This practice guide provides an insight into Indian employment laws, terms and conditions governing employment, dispute resolution mechanism between employers and employees, process of termination of employment, closure of establishments, social security, and retirement benefits.
Primary and secondary legislation
1 What are the main statutes and regulations relating to employment?
Indian employment laws comprise of laws enacted by the central
government and state governments, and notifications, regulations,
and orders issued thereunder. Indian employment laws, among other
things, prescribe the terms and conditions of employment, mechanism
of resolution of disputes between employers and employees, process
of termination of employment, closure of the establishment, social
security, and retirement benefits. The applicability of employment laws
depends on various factors including the nature of the industry, number
of employees, nature of work done by employees, seniority, and duration
The key Indian employment laws are:
• the Industrial Disputes Act, 1947;
• the Factories Act, 1948;
• the Contract Labour (Regulation and Abolition) Act, 1970;
• the Payment of Wages Act, 1936;
• the Minimum Wages Act, 1948;
• the Payment of Bonus Act, 1965;
• the Maternity Benefit Act, 1961;
• the Sexual Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013;
• the Equal Remuneration Act, 1976
• the Employees’ Provident Funds and Miscellaneous
Provisions Act, 1952
• the Payment of Gratuity Act, 1972;
• the Employees’ State Insurance Act, 1948; and
• the Rights of Persons with Disabilities Act, 2016; and
• state-specific statutes relating to shops and commercial
Protected employee categories
2 Is there any law prohibiting discrimination or harassment in
employment? If so, what categories are regulated under the law?
Yes, the Constitution of India, prohibits discrimination on grounds of
religion, race, caste, sex and place of birth.
In the context of private-sector employers, Indian employment
laws, key statutes of which are set out below, prohibit discrimination
and harassment based on gender, disability and HIV status in relation
The Equal Remuneration Act, 1936
This legislation mandates equal remuneration and service conditions
for men and women and prohibits discrimination at the time of recruitment and with respect to terms of employment on the basis of gender.
The Rights of Persons with Disabilities Act, 2016.
This law prohibits discrimination on grounds of disability and mandates
every establishment to implement an equal opportunity policy detailing
the measures to be taken by the organisation to provide opportunities to develop skills and employ persons with disabilities. The equal opportunity policy must be published on the company’s website and registered
with the local disabilities commissioner.
The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
This statute prohibits sexual harassment of women in the workplace. It is intended to protect all women at a workplace, including non-employees
and visitors, and also extends the concept of ‘workplace’ to employer provided transportation, work-related travel, etc. Employers with 10
or more employees are required to constitute a committee to receive,
investigate and redress complaints of sexual harassment in a confidential and time-bound manner. Employees who work for employers who have less than 10 employees are permitted to raise complaints with a local committee that is to be established by the government in each district.
The Transgender Persons (Protection of Rights) Act, 2019
This statute prohibits discrimination against transgender persons in
matters relating to employment, including but not limited to recruitment and promotion. Every establishment must designate a person to be a compliance officer who deals with complaints relating to violations of this statute.
The Human Immunodeficiency Virus and Acquired Immune
Deficiency Syndrome (Prevention and Control) Act, 2017
This statute prohibits discrimination of a person based on their HIV status in relation to, among other things, employment, including denial or termination of employment based on HIV status.
3 What are the primary government agencies or other entities responsible for the enforcement of employment statutes and regulations?
An overview of employment law enforcement agencies is set out below,
however, there is no unified redressal and enforcement authority in India
responsible for the enforcement of all labour statutes and regulations.
Those holding these responsibilities vary between states and specific
Ministry of Labour and Employment
This branch of the government of India is also a state-level ministry
tasked with the preparation of employment statutes and policies, and
their implementation, including formulating the procedural rules under
various employment statutes.
Statutory enforcement bodies
Employment law statutes typically provide for a specific enforcement authority that is tasked with ensuring compliance with the statute and investigating non-compliances. The officers of the Central Labour Department and state-level Labour Departments are generally appointed as enforcement officers under employment statutes.
These officers include the Labour Commissioner, the Deputy Labour
Commissioner, and inspectors. Further, certain employment statutes
also create or appoint specific agencies responsible for their implementation and enforcement. For instance, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 created the Employees’ Provident Fund Organisation to implement the statute, create and manage the provident fund and ensure compliance.
Labour Courts and Industrial Tribunals
Certain employment law statutes also confer labour courts and
industrial tribunals with the responsibility of enforcement and implementation. However, the primary role of these bodies is to adjudicate to
4 Is there any legislation mandating or allowing the establishment of employees’ representatives in the workplace?
In India, the right to form a trade union flows from the Constitution and hence all employees have a right to unionise. Further, certain employment laws mandate that works committees, employee bodies and similar bodies be formed in the workplace. The Industrial Disputes Act, 1947, requires that certain notified industries and establishments that employ 100 or more workers constitute works committees that comprise of employee and employer representatives to discuss conditions of work such as safety, amenities and benefits.
While employees have the fundamental right to unionise, the process of forming a trade union is governed by the Trade Unions Act, 1926. This statute prescribes the process of forming a trade union and the employee thresholds required to form a trade union (ie, seven or more persons may form a union and apply to have the union registered).
A trade union can be formed by workmen from the same establishment
or from different establishments belonging to the same industry.
Powers of representatives
5 What are their powers?
The powers of employee representative bodies vary based on the type of
employee representative body. For instance, registered trade unions in
India are conferred the same status as bodies corporate (ie, they enjoy
perpetual succession, have a common seal, and may sue and be sued).
Trade unions are empowered to collectively bargain with the employer
or industry on behalf of their members. Such bargaining typically relates to conditions of service, benefits, pay and leaves. Other statutory employee representative bodies such as the works council formed under the Industrial Disputes Act have limited powers, that are typically limited to dealing with routine issues pertaining to conditions of work such as ventilation, lighting, sanitation, safety, etc.
6 Are there any restrictions or prohibitions against background checks on applicants? Does it make a difference if an employer conducts its own checks or hires a third party?
There is no legal prohibition on conducting background checks in India
so long as the entity conducting the background check adheres to
applicable data protection laws. The storage, transfer and processing
of sensitive personal data or information belonging to persons located in India are regulated by the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or
Information) Rules, 2011 (Sensitive Information Rules) enacted under
the Information Technology Act, 2000. The Sensitive Information Rules
require that the information processor adheres to certain requirements
in relation to the collection, storage and transfer of electronic data that
is classified as sensitive personal data or information, including:
• financial information (eg, bank accounts, details of credit or debit
cards or other payment instruments);
• physical, physiological, and mental health conditions;
• sexual orientation;
• medical records and history; and
• biometric information.
The Sensitive Information Rules also require that the information
processor obtain the consent of the information provider regarding
the purpose of usage of the information that is collected, the intended
recipients of the information, and the name and address of the entity
storing the information. The Sensitive Information Rules also require
the company to formulate and publish policies regarding privacy and
the disclosure of information.
There is no difference between the employer conducting a background check or a third party doing so. In practice, however, organisations typically outsource conducting background checks to organisations that are experienced in conducting such tests.
7 Are there any restrictions or prohibitions against requiring a
medical examination as a condition of employment?
Per se, an employer is permitted to conduct a medical examination
as a precondition to employment and can choose not to hire persons who refuse to submit to such tests, subject to adhering to applicable
anti-discriminatory laws. In this regard, the Human Immunodeficiency
Virus and Acquired Immune Deficiency Syndrome (Prevention and
Control) Act, 2017, prohibits conducting HIV tests on persons without their informed consent.
As best practice, it is advisable that employers undertake medical
examinations for recruitment only in cases where there is a direct
correlation between the medical fitness of an employee and the work
that is to be performed.
Drug and alcohol testing
8 Are there any restrictions or prohibitions against drug and
alcohol testing of applicants?
The Indian statutes do not prohibit the testing of employees for drug
or alcohol consumption, subject to adhering to applicable data privacy
requirements. The employer can also formulate relevant policies to
prohibit the use of drugs or alcohol during working hours.
Preference and discrimination
9 Are there any legal requirements to give preference in hiring to, or not to discriminate against, particular people or groups of people?
There is no general requirement under Indian employment laws for
organisations in the private sector to give preference in hiring to a
particular category or set of persons. That said, in 2020 the government
of Haryana passed the Haryana State Employment of Local Candidates
Act, 2020, which mandates every employer in Haryana to employ local
candidates in at least 75 per cent of the posts or roles in which employees
are paid gross monthly salaries of less than or equal to 30,000 rupees.
The term ‘local candidate’ is defined as a candidate who is domiciled
in the state of Haryana. Further, there may be certain instances where
organisations have been given certain concessions by the government,
such as the acquisition of property at subsidised rates, that would require
the organisation to provide employment to certain identified categories of persons.
Employers in the private sector are prohibited from discriminating
on the basis of gender, disability, and HIV status.
10 Must there be a written employment contract? If yes, what essential terms are required to be evidenced in writing?
There is no mandatory requirement for organisations to issue employment contracts to employees; albeit it is highly recommended.
Employment contracts should essentially cover terms related to terms of employment and termination, designations, duties and responsibilities, probationary periods, salary and benefits, work hours and terms of work, restrictive covenants, confidentiality obligations, and the assignment and ownership of intellectual property.
It is important to note that while there is no statutory requirement for
a written employment contract, certain statute specific statutes require
employers to issue appointment letters and orders to employees. These
documents are simpliciter documents that among other things provide
the designation of the employee, wages and period of employment.
11 To what extent are fixed-term employment contracts permissible?
Fixed term-contract employment contracts are permissible in India and
there are no prescribed maximum durations for fixed-term contracts or
restrictions on the type of work that can be performed by employees who
are employed under fixed-term contracts. That said, it is important to
ensure that there are bona fide reasons for employing persons on fixedterm contracts.
12 What is the maximum probationary period permitted by law?
The duration of any probationary period is determined by the contract of
employment or by the standing orders applicable to the establishment.
Standing orders are a statutory consolidation of the terms of service
that are to be certified by a statutory authority under the Industrial
Employment (Standing Orders) Act, 1946 which generally prescribe a
probationary period of three months.
Typically, probation periods are structed such that they end prior
to any statutory termination protections kick in. Accordingly, based on the state that the employee is employed in, the work performed by the employee and the industry of the employer, employees are required to serve a probationary period of three to six months.
Classification as contractor or employee
13 What are the primary factors that distinguish an independent
contractor from an employee?
The primary factors that distinguish an independent contractor from an
employee are the amount of supervision and control that the employer is able to exercise on the individual and the type of work performed by the individual.
Indian courts usually consider various factors to determine whether an individual can be deemed to be an employee of an organisation, such as:
• the nature of services provided (including whether such services
are in relation to a core activity of the organisation or are specialised services);
• whether the nature of work is perennial;
• the ability of the organisation to monitor the individual’s work from
time to time;
• the extent of scrutiny into the work and the organisation’s ability to
• the duration of the engagement;
• exclusivity of the relationship; and
• whether the worker is being engaged as an independent contractor
solely for the organisation to avoid liability.
Temporary agency staffing
14 Is there any legislation governing temporary staffing through recruitment agencies?
The Contract Labour (Regulation and Abolition) Act, 1970 governs the engagement of workers (contract workers) through third-party
organisations (contractors) to perform work at an organisation’s
establishment. Specifically, it applies to establishments in which 20 or more workers are, or were, engaged on any day in the preceding 12 months as contract workers, and to contractors that deploy 20 or more contract workers. This applicability threshold varies in certain states.
The Contract Labour Act requires that the organisation engaging the
contract workers (the principal employer) and the contractors obtain
registrations and licences, and ensure payment of wages and benefits
to the contractor workers are timely and adequate.
15 Are there any numerical limitations on short-term visas? Are visas available for employees transferring from one corporate entity in one jurisdiction to a related entity in another jurisdiction?
The government of India issues various types of visas for expatriates visiting India. A person who is not an Indian citizen and wishes to undertake any work in India must obtain a valid visa.
There are two key work-related visas: the business visa (‘B visa’) and the employment visa (‘E visa’). The duration of such visas depends on the purpose of the visit and is granted at the discretion of the government.
Business visas are usually granted to foreigners coming to India on shorts visits for training or business meetings. Employment visas are granted to foreigners who come to India for the purpose of employment.
Foreign nationals, including those who are transferring from a related entity in a different country, are required to obtain Indian employment visas.
Employment visas in India are generally granted only to highly skilled or qualified professionals and are not granted for jobs for which qualified Indians are ordinarily available.
Further, the wages paid to foreign nationals should be more than US$ 25,000 per annum.
Additionally, in certain cases, employers may be required to provide an undertaking along with proof that they have tried but were unable to identify a suitable Indian candidate for the role.
16 Are spouses of authorised workers entitled to work?
Family members and spouses of workers who have obtained an Indian
employment visa are not permitted to work in India unless they make
the necessary applications to have their visas converted to Indian employment visas. The discretion to permit such persons to work in India is with the Indian government, and no foreigner may undertake employment in India without a valid employment visa.
17 What are the rules for employing foreign workers and what are the sanctions for employing a foreign worker that does not have a right to work in the jurisdiction?
Organisations that employ foreign workers are required to adhere to
applicable immigration, employment and taxation laws.
Indian immigration laws prohibit foreign nationals from undertaking any activity that is outside the scope of their visas. Any person who violates the conditions of their visas is liable to be punished with imprisonment and fines. Further, any person (including employers) facilitating (abets) such offences is liable for the same punishment.
Further, there are caps on the number of foreign nationals who can be
employed in certain sectors (eg, banking).
In terms of employment laws, an employer would be required to
make social security contribution at the rates applicable to the foreign
worker, and the foreign worker would also be eligible to receive the
statutory benefits and protection that is available to other workers of
the organisation unless they are from a country with which India has
a social security arrangement and obtain a certificate of exemption
in relation to the same. Further, appropriate tax deductions at source
would have to be made on salaries paid to foreign workers based on a
worker’s home country, duration of stay and quantum of wages.
Resident labour market test
18 Is a labour market test required as a precursor to a short or long-term visa?
While a labour market test is not a prerequisite for employment visas,
it is often recommended. It is possible that Indian visa authorities may
require the employer to provide an undertaking that there were no
Indian workers who were suitable or qualified for the role and hence
the employer had no option but to hire a foreign national.
TERMS OF EMPLOYMENT
19 Are there any restrictions or limitations on working hours
and may an employee opt out of such restrictions or limitations?
Yes, there are statutory restrictions on working hours and overtime payment requirements. The permissible number of working hours and overtime vary based on the state in which the establishment is located, the nature of the establishment (ie, whether it is a commercial establishment, a factory or a shop), and the work performed by the employee.
Generally, employees are permitted to work for eight to nine hours a day and 48 hours a week, beyond which they are entitled to be paid overtime at twice the rate of their usual wage.
If an employee’s work hours are statutorily governed, the employee cannot opt out of such restrictions or limitations, including in lieu of additional consideration.
20 What categories of workers are entitled to overtime pay and how is it calculated?
All employees, except for those employees in positions of management, are generally entitled to overtime pay. However, these rules vary from state to state and depend on the nature of the establishment where the employee is working.
21 Can employees contractually waive the right to overtime pay?
No, employees who are statutorily eligible to receive overtime wages
cannot contractually waive this right, even in return of additional
consideration by the employer.
Vacation and holidays
22 Is there any legislation establishing the right to annual
vacation and holidays?
Annual leave entitlements are dependent on the state in which the
establishment is located and the nature of the establishment. The terms and conditions of employees working in shops and commercial establishments (such as offices, storehouses, etc) are governed by state-specific statutes. The leave entitlements prescribed under the S&E Acts vary between states, however, employees are generally entitled to between 12 to 18 days of annual and privileged leave that can be
accumulated or carried forward up to a statutory cap, and to sick and
casual (ad hoc) leave which cannot be accumulated or carried forward.
The terms and conditions of employees working in factories is governed by the Factories Act, 1948. This statute entitles every worker who has worked for a period of 240 days or more in a factory during a calendar year to leave with wages in the subsequent calendar year, at the rate of one day for every 20 days of work performed during the
previous calendar year.
Employees in India are also entitled to leave for national and festival holidays, however, such entitlements vary between states.
Sick leave and sick pay
23 Is there any legislation establishing the right to sick leave or sick pay?
Sick leaves are provided for under the S&E Acts and the number of
days of sick leave that an employee is entitled to vary between states.
Further, employees are also entitled to certain sickness benefits and pay under the Employees’ State Insurance Act, 1948, subject to fulfilling criteria that are prescribed from time to time. Sick leave entitlement typically ranges from between 12 to 15 days.
Leave of absence
24 In what circumstances may an employee take a leave of absence? What is the maximum duration of such leave and does an employee receive pay during the leave?
Employees are permitted to utilise sick and casual leave as and when
required, as these leave allowances are granted to employees for
contingencies. However, employers may require employees to seek
approval to use annual leaves.
Employers also sometimes require employees to produce medical
certificates if more than a few days of sick leave is used. Employees are not limited to a maximum duration of leave, however, this period may be prescribed by the employer, subject to applicable law.
All forms of leave that are statutorily provided for are paid by employers. Employees may, with the consent of their employer, take unpaid leave, in excess of the statutorily mandated leave entitlements.
However, the employer is not obligated to allow the employee to do this.
Mandatory employee benefits
25 What employee benefits are prescribed by law?
The benefits that employees are statutorily entitled to include:
• annual, sick and casual leave;
• social security (ie, provident fund and insurance);
• end-of-service payments (known as ‘gratuities’);
• maternity benefits; and
• statutory severance pay.
Please note that the exact benefits that an employee is entitled to
depend on a number of factors including the work performed by the
employee, seniority, wages received, and the total number of employees
employed by the employer.
Part-time and fixed-term employees
26 Are there any special rules relating to part-time or fixed-term employees?
There are currently no rules that specifically govern part-time workers
or fixed-term workers. Such workers are generally entitled to the
benefits that permanent employees are entitled to, subject to fulfilling
27 Must employers publish information on pay or other details about employees or the general workforce?
No, there are currently no requirements for employers to publish
reports on employee pay, including pay gaps. However, an employer may
be required to make certain corporate filings in relation to the pay of
key employees and directors. Further, certain employment laws require
employers maintain registers at their establishment containing information on wages and periodically file returns to a labour department
that, among other things, could include wage details.
Validity and enforceability
28 To what extent are post-termination covenants not to
compete, solicit or deal valid and enforceable?
Post-employment non-compete obligations are unenforceable in India,
regardless of the duration of the restriction. An agreement to not deal
with customers is likely to be interpreted as a non-compete. However, in certain instances, post-employment non-solicitation obligations have been upheld by courts, on a case-by-case basis. Yet, even where non solicitation obligations have been upheld, courts typically only award damages to the aggrieved party and do not issue protective orders prohibiting employees, customers or suppliers from moving to the
29 Must an employer continue to pay the former employee while
they are subject to post-employment restrictive covenants?
Post-employment non-compete restrictions are unenforceable in India.
Post-employment non-solicitation obligations may be upheld only in
certain instances. Accordingly, there is no requirement for an employer
to continue to pay a former employee for the duration of a restrictive covenant.
LIABILITY FOR ACTS OF EMPLOYEES
Extent of liability
30 In which circumstances may an employer be held liable for
the acts or conduct of its employees?
An employer can be held vicariously liable for the acts done by an
employee, provided such acts were done during the course of their
employment, under the specific instructions of the employer, or using
the employer’s resources.
TAXATION OF EMPLOYEES
31 What employment-related taxes are prescribed by law?
The employer is required to deduct income tax at source from the salaries paid to employees, subject to the tax rates prescribed from time to
time. Further, certain states have also enacted taxation statutes that
levy tax on persons practising any profession, trade or calling. These
taxes are deducted by the employer and periodically deposited with
relevant tax authorities.
32 Is there any legislation addressing the parties’ rights with
respect to employee inventions?
There is no statute that specifically governs an employer’s rights in relation to intellectual property created by its employees; the rules in this regard vary based on the type of intellectual property that is created. For instance, the employer is considered to be the owner of any copyright in literary works created by an employee further to their employment, whereas the employee would have to assign other forms of intellectual property (eg, patents) to their employer.
Trade secrets and confidential information
33 Is there any legislation protecting trade secrets and other
confidential business information?
There is no statute or legislation that protects trade secrets or confidential business information in India. Trade secrets and confidential business
information are governed by the terms of employment contracts and the
principles of common law established by Indian courts.
Rules and obligations
34 Is there any legislation protecting employee privacy or
personnel data? If so, what are an employer’s obligations
under the legislation?
The storage, transfer and processing of sensitive personal data or
information belonging to persons located in India is regulated by the
Information Technology (Reasonable Security Practices and Procedures
and Sensitive Personal Data or Information) Rules, 2011 (Sensitive
Information Rules) enacted under the Information Technology Act, 2000.
The Sensitive Information Rules require that an information
processor adheres to certain requirements in relation to the collection, storage and transfer of electronic data that is classified as sensitive personal data or information (Sensitive Personal Information), including:
• financial information, such as bank accounts and details of
payment instruments (eg, credit and debit cards);
• physical, physiological, and mental health conditions;
• sexual orientation;
• medical records and history; and
• biometric information.
The Sensitive Information Rules also require that an information
processor obtain the consent of the information provider regarding the
purpose of usage of the information that is collected, the intended recipients of the information, the name and address of the entity storing the
information, and formulate and publish policies regarding privacy and
the disclosure of information.
35 Do employers need to provide privacy notices or similar
information notices to employees and candidates?
Yes, a body corporate (including an employer) that collects, receives,
the manner in which such personal information (including Sensitive
Personal Information) will be handled. This policy is to be published
36 What data privacy rights can employees exercise against
The Supreme Court of India has ruled that the right to privacy is a fundamental right under the right to life and so is guaranteed under the Indian Constitution. While fundamental rights cannot be enforced directly against private organisations, employees will have recourse under the Sensitive Information Rules for any breaches by employers. Further, an
employee would be able to make claims of tort against their employer in
the event their privacy is breached due to an act of the employer.
37 Is there any legislation to protect employees in the event of a business transfer?
Employees in India are largely categorised into workers and nonworkers. The Industrial Disputes Act, 1947 only applies to employees
categorised as ‘workers’ and, among other things, provides certain protections regarding termination. A ‘worker’, for the purpose of this Act, is a person employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward.
This definition excludes persons mainly employed in managerial or administrative capacities, and those who are employed in supervisory capacities drawing monthly wages in excess of 10,000 rupees.
The Industrial Disputes Act provides that where there is a transfer
of ownership or management of an undertaking from one employer to
a new employer (such as a business sale), every worker who has been
in continuous service for not less than one year (240 days) immediately
before the transfer shall be entitled to notice and compensation as if the
worker has been retrenched (terminated), unless the following conditions are fulfilled:
• the workers are being transferred under terms and conditions that
are not less favourable than the terms and conditions of service
applicable immediately before the transfer;
• the employment is not being interrupted by the transfer;
• the transferee, under the terms of transfer or otherwise, is legally
liable to pay the workers, in the event of termination of their service,
compensation on the basis that their service had been continuous
and not affected by the transfer; and
• the workers’ consent to their transfer.
If all of the above conditions mentioned are not met, then the workers who have been in continuous service for one year (240 days) or more are entitled to the following from the transferor entity: one month’s notice or wages in lieu thereof, and retrenchment compensation calculated at the rate of 15 days average pay for every year of continuous service or part
thereof in excess of six months.
The above protections do not apply to persons who are not workers
or workers who have not completed a minimum period of employment.
Grounds for termination
38 May an employer dismiss an employee for any reason or must
there be ‘cause’? How is cause defined under the applicable statute or regulation?
There is largely no concept of at-will employment in India and employment may only be terminated for reasonable cause, except for persons in management positions in certain states. Procedures for termination of employment vary based on the reason why an employee is terminated
and the category of the employee.
While ‘reasonable cause’ for termination of employment has not been statutorily defined, employment may be terminated on grounds of redundancy, underperformance, misconduct, superannuation, ill-health, or any other legitimate reason.
39 Must notice of termination be given prior to dismissal? May
an employer provide pay in lieu of notice?
Yes, notice or pay in lieu of notice should be provided to employees in
case of termination from employment, except if the employee’s employment is being terminated for misconduct. There is no requirement to provide notice or pay in lieu of notice in cases of termination of employment for misconduct.
40 In which circumstances may an employer dismiss an
employee without notice or payment in lieu of notice?
An employee can only be terminated without notice or salary in lieu of
notice in cases of misconduct. To terminate employment for misconduct it is essential to establish the misconduct through a disciplinary enquiry that is held for such purpose in accordance with the principles of natural justice.
41 Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?
The Industrial Disputes Act provides that in case of retrenchment, every
worker who has been in continuous service for at least one year (ie, 240
days) is entitled, among other things, to retrenchment compensation at
the rate of 15 days average pay for every completed year of continuous
service or any part thereof in excess of six months. For non-workers,
severance payments are set out in mutual agreements between the
employers and employees.
42 Are there any procedural requirements for dismissing an
Per se, there are no procedural requirements when terminating
employees for poor performance or misconduct, apart from allowing
the employee to the opportunity to correct or establish the misconduct in accordance with the principles of natural justice, respectively.
However, in relation to retrenchment of workers, certain establishments (eg, factories, mines and plantations) that employ 100 (or 300 in some states) or more workers are required to obtain the approval of the jurisdictional labour authority. In this regard, please note that before retrenching workers who have been in continuous service for at least one year (ie, 240 days), such establishments are required to meet the
1. The worker has been given three months’ notice in writing indicating
the reasons for retrenchment or be paid salary in lieu thereof.
2. The employer is required to make an application to the appropriate
authority in the manner prescribed, seeking permission to retrench
3. Once the employer has received permission for retrenchment in
accordance with point (2) above, every worker who is employed in such an industrial establishment shall be entitled to retrenchment compensation at the rate of 15 days average pay for every completed year of continuous service or any part thereof in excess
of six months.
Establishments other than the factories, mines and plantations referred to above are required to provide the retrenched workers who have been in continuous service for at least one year (ie, 240 days) one months’ notice in writing indicating the reasons for retrenchment or pay salary in lieu thereof; and retrenchment compensation at the rate of 15 days average pay for every completed year of continuous service or any part thereof
in excess of six months. Additionally, all establishments including are
required to follow the ‘last in, first out’ rule or record reasons for deviating from this rule when retrenching workers.
43 In what circumstances are employees protected from
Women employees who are on maternity leave cannot be terminated
from employment during their maternity leave, in accordance with the
Maternity Benefits Act, 1961. Further, employees categorised as ‘workers’
cannot be terminated from employment during the adjudication of an industrial dispute, in accordance with the Industrial Disputes Act.
Mass terminations and collective dismissals
44 Are there special rules for mass terminations or collective
No, there are no special rules in relation to mass termination or collective dismissals. However, the Industrial Disputes Act prescribes a
specific process that has to be adhered to when an establishment is be
permanently closed down and the workers are being terminated.
Class and collective actions
45 Are class or collective actions allowed or may employees only
assert labour and employment claims on an individual basis?
Typically, class or collective actions are asserted through trade unions
on behalf of a category of employees and not by individual employees.
Mandatory retirement age
46 Does the law in India allow employers to impose a
mandatory retirement age? If so, at what age and under what
Yes, employers are permitted to contractually agree to a mandatory
retirement age with employees.
However, there is no statutory retirement age that has been prescribed. Typically, the retirement age is between 58 to 60 years.
47 May the parties agree to private arbitration of employment disputes?
The ability to settle employment-related disputes by arbitration would
depend on the nature of the dispute and the category of employee that
is involved. Employment disputes that have recourse under specific
employment statutes may not be settled through arbitration and the
specific process prescribed under the relevant statute would have to be
adopted. Additionally, arbitration clauses are typically included in key
and senior managerial employment agreements.
Employee waiver of rights
48 May an employee agree to waive statutory and contractual
rights to potential employment claims?
While an employee can agree to waive contractual employment claims,
any waiver of statutory rights will not be enforceable, unless such waiver
is further to a settlement that is presided over by a court.
49 What are the limitation periods for bringing employment
The limitation period for employment claims varies based on the types
of claim that is sought to be enforced, but is typically between one to
three years. That said, courts generally have the ability to condone
delays and also tend to condone such delays if there is a valid reason
Key developments of the past year
50 Are there any emerging trends or hot topics in labour and
employment regulation in India? Are there current proposals to change the legislation?
In a major move to streamline, simplify and reform Indian employment
laws, the Indian government has enacted four labour codes which would
replace certain existing legislations:
• the Code on Social Security, 2020;
• the Industrial Relations Code, 2020;
• the Occupational Health, Safety and Working Conditions Code 2020; and
• the Code on Wages, 2019.
These new codes are expected to be game-changers in labour reform,
impacting more than 500 million organised and unorganised workers in
India, including non-traditional workforce engagement structures such
as gig workers and platform workers. While the codes are law, they are
not yet in effect. India’s government has not provided any indication
regarding when the labour codes will be implemented.