With the deepening of globalization, when enterprises expand their business in multiple countries, cross-border labor compliance has become one of the most complex and severe challenges. To help enterprises systematically address this issue, we have collaborated with top labor lawyers from over 50 major jurisdictions worldwide (all recommended by Chambers, The Legal 500, or equivalent institutions) to jointly compile a Chinese-English labor & employment compliance guide exceeding 1 million words, and we will continuously update relevant key points.

This article publishes the key points of labor & employment compliance in India.

01 Overview of the Labor Law System

1.Legal System

India is a common law jurisdiction.

2.Resources and Agencies

There are over 45 central labor legislations in India and over 200 labor legislations enacted by the respective State Governments. India has a complex architecture of enforcement agencies (both at the central/federal as well as the state level) that are entrusted with the administration of labor law.

02 Employment Qualifications and Classification

1.Employment Age

The CAL Act prohibits employment of persons below the age of 14 years in any occupation. It permits employment of individuals between the ages of 14-18 years in non-hazardous occupations (as defined under the said law). Individuals above 18 years can be employed in any occupation.

There is no legally stipulated age of retirement in the private sector. However, the IESO Act, where applicable, prescribes an age of retirement in its model rules, which usually ranges from 58 years to 60 years.

2.Qualifications for Foreign Employers

If a foreign company intends to conduct business in India, it must have a legal presence, which could be through a branch office, project office, liaison office or an Indian subsidiary. Where employees are engaged directly by foreign companies without having a legal presence in India, there is a potential risk of creating a taxable presence in India (such as a permanent establishment or a business connection) and also being in violation of Indian foreign exchange regulations.

3. Classification of Employment

• Direct employment;

• Contract Workers;

• Independent Contractors/Consultants;

• Interns and Apprentices.

4.Foreign Workers

Foreign nationals must possess a valid passport and appropriate visa authorization to work in India. There are 2 primary types of visas available to working professionals:

• Employment visa;

• Business visa.

03 Recruitment and Employment Contracts

1.Background Examination

It is legally permissible and common practice to conduct background checks, including verification of education, employment history, criminal records, references, and addresses. Consent is usually obtained during the interview process or when the offer is extended. 

2.Contract Types

While Indian labor laws generally do not mandate execution of formal written employment contracts, certain SSEAs (for example, in Karnataka and Delhi) and the IESO Act (where applicable) expressly require that terms of employment be recorded in a formal document. It is standard practice for organizations in India to execute written employment contracts.

3.Probationary Period

It is common and recommended practice to place employees on probation during their initial few months of employment. Probationers are not afforded the full protections provided to confirmed employees, and it is relatively easier to terminate their employment during probation if they are found to be unsuitable for the role.

04 Working Standards

1.Remuneration

The MWA empowers both the Central and State Governments (as appropriate) to fix minimum rates of wages for each specified industry. The prescribed minimum rate of wages differs based on the specific state, industry and category of worker.

Wages are usually paid monthly but may also be paid on an hourly or daily basis, depending on the terms of employment. The wage period cannot exceed 1 month in any event.

2.Statutory Benefits and Social Security

• Employees’ Provident Fund (EPF);

• Employees’ State Insurance;

• Statutory Bonus;

• Gratuity.

Unlike many jurisdictions, there is no statutory requirement in India to offer insurance benefits to employees. In practice, most large companies provide medical, life, and accident insurance coverage.

3.Working Hours

Working hours are regulated by the SSEAs and Factories Act for corporate offices and manufacturing units respectively. These laws prescribe daily and weekly working hour limits, and if employees are required to work beyond these hours, they will be entitled to overtime which is calculated at twice the normal rate of wages. 

4.Rest and Leave

Both under the SSEAs and the Factories Act, employees are entitled to at least 1 holiday per week.

In addition to weekly holidays, employees in India are also entitled to a specified list of national and festival holidays. 

05 Occupational Health and Special Protection

1.Occupational Health and Security

Employers must ensure workplace security and emergency preparedness by maintaining firefighting equipment, conducting safety drills, providing medical facilities, and reporting accidents. Hazardous industries have additional responsibilities, including establishing disaster management plans. 

2.Special Protection

Indian labor laws provide targeted protections for the following vulnerable classes:

• Women;

• Persons belonging to specific castes;

• Persons with disabilities;

• Transgender persons;

• Persons diagnosed with HIV.

06 Personal Information and Privacy

1.General Rules

Employers must:

（1）Publish a comprehensive privacy policy (accessible to personnel), setting out the types of data collected, purposes of collection, disclosure practices, security safeguards, and grievance redressal mechanisms (including contact details of the designated grievance officer).

（2）Designate a grievance officer to address complaints related to data handling.

（3）Implement reasonable security practices and procedures to protect such data. Compliance with ISO/IEC 27001 or similar recognized standards is generally expected.

2.Transnational Transfer

An employer may transfer SPDI outside India only if: (i) the receiving party ensures at least the same level of data protection as provided under Indian law; and (ii) the transfer is necessary for the performance of a lawful contract by the employer, or the transfer has been consented to by the data subject.

07 Anti-Discrimination and Anti-Harassment

1.General Rules

The Indian legal framework prevents discrimination and harassment against the following characteristics.

2.Protective Characters

• Gender;

• Disability;

• HIV and AIDS status;

• Protected castes.

08 Internal Policies

1.Applicability

Under the IESO Act, each State Government has published model standing orders (i.e., service rules) for various industries.

2.Validity

There is no requirement to obtain consent from or consult with employees prior to introducing policies, unless the proposed policies change the conditions of service of workman level employees (for example, leave entitlements or salary structure). In such cases, prior notice must be provided to workman level employees before introducing any such policy.

3.Whistleblowing

India does not currently have comprehensive legislation protecting whistleblowers in the private sector.

09 Transactions

1.Employment Relationship

Continuity of the employment relationship varies based on the nature of the transaction. In the case of a share acquisition or equity transfer, while the ownership changes, the employing entity remains the same and, therefore, the employment relationship continues under the existing employment contract. 

2.Compensation

There is no statutory requirement to pay compensation in share acquisitions or equity transfers. Retrenchment Compensation could be triggered in case of a merger, business transfer, or asset transfer if the workman level employee refuses to transfer to the new entity or if the Transfer Conditions are not met.

10 Termination of Employment

1.Termination Grounds

‘At will’ termination is not a concept recognized in India. Indian courts have consistently held that termination must be for a reasonable cause and must be effected after following the prescribed process and releasing the necessary exit -related payments.

Termination can be broadly categorized into:

• Stigmatic termination/misconduct;

• Termination simpliciter.

2.Termination Procedure

 Under the IDA, in case of retrenchment (i.e., simpliciter termination) of workman level employees who have been in continuous service for at least 1 year, the employer must:

• Issue notice of termination or pay in lieu thereof;

• Pay statutory severance (“Retrenchment Compensation”); and

• Issue a notice in the prescribed form to the appropriate authorities via registered post.

3.Termination Protection

The MB Act prohibits termination during the period of maternity leave (except in cases of gross misconduct) or on account of pregnancy/maternity leave.

4.Wrongful Termination

For workmen, the IDA provides robust protections. If a termination is found to be in violation of statutory requirements, employment contracts, or principles of natural justice, the employee may be entitled to reinstatement with or without continuity of service and back wages.

11 Confidentiality, Non-Compete, and Non-Solicitation

1.Confidentiality

While there is an implied obligation on employees to maintain confidentiality and not to compete or solicit, it is generally recommended and is common practice to include express confidentiality clauses in employment agreements of all employees and/or execute non-disclosure agreements with them. 

2.Non-Compete and Non-Solicitation

Non-compete and non-solicitation clauses are commonly included in employment agreements primarily to deter employees, but the enforceability of these clauses has been subject to significant legal scrutiny under Indian law.

12 Work Representation and Trade Unions

1.Work Representation

Industry practice is not consistent. While some organizations do constitute the above committees, most provide alternative mechanisms for resolving grievances and employee issues.

2.Trade Unions

Under the TU Act, workers are empowered to form trade unions, which act as representative bodies for employees across various sectors. These unions are authorized to negotiate with employers on matters such as wages, working conditions, and employment terms. Once registered, a trade union gains legal status and can represent its members in discussions with management, as well as in legal proceedings related to labor disputes.

13 Dispute Resolution

1.Procedures & Enforcement

The IDA establishes procedures for resolving disputes raised by workman category employees. The first step is conciliation, a non-adjudicatory process facilitated by a government-appointed conciliation officer who attempts to mediate between the parties and encourage voluntary settlement. If conciliation fails, the matter may be referred to adjudication before a Labor Court or Industrial Tribunal, depending on the nature of the dispute. These forums are empowered to decide on issues such as wrongful termination, wage disputes, retrenchment, and conditions of service.

2.Waiver & Enforcement

Indian courts have held that employees cannot waive statutory rights, even if such waivers are included in employment contracts or separation agreements.

Contractual rights, on the other hand, may be waived under certain conditions, provided the waiver is voluntary, informed, and constitutes a valid contract under the ICA. 

14 Others

1.Latest Development & Trends

A particularly noteworthy shift is the formal recognition of gig and platform workers under the Code on Social Security, 2020. This code provides for the creation of social security schemes tailored to gig workers, including provisions for health insurance, maternity benefits, and old-age protection.

2.Cultural and Religious Considerations

India is a culturally diverse and multilingual country, where the language, customs, practices and traditions vary from state to state. Investors should be aware that a uniform approach may not be successful if implemented across multiple states, and the approach may have to be modified based on the location where the office would be set up.

* To avoid ambiguity, this article should not be regarded as legal advice.

Authors

Rashmi Pradeep has been with Cyril Amarchand Mangaldas for over 20 years and heads the employment practice as well as the Southern Region of the Firm. She is recognized as an expert in Labor and Employment laws by Chambers and Partners, The Legal 500 and AsiaLaw Rankings, among others.

Abe Abraham is a partner in the employment practice of Cyril Amarchand Mangaldas. With over 24 years of experience, Abe is a seasoned legal expert specializing in Industrial Relations (IR) and Employment Law. 

Rohini Dayalan is a Senior Associate in the employment practice of Cyril Amarchand Mangaldas. She is an in advising multinational clients on complex employment matters across India.

Translator

Jin Dongjie, Master of Laws, associate at Anli Partners. Area of expertise: Labor Law, ESG Compliance, Dispute Resolution.