Companies extending their operations into India need a complete grasp of Indian employment contracts. A successful business largely depends on its employees. By creating work contracts that include the right terms and benefits, there will be no misconception, and the perfect work-life balance can be created for your workforce.

Thanks to our Professional Employment Organisation (PEO) and Employer Of Record (EOR) services, we can provide compliant labour contracts for your employees in India, including local benefits. Our team keeps track of Indian laws and regulations daily to be duly aware of updates that can be implemented in working contracts and to ensure a smooth entry for your business into the Indian economy.

The different types of Indian Employment Contracts

There is no statutory requirement at the federal level for written contracts, although most employers enter them with their employees. However, some of India’s 28 states insist on written agreements providing information such as wages, working hours and role descriptions. There are also distinctions between the types of employees. Employees classified as ‘workmen’ are typically industry-based manual, skilled or unskilled, technical and clerical staff. ‘Non-workmen’ generally work in managerial or administrative roles earning more than INR 10,000 (€120, US$132) per month.

Main contract types include:

Open-ended Employment Contract:  The most common type of arrangement, which remains in place until ended either by the employer or employee, per correct procedures under labour laws. These can cover full-time or part-time employment.

Fixed-term Employment Contract:  Permitted under labour laws and used for a specific time or project. If they exceed four years, fixed-term contracts become open-ended. They provide the same benefits and entitlements as indefinite contracts.

Probation Periods: These can be included in a contract for three months, although employers can extend the trial. Probationers do not have any statutory rights.

Collective Bargaining Agreements:  Agreements between employers or employers’ organizations with trade unions representing workers’ rights are enforceable under the Industrial Disputes Act. This Act will be incorporated into the new Industrial Relations Code. There are three types of collective agreements: Bipartite – where there is a voluntary agreement between employers and unions; Settlement – where a conciliation officer joins negotiations; Consent Awards – which become binding where agreement is reached pending adjudication by the authorities. Employers refusing to negotiate collective contracts contravene the terms of the Act/Code.

Indian Employment Contracts Requirements

International companies hiring employees in India must operate within a fluid mix of employment legislation, following the consolidation of 29 employment statutes into four Codes. The process began in 2019 but will likely stretch into 2023 before full implementation across the nation’s 28 states.

The four new pieces of legislation are the Social Security Code (SSC), the Industrial Relations Code (IRC), the Occupational Health, Safety and Working Conditions Code (OHS) and the Wages Code (WC).

Under the IRC, the term ‘workmen’ is replaced by the gender-neutral ‘worker’. Employees designated as ‘workmen’ are typically industry-based manual, skilled or unskilled, technical and clerical staff. ‘Non-workmen’ generally work in a managerial or administrative role earning more than INR 10,000 (€120, US$132) per month. Before introducing the new codes, the Industrial Employment Standing Orders Act (SO Act) applied to employees classified as ‘workmen’.

Understanding these issues is vital during the initial stages of hiring, onboarding and drawing up contracts for your new staff. Once Bradford Jacobs’ Professional Employer Organisation (PEO) recruitment networks have located the best talent for your company, we step in to steer you through this crucial element of onboarding.

The right advice is key to your company confidently moving into the marketplace, particularly as India poses unique problems. General points to be considered include:

  • Employers generally enter into written contracts, although there is no legal requirement to do so.
  • Some states stipulate contracts must give written details of wages, job descriptions and working hours.
  • Where it has been implemented, the OHS Code requires employers to give appointment letters to every employee, with such information as required by that state’s laws.
  • The SO Act, pending implementation of the new IR Code, stipulates that designated ‘workmen’ must receive at least 21 days’ notice of any detrimental change to their agreement, such as those affecting wages or working hours.
  • Outside of these provisions, working conditions for ‘non-workmen’ will be determined by the written contract between the employer and employee.
  • Central and state labour laws require employers to maintain records of registrations and attendances to be available for inspection by the authorities.


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