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Last update: October 2011

India

Employment Law

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Employment Regulations

There are various Acts, which regulate labour and employment in India. Some of the Acts are:

  • Apprentices Act, 1961
  • Beedi Workers Welfare Fund Act, 1976
  • Bonded Labour System (Abolition) Act, 1976
  • Building and Other Construction Workers (Regulation of Employment Service) Act, 1996
  • Child Labour (Prohibition & Regulation) Act, 1986
  • Children (Pledging of Labour) Act, 1933
  • Maternity Benefit Act, 1961
  • Minimum Wages Act, 1948
  • National Commission for Safai Karamcharis Act, 1993
  • Payment of Bonus Act, 1965
  • Payment of Gratuity Act, 1972
  • Payment of Wages Act, 1936
  • Plantation Labour Act, 1951
  • Cine-Workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981
  • Cine-workers Welfare Fund Act, 1981
  • Contract Labour (Regulation & Abolition) Act, 1970
  • Dangerous Machines (Regulation) Act, 1983
  • Dock Workers (Regulation of Employment) Act, 1948
  • Dock Workers (Safety, Health and Welfare) Act, 1986
  • Employees Provident Fund & Miscellaneous Provisions Act, 1952
  • Employees' State Insurance Act, 1948
  • Employers' Liability Act, 1938
  • Equal Remuneration Act, 1976
  • Factories Act, 1948
  • Industrial Disputes Act, 1947
  • Industrial Employment (Standing Orders) Act, 1946
  • India Contract Act, 1872
  • Inter-State Migrant Workmen (Regulation of Employment and Condition of Service) Act, 1979
  • Labour Laws (Exemption from Furnishing Returns & Maintaining Registers by Certain Est.s) Act, 1988
  • Pensions Act, 1871
  • Sales Promotion Employees (Conditions of Service) Act, 1976
  • Seamen's Provident Fund Act, 1966
  • Trade Union Act, 1926
  • Weekly Holidays Act, 1948
  • Workmen's Compensation Act, 1923
  • Monopolies and Restrictive Trade Practices Act, 1969
  • The Competition Act, 2002
  • Consumer Protection Act
  • Negotiable Instruments Act, 1881
  • Sale of Goods Act, 1930
  • Arbitration and Conciliation Act, 1996

Source: HLB International

Under the Constitution of India, labour is a subject in the Concurrent List where both the Central & State Governments are competent to enact legislation subject to certain matters being reserved for the Centre. Different labour laws have different eligibility criteria for establishments as well as to the workmen.

The main laws relating to labour protection, welfare and rights are enumerated below:

India Code Legislative Department

 

Work Permits

People coming from United Kingdom need to apply for a Visa to go to India, both for tourism and for business reasons. Visiting the High Commission of India's web site, you will find all the relevant information you need:


 

INDIA
High Commission of India London
India House
Aldwych
London
WC2B 4NA

Telephone: 0207 836 8484
                 0207 632 3123 (After Office Hours)
Fax:           0207 836 4331

Website: http://hcilondon.in/index.php
Email: administration@hcilondon.in

 

PAKISTAN 
High Commission of India
G-5, Diplomatic Enclave,
Islamabad, Pakistan


Telephone: +92-51-2206950-54
Fax:           +92-51-2823102

Website: http://www.india.org.pk/index.html
Email: cons.islamabad@mea.gov.in

 

SRI LANKA
High Commission of India in Sri Lanka
36-38 Galle Road
Colombo 03

Telephone: +94-11-2327587
                 +94-11-2422788
Fax:           +94-11-2446403

Website: http://www.hcicolombo.org/
Email: hicomind@sri.lanka.net

 

BANGLADESH
High Commission of India, Dhaka
House No.2, Road No. 142
Gulshan - 1,
Dhaka

Telephone: +880-2-988 9339 (Main Reception)
Fax:           +880-2-989 3050

Website: http://www.hcidhaka.org/index.php

 

The Employment Market

India has a large pool of all types of labour as well as an adequate supply of office staff for both management, supervisory and clerical posts. Skilled manpower and professional managers are available at a comparatively moderate cost. Except for top managerial positions, most of the other technically qualified staff is also available at inexpensive rates. There is an abundant supply of semiskilled and unskilled labour, with labour rates being just a fraction of those prevailing in developed countries. India is particularly rich in IT professionals. Both Indian and multinational recruitment agencies exist in the market.

Source: UK Trade & Investment


Graduate outlook
India is a huge country with many opportunities. Structurally, it is highly complex, with vast numbers of small businesses that traditionally are non-graduate recruiters. Large multi-nationals increasingly operate in India and many large Indian businesses compete on the global stage, so formal graduate recruitment is taking place on Indian university campuses as well as in the job market generally. There is a tradition of Western ex-pat managers but most international companies now aim to recruit indigenous staff.

Companies such as IBM, Wipro and Infosys recruit 15,000-20,000 new graduates each year. Recruitment problems are often exacerbated by high staff turnover, particularly in back office support businesses where annual staff turnover exceeds 60%.

Generally speaking, the best advice for British nationals is to train in the UK first with a company that operates in India, and then move with the company. This also helps with visa issues.

Unemployment
It is difficult to obtain accurate unemployment figures for India. The CIA World Factbook suggests 10.8% for 2010 but this figure does not reflect the reality that a fifth of the population live in poverty and many people are chronically under employed. More than 90% of the labour force are employed in the 'unorganised sector', i.e. they work without social security and other benefits.


Working practices and customs
The Indian work culture is immensely diverse. In indigenous sectors and companies, the work ethic is influenced by the importance given to family life and religious festivals. Public services can be bureaucratic, inefficient and corrupt, so there is a great need to attract private capital to the infrastructure.

Business practices vary between regions. Expatriates are often faced with a very different way of doing business and may require patience, flexibility and adaptability.

Companies have realised the importance of investing in training their workforce to meet new demands, and training is driving up standards of professionalism. The Indian education and training sector cannot meet the growing demand for training and there is potential for British professional training organisations to step in and meet this demand.

The average salary in India can significantly vary between different states, experience and qualifications achieved by the individual. Salaries are increasing rapidly and much of the high turnover in Indian businesses is due to competitors offering higher salaries. Salaries in major cities are usually higher and salaries in rural districts much lower.

There are three national public holidays in India and over 30 religious days that may be kept as holidays in particular regions. It is quite common for Indians to work on Saturdays.


Language requirements
Hindi is the official union language and is spoken by approximately 45% of the population. There are 18 official regional languages, another 24 that are relatively major, 720 dialects and 23 tribal languages. English is used for much official communication. Visitors can usually get by with English, especially in towns and cities.

The medium of instruction is English in most universities, especially for scientific, technical and professional education. A few universities and colleges have switched to Hindi and regional languages but, even there, English is used for most higher degrees.


Source: Prospects - the UK official graduate careers website

 

Engagement and Dismissal

India has the world's third-largest pool of scientific and technical personnel, which serves as an important attraction for foreign investors. Most managerial and technical people, and many skilled workers, speak English, and many have studied or worked abroad. Unemployment and underemployment are high, providing an abundant supply of potential employees. Although there is a large pool of underemployed educated personnel, as in much of the developing world, illiteracy acts as a brake on labor productivity in the workforce as a whole. The current 148 industrial policy provides for hiring of foreign technicians without prior government approval.

The RBI (Reserve Bank of India) has raised the remittable per-diem rate upto $1000 USD, with an annual ceiling of USD 200,000 for services provided by foreign technicians payable to a foreign firm.

Technical personnel can remit up to 75 percent of their monthly net income through authorized exchange dealers. Total duration of employment of a technician is limited to 12 months at a time. Employment in excess of 12 months requires clearance by the Ministry of Home Affairs.

India is a member of the International Labor Organization (ILO) and adheres to 37 ILO conventions protecting worker rights. Industrial relations are governed by the Industrial and Disputes Act of 1947. The Act curbs unfair labor practices by employers, workers or trade unions through imposition of fines and imprisonment. Workers may form or join unions of their choice. Nevertheless, although unionized workers affiliated with national federations number more than seven million, their unions represent less than one fourth of the workers in the so called modern sector (subject to the Factories Act of 1948), primarily in state-owned concerns, and less than two percent of the total work force. Where workers are unionized, wage increases are negotiated between unions and management. Most unions are linked to political parties and their politicization has, in the past, created problems for domestic and foreign employers. Labor militancy has declined in recent years, however, even among the formerly strident Communist-Marxist unions of West Bengal. Workdays lost to strikes and lock-outs have declined every year since 1991. Worker rights are broadly protected under Indian law.

The Industrial Disputes Act established freedom of association and collective bargaining rights. The Factories Act regulates working conditions in mechanized factories employing more than 10 employees or non-mechanized factories employing more than twenty, prescribing standards for working conditions, working hours, handling and storage of materials, etc. Other laws regulate employment of women and children and prohibit bonded labor.

Enforcement of these laws has been imperfect, however, and working conditions for workers not subject to the Factories Act are often quite poor. Payment of wages is governed by the Payment of Wages Act, 1936 and Minimum Wages Act, 1948. Retrenchment, closure and layoffs are governed by the Industrial Disputes Act, which requires prior government permission to carry out layoffs or closure of businesses employing 100 or more workers. In practice, permission is not easily obtained. However, private firms
have successfully downsized using voluntary retirement schemes.

Source: " FY 2000 Country Commercial Guide: India", U.S. Department of State.
Updated Using CIA World Factbook

 

Employees' Rights and Remuneration

India's labour laws are overlapping, potentially inconsistent and cumbersome, with more than 45 pieces of relevant legislation. Employers face particular difficulties in terminating employment and closing industrial establishments.

The Employees' Compensation Act, (was formerly known as The Workmen's Compensation Act, 1923). Provides for compensation to workers for industrial accidents and occupational diseases resulting in disability and death.

The Payment of Wages Act, 1936, and the Minimum Wages Act, 1948 call for regular and timely payment of wages, industry wage boards to recommend the minimum wage and fix the wage-rate structure for each industry.

The Industrial Disputes Act, 1947 covers layoffs, retrenchment compensation, labour-management disputes and unfair labour practices. The Act also addresses reinstatement of workers by a labour court or tribunal order that the employer can appeal to a higher court. A reinstated worker is entitled to 100% of wages while the decision of the higher court is pending.

The Act requires industrial establishments with 100 or more workers to draw up standing orders that specify working conditions (hours, shifts, holidays, vacation, sick pay, termination rules and grievance procedures). These orders must meet minimum state standards, and they may be changed only with the consent of the workers or the unions and only to augment benefits. The code of discipline in industry adopted by the Standing Labour Committee (a type of national 20 India International Tax and Business Guide conference held by the Ministry of Labour) defines the rights and responsibilities of employees and workers, and it provides for a grievance procedure and the settlement of disputes by voluntary arbitration.

The Industrial Employment (Standing Orders) Act, 1959 requires employers in industrial establishments to define conditions of employment.

The Maternity Benefit Act, 1961 covers mandatory maternity benefits.

The Payment of Gratuity Act, 1972 requires employers to pay a gratuity to workers earning less than a certain limit upon termination of service.

The Equal Remuneration Act, 1976 prohibits job and wage discrimination based on sex, except for prohibiting or restricting the employment of women in certain categories of work.

The Essential Service Maintenance Act, 1981 empowers the government to prohibit strikes in any industry that is declared essential.

The Child Labour (Prohibition and Regulation) Act, 1986 prohibits child labour in hazardous occupations and regulates it in non-hazardous occupations.

The Trade Unions Act, 1926 provides for registration of trade unions. By way of amendment in 2001, it reduced the multiplicity of trade unions.

The Indian government continues to oppose the linking of international trade with labour standards, but it is a signatory to 39 International Labour Organisation (ILO) conventions.

Useful information about employment law and many other subjects, to better understand Indian investment climate, can be found online at:

Doing business in India 

 

Working Hours

The Factories Act 1948 states that no worker shall be required or allowed to work in a factory for more than forty-eight hours per a week, and no more than nine hours in any day. If an employee works more than nine hours in any day, or forty-eight hours in any week, he shall be entitled to wages at twice the normal rate.

Being aware of the restrictions placed on the employment of women, and there working hours need to be taken into consideration.

The Factories Act was amended in 2011 to allow women to work on night shifts (10 pm-5 am), as long as employees provide adequate safeguards. They must notify the state government before authorisation for employment of any women working between those times can be done.

Office employees tend to work five days, and between thirty-seven to thirty-eight hours per week.

 

Pensions

The Employees Provident Fund (EPF) applies to most establishments that employ at least 20 workers. Contributions are compulsory for employees earning up to Rs6,500 per month and voluntary for those who earn more than this amount. Employers and employees each contribute 12% (10% for certain industries) of the basic wage and dearness allowance of the employee. From the employer's contribution, 8.33% of the wage is taken out and diverted to the Pension Fund. For the purpose of the contribution to the Pension Fund, if the pay of any employee exceeds Rs6,500 per month, the contribution payable by the employer will be limited to the amount payable on the first Rs6,500 only. The employee's contribution does not go to the Pension Fund. Four main types of pension are offered: a monthly pension upon superannuation or disability; a monthly widows' pension for death while in service; a monthly children's pension; and a monthly orphan's pension. The Employees Provident Fund Act now applies to 180 industries and classes of establishment.

 

Termination of Employment

Existing regulations require companies to obtain government permission to close an operation or lay off workers in firms with 100 or more employees (service-industry companies, such as IT firms, are exempt). The Industrial Disputes Act, 1947 requires employers wishing to close an establishment to apply for permission at least 60 days before the intended closing date. If the government does not convey its decision within 60 days of the application, approval is deemed granted. A company can appeal against a rejection to the Industrial Tribunal.

Workers in an establishment that is closed illegally (that is, without approval) remain entitled to full pay and benefits. Dismissal for misconduct is allowed without notice under the Industrial Employment (Standing Orders) Act, 1959. The Payment of Gratuity Act 1972 entitles workers to a gratuity of up to Rs350,000 after five years of continuous service.

It is usually difficult for large companies to dismiss staff. Retrenchments and layoffs require full explanation to and prior approval from the state government. (Retrenchment under an agreement specifying a termination date requires no prior notice.) The last-in, first-out principle is usually followed.

Compelled by mounting competition to cut wage costs or consider moving out of high-wage locations such as Mumbai (Bombay), several companies have resorted to voluntary retirement schemes (VRSs) or redeployment. Beneficiaries under an approved VRS of a private-sector company are exempt from tax on monetary benefits of up to Rs500,000.

 

Wages and Benefits

Wages and fringe benefits can differ significantly, depending on the industry, company size and region. The national minimum wage of India is currently at 115 Indian Rupees per a day (effective from 1st April 2011),  however this depends significantly on the state on where the employee is based.


Wages have two basic components; the basic salary and the dearness allowance, which are linked to the cost-of-living-index. A mandatory bonus supplements wages.


Companies use both time and piece rates. The former is more common in organised-factory industries, such as engineering, chemicals, cement, paper and glass. Rates may be per hour, day, week or month. Piece rates, which the government has encouraged in order to boost productivity, are usually paid monthly, although casual workers are paid on a daily basis. Some industries (especially metal extracting, metal rolling, electrical machinery and glass) pay production premiums.


In the organised sector, wages are often set by settlements reached between trade unions and management. Base pay usually contains benefits such as provident funds, pensions and bonuses, which account up to 30%-42%.

 

Provident and Pension funds

Employers and employees contribute 10% to 12% (depending on type of industry) of wages per month. Employers contribute an amount of INR 6,500 per year (8.33% of wages), which is paid into the pension fund. Employees contribute exclusively to the Provident Fund.

This law is applicable for certain establishments employing 20 or more employees.

 

Health Insurance 

Health insurance for industrial workers for which employers contribute 4.75% of an employee’s wages and employees contribute 1.75% on a monthly basis.

Sick leave of seven days annually at full pay; half pay for those covered under the Employees' State Insurance Act.

 

Employee Entitlement

One day of paid vacation for every 20 days worked (granted to every worker who has worked in a factory for a period of 240 days or more).

Severance pay will include basic pay plus dearness allowance of 15 days for each complete year of continous service.

Maternity leave of 12 weeks at full pay

 

Employment of Foreigners

Expatriate employment in manufacturing industries is generally limited to technical and specialised personnel. Many foreign affiliates have a few expatriates in India. The usual configuration is one or two at the head office (often in the finance function or as chief executive) and two or three technical people.

No specific permission of the Government of India or the RBI is required for a foreign national to take up employment in India. Foreign nationals do have to register with the concerned District Foreigners' Registration Officer/Foreigners' Regional Registration Officer, within 14 days of their arrival in India, if they hold a visa for a period of more than 180 days. This registration is required irrespective of whether or not they intend to stay in India for less or more than 180 days-that is, the deciding factor is the period for which the visa has been granted and not the actual length of stay. Foreigners' Regional Registration Offices are located in Mumbai, New Delhi (the capital) and Kolkata (Calcutta); there are also state-level offices in individual states.

Foreign nationals (except citizens of the countries of Nepal and Bhutan) require a valid passport or travel document and a valid visa to enter India. Such a visa can be obtained from the Indian Embassy/Consulate located in the home country of the foreign national.

It normally takes about three months to obtain an immigration visa, and foreign companies report no problems in acquiring visas for their technical personnel. The visa is generally given for the same period as the employment contract. Once it is obtained, a stay permit is granted; this must be endorsed annually by the state government where the foreign national resides.

Indian embassies and consulates abroad issue visas. Business visas are granted on application and may be issued for up to five years, with a multiple-entry provision. Visas may be extended or renewed within India. A foreigner who arrives in India without a visa may be granted a temporary visa at the airport, but this usually leads to future difficulties and should be avoided.

Expatriates are paid salaries several times those of their Indian counterparts. Domestic private-sector salaries are rising quickly, although they vary widely among industries. Foreign nationals employed in India for up to three years, but not permanently resident in the country, may remit up to 100% of their net salary out of India.

Under India's double-taxation agreements, salaries that a foreign company (and not its permanent establishment in India) pays for services rendered in India are taxable in India if the employee works for more than 182 days during the tax year.

Source: Deloitte International Tax and Business Guide

 

Occupational Health and Safety

Health and safety of the employees are important aspects in an organization's smooth and effective functioning. Good health and safety environment ensures an accident-free industrial set up. Maintenance of occupational safety and health is very closely related to productivity and good employer-employee relationship. Awareness of Occupational Health and Safety (OH&S) has improved in India considerably. Achieving high OH&S performance has become one of the key aspects of business activities.
Management of Occupational Health and Safety demands adoption of a structured approach for the identification of hazards, their evaluation and control of risks in the organisation. Bureau of Indian Standards has formulated an Indian Standard on OH&S management systems. It is called as the IS 18001:2000 Occupational Health and Safety Management Systems. This standard prescribes requirements for an OH&S Management Systems to enable an organization to formulate a policy and objectives, taking into account legislative requirements and information about significant hazards and risks, which the organization can control and over which it can be expected to have an influence, to protect its employees and others, whose health and safety may be affected by the activities of the organization. All the requirements in this standard are intended to be incorporated into any OH&S management system. This standard also provides informative guidance on the use of the specification.

Organizations interested in obtaining licence for OH&S Management System as per IS 18001 should ensure that they are operating the system according to this standard. The organization should apply on the prescribed proforma ( Form IV ) at the nearest Regional Office of BIS along with Questionnaire ( Form X ) and the prescribed application fee. The application shall be signed by the proprietor or the Chief Executive Officer (CEO) of the organization or any other person authorised to sign on behalf of the organization. The name and designation of the person signing the application must be recorded legibly in a space set apart for the purpose in the application form. Each application must be accompanied by a documented Occupational Health and Safety Management System Documentation (such as OHS manual etc.)

The Directorate General of Mines Safety (DGMS) and the Directorate General of Factory Advice Service and Labour Institutes (DGFASLI) are the two field organisations of the Ministry of Labour and Employment in the area of occupational safety and health in mines, factories and ports. The Directorate General, Factory Advice Service & Labour Institutes (DGFASLI), Mumbai,which is an attached office of the Ministry of Labour and Employment,functions as a technical arm of the Ministry in regard to matters concerned with safety, health and welfare of workers in factories and ports/docks. Directorate General of Mines Safety is the Indian Goverment Regulatory agency for safety in mines and oil-fields. The mission of the DGMS is to continually improve safety and health standards, practices and performance in the mining industry and upstream petroleum industry.

Source: Business.Gov.In

 

 

Please note that this information was last updated in October 2011. The Information shown is for guideline purposes.  For precise and up-to-date information please contact the IPTU team or visit the country government website. 

 

Last update: October 2011

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