LEG Employment Law Overview 2021-2022 - India - 27.03.21

employment law overview
india 2021-2022
INDUSLAW / Proud Member of L&E GLOBAL
an alliance of employers’ counsel worldwide 2021-2022 / india | 1
www.leglobal.org
table of contents.
I. General overview 03
II. HIRING PRACTICES 09
III. employment contracts 12
IV. working conditions 14
V. Anti-Discrimination Laws 17
VI. PAY EQUITY LAWS 21
VII. SOCIAL MEDIA AND DATA PRIVACY 22
VIII. Termination of Employment contracts 24
IX. Restrictive Covenants 27
X. TRANSFER OF UNDERTAKINGS 29
XI. TRADE UNIONS AND EMPLOYERS ASSOCIATIONS 30
XII. EMPLOYEE BENEFITS 33

an alliance of employers’
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worldwide 2021-2022 / india | 2
i. general overview
1. Introduction
The Constitution of India (“Constitution”) is the cornerstone of individual rights and liberties, and provides
the basic framework within which all laws in India, including laws relating to labour and employment, must
operate. The Constitution guarantees certain fundamental rights to individuals such as the right to life, privacy,
equality before the law and prohibition of discrimination in public education and employment on the basis
of religion, sect, gender and caste. The Constitution recognises the ‘right to livelihood’ as an integral part of
the fundamental right to life.
In addition to fundamental rights, the Constitution also envisages certain ‘directive principles’ which serve
as a guide to the legislature towards fulfilling social and economic goals. Given India’s history, social justice
has always been at the forefront of a number of Indian regulations, specifically labour and employment laws.
It is important to note that several labour laws in India have been designed from a worker emancipation
perspective – including those relating to factories, mines, plantations, shops and commercial establishments,
as well as those relating to payment of wages, regulation of trade unions, provision of social security, industrial
safety and hygiene.
However, given changing economic requirements in recent times, especially in light of the ongoing COVID-19
pandemic, the Indian Government has been increasingly conscious of the needs of businesses as well. In the
last 6 months, the Indian Government has already brought in certain significant changes in labour laws with
the aim of improving the ease of doing business in India. Further, there are several other big-ticket reforms in
the pipeline, which we hope will see the light of day in the near future.
2. Key Points of workmen, which are subject to far greater

statutory protections. The service conditions
of non-workmen are typically governed by the
• Labour and employment laws are listed under the
terms of the relevant employment contracts
Concurrent List in the Constitution, which means
and the internal policies of the organisation.
that the Union Parliament (federal legislature)
Determining whether a particular employee is a
and State Legislatures have co-equal powers to
workman or not, has to be undertaken on a case-
enact laws relating to all labour and employment
by-case basis.
matters in India. Typically, the Union Parliament
• India does not generally recognise employment-
enacts a Central law, while the States formulate
at-will. Further, in terms of the Indian Contract
rules thereunder. Additionally, States often enact
Act, 1872 (“Contract Act”), which is the
standalone legislation as well.
principal legislation governing contracts in India,
• One of the central principles of Indian labour and
agreements that restrain trade, business or one’s
employment law is that they distinguish between
profession are void – this could have an impact
employees who are defined as ‘workmen’ and
on employment bonds, and on non-compete and
those who are in management / supervisory /
non-solicit covenants in employment contracts.
administrative roles (‘non-workmen’). Most of
• Trade unions are typically restricted to the
the legislation regulates the service conditions
more traditional forms of business, such as

the manufacturing sector; however, in recent employed in a supervisory capacity, draw a salary
times there has been some unionisation in the exceeding INR 10,000 (~USD 136) per month or
Information Technology (“IT”) sector as well. The (iii) those who exercise, either by the nature of
Trade Unions Act, 1926 (“Trade Unions Act”) the duties attached to the office or by reason of
provides for registration of a trade union and the the powers vested in them, functions mainly of a
rights and liabilities of a registered trade union. It managerial nature.
is also proposed to recognise certain trade unions
both at the Central and State Government levels, That said, it is important to note that the wage
which would then participate in policy-making. ceiling of INR 10,000 (~USD 136) mentioned
• The Industrial Disputes Act, 1947 (“ID Act”) is the above is not the definitive criterion in respect of
key legislation that governs industrial relations ascertaining whether or not a particular employee
in India. The ID Act aims at securing industrial will be categorised as a workman. There have
peace and harmony by providing the process for been multiple occasions when Indian Courts have
settlement of industrial disputes arising between held that whether an employee is a workman
two or more employers; between employers and or not depends on the exact nature of the job
workmen; and disputes among workmen. responsibilities and duties and the context of his/
• The Equal Remuneration Act, 1976 (“ERA”), her role in the organisation, rather than merely
mandates the payment of equal remuneration to the compensation package. Determining whether
male and female workers who undertake similar a particular employee is a workman or not, has
tasks. The Contract Labour (Regulation and to be undertaken on a case-by-case basis. It does
Abolition) Act, 1970 (“CLRA”) is another major not depend on the level of education or the
legislation that pertains to regulating contract designation. Various judicial precedents have laid
labour in India. down that in order to determine an employee’s
status as a ‘workman’, the actual, substantial and
predominant work being performed by her is
3. Legal Framework decisive, rather than the employee’s remuneration/
designation. The other factors that are useful to
Given that both the Union Parliament (federal determine whether an employee is a workman or
legislature) and State Legislatures have co-equal a non-workman, is by taking into account whether
powers regarding labour and employment laws, the employee had any managerial responsibilities
there are currently hundreds of laws relating to and whether he had authority to take any decision
labour and employment in India, including around on behalf of the organisation.
50 statutes enacted by the Union Parliament.
Most of these laws concern blue-collar employees Employees considered to be workmen under the
or workmen, owing to the historical emphasis on ID Act have several additional rights – for instance,
improving working conditions for these employees. changes to their conditions of service and any
On the other hand, the legal structure relating to termination of their employment can only be
non-workmen (i.e., employees having managerial undertaken as per the specified process guaranteed
duties or white-collar employees) is not as under the ID Act. Further, they can approach labour
comprehensive and has evolved in recent decades commissioners and/or the industrial tribunals/
mainly through judicial pronouncements. labour courts in case of any unjustified termination
and/or unfair labour practice, on part of the
a. Difference Between employer.
Workmen and Non-Workmen The terms of service of non-workmen (i.e., those
who mainly work in a managerial or administrative
Section 2(s) of the ID Act defines a workman as
capacity) are ordinarily governed by the State-
a person who is employed to do any manual,
specific shops and establishments legislation
unskilled, skilled, technical, operational, clerical, or
(“S&E Act”), the terms and conditions of their
supervisory work for hire or reward. The definition
contracts of employment and the internal policies
however excludes the following persons: (i)
of an organisation. Persons occupying managerial
those who are employed mainly in a managerial
and confidential positions in an organisation are
or administrative capacity; (ii) those who, being
exempt from the S&E Act of certain States such

as Karnataka, Andhra Pradesh, Kerala, Madhya Industrial Disputes Act, 1947: The scope of this
Pradesh, Tamil Nadu and Maharashtra, among legislation is primarily restricted to workmen alone.
others. These employees will typically fall outside However, the principles and processes laid down
the scope of the ID Act; there are various judicial in this legislation have been replicated in other
pronouncements which have held that non- statutes with wider application. The ID Act inter alia
workmen are not entitled to claim protection under covers industrial disputes, industrial action (i.e.,
the ID Act. strikes and lockouts), regulation of retrenchment,
layoffs, closure, transfer of undertakings, envisages
b. Other Factors the constitution of works committees and grievance
redressal committees, and also regulates changes
Apart from the classification of employees into in certain service conditions of workmen.
workmen and non-workmen, the applicability of
labour legislation also depends on the nature of Shops and Commercial Establishments Act: The
activity that the employees are engaged in as well S&E Act is State specific – almost all States in
as the place of work – for instance, different laws India have enacted their own S&E Act. The S&E
apply depending on whether the place of work is Act regulates service conditions of employees
a factory, plantation, mine, shop, or commercial engaged in shops and commercial establishments,
establishment. Certain labour laws also take into which includes most private companies and firms.
account the number of employees engaged at a It regulates hours of work, payment of wages,
particular place of work; for instance, the scope overtime, leave, holidays, and other conditions of
and applicability of certain social security benefits service.
varies, depending on the number of employees
engaged in an establishment, the wages earned, Employees Provident Fund and Miscellaneous
and the position of the employee at the workplace. Provisions Act, 1952: The EPF Act read with all
rules and schemes framed thereunder is one of
the major social security laws in India. Under the
c. Overview of Key Labour Laws EPF Act, both the employer and employee, subject
to certain monetary limitations and conditions,
The various labour and employment laws in India are required to contribute 12% of an employee’s
can be broadly categorised into two important ‘basic wages’ to the Employees Provident Fund /
themes, namely (i) employer-employee relations; EPF. The employer’s contribution is also directed
and (ii) service or working conditions, such as wages, to a pension fund, from which an employee would
social security and working hours. Enactments such be entitled to monthly pension upon retirement.
as the ID Act, the Trade Unions Act, the Industrial The EPF and pension scheme has extensive rules in
Employment (Standing Orders) Act, 1946 (“IESO relation to contribution and withdrawal of funds. In
Act”) and CLRA are focused primarily on employer light of the COVID-19 crisis, the Indian Government
employee relations, whereas enactments such as had temporarily reduced the above contribution
the Factories Act, 1948 (“FA Act”), the various S&E rate to 10 % for the months of May, June and July
Acts, the Payment of Wages Act, 1936 (“Wages 2020.
Act”), the Minimum Wages Act, 1948 (“MW Act”)
and the Payment of Bonus Act, 1965 (“Bonus Payment of Wages Act, 1936: The Wages Act
Act”) are focused primarily on service conditions regulates the mode and method of payment of
of employees. There are both Central and State wages to certain categories of employees, namely,
rules framed under each of the aforementioned those to whom the payable wages do not exceed
enactments. In addition, there are enactments INR 24,000 (~USD 330) per month, and to those
such as the Employees Provident Fund and employed in factories and industrial establishments.
Miscellaneous Provisions Act, 1952 (“EPF Act”), the The Wages Act provides that wages must be paid
Employees State Insurance Act, 1948 (“ESI Act”) without deductions of any kind except certain
and the Payment of Gratuity Act, 1972, (“PG Act”) authorised deductions, such as taxes on income,
which provide for certain social security benefits to fines, or deductions owing to absence from duty.
employees.

Factories Act, 1948: The FA Act was enacted to Trade Unions Act: The Trade Unions Act provides
regulate working conditions in factories where for registration of a trade union and the rights
manufacturing operations are undertaken. It has and obligations of a registered trade union. The
extensive provisions with respect to the health, minimum number of persons required to apply
safety and welfare of persons who work in for registration of a trade union is 7; however, a
factories, and also regulates the working conditions trade union cannot be registered unless at least
of persons working in a factory. 10% of the workmen or 100 workmen (whichever
is lesser, and subject to a minimum of 7 workmen),
Minimum Wages Act, 1948: The MW Act employed in an establishment are its members.
provides for the payment of minimum rates of While employers in certain States are not legally
wages to employees working in specified kinds of bound to recognise trade unions or encourage
employment, termed ‘Scheduled Employment’. collective bargaining, a registered trade union
Under the MW Act, the Government is required can enter into collective bargaining agreements
to fix industry-specific daily and monthly minimum with the employer for better wages and service
wages, depending on the skill of the employee. conditions.
Once minimum wages have been fixed, an employer
is required to pay to every employee engaged in Contract Labour (Regulation and Abolition) Act,
Scheduled Employment, wages at a rate that is not 1970: The CLRA provides for regulation of contract
less than the minimum rate of wages fixed by the labour in establishments and provides for its
concerned Government for that class of employees. abolition in certain circumstances. A ‘workman’
is deemed to be ‘contract labour’ if he is hired in
Industrial Employment (Standing Orders) Act, connection with the work of an establishment,
1946: The IESO Act is generally applicable to every by or through a ‘contractor’, with or without
industrial establishment wherein 100 or more the knowledge of the ‘principal employer’. The
workmen are employed, subject to any specific term contractor is defined to mean a person
State rules in this regard. Certain States such as who undertakes to produce a given result for
Karnataka, Maharashtra and Tamil Nadu have an establishment through contract labour or
reduced the applicable threshold. The IESO Act who supplies contract labour for any work of the
requires employers in industrial establishments to establishment. The manager or occupier of the
formally define conditions of employment, such establishment is the principal employer. Under
as classification of workmen, manner of intimating the CLRA, every principal employer is required to
wage rates, working hours, leave periods, make an application in the prescribed form, for the
recruitment, shift working, attendance, procedure registration of the establishment with the labour
for availing leave, transfer of workmen, termination authorities. Every contractor under the CLRA
of workmen, and inquiries for misconduct. Such Act must also be licensed and should undertake
conditions are referred to as the ‘Standing Orders’. work through contract labour only in accordance
The State specific rules framed under the IESO with such license. The contractor is required to
Act provide for ‘Model Standing Orders’, which pay wages and provide facilities for the welfare
are a set of default conditions applicable to those and health of the contract labour, which includes
industrial establishments that have not framed providing rest rooms, canteens, wholesome
their own Standing Orders or to those industrial drinking water, toilets, washing facilities, and first
establishments that are awaiting certification from aid facilities in every establishment. The above
the Government on their own Standing Orders. compliances vary depending on the number of
In most cases, the internal employee handbook/ contract labour engaged in an establishment. It is
service regulations of the employers are generally important to note that as per the CLRA, in case the
customised and filed as the Standing Orders of that contractor fails to pay wages to the contract labour,
establishment. The IESO Act however provides that the principal employer will be responsible for the
while the Standing Orders adopted by an employer same.
need not necessarily be a duplication of the Model
Standing Orders, they should, as far as practicable,
be in conformity with the same.

4. New Developments Security Code is that it includes within its ambit,
certain non-traditional types of occupations/
workers such as gig workers, platform workers and
a. Codification of Labour Laws unorganised workers, and makes provisions for
providing social security benefits to them.
As part of a major rationalising and simplifying
exercise, India has consolidated about 29 of the 44
Central laws into 4 comprehensive labour codes:
d. Industrial Relations Code,
Code on Wages, 2019 (“Code on Wages”); the 2020
Occupational Safety, Health and Working Condition
Code, 2020 (“OSHW Code”); the Industrial Relations The IR Code has been passed by both houses of
Code, 2020; (“IR Code”); and the Code on Social the Indian Parliament and received the President’s
Security, 2020 (“Social Security Code”). assent on 28 September 2020. However, it shall
come into force and become law on a date yet to be
notified by the Central Government. The IR Code
b. Code on Wages shall subsume the following Central labour laws:
the ID Act; the IESO Act; and the Trade Unions Act.
The Code on Wages was notified by the Ministry of
The applicability of the IR Code (and its Chapters
Law and Justice in 2019. The Central Government
thereof) on industrial establishments depends on
has notified very few of the provision of the Code
various factors, such as the number of workers in
on Wages. However, it is yet to notify the other
an industrial establishment, as well as the nature
provisions of the Code on Wages. The Code on
and type of the industrial establishment.
Wages subsumes and amends the following Central
labour laws: the Wages Act; the MW Act; the
The IR Code has introduced certain key changes to
ERA; and the Bonus Act. Further, on 7 July 2020,
the current labour law. The IR Code has widened
the Indian Ministry of Labour and Employment
the scope of the term worker to include persons
published the draft Code on Wages (Central) Rules,
employed in a supervisory category, earning wages
2020 for seeking input from the stakeholders.
up to INR 18,000. Currently, the ID Act defines
These rules inter alia, prescribe the process and
the term ‘workman’ to, inter alia, include persons
fixation method of calculating the minimum rate
in a supervisory category, earning wages up to
of wages, procedures for making payments, the
INR 18,000. Significant changes with respect to
process of constituting the Central Advisory Board
the retrenchment process of workers have also
for the purpose of fixing the floor wage, procedures
been made. In regard to declaring a strike, the
for the deduction of wages and recovery, etc.
IR Code requires workers to give their employer
a prior 14 days’ notice before going on strike.
c. Code on Social Security This requirement under the ID Act was limited to
employers carrying out a public utility service. The
The Social Security Code has been passed by both IR Code also makes provisions for the recognition
houses of the Indian parliament and received the of trade unions. Further, penalties under the IR
President’s assent on 28 September 2020. However, Code have increased significantly.
the Social Security Code will enter into force (and
likewise become enforceable) on a date yet to be
notified by the Central Government. The Social
e. Occupational Safety, Health
Security Code will subsume the following Central and Working Conditions Code,
labour laws: the Employees’ Compensation Act, 2020
1923; the Employees’ State Insurance Act, 1948; the
EPF Act; the Employment Exchanges (Compulsory The OSHW Code aims to consolidate and amend
Notification of Vacancies) Act, 1959; the Maternity the legislation that currently regulate occupational
Benefit Act, 1961; the PG Act; the Cine Workers safety, health and working conditions of individuals
Welfare Fund Act, 1981; (h) The Building and Other employed in establishments, while providing the
Construction Workers Welfare Cess Act, 1996; and required flexibility for making necessary rules and
the Unorganised Workers’ Social Security Act, 2008. regulations with respect to the subject matter
One of the most important aspects of the Social thereof. The OSHW Code has been passed by both

houses of the Indian Parliament and received f. Transgender Persons
the President’s assent on 28 September 2020.
However, it shall come into force (and become (Protection of Rights) Act, 2019
enforceable) on a date yet to be notified by the
Central Government. The Transgender Persons (Protection of Rights)
Act, 2019 (“Transgender Act”) entered into force
The OSHW Code will subsume the following Central in December 2019. The Transgender Act aims to
labour laws: the FA Act; the Mines Act, 1952; the provide for the protection of rights of transgender
Dock Workers (Safety, Health and Welfare) Act, persons and their welfare, and for matters
1986; the Building and Other Construction Workers connected therewith. Amongst other provisions,
(Regulation of Employment and Conditions of the Transgender Act prohibits discrimination against
Service) Act, 1996; the Plantations Labour Act, a transgender person, including unfair treatment in
1951; the CLRA; the Inter-State Migrant Workmen relation to employment as well as discrimination in
(Regulation of Employment and Conditions of matters connected with employment (recruitment
Service) Act, 1979; the Working Journalist (Fixation and promotion), etc. Employers are also required
of Rates of Wages) Act, 1958; the Working Journalist to designate a complaint officer, who shall be
and Other Newspaper Employees (Conditions of responsible for dealing with complaints with
Service and Miscellaneous Provisions) Act, 1958; respect to violations of the Transgender Act and
the Motor Transport Workers Act, 1961; the Sales shall also ensure compliance with the same.
Promotion Employees (Conditions of Service) Act,
1976; the Beedi and Cigar Workers (Conditions g. Labour law reforms in light
of Employment) Act, 1966; and the Cine Workers of COVID-19 crisis
and Cinema Theatre Workers Act, 1981. The
OSHW Code is applicable to all ‘establishments’ Several States, such as Andhra Pradesh, Bihar,
including: places where an industry, trade, Punjab, Rajasthan and Karnataka have issued
business, manufacturing or occupation is carried ordinances to relax the applicability of the ID Act
out; motor transport undertakings; newspaper to certain establishments, such that provisions
establishments; audio-video productions; building relating to layoffs, retrenchment, closure of certain
and construction works; and plantations, provided establishments, wherein the number of workmen
that there are a minimum of 10 workers employed employed is not less than one hundred, has recently
in such places of work. been increased to three hundred workmen. In
addition to the above, some States have introduced
The OSHW Code is also applicable to establishments changes in the retrenchment compensation, which
engaged in hazardous/life threatening activities, was previously calculated as fifteen days’ average
mines or ports, regardless of the number of pay for every completed year of continuous service,
workers engaged therein. With respect to factories, or any part thereof in excess of six months.
the OSHW Code applies to: i) factories wherein 20
or more workers are engaged in the manufacturing
process carried out with the aid of power; ii)
factories wherein 40 or more workers are engaged
in the manufacturing process carried out without
the aid of power.
The OSHW Code imposes certain new obligations

on employers, such as the obligation to conduct
free health checkups for a certain class of
employees, duty to issue appointment letters to
every employee, and an obligation to report certain
accidents and diseases. Further, the employer
shall also provide separate bathing places and
locker rooms for male, female and transgender
employees.

iI. HIRING PRACTICES
1. Requirement for be received in India, or income accrues or arises/
deemed to accrue or arise to them in India. There
Foreign Employees to are certain other tax exemptions prescribed under
the relevant Double Taxation Avoidance Agreement
Work executed between India and the concerned host
country.
Once foreign companies set up an entity in India,
they often prefer to appoint employees from their
home country or headquarters for the management
b. Social Security
and control of the Indian business. This is done Contributions
mainly for the convenience of co-ordination with
the parent company in terms of decision-making, It is important to note that the EPF Act also extends
financial management and other business matters. to a category of employees called ‘international
This movement of employees could be undertaken workers’ (“IWs”). An IW is defined both in an
by way of secondment or transfer. There are three inbound (i.e. in the context of foreign employees
broad considerations that must be kept in mind, coming to India) and outbound context (i.e. Indian
in either of the approaches: (i) income tax issues; employees going abroad). An IW (inbound) is
(ii) social security contributions; and (iii) visa a person who holds a passport other than an
considerations. Indian passport and comes to work for an Indian
establishment that is covered under the EPF Act.
It is important to note that the EPF Act makes no
a. Income Tax Issues distinction between a foreign worker on deputation
to India and a foreign worker who is transferred to
It is imperative that any secondment/transfer of
India. All IWs (inbound) are required to contribute
employees be structured appropriately, so as to
to the EPF, unless they are ‘excluded employees’.
minimise any permanent establishment risks for
Exclusion from EPF contributions is only granted if
the foreign entity in India. Also, the tax treatment
the IW contributes to a social security program in
of any service fee paid/reimbursement of expenses
his/her host country which has executed a social
by the Indian entity to the foreign company must
security agreement (“SSA”) with India.
be analysed well in advance given that this area has
often been the subject of scrutiny by tax authorities.
There are certain significant differences between
Further, the tax position of the individual in India
EPF contributions in respect of IWs (inbound) and
must also be examined – this would depend on his/
domestic employees. For instance, such IWs are
her tax residential status as specified under the
required to contribute to the EPF on their ‘full
Income tax Act, 1961 (“ITA”). In terms of the ITA,
salary’ and not merely ‘basic wages’. There are
an individual is said to be resident in India if he/
also differences in case of timing and manner of
she has been physically present in India for a period
withdrawal of EPF contributions.
of 182 days or more in the relevant financial year.
However, the Finance Act of 2020 has reduced the
abovementioned time period to 120 days for Indian c. Visas
citizens and person of Indian origin with a total
income, other than income from foreign sources, Business visas to India are given strictly only for
of more than INR 1.5 Million (~USD 20,453) ‘business purposes’, such as sales or establishing
contact on behalf of the foreign company in India.
Indian tax residents are subject to tax in India on Like most other jurisdictions, business visas in India
their global income, while non-residents are subject cannot be used for any direct revenue generating
to tax only on income that is received/deemed to work or employment in India. There is a separate

employment visa category for employees coming b. Engagement of the
to work at an Indian establishment, which is
granted based on the sector and the term of the Representative or Sales Person
assignment. There are certain additional conditions as an Independent Contractor
prescribed in this regard, including that the foreign
national must draw a salary in excess of USD 25,000 Here, the arrangement between the representative
per annum. Foreign nationals, including their family and the foreign employer will be that of a ‘contract
members, who intend to stay in India for more than for services’. A contract for services implies an
180 days, must register with the Foreign Regional agreement wherein one party undertakes to provide
Registration Office (“FRRO”) within 2 weeks of services to or for another in the performance of
arrival in India. For the purposes of registration, the which he is not subject to detailed direction and
individual is required to make an application in the control, but exercises professional or technical
prescribed form and be present in person at the skill and uses his own knowledge and discretion as
time of registration. appropriate. Such independent contractors would
typically not be entitled to any social security
benefits (as they will not be considered employees)
2. Does a Foreign and would have to pay their own taxes in India.
Employer need to However, it is important to note that in the event
the foreign employer engages personnel in India by
Establish or Work way of method 1 or 2, there is a risk of the foreign
employer having a permanent establishment in
through a Local Entity India; accordingly, this arrangement would have to
be structured appropriately and the tax implication
to Hire an Employee? with respect to the same will need to be identified.
Foreign employers may often have requirements

wherein they might need to engage a sales person, 3. Limitations on
representative or agent in India, even though they
may not have a place of business in India. Also, the Background Checks
foreign employer may not intend to immediately
generate any revenue in India. In such a scenario, Employers are increasingly conducting background
the foreign employer need not mandatorily set up checks to guard against inaccurate resumés,
a local entity in India. There are various methods overstated work experience and any employee
through which the foreign employer may engage/ behavioral issues. Typically, employers issue an
hire representatives or an agent in India depending offer letter, conduct background checks, and
on the exact business requirements. expressly state that the person’s employment with
the organisation is contingent upon his/her clearing
the background checks, and vetting of educational
a. Engagement of the and job qualifications. However, the permission
Representative or Agent of the concerned employee would be required to
through a Manpower Agency conduct a background verification. In terms of the
Information Technology Act, 2000 and Information
This is a model where the foreign employer enters Technology (Reasonable Security practices and
into an arrangement/agreement with a manpower procedures and sensitive personal data and
agency in India, which would provide certain information) Rules, 2011 (“IT Rules”), which is
services to the foreign employer through identified the governing legislation on data protection,
employees of the manpower agency. However, the any company collecting, using, or disclosing any
manpower agency would be required to satisfy the personal information of an employee/prospective
following obligations as part of the arrangement: i) employee, will require such person’s consent.
processing of salaries for the identified individuals; Further, the employer’s compliance requirements
and ii) undertaking all legal compliances for the under the Personal Data Protection Bill, 2019, which
identified individuals on account of being their is likely to come into effect in 2021, will need to be
employer, including under all Indian employment examined for purposes of conducting background
laws and taxation laws. checks on employees.

4. Restrictions on most employers in India conduct at least basic
(education, job history) background verification of
Application/Interview prospective employees in accordance with the IT
Rules and/or ask prospective candidates to disclose
Questions specific information as a condition precedent to
the employment relationship.
Given Constitutional safeguards against
discrimination on the grounds of religion, race,
caste, sex, and place of birth, it is imperative
that employers bear these principles in mind
while conducting background verifications and
job interviews. Excessively personal questions
are generally not advisable. The IT Rules apply
to the collection of personal information during
background verifications and during the interview
process as well. In terms of the IT Rules, at the
time of application, the employer must inform
the concerned person of: i) the fact that his/
her personal information is being collected; ii)
the purpose for which the information is being
collected (i.e. verification of credentials); and iii)
the intended recipients of the information (i.e. the
employer and/or the third-party service provider
who conducts background checks).
The IT Rules further state that where any Sensitive

Personal Data or Information (“SPDI”) is sought to be
collected (such as passwords, financial information,
bank account or payment instrument details,
details of health conditions, sexual orientation,
medical records and history), the same can be
collected only for a lawful purpose connected
with a function or activity of the company,
and the collection of this information must be
necessary to achieve such purpose. This purpose
must be notified to the prospective employee in
the application/background verification form/
during an interview, and his/her consent must be
obtained. It may be noted that the IT Rules permit a
person to withdraw consent at any stage, in which
case the company would be required to return the
SPDI and not store or transfer the same any further.
The IT rules prescribe certain additional safeguards
for collecting, storing, processing, and transferring
SPDI; for instance, the IT Rules state that any
SPDI collected by a company cannot be stored/
retained longer than required for the purpose of its
collection, except under any applicable law.
Apart from the above, it may be noted that Indian

labour and employment laws are largely silent as to
the process of selection and hiring of employees in
the private sector. In any case, as market practice,

iII. EMPLOYMENT
CONTRACTS
1. Minimum days’ prior written notice (for certain States like
West Bengal, Telangana and Andhra Pradesh,
Requirements the above notice requirement is 42 days). If any
workman challenges the proposed changes before
While the current labour laws in India do not the labour courts during this period, it is likely
strictly require that an employment contract that the said change will be suspended, pending
be in writing, it is predominant market practice resolution of the dispute by the court.
(with very rare exceptions) to have all terms and
conditions of employment agreed and signed by
both parties. A few States however, have specific
2. Fixed-term /Open-
legislation that necessitate a written contract ended Contracts
in order to establish an employer-employee
relationship. From the perspective of certainty Fixed-term employment contracts are permitted
and enforceability, it is strongly recommended in India, as long as the employer is employing
that all employment contracts be in writing, the person for a short-term requirement. The
whether as a simple appointment letter or a fully Government has recently stated that fixed-term
detailed contract, setting out relevant terms and contracts will be permitted across sectors; earlier,
conditions agreed to between the employer and they were expressly permitted only in the apparel
employee. Employment contracts are governed by manufacturing sector. However, it is unlikely
the Contract Act; accordingly, provisions stipulated that employers will be able to convert existing
therein with respect to parties being competent permanent positions into fixed-term employment
to contract, consideration, and validity, would be positions.
applicable to employment contracts as well.
In the context of fixed-term employment contracts,
Employment contracts in India are generally the Indian judiciary has consistently held that
considered to be ‘unlimited term’ contracts, successive fixed-term contracts cannot be used
(i.e. contracts that are valid until termination or as a substitute for employing the person on a
superannuation, unless specifically identified as ‘permanent’ or ‘unlimited term’ basis and that
a ‘fixed term’ contract). Some of the common fixed-term employment is not to be used in job
provisions included in an employment contract are: roles or functions that are permanent in nature,
i) location, description and title of the job; ii) date as far as the particular employer or industry is
of commencement, duration (whether fixed term concerned. Fixed-term employment contracts
or unlimited term) and type (whether part-time or may be signed directly between the employer and
full-time) of the job; iii) details of any probationary employee or created through use of a contractor
period; iv) leave entitlement; v) salary details and under the provisions of the CLRA. Expiry of a fixed
other benefits; vi) terms governing termination of term contract will typically not be considered
employment; vii) restrictive covenants; and viii) ‘retrenchment’ under the provisions of the ID Act;
governing law and dispute resolution. thus, the compliances pertaining to retrenchment
would not have to be undertaken in this case.
As discussed above, it is important to note that for
‘workmen’, some employment terms and certain
service conditions can only be changed with 21

3. Trial / Probation Additionally, any notice period prescribed under
the relevant S&E Acts, as well any requirements
Period under the relevant employment contract in this
regard would have to be taken into account. Given
Indian law permits new employees to be placed that India does not recognise the employment at-
on a trial or ‘probation’ period. Such period is will doctrine, judicial precedents have held that
meant to provide employers the opportunity to termination of employment without providing
assess the abilities and suitability of the employee any prior notice would render the contract of
to the organisation; and hence, by definition, employment as an ‘unconscionable bargain’, and
allow the employer greater freedom to terminate hence illegal.
employment if the employee is found unsuitable
during the probation period. The IESO Act envisages
a probation period of 3 (three) months – this is
largely followed by companies that are not subject
to the IESO as well. The general market trend in
India is to have a probation period between 3 and
6 months, especially in the technology and services
sectors.
During the probation period, the employer will

usually have the right to terminate employment
of the probationary employee without providing
any notice; however, this would be subject to
the stipulations of the concerned S&E legislation
as well. At the end of the probation period, the
employee may be ‘confirmed’ as a permanent
employee or dismissed. Terms with respect to an
employee’s probation period should be adequately
captured under his/her employment agreement/
appointment letter.
4. Notice Period
In terms of Indian labour legislation, ‘workmen’
who have undertaken at least 1 year of continuous
service are entitled to a notice period of 1 month,
or equivalent wages in lieu thereof. In addition, the
employer would be required to pay ‘retrenchment
compensation’ to the workman, which is calculated
at the rate of 15 days’ wages for every completed
year of service. Further, for industries having
more than 100 workmen (300 workmen in certain
States), the above notice period requirement may
differ and there may be certain other compliances
with respect to undertaking a retrenchment
exercise. However, no notice period (or payment
in lieu thereof) or payment of retrenchment
compensation is required in the case of workmen
dismissed for misconduct, provided the employer
conducts an internal inquiry prior to such dismissal.

IV. WORKING
CONDITIONS
1. Minimum Working child nursery facilities, canteens, wholesome
drinking water, toilets, washing facilities, and first
Conditions aid. It is pertinent to note that if the contractor
does not provide these facilities, the onus would
Requirements in this regard are principally fall on the principal employer.
stipulated in the concerned S&E Acts, the FA Act,
the IESO Act and the CLRA. The S&E Acts have
stipulations relating to working hours, overtime,
2. Salary
intervals of rest, provision of basic amenities
Although the words ‘wages’ and ‘salary’ are
such as drinking water, toilets, first aid facilities,
commonly used interchangeably, there is a
etc., for employees at shops and commercial
discernible difference between the two. The
establishments. The Standing Orders formulated
term ‘wages’ is used under labour/employment
as per the IESO Act also have stipulations with
laws to refer to any and all remuneration and
respect to work timings, leave, overtime, holidays,
emoluments earned by an employee (excluding
for industrial establishments engaging more than
certain allowances and bonuses) whereas the term
100 workmen (the threshold may be different for
‘salary’ is used under income tax law to denote the
certain States).
total taxable income received by an employee. It is
important to note that currently, different labour
The FA has extensive provisions in respect to the
laws have dissimilar definitions of wages. However,
health, safety and welfare of workers engaged in
the same is likely to be remedied under the Code
manufacturing establishments – these compliances
of Wages, which provides for a uniform definition
vary depending on the number of workmen
of wages, which would then have to be closely
engaged. For instance, in industrial establishments
examined.
where 250 or more workmen are employed, the
employer has to provide for a canteen. Suitable
For instance, the EPF Act refers to ‘basic wages’
shelters or rest rooms, and lunchrooms with
which is used as the base for computing employee
drinking water facilities are to be provided where
and employer social security contributions. Basic
150 workmen are employed. Factories wherein 30
wages are defined as all payments which are earned
or more women workers are ordinarily employed,
by an employee in accordance with the terms of the
are to be equipped with creche facilities/nurseries
employment contract, but does not include: i) the
for children under the age of 6 years. There are
cash value of any food concession; ii) any dearness
also provisions regarding toilets, washing places,
allowance (i.e. cash payments paid on account of
temperature control mechanisms, adequate
a rise in the cost of living), house-rent allowance,
ventilation, lighting in the workrooms, painting
overtime allowance, bonus, commission or any
of factory walls, doors and windows, cleaning of
other similar allowance; and iii) any presents made
floors, effective removal of dirt and refuse, etc. The
by the employer.
FA Act envisages certain precautions to be taken
against explosives, inflammable gases, dangerous
The Wages Act on the other hand, has a much
fumes and gases and fire.
wider definition of wages; here ‘wages’ is defined
as all remuneration (whether by way of salary,
Under the CLRA Act, the contractor is required to
allowances, or otherwise) expressed in terms of
provide certain facilities, which include rest rooms,
money or capable of being so expressed, which

would, if the terms of employment, express or
implied, were fulfilled, be payable to a person
4. Overtime
employed in respect of his employment and
As described above, employees working longer
includes: i) any remuneration payable under
than 9 hours a day or 48 hours a week are typically
any award or settlement between the parties or
entitled to overtime payments. An employee
order of a Court; ii) any remuneration to which
working ‘overtime’ becomes entitled to wages at
the person employed is entitled in respect of
the rate of twice his/her ordinary rate of wages and
overtime work or holidays or any leave period; iii)
could also be entitled to a compensatory time off.
any additional remuneration payable under the
This would however have to be analysed further;
terms of employment (whether called a bonus or
given that there are some States which also prohibit
by any other name); iv) any sum which by reason
overtime work, except in limited circumstances.
of termination of employment is payable under
any law, contract or instrument; and v) any sum to
which the person employed is entitled under any 5. Health and Safety in
scheme framed under any law for the time being
in force. the Workplace
The following are excluded: i) any bonus (whether a. Employer’s Obligation to
under a scheme of profit sharing or otherwise)
which does not form part of the remuneration Provide a Healthy and Safe
under the terms of employment or which is not Workplace
payable under any award or settlement between
the parties or order of a Court; ii) the value of any An employer’s health and safety obligations
house-accommodation, or of the supply of light, towards its employees are far more extensive in the
water, medical attendance or other amenity or manufacturing sector and in certain other sectors
of any service excluded from the computation of such as mines and building and construction.
wages by a general or special order of the State The various State-specific S&E Acts have special
Government; iii) any contribution made by the provisions with respect to ensuring safety of
employer to any pension or provident fund, and women who work during night shifts. Employers
the interest accrued thereon; iv) any travelling in such cases are required to ensure that adequate
allowance or the value of any travelling concession; security and transport facilities are provided (at
v) any sum paid to the employed person to defray their own cost) to female employees.
special expenses entailed on him by the nature of
his employment; or vi) any gratuity payable. As described above, the FA Act read with State
specific rules thereunder has elaborate provisions
regarding health and safety of workmen. These
3. Maximum Working stipulations include maintaining cleanliness,
Week disposal of wastes and effluents, provision of clean
drinking water and toilets, ensuring a temperature
control mechanism so as to prevent any injury to
This would be subject to stipulations in the State
health of workmen, ensuring adequate lighting and
specific S&E Acts in cases of shops and commercial
ventilation, measures to prevent inhalation of dust
establishments and the FA Act for establishments
and fumes, regulation of artificial humidification,
in the manufacturing sector. As a general principle,
measures to prevent overcrowding on factory
employees cannot be required to work in any
premises, construction and proper maintenance
establishment for more than 9 hours a day or
of floors, stairs, passages and ensuring that they
48 hours a week, without attracting overtime
are obstruction free for the safety of the workers,
payments. In order to overcome the economic
fencing of dangerous machinery, providing suitable
crisis in times of pandemic, certain States have
gear or appliances, driving belts and other safety
increased the permissible limits of working hours
devices. The FA Act also envisages precautions to
for employees, subject to certain conditions and
be taken against explosives, inflammable gases,
restrictions.
dangerous fumes, gases and fire. Non-compliance

with provisions of the FA attracts both monetary companies must take interim measures to protect
penalty and imprisonment. the complainant from any retaliation at the
workplace. Most employers do have stipulations in
In addition, the ESI Act and the Employees their employee handbooks / internal policies that
Compensation Act, 1923 (“ECA”) also address address employee complaints and protection from
compensation and other benefits that the employer any retaliation in this regard.
must provide employees in contingencies such
as maternity, temporary or permanent physical
disablement due to injury arising in the course of
employment that results in loss of wages or earning
capacity, death due to employment injury, as well
as medical care to workers and their immediate
dependents.
Given changing economic requirements in recent

times, especially in light of the ongoing COVID-19
pandemic, the Indian Government has been
increasingly conscious of the needs of businesses as
well. In the last 6 months, the Indian Government
has already brought in certain significant changes
in labour laws with the aim of improving the ease
of doing business in India. Further, there are several
other big-ticket reforms in the pipeline, which we
hope will see the light of day in the near future.
b. Complaint Procedures
In the terms of the ISEO Act, employees are
required to frame grievance redressal mechanisms
to address individual worker complaints. Also,
under the FA where there are 20 or more workmen,
a grievance committee is to be constituted in
the manner prescribed. In any case as a general
practice, most employers do have an internal
complaint mechanism that details the processes
employees must follow, in case of any workplace
related issues. It is also important to note that
India has a standalone legislation pertaining to
sexual harassment at the workplace – the Sexual
Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013 (“SHW Act”) –
which prescribes a detailed complaint mechanism
for instances of sexual harassment, that all Indian
establishments must adhere to.
c. Protection from Retaliation

India does not have extensive provisions
regarding protection of employee complainants
/ whistleblowers, that apply to establishments
in the private sector. However, the SHW Act
stipulates that during the pendency of any inquiry,

V. ANTI-DISCRIMINATION
LAWS
1. Brief Description of The SHW Act defines the terms ‘sexual harassment’
broadly to include any of the following unwelcome
Anti-Discrimination acts or behavior: i) physical contact and advances;
or ii) demand or request for sexual favors; iii)
Laws making sexually colored remarks; or iv) showing
pornography; v) any other unwelcome physical,
In the context of private sector employment, India verbal or non-verbal conduct of a sexual nature.
currently does not have a comprehensive legislation
that addresses workplace discrimination, except in In addition, the SHW Act also identifies certain
relation to sexual harassment and in the context of circumstances which, if occurring in conjunction
persons with disabilities and with HIV, and in the with sexual harassment (as defined in the SHW
context of protection of transgender persons from Act), would provide strong evidence that an
discrimination under the Transgender Act. offence has been committed. Such circumstances
are: i) implied or explicit promise of preferential
Further, there are principles set out by the Indian treatment in employment; or ii) implied or explicit
judiciary that seeks to protect employees from threat of detrimental treatment in employment; iii)
discrimination and harassment at the workplace. It implied or explicit threat about present or future
is also important to note that that most new-age employment status; or iv) interference with work or
employers in India already cover these subjects creating an intimidating or offensive or hostile work
comprehensively as part of their internal policies/ environment; or v) humiliating treatment likely to
employee handbook. affect one’s health or safety. It is important to note
that the protections provided under the SHW Act
a. SHW Act extend beyond the parameters of the traditional
employee-employer relationship. For example,
As discussed above, the SHW Act provides for a the ‘aggrieved woman’ need not necessarily be an
detailed complaint and inquiry mechanism in case employee - she could be any woman who may be
of sexual harassment complaints at the workplace. subject to sexual harassment at a workplace. The
Though it is not an anti-discrimination legislation term ‘workplace’ is also defined broadly to include
per se, the SHW Act recognises that women may be not only the usual place of employment, but any
especially vulnerable to workplace discrimination place visited during the course of employment,
and harassment – thus, the scope of the SHW Act including any transportation provided by an
only extends to complaints raised by ‘aggrieved employer. Further, as working from home has
women’ that pertain to the ‘workplace’ (it is become the new norm amidst the COVID-19
important to note that the SHW Act is not a gender- pandemic, the ambit of the term ‘workplace’ has
neutral legislation). That said, several companies also been expanded.
do frame gender neutral policies on both general
and sexual harassment. The SHW Act requires an b. Other Legislation
employer to formulate an anti-sexual harassment
policy for the effective redressal of complaints Other laws address workplace discrimination issues
pertaining to sexual harassment. in the private sector by prohibiting acts such as:
i) refusal of / obstructing employment solely on

the grounds of a person belonging to a socially stipulates that male and female employees who
backward community; ii) deducting salary or perform similar tasks must be paid equal wages,
dismissing women employees while on maternity and also mandates that employers are prohibited
leave; iii) payment of unequal wages to men and from discriminating against women in matters of
women employees performing similar tasks; iv) recruitment, promotions and transfers. The Code
discriminating against persons with disability on Wages, which has yet to come into force, also
(as prescribed under the Rights of Persons with grants similar protections to employees. Further,
Disabilities Act, 2016 (“RPD”); v) discriminating women employed in labour intensive industries
against persons with HIV, as further provided under such as factories and construction sites, can work
the Human Immunodeficiency Virus and Acquired fewer hours than male employees. The MB Act also
Immune Deficiency Syndrome (Prevention And has stipulations protecting women from dismissal,
Control) Act, 2017 (“HIV Act”); vi) discriminating while on maternity leave.
against transgender persons in relation to matters
associated with employment, such as recruitment, Under the RPD, the head of the establishment has
termination, promotion, etc. as prescribed under the responsibility of ensuring that persons with
the Transgender Act. The recent trend is that most disabilities are not discriminated against. In case
companies, irrespective of size, have far more strict any complaint is received in this regard, the head
internal policies with reference to the workplace of the establishment shall either initiate action in
discrimination issues, than what is required under the manner specified under the RPD / inform the
various statutes. concerned person as to how the ‘impugned act or
omission is a proportionate means of achieving a
It is also pertinent to note here that the ID Act legitimate aim’.
prohibits commission of certain ‘unfair labour
practices’, which include: discrimination against Under the Transgender Act, establishments
any workman for filing charges or testifying against are prohibited from discriminating against any
an employer in any inquiry or proceeding relating transgender person with respect to matters
to any industrial dispute or discriminating against related to the employment of such persons. The
workmen by reason of their being members of a Transgender Act also requires an establishment
trade union and/or showing favoritism or partiality to designate a complaint officer who would
to one set of workers regardless of merit. be responsible for the redressal of complaints
pertaining to violations of the Act. The Transgender
There have also been attempts by the Central Act also requires an employer to provide the
and State Governments to introduce ‘quotas’ necessary facilities to transgender persons.
/ reservation of posts in the private sector,
for members of particular socially backward
communities. However, this has been resisted in 3. Protections Against
the past, and it is unlikely that such measures will
be implemented in the future due to its sensitivity
Harassment
and other contemporary political and sociological
circumstances. a. SHW Act Procedures
Every employer is required to constitute an
2. Extent of Protection Internal Complaints Committee (“ICC”) that will
inquire into sexual harassment complaints. The
India currently does not have a single comprehensive ICC shall consist of: (i) a presiding officer who
legislation on discriminatory practices at the will be a senior women employee; (ii) at least 2
workplace; instead, there are various laws that employees preferably committed to the cause of
prohibit certain kinds of discriminatory practices women or who have had experience in social work
and protect the interests of vulnerable communities or have legal knowledge; (iii) an external member
such as workmen, women, persons with HIV and from amongst non-governmental organisations or
AIDS, persons with disabilities, transgender persons associations committed to the cause of women or
and members of certain socially backward classes. an external counsel familiar with issues relating to
For instance, with respect to women, the ERA sexual harassment. This external counsel can either

be a social worker with at least five years’ relevant internal policies, provisions of the IESO Act, and
experience or a person familiar with labour, service, stipulations under the FA that mandate the setting
civil or criminal law. At least half of the ICC members up of a grievance redressal committee. Typically,
shall at all times be women, and the term of the ICC the internal policies clearly stipulate the conduct
members shall not exceed 3 years. that would amount to harassment, the manner
of conducting an internal inquiry and nature of
The broad process followed by an ICC will be as disciplinary action that would be undertaken,
follows: (i) Upon receipt of a complaint, if the depending on the seriousness of the conduct.
complainant is agreeable, the ICC may attempt
to settle the matter by way of conciliation. If a
settlement is arrived at, the ICC need not conduct 4. Employer’s
an inquiry; (ii) If the ICC conducts an inquiry, it
should be conducted as per the general rules of
Obligation to
the organisation and in accordance with principles Provide Reasonable
of natural justice. A quorum of 3 ICC members is
required for conducting the inquiry, which has Accommodations
to be completed within 90 days. In the course
of conducting the inquiry, the ICC is vested with This is again governed mainly by the internal
the powers of a civil court under Indian laws. policies of an organisation – however, the SHW Act,
Accordingly, the ICC can summon and enforce the RPD and HIV Act have certain stipulations in this
the attendance of any person and examine him/ regard. In terms of the RPD, employers are required
her on oath, and also require the discovery and to ensure compliance with certain accessibility
production of documents. The parties cannot, at standards, such as: (i) standards for public buildings
any stage, bring in a legal practitioner to represent as specified in the ‘Harmonised Guidelines and
them before the ICC; (iii) Upon completion of the Space Standards for Barrier Free Built Environment
inquiry, the ICC shall prepare a report with its for Persons With Disabilities and Elderly Persons’ as
recommendations, and submit the same to the issued by the Government of India; (ii) standards
employer within a period of 10 (ten) days. It is for Bus Body Code for transportation system as
imperative that the ICC records detailed reasons specified in the relevant Government of India
for arriving at its conclusion and recommendations. notification; (iii) website standards as specified in
The management is required to act upon the ICC the guidelines for Indian Government websites, as
recommendations within 60 days from receipt of adopted by Department of Administrative Reforms
the inquiry report. and Public Grievances, Government of India; (iv)
ensuring that the documents to be placed on
While inquiry proceedings are ordinarily conducted websites are in the Electronic Publication (ePUB) or
face-to-face, with parties and witnesses physically Optical Character Reader (OCR) based pdf format.
appearing for the meeting, in certain circumstances,
especially during the on-going pandemic, the Under the HIV Act, every establishment engaged
ICC may allow the parties or witnesses to appear in healthcare services and those where there is a
through video conference or by telephonic means, significant risk of occupational exposure to HIV, is
subject to certain conditions and considerations. required to ensure a safe working environment.
In terms of the SHW Act, employers have the
The SHW Act also prescribes other obligations of obligation to provide a safe working environment
an employer, including conducting periodic training which shall include safety from persons coming
and ensuring that the workplace has adequate into contact at the workplace.
safety arrangements.
5. Remedies
b. General Harassment
Each of the statutes listed above have a different
Cases of general harassment (provided they are mechanism, and also penalties in case of non-
not criminal offices under the Indian Penal Code, compliances by employers – these penalties
1860) are typically governed by the establishment’s extend to monetary fines, imprisonment and even

cancellation of any Government registration for
carrying out their business.
For instance, if an employer commits any ‘unfair

labour practice’ as defined under the ID Act,
workmen have the right to approach the concerned
labour court / industrial tribunal. In terms of the
SHW Act, women employees can approach the ICC
/ file a complaint on a portal (www.shebox.nic.in).
In terms of the RPD, persons with disabilities can
also approach the Central / State Commissioner for
Disabilities.

VI. PAY EQUITY LAWS
1. Extent of Protection been filed by an employee, alleging violations of
the provisions of the ERA.
In India, the Equal Remuneration Act, 1976 or the
ERA mandates the payment of equal remuneration 3. Enforcement/
to male and female workers undertaking similar
tasks or work of a similar nature. The ERA also Litigation
provides for the prevention of discrimination on
grounds of sex against women in matters connected Over the years, the principle of equal pay for equal
with respect to employment, such as recruitment, work has evolved through judicial precedents.
promotion, etc. This legislation not only provides Indian Courts have held that discrimination based
women with a right to demand equal pay, but also on gender only arises when men and women
holds employers accountable for any violation of perform the same work or work of a similar nature.
the ERA. For differences in educational qualifications or
for those relating to responsibility, reliability or
While the ERA extends protective provisions in favor confidentiality, the principle of equal pay for equal
of women, the Code on Wages has taken a gender- work would not apply.
neutral approach and prohibits discrimination on
the grounds of gender in matters relating to wages. The constitutional principle of ‘equal pay for
equal work’ has been upheld by Indian Courts
The principle of ‘equal pay for equal work’ has also with respect to temporary employees’ vis-à-vis
been enumerated under Article 39 (d) of the Indian permanent employees in the government sector,
Constitution, which requires the State to strive for where temporary employees performing similar
securing equal pay for equal work, for both men duties and functions as permanent employees, are
and women. entitled to draw wages at par with similarly placed
permanent employees. The principle is required to
be applied in all cases where the same work is being
2. Remedies performed, irrespective of the class of employees.
Under the ERA, an employee has the right to file

a complaint with the concerned labour authorities
with respect to contravention of the provisions of
the ERA on the part of the employer, or for claims
that arise out of non-payment of wages, at equal
rates, to men and women. The appropriate labour
authority, after verifying the merits of the case,
may initiate an inquiry into this matter and take the
appropriate action (as it may deem fit).
Further, under the ERA, employers are required

to maintain registers which should contain the
particulars of the remuneration of its employees.
The inspector appointed under the ERA has the
right, at any point in time, to inspect the register
if there is any suspicion of a violation of the ERA
on the part of the employer, or if a complaint has

VII. SOCIAL MEDIA
AND DATA PRIVACY
1. Restrictions in 2. Employee’s Use
the Workplace of Social Media
India is also in the process of framing a to Disparage the
comprehensive legislation on data protection,
which would certainly have an impact on the
Employer or Divulge
employer’s right to monitor and review employees’ Confidential
electronic communications.
Information
a. Can the Employer Monitor, While there are no specific laws that govern
Access, Review the Employee’s employees’ use of social media, any disparagement
Electronic Communications? of employers and/or any divulging of confidential
information would attract consequences under
In terms of the IT Rules, employers can access, existing civil and criminal laws that govern
review and monitor an employee’s official defamation, breach of contract, divulging trade
electronic data (i.e. work-related data) subject to secrets and infringing intellectual property. Further,
obtaining his/her consent, as clearly stipulated in keeping in mind the rapidly evolving regulatory
the concerned employment contract / appointment framework in relation to technology laws and data
letter and internal policy / employee’s handbook. protection, employers are also defining policies
Employers would also have to formulate a privacy that would affect their employees’ participation
policy and upload the same on its website and on social media during work hours. Several
the intranet. This privacy policy would detail all companies, especially technology and outsourcing
its obligations regarding collecting, storing, and companies, have installed firewalls that prevent
processing of employees’ personal information. employees from accessing social media sites at the
Additional obligations are prescribed under the IT workplace, whereas several other companies have
Rules in case the employer collects / has access to defined social media usage policies that educate
‘sensitive personal information’ of employees such employees on the implications of misuse of social
as credit card information, biometric information, media (especially given that employers could be
passwords and medical records. Moreover, there held vicariously liable for any actions of employees
are a couple of landmark judgments in India on the in this regard).
fundamental right to privacy.
In addition, employers can include strong provisions
in their employment contracts / appointment letters
for protection of confidential information, trade
secrets, intellectual property, and other proprietary
information. Indian Courts, typically, take claims of
confidentiality breaches and disclosure of sensitive
information very seriously; it is an established

principle under Indian jurisprudence that an
employer has full and exclusive ownership of the
information that the employee comes in contact
with during the course of employment, including
any and all information contained in the employee’s
official email accounts. Also, employers can,
subject to obtaining employee consent, monitor
employees’ activities on social media during work
hours for the reasons outlined above.

VIII. TERMINATION OF
EMPLOYMENT CONTRACTS
1. Grounds for account of shortage of power, raw materials, break-
down of machinery, natural calamity or any other
Termination reason beyond the employer’s control. The ID Act
also prescribes conditions for transfer / closure of an
There are various modes of termination of undertaking that would result in redundancies.
employment that are recognised in India, including:
i) expiry of a fixed term contract / mutual separation; In case of retrenchment, depending on the number
ii) resignation by an employee; iii) retirement or of workmen engaged, employers are required to
superannuation; iv) layoffs, termination due to either notify/seek prior approval of the concerned
transfer of business/closure of an undertaking/ labour department. Also, employers are required to
organisational restructuring; and v) termination by provide employees who have been in service for at
an employer for ‘cause’. Termination for ‘cause’ may least 1 year, a notice of 1 or 3 months (or equivalent
involve one or more of the following: pay) and ‘retrenchment compensation’ calculated at
15 days’ wages for every completed year of service.
• established breach of employment contract and/ It is important to note that in case of retrenchment,
or internal policies; employers must follow the “last in, first out”
• employee having committed any criminal principle, wherein the employment of the shortest-
offence / authorities having initiated criminal serving employees will be the first to be terminated,
proceedings; unless the employer has justifiable reasons for not
• employee’s inability to fulfill material obligations doing so.
of his job;
• misconduct; In a layoff situation, prior approval of the concerned
• inefficiency/ poor performance, after undertaking Government may be required, and compensation
sufficient processes such as a performance would have to be paid, in the manner prescribed.
improvement plan; Laid off workmen can also be retrenched in the
• loss of confidence by management; and manner prescribed under the IDA. Provisions with
• abandonment of employment / continuous respect to layoffs under an organisation’s certified
absenteeism. Standing Orders (as may be applicable) or internal
policies, will also need to be taken into consideration.
2. Collective Dismissals The above stipulations are all in the context of

workmen – in case of managerial employees, there
‘Collective dismissal’ of employees is permitted under are no specific requirements under statute, and any
Indian labour laws, only in certain circumstances dismissal would be as per the terms of their contract.
and upon satisfaction of specified conditions. In this
context, the ID Act describes the following processes
with respect to workmen: i) ‘retrenchment’, which 3. Individual Dismissals
is defined as termination of workmen’s services
for any reason whatsoever, otherwise than as As per the IDA, any dismissal of an individual
punishment inflicted by way of disciplinary action; workman would also be considered ‘retrenchment’
ii) ‘layoffs’, which is defined as the failure, refusal or as described above. Accordingly, (depending on the
inability of an employer to employ a workman, on number of workmen engaged at the establishment),
the employer would have to provide prior notice

of termination of either 1 month or 3 months, • gratuity in accordance with PG Act (i.e. 15 days
or equivalent wages in lieu thereof. In addition, wages for every completed year of service),
‘retrenchment compensation’ would have to be paid, subject to a maximum of INR 2 million (~USD
at the rate of 15 days’ wages for every completed 27270); and
year of service. • any other contractual dues, such as variable pay,
performance bonus, etc.
However, in case of employees who are dismissed
for misconduct (provided the employer conducts Termination initiated by employer: In case of
an internal inquiry prior to such dismissal) no prior termination for misconduct (which is established
notice of termination or retrenchment compensation as per the clear processes set out in the employee
would be required. handbook, policies, and employment contract), the
employer would be required to make the following
In the case of employees other than workmen (i.e. payouts:
managerial cadre), provisions of the employment
contract and the relevant S&E Acts would have to • all accrued and unpaid wages;
be considered. Since India does not recognise at-will • wages in lieu of accrued earned leave;
employment, termination of employment without • gratuity in accordance with PG Act, except
providing any prior notice at all (or equivalent pay) where (i) any willful act, omission or negligence
would typically render the contract of employment of the employee has caused damage to
as an ‘unconscionable bargain’, and hence, illegal. employer property; (ii) the employee has been
terminated for riotous or disorderly conduct or
Several States, such as Andhra Pradesh, Bihar, any other act of violence; or (iii) the employee
Punjab, Rajasthan and Karnataka have issued has been terminated for an offence involving
ordinances to relax the applicability of the ID Act moral turpitude committed in the course of
to certain establishments, such that provisions employment; and
relating to layoffs, retrenchment, closure of certain • any other contractual dues.
establishments, wherein the number of workmen
employed is not less than one hundred, has recently
been increased to three hundred workmen. In 4. Separation
addition to the above, some States have introduced
changes in the retrenchment compensation, which
Agreements
was previously calculated as fifteen days’ average
pay for every completed year of continuous service, a. Is a Separation Agreement
or any part thereof in excess of six months. required or considered Best
Practice?
a. Is Severance Pay Required?
While a separation agreement is not mandatory
Yes, a severance payment would have to be made by under Indian laws, it is increasingly being followed by
the employer. However, the quantum of the amount Indian companies, especially in cases of contentious
and the processes followed would be different, separations / separation of senior executives.
depending on specific circumstances. For instance:
Voluntary resignation: If the employee voluntarily

b. What are the standard
resigns, the employer must accept the same and provisions of a Separation
communicate whether the employee has to serve Agreement?
the notice period / the notice period has been
waived. In such an instance, the employer would be The key clauses in a separation agreement pertain
required to pay the following as part of severance to the employee releasing the company from all
pay: present and future liabilities with reference to
the employment relationship, assignment by the
• all accrued and unpaid wages; employee of any and all IP created in the course
• wages in lieu of accrued earned leave; of employment to the employer, the employee

agreeing to adhere to confidentiality obligations and
the employee returning all company property in his/
5. Remedies for
her possession or control. The reasons for separation Employee Seeking to
and the terms and conditions of severance, including
any separation consideration paid out and any Challenge Wrongful
benefits provided, should be accurately captured.
Termination
c. Does the age of the The remedies available for employees seeking to
employee make a difference? challenge a wrongful termination include:
No, there are no restrictions regarding age. However, • reinstatement of employment;

the employee must have attained the age of majority • back pay;
(18 years) as required under the Contract Act. • loss of wages and earning capacity;
• all other expenses.
d. Are there additional Workmen can approach the labour department and
provisions to consider? the industrial tribunal in this regard.
Yes, separation agreements should be customised

based on specific circumstances and should closely 6. Whistleblower Laws
reflect the terms of the employment contract /
employee handbook and internal policies. Such Currently, legislation in India concerning
customisation may be undertaken basis the following whistleblowers mainly pertains to listed companies
considerations: and the public sector. In terms of regulations
prescribed by the Securities and Exchange Board
• Is the termination part of a workforce reduction? of India (SEBI), companies listed on a recognised
• Is the termination part of a transfer of stock exchange in India have to devise an
undertaking? If so, is there any change to the effective whistleblowing mechanism that enables
employment terms? Are any employee benefits stakeholders, including individual employees and
being carried over? their representative bodies, to freely communicate
• Is the termination part of a disciplinary their concerns about illegal or unethical practices.
proceeding? Under the (Indian) Companies Act, 2013, certain
• Is there company information or equipment that categories of companies are also required to
the employee needs to return? constitute a ‘vigil mechanism’ for their directors and
• Are there any stock option related queries to be employees to report genuine concerns or grievances.
addressed?
• Does the employee have any specific The Whistleblowers Protection Act, 2014 (which
confidentiality obligations? has not yet seen the light of day, with further
• Is there a possibility of the employee disparaging controversial amendments being proposed) mainly
the employer and its other employees? governs alleged corruption and misuse of power by
• Should the employee be offered ‘garden leave’? public servants and seeks to protect persons who
expose alleged wrongdoings in government bodies,
Depending on the responses to the above questions, projects and offices.
corresponding provisions should be added to the
separation agreement. It is also important to note that India has recently
amended its Prevention of Corruption Act, 1988,
wherein the giving of a bribe by any person
(including the private sector) to a public servant for
an improper performance of public duty, has now
been made an offence (penalties extend to fines and
imprisonment), whereas previously, only the receipt
of a bribe by a public servant was covered.

IX. RESTRICTIVE
COVENANTS
1. Definition of b. Non-solicitation of
Customers and Suppliers
Restrictive Covenants
A non-solicitation clause is intended to ensure
Companies in the ‘knowledge industry’ place high that an employee does not induce the employer
value on their intellectual and human capital. Key company’s customers, suppliers, or clients away
employees who develop the intellectual property of from the company, typically after such employee
the company, and those who have close interactions leaves his/her employment.
with customers and suppliers (such as sales staff),
are critical to the growth and development of the
company, and on many occasions, the company may c. Non-solicitation of
be reliant on the personal attributes and market Employees
knowledge of such employees in order to improve its
market base. Therefore, companies look to protect A non-solicitation clause may also prevent an ex-
their business interests by prescribing certain employee from inducing any current employees to
restrictions for their employees – these clauses in resign from employment with the company and join
employment contracts which place restrictions on the company where such ex-employee is currently
certain activities of employees, either during or employed (or any other company), at his/her
after their employment, are ordinarily referred to as direction (including any competitor of the company).
‘restrictive covenants’.
3. Enforcement of
2. Types of Restrictive
Restrictive Covenants –
Covenants
Process and Remedies
a. Non-Compete Clauses As described in the earlier sections, the Constitution
guarantees every Indian citizen, a fundamental right
A non-compete clause is typically a restriction placed
to practice a trade or profession. Further, as per the
by the employer on an employee, pursuant to which
Contract Act, any contract which restrains trade,
the employee cannot indulge in any activity that
business or profession of any kind will be void. In
would be in direct competition with the business of
light of this, any restrictive covenant that extends
the employer. In nearly all employment contracts,
beyond the tenure of employment will not be looked
such restrictions are stipulated for as long as the
upon favourably by Indian Courts (but in any case,
employee is employed by the company; however,
are often incorporated into employment contracts
some employment contracts may also contain
as a deterrent measure). The courts are generally
clauses which will prevent the employee from joining
guided by the presumption that the employer is in
a competitor company, or starting a competing
a stronger bargaining position in comparison to the
business for a certain period, after the employment
employee, and the employee has no choice but to
with the company comes to an end. These clauses
typically accept the employer’s terms.
attain greater significance in case of promoter and/
or founder’s separation from the company.

However, there are certain principles laid down by
India’s judiciary that enable employers to protect
their legitimate business interests:
• employers can contractually restrict their

employees from misusing or disclosing the
employer’s trade secrets or confidential business
information and practices (and the enforceability
concerns with respect to restrictive covenants as
outlined above, will typically not apply in these
instances). Similarly, where the employee has a
motive to cheat or cause irreparable harm to the
employer, a restrictive covenant beyond the term
of employment would be enforceable.
• non-solicitation clauses may be valid if reasonable
restrictions (such as distance, time limit and
location) regarding non-usage of trade secrets
and goodwill are imposed on former employees,
depending on their designation and access to
confidential information. Courts have also held
that merely approaching customers of a previous
employer would not amount to ‘solicitation’ until
orders are placed by customers based on such
approach.
4. Use and Limitations

of Garden Leave
The concept of ‘garden leave’ is becoming common
in India. Typically, garden leave involves a situation
wherein an employee gives notice or is given notice
of termination, and during such notice period is
directed to stay away from work and/or the office
premises, whilst continuing to receive his normal
remuneration. Courts have held that while it is not
possible to stop an employee from leaving, he can
be restricted from joining a competitor during the
term of employment (i.e. during the garden leave
period). However, the garden leave provision should
not be unreasonable and should typically not extend
to inappropriately long periods of time.

X. TRANSFER OF
UNDERTAKINGS
There are specific provisions under ID Act, that
protect ‘workmen’ in cases of transfer of business
2. Requirements for
undertakings. These however do not extend to Predecessor and
non-workmen; thus, in case of non-workmen, the
terms of the employment contract and/or the Successor Parties
internal policies of the company would have to be
examined. The requirements mentioned above relate to
the obligations of the old employer (i.e. one
whose business undertaking is being transferred).
1. Employees’ Rights in However, if Section 25FF of the ID Act does not
Case of a Transfer of apply to the transfer of the undertaking in question
(i.e. for instance, the services of the employees
Undertaking are not ‘interrupted’ on account of the transfer or
alternatively, the employees resign and join the
In terms of Section 25FF of the ID Act, where the new employer), then the successor entity would
ownership or management of an undertaking is have to ensure that the salary and benefits that
transferred, whether by agreement or by operation the employees were entitled to under the old
of law, every workman who has been in continuous employer (such as provident fund, employee state
service with that undertaking for not less than insurance, gratuity) will continue to be paid. The
1 year, would be entitled to one month’s notice, EPF Act and ESI Act specifically provide for liability
or payment in lieu thereof, and to compensation of the successor entity, where the predecessor has
calculated at the rate of 15 days’ wages for every defaulted in remitting provident fund and state
completed year of service. insurance contributions, prior to the date of the
transfer of the undertaking.
However, Section 25 FF of the ID Act, would not
apply to workmen if:
• the service of the workmen has not been

interrupted by such transfer;
• the terms and conditions of service applicable to
the workmen after the transfer are not in any way
less ‘favourable’ than those applicable to them
immediately before the transfer; and
• the new employer is, under the terms of such
transfer or otherwise, legally liable to pay to the
workmen, in the event of their retrenchment,
compensation on the basis that their service has
been continuous and has not been interrupted by
the transfer.

XI. TRADE UNIONS AND
EMPLOYERS ASSOCIATIONS
1. Brief Description b. Key Associations under the
ID Act
of Employees’
and Employers’ In terms of the ID Act, establishments with 100
or more workmen have to constitute a ‘works
Associations committee’. The works committee should promote
measures for securing and preserving amity and
The ID Act and the Trade Unions Act have provisions good relations between the employer and workmen
relating to employer and employee associations at and, to this end, can comment upon matters of
an industrial establishment. common interest / concern and compose any
material differences of opinion that arise between
a. Trade Unions Act employers and workmen.
The Trade Unions Act defines a trade union as ‘any Establishments with 20 or more workmen have to
combination, whether temporary or permanent, set up a grievance redressal committee to address
formed primarily for the purpose of regulating individual employee grievances. However, if the
the relations between workmen and employers establishment already has a grievance redressal
or between workmen and workmen, or between mechanism in place for its workmen, it may not
employers and employers, or for imposing restrictive establish a separate grievance redressal committee.
conditions on the conduct of any trade or business’.
As described under Section 1 herein, at least 10% of The setting up of the works committee will not affect
the workmen or 100 workmen at the establishment the right of workmen to raise industrial disputes
(whichever is less, subject however to a minimum under the ID Act. Any workman who is aggrieved
of 7) must be members of the trade union at the by the decision of this committee can appeal to the
time of making an application for registration. employer, and the employer shall, within 1 month
The registration of a trade union under the Trade from the date of receipt of such appeal, dispose of
Unions Act must be distinguished from the process the same and send a copy of the decision to the
of ‘recognition’ of a trade union. Recognition is workman concerned.
the process through which an employer agrees to
negotiate with representatives of a trade union on There are other committees that have to be set
aspects such as working conditions, wages, etc. on up as per State rules framed under the ID Act. In
behalf of a particular group of workers. There are Gujarat for instance, a ‘joint management council’
certain State level rules with respect to recognition has to be formed in industrial establishments that
of trade unions; however the Trade Unions Act itself employ 500 or more workmen.
does not have extensive provisions in this regard.
Refusal by an employer to collectively bargain in
good faith with a recognised trade union (and vice
versa) qualifies as an ‘unfair labour practice’ as
defined under the IDA, attracting consequences
that include imprisonment and/or monetary
penalties.

2. Rights and 3. Types of
Importance of Trade Representation
Unions a. Number of Representatives
The Constitution of India guarantees the
fundamental right of all citizens to form associations The rules pertaining to each of the associations
or unions, including the right to form or join trade listed above, have detailed provisions regarding
unions. Some of the rights of registered trade their roles and responsibilities as well as the
unions are as follows: appointment of members. For instance, in case
of a works committee, the ID Act prescribes that
• immunity is granted to office bearers and it shall have an equal number of both employer
members from proceedings relating to criminal and employee representatives and shall not exceed
conspiracy, in instances where the trade union 20 members. Further, if the establishment has
has been engaged in furthering its objects. registered trade unions, then they would have to
• trade unions can maintain a separate fund for be consulted by the employer before finalising
political purposes from which payments may representatives from the workmen fraternity. A
be made for the promotion of civic and political grievance redressal committee on the other hand,
interests of its members. shall also consist of an equal number of employer
• trade unions can amalgamate with other trade and workmen representatives; however, the total
unions in the manner prescribed. number of members constituting the grievance
• agreements between members of a registered redressal committee shall not exceed 6.
trade union shall not be void or voidable merely
on account of the fact that any of its objects are b. Appointment of
in restraint of trade. Representatives
• no suit or other legal proceeding can be
maintained in any civil court against any registered In relation to a works committee, the employer
trade union or any office-bearer or member in representatives shall be nominated by the
respect of any act done in contemplation of a employer and shall, as far as possible, be officials
trade dispute to which a member is a party, on who are in direct touch with the working of the
the ground that such act induces some other establishment. Employee representatives must be
person to break a contract of employment, or chosen by way of voting in the manner prescribed.
that it interferes with the trade, business or In case the establishment has registered trade
employment of some other person or interferes unions workmen representatives on the works
with the right of some other person to dispose of committee should be divided into those who are
his capital or labour as he wills it. trade union members and those who are not. The
works committee should have a chairman, vice
Trade unions have immense significance both for chairman and two joint secretaries, who term of
the wellbeing of the industrial establishment and office shall be 2 years. The works committee should
for the society at large. Trade unions play a major meet at least once every quarter.
role in negotiating better work conditions for
employees, settlement of existing disputes and in The chairperson of the Grievance Redressal
reducing instances of industrial disputes, thereby Committee shall be selected from among the
maintaining an amicable relationship between the employer representatives and from the workmen
employer and the workforce. They can also assist in representatives alternatively, on rotation basis
the recruitment and selection of workers and help every year. There shall, as far as practicable, be
them adjust better to the organisational structure one female member on the grievance redressal
and hierarchy. committee, and depending on the total number
of members on the grievance committee, the
number of female members may be increased
proportionately.

4. Tasks and 6. Other Types
Obligations of of Employee
Representatives Representative Bodies
Though trade unions, works committees and As per the FA Act, in every factory where a hazardous
grievance redressal committees are all envisaged process takes place or where hazardous substances
to ensure greater participation of workmen in are used or handled, the occupier shall set up a
the running of an establishment, there are subtle ‘safety committee’ consisting of an equal number
differences in relation to each of their terms of of representatives of workers and the management
reference. Trade Unions are the principal collective to promote co-operation in maintaining proper
bargaining agents and can enter into settlement safety and health at work, and to periodically
agreements with employers. A works committee review the specific measures taken in this regard.
on the other hand, aims at pre-empting industrial Also, in factories where there are 250 or more
disputes, smoothening working relationships employees, a canteen is required to be provided
and addressing any differences by way of direct by the employer, which is then to be managed by
negotiations between employer and workmen a committee that would also have representatives
representatives. A works committee functions as of workmen. Furthermore, safety committees are
a recommendatory body that addresses, at the required to be set up in mines where there are 100
first instance, problems arising in the day to day or more persons employed.
functioning of the industrial establishment. A
grievance committee looks into individual employee
grievances - unlike the other two committees which
are concerned with employer-employee relations
as a whole.
5. Employees’
Representation in
Management
The nature and extent of employees’ representation
eventually depends on the kind of establishment in
question and the number of employees engaged
at such establishment. It may be noted that the
works and grievance redressal committees are only
required where the requisite employee threshold
is satisfied, as described above. Also, trade
unionisation in India is entrenched primarily in the
traditional manufacturing sectors, though the IT
sector has recently seen some unionisation as well.
In addition, certain other committees may also be
required depending on the nature of the industry
and any State specific requirements.

XII. EMPLOYEE BENEFITS
1. Social Security • Employees’ Provident Fund Scheme, 1952
(“Provident Fund Scheme”).
• Employees’ Pension Scheme, 1995 (“Pension
The key legislation governing employees’ benefits
Scheme”); and
in India include:
• Employees’ Deposit Linked Insurance Scheme,
1976 (“Deposit Linked Insurance Scheme”).
a. Employees’ State Insurance
Act, 1948 Employees are required to contribute 12% of their
basic wages, dearness allowance and retaining
Benefits of this ESI Act extend to establishments allowance to the Provident Fund Scheme - this
where 10 or more employees are engaged (subject is undertaken by the employer (on behalf of the
to any State rules), and to all employees earning employee) as a monthly deduction from wages and
less than INR 21,000 (~USD 286) per month. deposited into the provident fund. An employer is
Employers are required to contribute an amount then required to match this employee contribution
equivalent to 4.75% of the employees’ wages – however, out of the 12% of the employer’s
monthly to an Employees’ State Insurance Fund contribution: 8.33% is directed to the pension fund
(“Insurance Fund”), while the employee is required set up under the Pension Scheme; 0.5% is directed
to contribute 1.75% of his/her wages to the to the deposit linked insurance fund set up under
Insurance Fund. The employees are then entitled the Deposit Linked Insurance Scheme; and the
to certain medical benefits (including medical care, remaining 3.17% is deposited into the provident
sickness benefit, disablement benefit, etc.) from fund.
accumulations in the Insurance Fund.
In light of the COVID-19 crisis, the Government
of India temporarily reduced the above rate of
b. Employees’ Provident Fund contribution from 12% to 10% for the months of
and Miscellaneous Provisions May, June and July 2020 (for both employer and
Act, 1952 employees), to decrease the financial liability of
the employer and also to increase the take home
Benefits under this Act typically extend to salary of the employees.
establishments where there are 20 or more
employees. Employees earning less than INR c. Payment of Gratuity Act, 1972
15,000 per month (~ USD 204) have to compulsorily
contribute to schemes under the EPF Act, whereas The PG Act contemplates payment of gratuity to
those earning above this limit may opt out, subject all employees (whether workmen or not) engaged
to certain conditions. Further, in cases where in establishments (including factories, shops and
monthly wages exceeds INR 15,000 per month, other commercial establishments) in which 10
employers and employees may either agree to i) or more persons are employed. An employee
make contributions on the entire monthly wages is entitled to gratuity if he/she has rendered
in the manner prescribed or ii) cap wages for the continuous service for not less than 5 years (except
purposes of contribution to INR 15,000 per month. in the case of death or disability) under any of the
There are three main schemes framed under the following circumstances, namely: superannuation,
EPF Act, namely: retirement or resignation, or death or disablement
due to accident or disease. The gratuity payable to
an employee is calculated at 15 days’ wages payable

multiplied by the number of years of service (a part Across India, there are certain national holidays
of a year in excess of 6 months counted as 1 year). namely: Republic Day (26th January); Independence
A formula for computation has been prescribed in Day (15th August); and the birth anniversary of
this regard. Mahatma Gandhi (2nd October). In addition to
these, every employee would be entitled to other
holidays, as may be declared by the concerned
2. Healthcare and State Governments. In case an employee is
Insurances required to work on any of these holidays, he/
she will be entitled to twice the wages and also a
compensatory off day.
The main legislation applicable to the private
sector, the ESI Act, contemplates medical benefits
The S&E Acts prescribe different privilege leave/
for employees in contingencies such as sickness,
earned leave requirements, and in some States,
maternity, disablement, and death due to
employees may avail privilege leave only after being
employment injury and provides medical care to
in service for a certain period (such as 3 months or 1
insured persons and their families. Additionally,
year). The S&E Acts also allow unutilised privilege/
the ECA requires employers to pay compensation
earned leave to be carried forward at the end of
(computed in the manner prescribed) in cases of
the year (subject to a limit), and also contemplate
death/disablement of employees owing to injuries
that any unutilised leave may be encashed at the
sustained at the workplace.
time of separation from employment.
The Government also launched an ambitious
universal health scheme (the ‘Pradhan Mantri b. Maternity and Paternity
Jan Arogya Yojana’) to ensure that the poor Leave
and vulnerable populations are provided health
insurance coverage up to INR 5 lakh (~ USD 6818) With respect to maternity leave, female employees
per family, per year, for secondary and tertiary who have been in service for 80 days are entitled
hospitalisation. In addition to the above, most large to paid maternity leave of 26 weeks. In case of a
employers in the private sector provide medical miscarriage or medical termination of pregnancy,
insurance benefits to their employees and their female employees are entitled to leave with wages
immediate dependents, and bear the costs in this for a period of 6 weeks, immediately following
regard. the day of the miscarriage or medical termination
of pregnancy. Leave requirements are also
3. Required Leave specified for women having undergone tubectomy
operations, or in case of any illness arising out of
pregnancy, premature birth, delivery, miscarriage
a. Holidays and Annual Leave or medical termination of pregnancy.
Provisions relating to holidays and leave are mainly There is no separate category of paternity leave
prescribed in the State specific S&E Acts (for shops recognised under Indian law, though a bill has been
and commercial establishments) and under the FA introduced in this regard seeking paternity leave of
Act (for factories). 15 days across all sectors. Currently however, some
corporate and public sector departments provide
The FA Act and some of the S&E Acts state that paternity leave to their employees, as prescribed in
establishments shall remain closed on at least 1 day the concerned leave policy/rules.
of every week (this is typically Sunday). However,
the S&E Acts of certain States (e.g., Maharashtra,
Karnataka and Tamil Nadu) contemplate that some
c. Sickness and Disability Leave
establishments may remain open on all days of
Typically, sick leave cannot be carried forward or
the week, subject to them allowing every worker
encashed and is not subject to any minimum service
a weekly holiday of at least 24 consecutive hours
requirements. However, in certain States like
(and other conditions being satisfied).
Gujarat, Andhra Pradesh and Telangana employees
could be eligible to encash their sick leave at the

time of their discharge from employment. No
specific category of disability leave is recognised in
India.
d. Any Other Required or

Typically Provided Leave(s)
Some of the S&E Acts also recognise casual
leave, which can be availed by employees in
unforeseen situations, subject to the approval of
an organisation. This category of leave is also not
typically carried forward or encashed.
4. Pensions: Mandatory
and Typically Provided
Employees who fall within the purview of the EPF
Act will be entitled to a monthly pension, as per
the rules of the Pension Scheme. Other than that,
employees in the public sector will be entitled to
such pension(s) as prescribed in their service rules.
5. Any Other Required

or Typically Provided
Benefits
In addition to the above, various employers
provide other benefits to employees (which also
have certain tax benefits) such as food coupons,
a conveyance allowance and reimbursement of
mobile phone and Internet expenses. There are
also specific benefit programs and labour welfare
funds prescribed for certain sectors.
Avik Biswas
Partner, IndusLaw
[email protected]
+91 80 4072 6686

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This publication may not deal with every topic within its scope
nor cover every aspect of the topics with which it deals. It
is not designed to provide legal or other advice with regard
to any specific case. Nothing stated in this document should
be treated as an authoritative statement of the law on any
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employment law overview

employment law overview

2. Key Points of workmen, which are subject to far greater

employment law overview

employment law overview

employment law overview

employment law overview

employment law overview

The OSHW Code imposes certain new obligations

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Foreign employers may often have requirements

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The IT Rules further state that where any Sensitive

Apart from the above, it may be noted that Indian

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During the probation period, the employer will

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Given changing economic requirements in recent

c. Protection from Retaliation

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For instance, if an employer commits any ‘unfair

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Under the ERA, an employee has the right to file

Further, under the ERA, employers are required

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2. Collective Dismissals The above stipulations are all in the context of

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Voluntary resignation: If the employee voluntarily

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No, there are no restrictions regarding age. However, • reinstatement of employment;

Yes, separation agreements should be customised

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• employers can contractually restrict their

4. Use and Limitations

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• the service of the workmen has not been

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employment law overview

employment law overview

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d. Any Other Required or

5. Any Other Required

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This memorandum has been provided by:

employment law overview

L&E Global CVBA is a civil company under Belgian law that

employment law overview