaks per day, in addition to rest breaks, to nurse a child up to the age of fifteen months. Employers cannot require women to work the night shift during a 24-week period before and after giving birth.

Employers can require women to perform night-shift work only when:

• the woman provides written consent to working the night shift;
• no fewer than three women are working the night shift at a given time; and
• the employer provides safe transportation between the workplace and the woman’s residence.

Note: Under the Occupational Safety, Health and Working Conditions Code, 2020, which was enacted by Parliament but has yet to go into effect, employers will be able to hire women to work at night between 7 p.m. and 6 a.m., provided they meet certain safety requirements for these workers.

Minimum Wage

Under the Minimum Wages Act of 1948 and subsequently enacted laws and regulations, there is no national minimum wage applicable for all industries. Instead, states and union territories have authority to establish minimum wages, and there is considerable variance among the jurisdictions’ minimum wages. Within a state or union territory, applicable minimum wages may further vary by occupation, the part of the state or union territory where work is performed, a worker’s level of skill, or the duration of time that a worker has performed particular work.

India’s minimum wages typically consist of two parts: a basic minimum wage rate and a dearness allowance, also known as a variable dearness allowance, that functions as a cost-of-living adjustment based on consumer price index changes. Dearness allowance adjustments generally occur semiannually on April 1 and Oct. 1.

While the central government does not have the power to establish a national minimum wage for all industries, it may set minimum wages for scheduled employment types with work located in establishments under the authority of the central government, railway administrations, mines, oil fields, major ports, or corporations established by a central act. In India, these scheduled employment types are referred to as being within the central sphere. Minimum wages for central sphere employment vary based on occupation and skill level.

While a national minimum wage for all industries does not exist, the Minimum Wages Act authorizes the central government to establish a national floor level minimum wage (NFLMW) and request the states and union territories to adjust the lowest minimum wage in their range of minimum wages so that it is no lower than the NFLMW. However, the states and union territories are not required to abide by the NFLMW with regard to rate adjustments. The NFLMW generally is adjusted in June or July of each odd-numbered year.

Note: Under the Code on Wages, 2019, which was enacted by Parliament but has yet to take effect, wage laws in India will be modified as follows:

• employers will need to ensure that employees’ wages comprise at least 50% of their total gross compensation;
• the number of minimum wages set by state and union territories will be reduced to ease employers’ compliance burden;
• the government will establish ‘floor wages’ that will serve as minimum thresholds that state governments must meet or exceed when setting their minimum wages; and
• provisions for equal pay between men and women will be extended to include transgender employees.

Overtime

Employees covered by the Minimum Wages Act are entitled to double pay for hours worked in excess of the hours constituting a normal work day. Similarly, the Factories Act mandates that any work beyond nine hours per day or 48 hours per week is considered overtime and is entitled to overtime pay. The maximum number of overtime hours an employee can be required to work is 50 in a quarter.

Wage Payment

Employers are required to pay wages according to a set schedule and no less often than monthly. Wages may be paid in cash or by check or direct deposit into an employee’s bank account.

Mandatory Bonuses

The Payment of Bonus Act of 1965 mandates a minimum annual bonus of 8.33 percent of a worker’s annual wages, which must be paid even if a business is making no profit or running losses. The maximum bonus allowed under the law is 20 percent, and the percentage the employer applies must be the same for all eligible staff.

Reference Citations

Minimum Wage: Minimum Wages Act, 1948, No. 11, § 3

Overtime: Factories Act, 1948, No. 63, § 59; Minimum Wages Act, 1948, No. 11, § 14

Wage Payment: Payment of Wages Act, 1936, No. 4, § 5

Mandatory Bonuses: Payment of Bonus Act, 1965, No. 21, § 10; Payment of Bonus (Amendment) Act, 2015, No. 6, § 3

Benefits

Vacation

Manufacturing employees covered by the Factories Act, 1948 who have worked at least 240 days during the calendar year are entitled to one day of leave for every 20 days worked. Up to 30 days can be carried forward to the succeeding year. Other employees are covered by state-specific Shops and Establishments Acts, which may differ state to state.

Vacations—commonly referred to as “annual” or “privilege” leave—in any organization (other than a factory) are governed by the provisions of the relevant state-specific Shops and Establishments Act. These laws may differ from state to state.

Under the Factories Act, every adult worker who has worked for a period of 240 days or more in a factory during the calendar year is entitled to one day of leave for every 20 days worked during the previous calendar year. The total number of days that can be carried forward to a succeeding year cannot exceed 30.

Note: Under the Occupational Safety, Health and Working Conditions Code, 2020, which was enacted by Parliament but has yet to take effect, employees will be able to cash out any unused vacation leave at the end of the year.

Holidays

India observes the following three national holidays:

• Jan. 26: Republic Day
• Aug. 15: Independence Day
• Oct. 2: Birthday of Mahatma Gandhi

In addition, an employer is required to provide five to nine festival holidays, the number depending on the state in which operations are located.

Generally, a list of holidays is published by the state government every year, and employers are required to choose the holidays they will observe. In certain states, employers are required to display the list of holidays in a conspicuous location in the workplace. Employers are also required to provide one weekly day off, generally Sunday.

Employees who are required to work on a public holiday are entitled to double pay.

Maternity Leave

Employers with 10 or more employees must provide 26 weeks’ paid leave during an employee’s first two pregnancies and 12 weeks’ paid leave for adoptive and surrogacy-commissioning mothers. Female employees who have worked for a given employer for at least 80 days in the 12 months immediately preceding the date of expected delivery are eligible for the benefits, provided they give the employer written notice seven weeks before the expected date of delivery. The 26-week leave entitlement applies only to the first and second pregnancy. For the third child and after, only 12 weeks are available. Adoptive mothers are entitled to paid leave only if the adopted child is less than three months old.

In the event of miscarriage or the medical termination of pregnancy and on presentation of a certificate from a registered medical practitioner, employees are entitled to six weeks’ paid leave immediately following the day of miscarriage or medical termination of pregnancy. An employee undergoing a tubectomy is entitled to two weeks’ leave immediately following the operation.

In the event of complications related to pregnancy, delivery, premature birth, miscarriage, medical termination of pregnancy, or tubectomy, an employee is entitled to an additional month of leave.

Working mothers are entitled to two nursing breaks per day, in addition to rest breaks, to nurse a child up to the age of fifteen months.

All eligible female employees entitled to maternity benefits are also entitled to a medical bonus of 3,500 rupees in cases where the employer does not provide free of cost pre-confinement and postnatal care to the employee.

Employers with 50 or more employees must provide a day care center onsite or adjacent to the workplace. A working mother must be allowed to visit the day care center four times each day to see her child.

Indian labor law prohibits termination of an employee while she is on maternity leave. Upon completion of maternity leave, the working mother may request to work from home and the employer is obliged to consider the request, taking into account the nature of the work and whether it can be executed from home.

All eligible women employees are entitled to maternity leave benefits once they have worked for eighty days in the twelve months immediately preceding their expected date of delivery, even if such benefits exceed the term of her employment contract, per the High Court of New Delhi’s interpretation of the Maternity Benefit Act of 1961.

Paternity Leave

There is no legal entitlement to paternity leave.

Sick Leave

Casual (personal) and sick leave is generally governed by the state-specific Shops and Establishments Act. Not all states separately define casual and sick leave, and the number of days of such leave to which employees are entitled varies from seven to 12 depending on the state in which the workplace is located.

In the manufacturing sector, casual/sick leave is governed by the Industrial Employment (Standing Orders) Act, 1946, under which employees are entitled to up to 10 days of leave.

Casual/sick leave cannot be accumulated or cashed out.

Other Leave

Bereavement leave. While there is no legal entitlement to paid bereavement leave, an employer cannot refuse employees time off under these circumstances. The employer can offer bereavement leave as a separate benefit or as an option under casual or annual leave.

Pensions and Social Security

There is no nationwide retirement age. States are free to establish their own criteria.

India’s social security system covers the following types of programs:

• pension,
• medical,
• disability and
• gratuity.

Some of the social insurances require employer contributions from all companies, some from companies with 10 or more employees, and some from companies with 20 or more employees.

Note: Under the Code on Social Security, 2020, which was enacted by Parliament but has yet to go into effect, employers will be required to contribute to a social security fund for gig and independent workers.

Workers’ Compensation

The Employees Compensation Act. The EC Act—which covers employees in factories, mines, plantations, construction and certain other hazardous occupations—provides compensation to workers and their dependants in cases of work-related accidents resulting in disability or death. The amount of compensation depends on the nature of the injury and on the employee’s age and average monthly wages.

The state-administered welfare fund is intended to promote the welfare of employees and their dependants. The fund is financed by voluntary contributions and by contributions from employees, employers and state governments. The rate of contribution varies from state to state.

Reference Citations

Vacation: The Delhi Shops Act, 1954, § 22; The Bombay Shops Act, 1948, § 35(1); Factories Act, 1948, No. 63, § 79

Holidays: The Bombay Shops Act, 1948, § 35(4)

Maternity Leave: Maternity Benefit Act, 1961, No. 53, §§ 5(2), 6(2), 9, 10, 12; Maternity Benefit Amendment Act, 2017, §§ 2-4

Sick Leave: The Delhi Shops Act, 1954, § 22

Pensions and Social Security: Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, No. 19, §§ 1, 7Q; Employees’ State Insurance Act, 1948, No. 34; Payment of Gratuity Act, 1972, No. 39, § 4(2)

Workers’ Compensation: Workmen’s Compensation Act, 1923

Labor Relations

In General

The Trade Unions Act provides for the recognition and registration of trade unions and for collective bargaining. The Industrial Disputes Act regulates strikes, lockouts, layoffs, changes in conditions of services and unfair labor practices and provides for the investigation and settlement of industrial disputes through the dispute resolution authorities. Industrial establishments with 20 or more employees are required to have an internal process for grievance redressal or set up one or more grievance redressal committees to resolve workplace disputes. Conciliation officers, labor courts, industrial tribunals and national tribunals mediate or adjudicate disputes.

Right to Organize

The Trade Unions Act provides for the recognition and registration of trade unions, providing legality to labor organizations and collective bargaining.

In the case of shops and commercial establishments, conditions of employment are governed by the state-specific Shops and Establishments Act and in the case of manufacturing facilities by the Factories Act and the Industrial Employment Act.

Dispute Resolution

The Industrial Disputes (ID) Act regulates strikes, lockouts, layoffs, changes in conditions of services and unfair labor practices and provides for the investigation and settlement of industrial disputes through the dispute resolution authorities. The ID Act requires that every industrial establishment with 20 or more employees have an internal process for grievance redressal or set up one or more grievance redressal committees to resolve workplace disputes.

The ID Act provides for the following authorities for the resolution of labor disputes:

• The appropriate government, central or state, has the power to constitute a board of conciliation for the settlement of an industrial dispute. The board of conciliation can have either two or four members, appointed in equal numbers by the parties to a dispute, and an independent chairman. The board functions like an arbitral tribunal.
• Conciliation officers are government officials appointed by the labor department to mediate and promote the settlement of industrial disputes between employees and their employers. The powers of conciliation officers are neither judicial nor quasi-judicial but administrative in nature.
• Labor courts have been set up by the government in all states for the purpose of adjudicating industrial disputes regarding (for example) discharge or dismissal and the legality of strikes and lockouts.
• Industrial tribunals adjudicate industrial disputes relating to such matters as wages, hours of work, bonuses, downsizing and closures. The functions and duties of the industrial tribunals are quasi-judicial in nature.
• National tribunals adjudicate disputes that in the opinion of the government involve questions of national importance or matters that affect industrial establishments in more than one state.

In special cases, the central or state government may establish a court of inquiry to look into any matter relevant to an industrial dispute. Apart from the authorities set up under the ID Act, state high courts and the Supreme Court of India also have jurisdiction to hear certain labor disputes under provisions of the Constitution of India.

Decisions of labor courts or tribunals can be challenged before state high courts, whose orders are binding on all subordinate state courts.

The orders of labor courts and tribunals and high courts can be challenged in the Supreme Court of India, the judgments of which are binding on all lower courts. Employer and employee may also agree to refer the dispute to arbitration in accordance with the provisions of the ID Act.

Strikes and Lockouts

The right of employees to strike and of employers to lock employees out is regulated by the ID Act. Strikes or slowdowns in contravention of any law or any rule having the force of law are considered misconduct and can justify suspension or dismissal of an employee.

Successorship Clauses

Under the ID Act, employees who have worked for a continuous period of 240 days in a year preceding a transfer of the ownership of a business and are terminated as a result of that transfer are entitled to retrenchment (downsizing) benefits including one month’s notice (or salary in lieu of notice) and compensation equivalent to 15 days’ salary for every completed year of service or any partial year in excess of six months. These benefits are payable to the employee in addition to normal termination benefits.

Retrenchment benefits are not available to employees:

• whose employment has not been interrupted by the transfer of business,
• the terms and conditions of whose employment are no less favorable after the transfer of the business than before or
• who are entitled under the terms of the transfer to compensation in the event of retrenchment calculated as though the employee’s service had not been interrupted by the transfer.

Reference Citations

Right to Organize: Trade Unions Act, 1926

Dispute Resolution: Industrial Disputes Amendment Act, 2010, No. 24 § 9C

Strikes and Lockouts: Industrial Disputes Act, 1947, No. 14, §§ 23 - 24

Successorship Clauses: Industrial Disputes Act, 1947, No. 14, § 25B

Safety, Health and Security

In General

Various measures regarding safety, health and security—including cleanliness, proper disposal of waste, proper ventilation, temperature control and enclosure of dangerous machinery—are required of employers.

Employers can prohibit the use of drugs and alcohol as a condition of employment. Smoking is prohibited in public places, including workplaces.

Monitoring of employee telephone calls and e-mails is legal if such surveillance is required to protect the employer’s legitimate business interests and the practice is outlined in a corporate policy.

Workplace Safety and Health

Various measures regarding safety, health and security—including cleanliness, proper disposal of waste, proper ventilation, temperature control and enclosure of dangerous machinery—are required of employers.

Drug and Alcohol Use

Employers can prohibit the use of drugs and alcohol as a condition of employment. Furthermore, the Prohibition of Smoking in Public Places Rules and the Cigarettes and Other Tobacco Products Act prohibit smoking in public places, including workplaces.

Reference Citations

Workplace Safety and Health: The Delhi Shops Act, 1954, §§ 25 - 27

Drug and Alcohol Use: Cigarettes and Other Tobacco Products Act, 2003, No. 34

Termination

Termination by Employer

State laws generally provide for one month’s written notice of termination or salary in lieu of notice. Company standing orders regulating dismissal must be approved by government authorities and typically severely restrict dismissal as a disciplinary action.

The following are considered just cause for dismissal:

• theft,
• habitual negligence of duty,
• disorderly behavior,
• bribery,
• lack of capability,
• financial irregularities and
• insubordination.

In most cases the employee is entitled to a warning prior to dismissal and a fair hearing.

A dismissal is considered unfair:

• if provisions for retrenchment or dismissal have not been properly followed,
• where the employee has not had an adequate opportunity to defend him/herself,
• during sickness or maternity leave,
• in retribution for filing a complaint,
• for taking part in peaceful trade union activities or
• as a result of discrimination.

Plant Closings and Mass Layoffs

Plant closings and layoffs are governed by the provisions of the Industrial Disputes Act. Under Indian law, “layoff” is defined as the failure, refusal or inability of an employer to employ a worker because of a shortage of power or raw material, the accumulation of stock, the breakdown of machinery or a natural calamity.

If a worker who has worked for the same employer for 240 continuous days in a year is laid off, whether continuously or intermittently, he or she is entitled to 15 days’ average pay for every completed year of service or any part thereof in excess of six months. In the case of a business closing down, the employer must give 60 days’ notice to the labor authorities.

If a worker is laid off for more than 45 days in 12 months, employer and employee may agree to end layoff compensation. Alternatively, layoff for more than 45 days in 12 months can be reasonable grounds for employer downsizing (retrenchment).

The Industrial Disputes Act requires that factories employing 100 or more workers obtain permission from state governments before laying off any employee or closing an operation. Note: Under the Industrial Relations Code, 2020, which was enacted by Parliament but has yet to take effect, only factories employing 300 or more workers will need to obtain permission from state governments before laying off any employee or closing an operation.

For economic redundancies, in the absence of any agreement between the employer and dismissed worker, the employer should dismiss the worker who was the last person to be employed in the category.

Payment on Termination

Employees with at least one year of service are entitled to a severance payment equal to 15 days’ wages for each completed year of service.

Employees who have completed five years of service and work for an employer with 10 or more employees also are entitled to a gratuity payment. Gratuity payments are equal to 15 days’ wages multiplied by the number of years of service (with part of a year in excess of six months counted as one year).

Unemployment Insurance

Under a program administered by the Employees’ State Insurance Corporation, workers who have become unemployed through no fault of their own (because of employer downsizing, for example) and have contributed to the ESI program for at least three years are entitled to unemployment benefits of 50 percent of their previous wages for up to one year.

Reference Citations

Termination by Employer: The Delhi Shops Act, 1954, § 30

Plant Closings and Mass Layoffs: Industrial Disputes Act, 1947, No. 14, §§ 25F - 25FFA

Unemployment Insurance: Payment of Gratuity Act, 1972, No. 39, § 4(2)

Personal Taxes

Residency Requirements

An individual is deemed to be resident in India in any year the individual:

• stays in India for an aggregate period of 182 days or more or
• stays in India for 60 days or more and the total stay in India within the preceding four years amounts to 365 days or more.

Taxable Income

Indian residents are taxed on their worldwide income unless the income is specifically exempt. Nonresidents are taxed only on India-sourced income. Taxable salary includes wages, annuities, pensions, gratuities, fees, commissions, bonuses, perquisites and other payments employees receive from their employers.

Tax Rates

Personal income in India is taxed on a progressive scale from 0 percent to 30 percent depending on income

Reference Citations

Tax Rates: Income Tax Department

Residency Requirements: Income Tax Act, 1961 - 2016, § 6

Web References

Law and Regulation

The Delhi Shops Act, 1954, § 30

Industrial Disputes Act, 1947, No. 14, §§ 25F - 25FFA

Payment of Gratuity Act, 1972, No. 39, § 4(2)

The Bombay Shops Act, 1948, § 35(4)

Minimum Wages Act, 1948, No. 11, § 3

Factories Act, 1948, No. 63, § 59

Payment of Wages Act, 1936, No. 4, § 5