COMPARATIVE GUIDE
20 November 2023

Labour and Employment Comparative Guide

KC
Kochhar & Co.

Contributor

With more than 200 lawyers, Kochhar & Co. is one of the leading and largest corporate law firms in India (""Firm”) . Kochhar & Co. enjoys the distinction of being the only law firm with a full-service presence in the six (6) prominent cities of India namely: New Delhi, Mumbai, Bangalore, Chennai, Gurgaon and Hyderabad and four (4) overseas offices: Dubai, Singapore, Atlanta, Jeddah. The Firm offers a wide range of legal services in the area of Corporate & Commercial Laws, Dispute Resolution, Tax and Intellectual Property (IPR) and specializes in representing major foreign corporations with diverse business interests in India.
Labour and Employment Comparative Guide for the jurisdiction of India, check out our comparative guides section to compare across multiple countries
India Employment and HR

1 Legal framework

1.1 Are there statutory sources of labour and employment law?

There are as many as 165 labour and employment laws, including nearly 50 central (federal) laws, in India. The main statutes and regulations relating to labour and employment include:

  • the Industrial Disputes Act 1947;
  • the Factories Act 1948;
  • the state-specific Shops and Commercial Establishments Acts;
  • the Industrial Employment (Standing Orders) Act 1946;
  • the Contract Labour (Regulation & Abolition) Act 1970;
  • the Maternity Benefit Act 1961;
  • the Payment of Wages Act 1936;
  • the Minimum Wages Act 1948;
  • the Payment of Bonus Act 1965;
  • the Equal Remuneration Act 1976;
  • the Employees' Compensation Act 1923;
  • the Employees' State Insurance Act 1948;
  • the Employees' Provident Fund and Miscellaneous Provisions Act 1952;
  • the Payment of Gratuity Act 1972;
  • the Trade Unions Act 1926; and
  • the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Both central (federal) and state governments have their own specific rules setting out the procedures for proper enforcement of a statute. In India, states have some statutes that deal with specific issues within the broader federal statutes umbrella.

1.2 Is there a contractual system that operates in parallel, or in addition to, the statutory sources?

In addition to the labour and employment statutes, the employment relationship may be governed by the employment contract (provided that the terms are no less favourable than those set out in the applicable statutes).

1.3 Are employment contracts commonly used at all levels? If so, what types of contracts are used and how are they created? Must they be in writing must they include specific information? Are implied clauses allowed?

In India, most labour and employment laws are applicable to employees who fall within the category of 'workmen' (blue-collar employees). A 'workman' is defined under the Industrial Disputes Act, 1947 as 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
  • who, being employed in a supervisory capacity:
    • draws a salary exceeding INR 10,000 per month; or
    • exercises functions mainly of a supervisory or managerial nature.

Apart from certain labour and employment statutes that may apply to the 'non-workmen' category of employees, employment relationships with 'non-workmen' are usually governed by the employment contract.

The Companies Act, 2013 further provides for the passing of a resolution and the conclusion of an employment contract for the appointment of a managing director of a company.

Although there is no specific requirement for a written employment contract, some employment statutes or state-specific statutes (or both) require an employment contract covering limited matters to be issued. As a matter of good corporate practice:

  • written employment contracts are executed between the employer and the employee; or
  • a detailed written appointment letter is issued to the employee, the terms of which must be duly accepted and acknowledged by the employee.

The employment contracts generally used in India include the following information:

  • the name and address of the employer and employee;
  • the title of the job or the nature of the work (or a job description);
  • the place of work;
  • any probationary period and its term;
  • any option of the employer to transfer the employee from one office to another branch office, affiliate or similar;
  • the date of commencement of employment;
  • wages or salary details;
  • any concessions or benefits to which the employee is entitled;
  • the type of contract – permanent or fixed term;
  • the period of notice required to terminate employment;
  • the leave entitlement;
  • the conditions under which the employer can terminate the contract;
  • any non-compete, confidentiality and non-solicitation provisions or similar; and
  • the working hours.

The provisions of employment contracts may depend on the nature of the employment; and different rules may apply to:

  • fixed-term employees;
  • apprentices; and
  • permanent employees.

2 Employment rights and representations

2.1 What, if any, are the rights to parental leave, at either a national or local level?

A female employee who has been employed with an employer for not less than 80 days in the 12 months immediately preceding the date of expected delivery will be entitled to paid maternity leave for the following purposes:

  • leave for delivery;
  • leave on account of miscarriage or medical termination of pregnancy;
  • leave for a tubectomy;
  • leave for illness arising from maternity; and
  • adoption leave.

Male employees have no statutory entitlement to parental leave. Male employees may use their annual or other leave for such purpose. However, employers may, at their discretion, provide such leave as a benefit for their employees.

2.2 How long does it last and what benefits are given during this time?

An eligible female employee will be entitled to the following benefits:

  • Leave for delivery: All eligible female employees are entitled to a maximum of 26 weeks' paid maternity leave – that is:
    • eight weeks up to and including the expected day of delivery; and
    • 18 weeks immediately following that day.
  • However, if a female employee has two or more surviving children, she will be entitled to 12 weeks of paid maternity leave, of which up to six weeks can be taken prior to the expected date of delivery. That apart, if a female employee adopts a child below the age of three months or is a commissioning mother (ie, a biological mother who uses her egg to create an embryo which is implanted in another woman), she will be entitled to leave for a period of 12 weeks from the date on which the child is handed over.
  • Leave for miscarriage or medical termination of pregnancy: In case of miscarriage or medical termination of pregnancy, a female employee will, on production of sufficient proof, be entitled to paid leave for a period of six weeks immediately following the date of her miscarriage or medical termination of pregnancy.
  • Leave for a tubectomy: In case of a tubectomy, on the production of sufficient proof, a female employee will be entitled to paid leave for a period of two weeks immediately following the date of the operation.
  • Leave for illness: A female employee will also be entitled to paid leave for a maximum period of one month in case of illness arising from:
    • pregnancy;
    • delivery;
    • the premature birth of a child;
    • stillbirth;
    • miscarriage;
    • medical termination of pregnancy; or
    • a tubectomy.
  • A female employee may be required to submit medical proof regarding any such illness as may be requested by the employer.
  • Adoption leave: A female employee who adopts a child below the age of three months or who is a commissioning mother (ie, a biological mother who uses her egg to create an embryo which is implanted in another woman) will be entitled to 12 weeks' paid maternity leave from the date on which the child is handed over to her

2.3 Are trade unions recognised and what rights do they have?

The Trade Unions Act, 1926 provides for the registration of trade unions, but it does not make registration mandatory. That said, registration of a trade union is beneficial, as it leads to certain privileges. A registered trade union is deemed to be a body corporate, thus giving it the status of a legal entity. As a result, a registered trade union has:

  • perpetual succession;
  • the power to acquire and hold property;
  • the power to enter into contracts; and
  • the power to sue and be sued.

A registered trade union is also immune from certain contractual, criminal and civil proceedings. Generally, registration of trade unions under the Trade Unions Act does not automatically imply that a particular trade union has gained recognition by the employer.

Registration of a trade union differs from recognition of a trade union. The key distinction is that a trade union:

  • is registered by the registrar of trade unions; and
  • is recognised by the management as a collective bargaining agent (in case of a single trade union) or as a collective bargaining council (in case of more than one trade union). Recognition of a trade union is the process through which the employer accepts it as having a representative character and hence demonstrates its willingness to engage in discussions with the union on matters concerning the interests of workers.

Some states in India have enacted separate laws relating to the recognition of trade unions. Ideally, in order to enjoy certain rights and privileges, a trade union must obtain legitimacy through registration under the Trade Unions Act and thereafter seek recognition as a sole bargaining agent either under the appropriate law or under an employer-employee agreement.

The rights conferred on a recognised trade union include the following:

  • The executive of the trade union can negotiate with the employer regarding employment, non-employment, terms of employment or conditions of employment on behalf of any employee or all employees;
  • The executive of the trade union can display notices of the trade union in the premises where the employees are employed and the employer must make necessary arrangements for this;
  • The executives of the trade union may appear on behalf of any employee or employees in any domestic or departmental enquiry;
  • The trade union may appoint a nominee to represent its workmen on works committees constituted under the Industrial Dispute Act, 1947; and
  • The trade union enjoys the status of sole bargaining agent or principal bargaining agent.

2.4 How are data protection rules applied in the workforce and how does this affect employees' privacy rights?

India notified the Digital Personal Data Protection (DPDP) Act, 2023 on 11 August 2023, but it has not yet come into force. The DPDP Act will replace Section 43A of the Information Technology Act, 2002 and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011, which currently govern privacy law in India with regard to personal information and sensitive personal data and information.

All employers (and any entities authorised on their behalf) that collect, receive, process, store, deal with or handle personal data or sensitive personal information must put in place a privacy policy which covers the following matters, among others:

  • details on the handling of such information;
  • details on the type of information collected;
  • the purpose for which such information is collected and used;
  • details on the disclosure/transfer of such information (including to third parties), if any; and
  • reasonable security practices and procedures for the protection of information, as approved and notified by the government.

Other obligations include the following:

  • Employers should obtain employees' consent in writing (through a letter, fax or email) before obtaining information such as:
    • passwords;
    • financial information (eg, bank account, credit card/debit card or other payment instrument details);
    • details of an employee's physical and mental health, sexual orientation, medical records and history or biometric information; or
    • any other personal information.
  • Such information should be used by employers only for the purposes for which it was obtained.
  • Employers must give employees access to make any necessary corrections to such information or to withdraw their consent.

In case of wrongful disclosure of personal information, an aggrieved employee can claim monetary compensation for any damage caused.

2.5 Are contingent worker arrangements specifically regulated?

The Contract Labour (Regulation & Abolition) Act (CLRA) regulates contingent worker arrangements. Depending on the employee thresholds prescribed by different states, an employer may be obliged to register under the CLRA. Also, a contractor that supplies contingent workers must be licensed to do so.

An employer to which the legislation applies will be regarded as the 'principal employer'. The principal employer must ensure that the contractor complies with all applicable labour and employment laws. In case of non-compliance by the contractor, the principal employer must take necessary corrective action (eg, if the contractor does not pay the contingent workers' wages, the principal employer must pay them and thereafter can recover the same from the contractor).

3 Employment benefits

3.1 Is there a national minimum wage that must be adhered to?

In India, the Minimum Wages Act, 1948 provides for minimum wages in respect of scheduled employment. The act requires the appropriate government (at both federal and state level):

  • to fix minimum wages for the types of employment that are specified in the schedule; and
  • to review and revise the same at intervals not exceeding five years.

Currently, there are approximately 45 types of scheduled employment at the federal level and approximately 1,650 types at the state level.

The federal government also introduced the national floor level of minimum wage (NFLMW) for industrial workers in 1996. The NFLMW was fixed at INR 35 per day in 1996 and has been revised approximately every two years since, taking into consideration the consumer price index. The NFLMW is now INR 178 per day.

3.2 Is there an entitlement to payment for overtime?

All employees – except those who may fall under the definition of an 'employer', such as a director, occupier or manager of a factory or any other person in control of the affairs of the business, who are exempt under a specific applicable law – are entitled to overtime payments. Some state-specific Shops and Commercial Establishments Acts specifically exempt notified employees (as notified by the employer from time to time) from the overtime requirement. It is possible that the applicable statutes may impose a ceiling on the maximum percentage of employees who can be exempted.

Overtime is calculated at a rate of up to twice the normal wage depending on the location or place of work of the employee.

3.3 Is there an entitlement to annual leave? If so, what is the minimum that employees are entitled to receive?

All employees are entitled to annual leave. The relevant laws providing for annual leave entitlements are:

  • the Factories Act 1948 for employees who work in factories; and
  • the state-specific Shops and Commercial Establishments Acts for employees who work in an establishment which is not a factory.

Annual leave entitlement:

  • An employee who has worked in a factory or manufacturing unit for 240 days in a calendar year is entitled to 19 days of annual leave.
  • Typically, employees who work in an establishment other than a factory are entitled to 12 to 21 days of annual leave.

3.4 Is there a requirement to provide sick leave? If so, what is the minimum that employees are entitled to receive?

Statutes that deal with sick leave and sickness pay include:

  • the state-specific Shops and Commercial Establishments Acts; and
  • the Employees' State Insurance Act 1948.

Depending on the state, the law may provide for between seven and 14 days' sick leave. Sick leave is generally paid leave in most states. In case of sickness, an employee can also utilise any accrued casual or annual leave.

In the case of employees who are covered under the Employees' State Insurance Act 1948, sickness benefits are paid by the government at the rate of approximately 60% of the employee's salary, subject to the fulfilment of certain conditions.

3.5 Is there a statutory retirement age? If so, what is it?

It is not mandatory to specify a retirement age in private employment. Generally, employers fix a retirement age of between 55 and 60 years. In certain industrial establishments where the Industrial Establishment (Standing Orders) Act, 1946 applies, employers must fix the retirement age at 58 or above.

4 Discrimination and harassment

4.1 What actions are classified as unlawfully discriminatory?

The Constitution provides for equality of opportunity in matters of public employment as a fundamental right. The Constitution prohibits discrimination on the grounds of:

  • race;
  • gender;
  • religion;
  • place of birth;
  • domicile;
  • caste; and
  • descent.

Additionally, the Industrial Disputes Act 1947 and the Industrial Establishment (Standing Orders) Act 1946 set out a list of unfair labour practices and misconduct for employers and employees respectively. Unfair labour practices are prohibited under the Industrial Disputes Act 1947 and some may amount to harassment in the workplace. Similarly, an employee who is charged of misconduct that amounts to any kind of harassment will be subject to punishment.

In specific circumstances, employees in the private sector can also seek protection against discrimination on the grounds that this constitutes a bad-faith action on the part of the employer. However, there is no specific statute in this regard.

The Equal Remuneration Act 1976 prohibits discrimination on the grounds of gender and against women in matters of employment (eg, recruitment, salary).

Further, the Rights of Persons with Disabilities Act 2016 prohibits employers from discriminating on the grounds of disability, except where this is a proportionate means of achieving a legitimate aim.

The federal government has also enacted the HIV and AIDS (Prevention and Control) Act 2017, which prohibits discrimination or unfair treatment against persons with HIV or AIDS in matters of employment. Also, anyone who is living or has lived with a person who is HIV positive is protected against discrimination.

4.2 Are there specified groups or classifications entitled to protection?

Please see question 4.1.

4.3 What protections are employed against discrimination in the workforce?

Generally in India, employers implement policies that prohibit discrimination on the grounds of:

  • gender;
  • caste;
  • race;
  • religion;
  • sexual orientation; and
  • disability.

Additionally, employers conduct various training and awareness programmes for their employees to raise awareness of the issue of discrimination and the procedures for reporting it.

4.4 How is a discrimination claim processed?

Anyone who is discriminated against may approach the employer's grievance redressal committee. In specific circumstances, private sector employees can also seek protection against discrimination on the grounds that this constitutes a bad-faith action on the part of the employer. However, there is no specific statute in this regard.

Where a person is discriminated against on the grounds of disability, the aggrieved employee may approach the designated authority prescribed under the equal opportunity policy of the employer.

4.5 What remedies are available?

Based on the circumstances of each case, any employee who is found guilty of discrimination in the workplace will be subject to appropriate punitive actions under the service rules/policies of the employer, including but not limited to termination of employment.

4.6 What protections and remedies are available against harassment, bullying and retaliation/victimisation?

Employers must establish an internal committee in each offices with 10 or more employees in order to handle grievances regarding sexual harassment.

All other forms of harassment, bullying and retaliation/victimisation are dealt with under the service rules/policies of the employer. Generally, employers designate a senior-level officer or a committee of senior-level officers to handle such complaints. On receipt of a complaint relating to harassment, bullying or retaliation/victimisation, the officer or officers can:

  • initiate formal disciplinary proceedings against the delinquent employee; and
  • if the employee is found guilty, order punishment under the service rules/policies of the employer.

5 Dismissals and terminations

5.1 Must a valid reason be given to lawfully terminate an employment contract?

The laws on dismissal or termination are different for employees who are categorised as 'workmen' and 'non-workmen'.

Workmen cannot be terminated without cause. The causes for termination may include:

  • misconduct;
  • continued ill health;
  • non-renewal of a contract;
  • redundancy; or
  • non-performance.

Non-workmen can be terminated without cause (except in a few states where the reasons for termination must be provided or grounds must be disclosed) by giving the requisite notice or payment in lieu thereof as per the terms of the contract or the state-specific Shops and Commercial Establishments Acts. Recently, however, the courts have held that even for termination of employment of non-workmen, reasonable cause must exist.

5.2 Is a minimum notice period required?

Most state-specific Shops and Commercial Establishments Acts provide that no one may be dismissed from employment unless he or she is given:

  • notice in writing (which is usually a period of 30 days); or
  • payment in lieu thereof.

In case of misconduct, an employee can be terminated without notice or payment in lieu thereof; but an inquiry (following the principles of natural justice) must be conducted before dismissing an employee in such a situation.

5.3 What rights do employees have when arguing unfair dismissal?

If a dismissal is found to be unfair or illegal, the aggrieved employee may claim reinstatement and back wages, along with costs and compensation provided under the law.

5.4 What rights, if any, are there to statutory severance pay?

Statutory severance is payable only to employees who fall within the category of 'workmen'. Under the Industrial Disputes Act 1947, a workman who has been in continuous service for at least one year is entitled to severance compensation (referred to in India as 'retrenchment compensation'). Retrenchment compensation is payable at the rate of 15 days' salary for every completed year of service or any part thereof in excess of six months.

Certain state-specific requirements may also need to be adhered to.

If the terms of the employment contract provide for higher severance compensation than is statutorily prescribed, this will apply accordingly.

6 Employment tribunals

6.1 How are employment-related complaints dealt with?

Any employment-related complaint must be made in writing to the prescribed authority. Upon receipt of the complaint, the jurisdictional authority will summon the employer to appear before it and file such replies or documents as may be required. Both the employer and the employee will be given an opportunity to prove their case and put the relevant evidence on record. Based on the evidence available on record and the arguments of both parties, the authority will issue its final order.

6.2 What are the procedures and timeframes for employment-related tribunals actions?

Please see question 6.1 for details of the procedure.

With regard to the timeframe, although the law provides for the settlement of employment disputes within 90 days from receipt of the complaint, in practice it takes around two to three years for such matters to conclude.

7 Trends and predictions

7.1 How would you describe the current employment landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The following developments are anticipated in the near future:

  • Code on Wages, 2019: Wages would include salary, allowance or any other monetary component. It would not include bonuses and travel allowances.
  • The Industrial Relations Code, 2020: It would improve ease of doing business by allowing companies with up to 300 workers to proceed with lay-offs, retrenchment and closure without government permission.
  • The Occupational Safety, Health and Working Conditions Code, 2020: It would allow women to be employed in all kinds of establishments including facilitating working at night (between 7 PM and 6 AM) subject to their consent and safety.
  • The Code on Social Security, 2020: Companies employing more than 20 workers must mandatorily report vacancies online under this code.
  • Digital Personal Data Protection Act, 2023: Employer can process employee data without specific consent for:
    • the purposes of employment;
    • to safeguard the employer from loss or liability; or
    • providing any service or benefit sought by an employee.
  • The Act has received presidential assent and should be notified in the first half of 2024.

8 Tips and traps

8.1 What are your top tips for navigating the employment regime and what potential sticking points would you highlight?

  • Compliance is key: Given that employment is a highly regulated sector and the judicial trend is to lean towards employees, employers must ensure strict compliance with laws.
  • Employers must harmonise business considerations with applicable laws, for example, in relation to restructuring and non-compete.
  • Existing company policies (drafted in foreign jurisdictions) must be synced with Indian law requirements.
  • Non-compliance usually has both civil and criminal consequences. However, certain legislations provide for compounding of criminal offences.
  • While dealing with employee issues, the distinction between blue and white collar employees must be borne in mind.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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