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Employment Laws in India:
Complex employment laws in India have been major area of concern for multi-national companies entering into Indian market. With greater mobility and flexibility in the labour markets becoming the need of the hour, employers in India have been arguing and demanding for years for simplification of employment / labour laws. With focus on “Ease of Doing Business in India”, successive governments have been working tirelessly to improve upon overall business environment in India which has resulted in liberalized and stable regulatory framework, leaner licensing regime and simplified and balanced employment laws.
As part of labour laws reform initiatives, Government of India has undertaken the exercise of rationalization, integrating and consolidating around 44 labour/ employment laws into 4 labour codes viz. Code on Wages, Code on Industrial Relations, Code on Social Security and Code on Occupational Safety, Health and Working Conditions. The Codes are undergoing legislative process and the Government is very close to implementing these codes.
Employment Laws Applicable for Services Sector:
While above labour codes are yet to be implemented, below-listed employment laws would be applicable on any establishment in services sector:
General Conditions of Employment in Commercial Establishments in Services Sector:
Commercial establishments in a state are governed by Shops and Commercial Establishments law of the state concerned apart from other employment laws listed above. Following are the main employment conditions governing employment of employees in establishments in services sector:
Head | Governing Law |
Opening & Closing Hours | State law on Shops and Commercial Establishments |
Hours of Employment | State law on Shops and Commercial Establishments |
Overtime & Overtime Wages | State law on Shops and Commercial Establishments |
Intervals for Rest & Meal | State law on Shops and Commercial Establishments |
Spread Over | State law on Shops and Commercial Establishments |
Closed Day & Weekly off | State law on Shops and Commercial Establishments |
Pay Day | State law on Shops and Commercial Establishments & Payment of Wages Act, 1936 |
Holidays | State law on Shops and Commercial Establishments & State law on National and Festival Holidays |
Sick Leave [SL] | State law on Shops and Commercial Establishments |
Casual Leave [CL] | State law on Shops and Commercial Establishments |
Earned Leave/ Privileged Leave | State law on Shops and Commercial Establishments |
Maternity Leave [ML] | Maternity Benefit Act, 1961 |
Paternity Leave [PL] | Not a legal requirement in India |
Retirement Age | HR Policy of the Company or Model Standing Orders |
Notice of Termination | As per contractual covenants subject to provisions of state law on Shops and Commercial Establishments |
Policies & Procedures for Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace | POSH Act |
Compliance Obligations under Employment Laws:
Employers are under obligation to ensure regular compliances under above-listed laws. Major compliances under employment laws range from:
Employment Contracts:
Employment documents play pivotal role in the Employer-Employee engagements. Typically, employee engagement documents start with Offer Letter / LOI by the employer followed by Appointment Letter + Employment Contract or Employment Contract-cum-Appointment Letter. As employment contract serves as a base for all terms & future relationship between employer and the employee, an employer has to be very careful in setting up appropriate type of employment contracts in order to engage workforce in India. Depending upon business requirements and nature of specific employment role, employers pick up employment contracts from amongst below:
Firing of Employees:
Termination of services of workmen by the employer for any reason, otherwise than continued ill health or punishment inflicted by way of disciplinary action, amounts to “retrenchment” under Industrial Disputes Act, 1947 (ID Act). However, termination of service of a workman as a result of non-renewal of his/ her contract of employment does not amount to retrenchment.
Further, it is pertinent to note that persons employed mainly in managerial or administrative capacity or in a supervisory capacity have been excluded from the definition of “workmen” covered under ID Act.
Conditions Precedent to Retrenchment of Workmen – As per requirements of Section 25F of ID Act, no workman employed in any industry who has been in continuous service for not less than one year (read 240 days) under an employer shall be retrenched by that employer until:
Procedure for Retrenchment – Seniority list of category / class of employees is prepared to which the retrenchment is targeted and displayed at the establishment. While proceeding with retrenchment, LIFO (LAST IN FIRST OUT) method is employed, i.e. the employee who joined last in his category / class will go first.