Expanding your business to India is an excellent idea because of its strong economy, talented workforce, and competitive costs. However, if you're considering hiring remote employees in the country, you need to know the employment laws to maintain compliance. Non-compliance can lead to legal penalties, fines, and hefty administrative costs.
By partnering with an Employer of Record (EOR) service provider like BGC Group , you gain access to a team of employment experts who’ll take care of the complexities of hiring, paying, and managing employees in India and beyond on your behalf so you don't have to stress about it. In this blog, we'll provide an overview of employment laws in India, explain how to stay compliant, and show how an EOR service provider can help you adhere to the local rules and regulations.
Overview of Employment Laws in India
Let’s begin by understanding the Employment Act of India: The Employment Act of India is a significant piece of legislation that deals with how people work in India. Enacted in 1967, it lays down important rights for employees, including:
- Fair and equal salary
- Healthy and safe working environment
- Access to job-related rules and regulations
- Timely notice of dismissal
In addition to these fundamental rights, the act also provides guidelines on wages, working hours, and employment conditions.
Key Statutes Governing Indian Employment
Employment laws in India make sure both employers and employees are treated fairly. For example, the Industrial Disputes Act helps solve problems between employers and employees, like layoffs. The Employees' Provident Funds Act makes sure employees have savings for the future, with money from both the employer and the employee. The Payment of Gratuity Act gives employees extra money when they leave their jobs after working for a while. And the Minimum Wages Act makes sure everyone gets paid enough to live comfortably. These laws help create a fair and respectful workplace for everyone in the country.
Employment Contracts and Terms in India
When you hire someone new in India , it's standard practice for them to sign a work agreement. While the national labor law doesn't always demand a written contract, some states like Karnataka and Delhi insist on it. To keep your company safe and clear, it's always a smart move to have a written agreement that covers basic terms of employment and additional important information like:
- Scope of work
- Leave policies
- Non-solicitation agreement
- Termination policies
- Dispute resolution
- Confidentiality requirements
Indian law permits a probationary period of three to six months for new employees. During this time, the employer can terminate the job without giving notice. The initial job offer and contract should explain this trial period and what rights the employee and employer have during and after it. Comprehensive documentation in a written contract is the best way to save time and minimize risks when hiring internationally. It helps protect your company and avoids disagreements later on.
Talented experts at BGC Group provide EOR in India to help ensure your work contracts in India are easy to understand, follow the local rules, and fit your needs. This helps avoid problems, makes things run smoothly, and is extremely useful when you're hiring people from abroad.
Work Hours, Leave, and Overtime Regulations
Let’s have a close look at the working hours, leave policies and overtime regulations prevalent in India.
Working hours and overtime
According to labor laws, employees can work up to 48 hours per week and 12 hours per day. Employers must also ensure that employees get sufficient breaks during their shifts. If employees have to work extra hours beyond their usual schedule, it's called overtime. Indian laws make sure that employees are paid fairly for all this extra work. There are rules about how much extra time employees can put in and how much they should get paid for it.
These regulations vary across states and industries but ultimately aim to protect employees' health and ensure a work-life balance.
Leaves
Here are the different kinds of leaves employees in India are entitled to:
- Required leaves: In India, employees must get paid time off every year. If they work more than 240 days, they should get 12 paid leave days. They also get at least one day off every week, usually on Sundays, and sick leave whenever required.
- Maternity leave: For female employees expecting a baby, Indian law says they should get 26 weeks of paid time off if they've worked for at least 80 days in the year before their baby is due. Those adopting a child can get up to 12 weeks off too.
- Public holidays: India has certain days when everyone gets time off, like Republic Day, Independence Day, and Gandhi Jayanti. Some companies may also have to close on other regional holidays, depending on which state they are based in. It's essential to check local laws for religious festivals and other special days.
Employee Rights and Protections in India
Employees in India enjoy several rights and protections guaranteed by the law to ensure their well-being and fair treatment in the workplace. Here are some key aspects of employee rights and protections in the country:
- 1. Right to fair treatment: Indian labor laws prohibit discrimination based on factors such as gender, religion, caste, or disability. Employees have the right to equal opportunities and fair treatment in recruitment, promotion, and other employment-related decisions.
- 2. Safety and health regulations: Employers are required to provide a safe and healthy working environment for their employees. This includes maintaining proper safety standards, providing necessary safety equipment, and implementing measures to prevent workplace accidents and hazards.
- 3. Minimum wage and payment regulations: Indian labor laws uphold minimum wage rates that employers must adhere to, making sure that employees receive fair compensation for their work. Moreover, these laws also regulate the timely payment of wages, overtime rates, and deductions from salaries.
Discrimination and Harassment Laws in Indian Workplaces
The Indian authorities have implemented several measures to protect employees from harassment and discrimination in the workplace. In 2013, the Indian Parliament enacted one of the most important employment laws in India - the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act. This law defines what counts as sexual harassment and lays out how to handle it properly. It applies to all women working, whether full-time, part-time, interns, or apprentices, in both public and private sectors, and organized or unorganized industries.
All employers are required to set up an Internal Complaints Committee (ICC) to receive reports of sexual harassment in accordance with the Sexual Harassment of Women at Workplace Act. Apart from the Sexual Harassment of Women at Workplace Act, India has several laws that protect workers from discrimination. The Indian Constitution prohibits discrimination based on religion, ethnicity, caste, sex, or place of birth. The Equal Remuneration Act of 1976 ensures that employees receive equal pay for equal work. Additionally, the Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act of 1989 safeguards employees belonging to these groups from harassment and discrimination.
Termination Procedures and Severance in India
The main Indian statutes governing termination of employment include the IDA, IESOA, and relevant Shops and Establishments legislations. It's crucial to ensure that your employment contracts fully comply with both local and federal regulations regarding termination and severance. If there are conflicts between employment contracts and state or federal laws, the laws take precedence over the contract terms. The IDA says you need to give workmen 30 to 90 days' notice before ending their job. Reasons for termination can include:
- 1. Cutting back on staff
- 2. Disciplinary issues
- 3. Performance problems or negligence
- 4. Misconduct, such as theft or fraud, willful damage to employer property, prolonged unauthorized absence, accepting bribes, and so on.
Legal Considerations for International Companies in India
Legal considerations for international companies operating in India are extremely important to ensure compliance with local regulations and mitigate risks. Below are some key aspects to consider:
- 1. Company formation and registration: International companies must establish a legal entity in India to conduct business operations.
- 2. Foreign Direct Investment (FDI) regulations: There are specific rules for how much foreign investment is allowed in different sectors. Companies need to follow these rules and get approval from government agencies like the Reserve Bank of India.
- 3. Taxation and compliance: International companies operating in India have to pay taxes like income tax and GST. They need to make sure they file tax returns on time and pay the right amount to avoid hefty penalties.
The best way to hire from India
Partnering with an EOR service provider such as the BGC Group makes expanding your business to places like India much easier. We know all the prevalent rules and laws in those countries, so you don't have to worry about running into any legal troubles. By letting us handle complicated tasks such as hiring and managing employees, you can focus on growing your business. This also helps you avoid problems that might come up when expanding internationally. Plus, BGC Group gives you the flexibility to adjust your operations as needed. With our local knowledge and support, you can run your business smoothly and communicate effectively with local authorities and employees.
So, Contact us now for a free EOR quotation and start your global expansion journey today!
