India’s employment legislation governing compensation laws for employees is covered by the Social Security Code (SSC), the Wages Code (WC), the Industrial Relations Code (IRC) and the Occupational Health, Safety and Working Conditions (OHS). India’s government announced this new legislation in 2019 and 2020 to rationalize and consolidate 29 previous acts and statutes.
- The SSC – consolidates nine social security statutes
- The IRC – rationalizes three statutes on industrial disputes, trade unions and industrial employment
- The OHS – replaces 13 central labour statutes
- The WC – incorporates four labour laws on wages, bonuses and related payments.
Employers in India must be up to speed with changing responsibilities to their staff over benefits, compensation and minimum requirements. Minimum standards include maternity leave, sick leave, termination, severance payments, overtime, paid vacations, notice periods and probation. Do not risk paying penalties or facing sanctions for ignoring these responsibilities.
National Minimum Wage (NMW): The government introduced the non-statutory National Floor Level Minimum Wage (NFLMW) in 1996, which aimed to ensure minimum wages set by states were revised upwards. The Ministry of Labour and Employment predicted the minimum wage level to be INR 178 (€2.14, US$2.36) per day in 2022, or approximately INR 5,340 (€64, US$71) per month, plus an added allowance for the cost of living, known as Variable Dearness Allowance (VDA). Beyond this, minimum rates can be set by states, or areas and zones within the state, the sector, whether workers are skilled or unskilled, and their level of experience, training and responsibility. It is assessed there are over 1,200 rates in play.
Sick Leave and Benefit: This varies between states, but in theory, workers covered by the Employee State Insurance Act (ESIA) receive around 70% of their average daily wage, paid after a two-day wait. The cover is up to 91 days in any of two designated spells of six months. However, some states make no provisions for sick leave and benefits, while others, such as Gujarat, allow only seven days of paid sick leave per year.
Working Hours and Breaks: The Factories Act (before being incorporated under the new Wages Code) stipulates over-18s cannot work more than 48 hours a week or nine per day. A nine-hour working day, including breaks, cannot exceed ten and a half hours, with breaks generally 30 minutes or an hour after four or five hours of continuous work. However, different sectors can apply higher limits for working hours.
Overtime: Under the Factories Act, overtime should be paid twice the standard hourly rate.
Paid Vacations: Entitlement varies between states and sectors within 12 to 21 days of paid leave annually. Employees covered by the Factories Act who have worked more than 240 days in a calendar year receive one day’s rest for every 20 days worked.
Public Holidays: India has many national, government, state and city holidays and festivals. There are three national holidays, which are:
- Republic Day: January 26
- Independence Day: August 15
- Gandhi Jayanti Day: October 2
Maternity / Paternity / Parental Leave and Benefit: The Maternity Benefit (Amendment) Act 2017 raised maternity leave to 26 weeks, eight weeks before the expected birth. The employer pays a benefit based on average daily earnings over the previous three months, but the woman must have worked for the employer for at least 80 days for the last 12 months. However, this applies only to women working in an establishment with at least ten workers in the ‘organised’ employment sector. The entitlement for women already with two or more children is 12 weeks. There is also 12 weeks’ leave for women adopting a child under three months old.
There is no statutory provision for paternity or parental leave in India. Employees of the central government receive 15 days of paternity leave before birth or within six months after, and there is a growing trend among companies in the private sector to grant paternity leave. There is no statutory provision for parental leave.
Discrimination: Employment law prohibits gender-based discrimination both during employment and recruitment. The Sexual Harassment of Women at the Workplace Act decrees that all offices, hospitals, and institutions have procedures for dealing with harassment in both the private and public sectors.
Termination / Severance / Redundancy: Before regulations are consolidated under the proposed Industrial Relations Code (IR), the termination will comply with federal and state laws and employment contracts. Until implementation of the IR Code, the Industrial Disputes Act and the Industrial Employment Act statutes will apply, among them the requirement for an employer to hold an inquiry for dismissal with cause.
Employees who are dismissed are entitled to outstanding pay instead of vacation, payment instead of notice if applicable, and a gratuity payment for more than five years of service. Severance in the case of redundancy, or retrenchment, is based on 15 days’ average pay for each year of continuous service or a year including more than six months of employment. Whether redundancy applies to an individual worker or a group of employees in establishments that have employed more than 100 workers over the previous 12 months, employers must have approval from the relevant government department. Workers must be given three months’ notice or pay instead of information in this case.
Notice Periods: Different rules apply depending on the sector and the states, but generally, employers give one month’s notice or payment in lieu, depending on contracts. Workers from factories, mines or plantations are entitled to three months of income in lieu.