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Sponsored Q&A: Cyril Amarchand Mangaldas

1. What are the key employment laws and regulations in India that both employers and employees should be familiar with?

The most significant aspect of the Indian labour law regime pertains to the categorisation of workforce into workmen and non-workmen under the Industrial Disputes Act 1947 (IDA), with non-workmen, who are essentially senior managerial employees, not having the same statutory protections as workmen on matters relating to termination, dispute resolution, unfair labour practices, etc. Senior managerial employees are also often excluded from the scope of state-specific ‘shops and establishments’ legislations (LSEA), which are the key laws governing employees’ working conditions, such as working hours, leave, overtime, etc. The central and state governments can legislate on labour and employment matters in India often leading to complex interplay between over 50 and 200 legislations at the central and state levels respectively.

2. What are the rights and obligations of employers and employees under Indian labour laws?

The obligations of employers in India can primarily be classified into: (i) obtaining relevant registrations/licences; (ii) implementing necessary policies on anti-sexual harassment, leave, equal opportunity, etc; and (iii) providing statutory employee benefits (described below). As regards employees’ rights, employees are entitled to receive applicable statutory benefits, apart from a workplace free from harassment and discrimination as prescribed under various legislations. While employers can terminate the employment of employees for redundancy, poor performance, misconduct, etc. this would have to be done in line with statutory and judicial prescriptions.

3. What are the legal requirements for drafting employment contracts in India, and what should employers consider when creating such contracts?

A well-drafted employment agreement is of utmost importance as that explains the rights, obligations and duties of the parties involved. At a minimum, it should contain details of the roles and responsibilities of employees, compensation structure and parameters for variable compensation, termination process and consequent obligations. Working hours, leave benefits and adherence to internal policies are the other requirements that should be covered in employment agreements. Certain state laws mandate issuance of employment agreements containing prescribed particulars, and employers should ensure that their contracts tie in with such requirements.

4. What are the laws and regulations regarding minimum wages, working hours, and overtime in India?

Given that safeguarding labour rights is encapsulated in the Indian Constitution, there are multiple laws that presently govern employment and working conditions in India. Service conditions and applicable minimum wages differ between Indian states and industries. Employers are bound by working hours prescribed under applicable central and state legislations, and employers are statutorily mandated to pay overtime wages to eligible employees (though state-specific exemptions exist for certain categories of employees and sectors). The new labour codes, which await enforcement, seek to further empower employees with more advantageous and homogeneous provisions on service conditions.

5. What steps can employers take to ensure compliance with anti-discrimination and harassment laws in the workplace?

The Indian labour law regime requires employers to protect certain recognised characteristics (such as sex, gender identity, disability, HIV status, pregnancy and certain castes and tribe) against discrimination. Certain legislations mandate formulation of policies to ensure equal opportunities and non-discrimination in employment matters for persons with these protected characteristics. India also has a robust framework for prevention of sexual harassment of women in the workplace, which also requires covered employers to establish an internal committee to redress sexual harassment complaints of women. Employers should ensure implementation of robust policies in line with the law. From a practical standpoint, employers should also ensure periodic training and sensitisation programmes for employees, adequate disciplinary policies to handle violations, redress complaints in an empathetic manner and not mere mechanical application of law/policy, and embed diversity, anti-discrimination and anti-harassment as part of their core values.

6. What are the legal procedures and requirements for terminating an employee’s contract in India?

Termination of employment is of two types – termination ‘for cause’ (generally on account of misconduct), and termination without cause.
Termination without cause is primarily governed by the LSEAs and IDA. The IDA and most LSEAs require employers to give one month’s notice/notice pay and reasons for termination. For the ‘workmen’ category, under the IDA an additional severance compensation is also payable and local labour authorities must be notified of the termination. Factories employing over a certain number of workmen, will require prior approval of the labour authorities for termination of workmen. If the employment contracts provide for better terms and conditions, the same will have to be followed.

For termination for cause, while giving a notice/notice pay will not be required, additional processes such as conducting a disciplinary enquiry will have to be followed.

Depending on the circumstances, employers often opt for a mutual separation, rather than unilateral termination.

7. How can employers handle grievances and disputes raised by employees, and what are the options for dispute resolution?

A key legislation that sets out dispute resolution mechanisms is the IDA, which apart from prescribing a grievance redressal mechanism to be implemented by employers, also sets out processes for resolution of industrial disputes through conciliation, labour courts, tribunals, etc. While the option of approaching civil courts or adopting alternative dispute resolution mechanisms like arbitration and mediation are available to all employees, it would be advisable for employers to establish a robust and confidential in-house grievance redressal mechanism for workplace conflicts, which could help reduce disputes and ensure workplace harmony.

8. Can you provide guidance on the process of creating and implementing workplace policies in accordance with Indian employment laws?

Employers must formulate statutory policies as required under various labour laws including an anti-sexual harassment policy and equal opportunity policy to prevent any discrimination against persons with disabilities, transgender persons, etc. Employers also often formulate policies on maternity benefits, leave, intellectual property, confidentiality, etc. with everything usually being bundled into an employee handbook given to employees upon joining.

9. What are the legal requirements for employee benefits and entitlements, such as leave, health insurance, and retirement benefits?

Employees are entitled to various statutory employee benefits under applicable central and state-specific labour legislations. Key benefits include annual leave, paid maternity leave and other maternity benefits, profit-based statutory bonus, etc. The social security regime provides for provident fund and employees’ state insurance benefits that require both employer and eligible employees to contribute at predetermined rates to the prescribed scheme/funds. Another key benefit is gratuity, which is a statutory terminal pay-out, calculated based on salary and tenure of eligible employees. The eligibility and entitlement to these statutory benefits depends on factors like employee threshold, nature of establishment, salary bracket, tenure, job profile, etc. Employers are required to provide the applicable statutory benefits to employees as a baseline and have flexibility to offer additional contractual benefits.

10. Are there any recent updates or changes in Indian employment laws that employers and employees should be aware of?

A significant update in the social security regime is the Supreme Court’s judgment upholding the Employees’ Pension (Amendment) Scheme 2014 (with riders), following which the Employees Provident Fund Organisation (EPFO) has issued circulars for effective implementation. The key takeaway is that specified categories of members falling in prescribed salary brackets and making contributions on such higher salaries, may exercise joint options, to avail higher pension benefits from the EPFO. Another significant update is the passing of the Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act 2023, which is a first-of-its-kind legislation in India guaranteeing social security protections to platform-based gig workers. Other noteworthy updates include the Supreme Court’s directions to states to ensure implementation of laws on prevention of sexual harassment at the workplace and protection of rights of persons with disabilities, potentially resulting in higher scrutiny by authorities into employers’ compliances.

For more information contact

Rashmi Pradeep
Partner (head – employment)

Abe Abraham

Bishen Jeswant

Ankita Ray

Krithika Radhakrishnan
Principal associate

Anna Thomas
Principal associate