India Employment Law: What Every Global Company Needs to Know

Introduction

India's employment laws are complex and vary by state. Understanding these regulations is crucial for any global company looking to hire in India.

Key Employment Laws in India

Industrial Disputes Act, 1947

This act governs industrial relations and provides for the investigation and settlement of industrial disputes.

Factories Act, 1948

Regulates working conditions in factories, including working hours, safety, and health provisions.

Minimum Wages Act, 1948

Ensures minimum wages for different categories of workers across different states.

Social Security Contributions

Provident Fund (PF)

All employees earning more than ₹15,000 per month must contribute to the Provident Fund:

• Employee contribution: 12% of basic salary
• Employer contribution: 12% of basic salary
• Total contribution: 24% of basic salary

Employee State Insurance (ESI)

Employees earning up to ₹21,000 per month are covered under ESI:

• Employee contribution: 0.75% of gross salary
• Employer contribution: 3.25% of gross salary
• Provides medical and cash benefits

Professional Tax

Most states levy professional tax on salaried employees:

• Maharashtra: ₹200 per month
• Karnataka: ₹200 per month
• Tamil Nadu: ₹2,500 per year
• West Bengal: ₹2,500 per year

Gratuity

Employees who complete 5 years of service are entitled to gratuity:

• Calculation: 15 days' salary for each year of service
• Maximum limit: ₹20 lakh
• Tax-free up to ₹20 lakh

Leave Entitlements

• Annual Leave: 12 days per year (varies by state)
• Sick Leave: 12 days per year
• Maternity Leave: 26 weeks for first two children
• Paternity Leave: 15 days

Working Hours and Overtime

• Normal Working Hours: 8 hours per day, 48 hours per week
• Overtime: Double the normal rate
• Weekly Rest: One day per week

Termination and Severance

Termination procedures vary by state and employment type:

• Notice period: 30-90 days depending on service length
• Severance pay: 15 days' salary for each year of service
• Retrenchment compensation: Additional benefits for layoffs

Compliance Best Practices

• Maintain accurate employment records
• File returns on time
• Keep updated with law changes
• Work with local legal experts
• Use EOR services for compliance

Conclusion

India's employment laws are complex but manageable with the right approach. EOR services can help ensure full compliance while you focus on growing your business.