TerraLex Cross-Border Guide to Cross-Border Labor & Employment Guidance

Labour laws falls under the Concurrent List of the Constitution of India and therefore, both Parliament (Central Government) and State Legislatures (State Government) have the power to make laws regulating labour and employment. Effective 21st November 2025, the four new Labour Codes were implemented viz. The Industrial Relations Code, 2020 (IRC), The Code on Social Security, 2020 (CoSS), The Code on Wages, 2020 (CoW), and The Occupational Safety, Health and Working Conditions Code, 2020 (OSHWC). These new Codes have consolidated and amended the various labour legislations under four broad heads. India had 29 central labour legislations which have now been consolidated and rationalised into 4 Labour Codes with the aim of simplifying compliance, expanding coverage, and modernising labour regulations. For the first time the labour codes have recognised and brought within its ambit "gig-workers" and provided them with social security benefits. The State legislatures are required to frame Rules under each of the Codes to give effect thereto; presently draft rules are in place and are likely to be enforced soon; in the interim the procedures prescribed under the erstwhile labour legislations continue to apply.

The work force is generally divided into three categories:

1. Workers;
2. Non-workers; and
3. Persons engaged mainly in managerial or administrative capacity, or employed in a supevisory capacity drawing wages exceeding Indian Rupees (INR) 18,000 per month or such wages as notified by the Central Government from time to time.

As against the definition of "workman" under the erstwhile labour legslation, the Industrial Relations Code, 2020 (IRC) define "worker" which has excluded from its ambit "apprentices" defined under the Apprentices Act, while including working journalists, and sales promotion employees, defined under the specific legislation applicable to them. Broadly, the term "worker" means any person (excluding an apprentice defined under the Apprentices Act, 1961) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and includes working journalists and sales promotion employees, and for the purposes of any proceedings under the IRC in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute. The new definition of "worker" now includes working journalists and sales promotion employees as defined under the respective legislation relating to such persons.The following persons are excluded from the ambit of the "worker" definition:

1. who is subject to the Air Force Act, 1950, or the Army Act, 1950 or the Navy Act, 1957; or
2. who is employed in the police service or as an officer or other employee of a prison, or
3. who is employed mainly in a managerial or administrative capacity, or
4. who, being employed in a supervisory capacity, draws wages exceeding INR 18,000 per month or such amount as notified by the Central Government form time to time

While the IRC is a central legislation governing industrial disputes, yet concurrently every State In India has legislated the Shops and Establishments Act which governs the working conditions, hours of employment, number of leaves and holidays, in a shop or a commercial establishment irrespective of whether the employee is a worker or a non-worker; in some States, this legislation excludes persons employed in a managerial, administrative or confidential capacity from its applicability.'

The new labour codes and the State Shops and Establishments Act may contain provisions that conflict with one another in relation to worker/employee benefits. In such cases, the new labour codes provide that the provisions that are more beneficial to the worker/employee shall prevail.

Foreign nationals seeking to work in India with an Indian company must obtain an employment visa, which is usually issued either in their home country or in a country where they have resided for over two years. This visa is typically granted for the length of the employment contract or for a period ranging from 1 to 5 years (extendable), depending on the category of the employee. It is mainly issued to highly skilled or qualified professionals and not for positions where qualified Indian candidates are available or for routine, secretarial, clerical, or other common roles. The visa application must be sponsored by the Indian employer, and the applicant's annual salary must be above USD 25,000. Additional conditions may apply based on the job type and the applicant's nationality. There are exceptions to the aforesaid salary threshold for certain categories, such as ethnic cooks, language teachers or translators, staff of embassies or high commissions, foreign nationals engaged in honorary work with NGOs registered in India without salary, foreign faculty at the South Asian University and Nalanda University, and circus artists.

Foreign nationals intending to stay in India for more than 180 days are required to register with the Foreigners Regional Registration Office (FRRO) within 14 days of their arrival. As part of this registration process, the Indian employer must submit an undertaking to the FRRO, agreeing to take responsibility for the foreign national's conduct during their stay, including repatriation if necessary. It is important to note that India's immigration policies are periodically updated.

In addition to the above, Indian companies/employers must ensure complete adherence to relevant labor Codes, including the provisions of The Code on Social Security, 2020 as they apply to international workers employed in India. Employers must also comply with tax regulations and other applicable obligations concerning foreign nationals working as employees in their respective organizations.

Terms and conditions of employment generally depend upon the category of employee, i.e., worker or non-worker, and the laws that are applicable upon such employee under a written employment contract. Further, a person engaged in a managerial, administrative, or confidential capacity, where excluded from the applicability of a Labour Code or the State Shops and Establishmnts Act, is governed by their respective employment contract; certain terms and conditions can be agreed by the employer and the employee mutually under the employment contract.

The employment contract generally contains the following terms:

• appointment (designation, acceptance of employment, office/location of employer, reporting senior).
• probation
• term, if a fixed term employee; else all employment continues unless terminated as per employment terms in accordance with applicable laws.
• primary responsibility and job description.
• remuneration (base salary, incentives/allowances, bonus, provident fund, gratuity).
• termination (notice period, termination without cause, resignation, termination for cause)
• hours of work
• confidentiality
• return of employers property
• intellectual property
• indemnification
• non-compete (with reasonable restrictions only)
• non-solicitation
• dispute resolution (may be court or arbitration), governing law, jurisdiction.

The Code on Wages, 2020 (CoW) determines the payment, fixation and components of wages. It applies to both workers and non-workers.

Minimum Wages: The CoW empowers the Central Government to fix floor wages considering the minimum living standards of an employee; however, different floor wages may be fixed for different geographical areas on the basis of which the minimum wages are fixed for different States by the respective State Governments. The State Government cannot fix minimum wages below the floor wage. The State Government can fix a basic rate of wages, and an allowance which can be adjusted at intervals basis the variation in cost of living index and/or the cash value of any concessions in supply of essential commodities, or an all inclusive rate of minimum wages comprising of these components.

Payment of Wages: Wages are to be paid for a wage period fixed by the employer, which cannot exceed a month. The wages are to be paid by the employer within the presecribed time limit for each wage period e.g. it is to be paid before the expiry of the 7th day of the succeding month for a monthly wage period. Only permitted deductions and for the purposes mentioned in the CoW can be made by the employer from wages payable.

Overtime: An employee who works more than the number of hours constituting a normal working day is entitled to overtime pay by the employer for every hour or part theeof so worked in excess, at the overtime rate which is not less than twice the normal rate of wages.

In India, collective bargaining agreements are entered between the employer and the trade unions by which employment related disputes are resolved cordially, peacefully, and voluntarily by settlement between labour unions and managements. This mechanism which was prevalent under the erstwhile Industrial Disputes Act, 1947, continues under The Industrial Relations Code, 2020 (IRC); however, the IRC introduces a structured framework through the concept of a Negotiating Union or Negotiating Council in industrial establishments havng a registered trade union, which is to be recognised by the employer for settling worker grievances. The IRC prescribes the conditions for the recognition of a Negotaiting Union or constitution of a Negotiating Council.

Pension - Under the erstwhile Employees Provident Fund and Miscellaneous Provisions Act, 1952 (EPF Act), the Central Government framed the Employees' Pension Scheme, 1995 (EPS) which has been amended from time to time. While the EPF Act has been, inter alia, subsumed in The Code of Social Security, 2020 (CoSS), the CoSS continues to empower the Central Government to frame social security schemes, including pension. In the absence of any new scheme currently framed under the CoSS, the EPS continues to be in force providing superannuation pension, retiring pension, disablement pension, widow pesnion, orphan pension, or nominee pension.

The CoSS is applicable to all employees employed on wages and includes theose performing managerial, and administrative functions.

Benefits - Employees are entitled to certain statutory benefits under the CoSS and the Code on Wages, 2020 (CoW)-

(A) Under the CoSS the employees are entitled to certain statutory benefits listed below:

1. Employees' Provident Fund: Applicable to establishments including factories, with 20 or more employees and independent of any wage limits. Both the employer and the employee contributes amounts equal to 12% of the wages of the employee. In the absence of any new Provident Fund Scheme framed by the Central Government under the CoSS, the erstwhile Employees provident Fund Scheme, 1952 continues to apply.
2. Employees' State Indusrance Fund: Applicable to establishments including factories, with 10 or more employees and provides mandatory insurance coverage to employees and their dependents related to sickness, maternity, employment injury, and medical treatment including hospitalisation. In the absence of any new Employees' State Insurance Fund framed by the Central Government under the CoSS, the erstwhile Fund created under the Employees' State Insurance Act, 1948 continues to apply. Both the employer and the employee contribute to the Fund; however, the present monthly wage limit for applicability is Indian Rupees 21,000.
3. Gratuity: The employee is eligible to receive an amount equal to 15 days of average wages for every completed year of services upon retirement or retrenchment if such employee has rendered continuous service for 5 years with the employer. However, for working journalists under the law applicable to them, and for fixed term employees, the qualifying period for gratuity is 3 years and 1 year of continuous service, respectively.
4. Maternity Benefit: Applicable to establishments including factories with 10 or more employees. Eligibility - Women employee who has worked for not less than 80 days in the 12 months immediately preceding her expected date of delivery (EDD). Allows a pregnant woman employee to avail 26 weeks of maternity benefit of which not more than 8 weeks shall precede the EDD. However, the maternity benefit is reduced to 12 weeks with not more than 6 weeks preceding the EDD, where the women employee has 2 or more surviving children. The employer cannot teminate such woman employee during the period of maternty benefit. The employer is required to pay the woman employee during the maternity benefit period the average daily wage being the average wage payable to her during the 3 calendar months immediately preceding the start of her maternity benefit period.

(B) Under the CoW, eligible employees are entitled to satutory bonus:

1. Bonus: Applicable to establishments including factories employing 20 or more persons, on the basis of profits or on the basis of production or productivity and matters connected therewith.The minimum bonus payable is 8.33% irrespective of any profits, with a maximum of 20%. The present monthly wage limit for applicability is Indian Rupees 21,000.

(C) Other Benefits - The employer can frame policies allowing any other benefit, such as a peformance bonus, retention bonus, stock options.

Worker Representation can be done through trade unions in the organization. A trade union is formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen, or between employers and employers, or for imposing restrictive conditions on the conduct of any trade or business, and includes any federation of two or more trade unions.

The Industrial Relations Code, 2020 (IRC) has mandated the employer of an industrial establishment to recognise a registered Trade Union having 51% or more of the workers on its muster role as members of such Trade Union, as the Negotiating Union for negoatiating on matters as may be prescribed. Where only one registered trade union of workers of that industrial establishment exists, such Union will be recognised as the Negotiating Union. Where multiple registered unions of workers of that industrial establishment exist without any of them having 51% or more membership of the workers of that industral establishment, then the industrial establishment shall constitute a Negotiating Council comprising of representatives of such registered trade unons having the support of not less than 20% of the total workes on the muster role of that industrial establishment.

The Occupational Safety, Health and Working Conditions Code, 2020 (OSHWC) prescribes the working hours, weekly and compensatory holidays and annual leaves for workers in an establishment. The OSHWC defines an "establishment" to mean, inter alia, a place where any industry, trade, business, manufacturing or occupation is carried on in which 10 or more workers are employed; thus even a factory would fall within the ambit of establishment.

Alongside the OSHWC, there are State specific Shops and Establsihments Acts which also regulate the working hours, holidays and leaves for employees (the term employee here is broad and includes workers; however some such State specific Acts exclude managerial, and administrative employees from its applicability). The State Shops and Establishments Act may also provide for the number of paid holidays on account of national and festival holidays.

It is to be noted that the OSHWC provides that in case of any inconsistency with any other law, the OSHWC prevails; however any benefits provided to an employee under any award, agreement, or contract of service which are more beneficial than provided under the OSHWC, shall prevail. Accordingly, some matters such as number of national and festival holidays not provided under the OSHWC, would be governed by the State specific legislation.

The workmen who have completed one year of service with the employer are eligible to receive retrenchment compensation which is equivalent to 15 days of average pay for every completed year of service and one month notice or salary in lieu of such notice in case of dismissal by the employer. The term retrenchment does not include:

• voluntary retirement of the workman; or
• retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or
• termination of the service of the workman as a result of the on-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or]
• termination of the service of a workman on the ground of continued ill-health;

In factories, mines, and plantations where more than 100 workmen are employed, prior permission of the appropriate Government or such authority as may be specified by that Government by notification in the Official Gazette has to be obtained in case the employee has to be retrenched.

An employee will be dismissed due to redundancy if there is a business closure, a workplace closure, or a reduced requirement for employees to carry out work of a particular kind.

In case of workplace closure, every workman shall be entitled to receive a notice of 60 days before the date on which the intended closure is to become effective

The Industrial Dispute Act, 1947 provides for the compensation to the workmen in case of transfer of undertakings. It states that when the ownership or management of an undertaking is transferred, whether by agreement or by operation of law, from the employer in relation to that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of retrenchment compensation.

In certain cases, it shall not apply to a workman where there has been a change of employers by reason of the transfer, if (a) the service of the workman has not been interrupted by such transfer; (b) the terms and conditions of service applicable to the workman after such transfer are not in any way less favourable to the workman than those applicable to him immediately before the transfer; and (c) the new employer is, under the terms of such transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer.

Different labour legislations provides for different authorities and procedure for resolution of disputes. In case of acts providing social security benefits, each act provides for specific authority to adjudicate the claims raised by the employees. For example, any claims under the Employees Provident Fund Act, 1952, shall be raised in front of the Regional Provident Fund Commissioner and any appeal arising out of such orders shall lie with the tribunal. If the parties are not satisfied with the order of the tribunal, the parties can prefer a further appeal in the High Court and then in the Supreme Court.

In case of any dispute under the Industrial Disputes Act, 1947, the disputes are generally brought forward in front of the conciliation officer. If the conciliation fails, the dispute is forwarded to the tribunal. If the parties are not satisfied with the order of the tribunal, the parties can prefer a further appeal in the High Court and then in the Supreme Court.

Employee’s Compensation Act, 1923: The Employee’s Compensation Act, 1923 provides for payment of compensation to workmen (or their dependents) in case of personal injury caused by accident or certain occupational diseases arising out of and in the course of employment and resulting in disablement or death.

Maternity Benefits In India, maternity benefits for women employees are regulated under the Maternity Benefit Act, 1961, which provides essential support during pregnancy and childbirth.

The Act ensures that women are entitled to paid maternity leave of up to 26 weeks, along with provisions for nursing breaks and job security. These benefits aim to protect the health of both the mother and child, while also promoting a supportive work environment for women. Over time, the law has been updated to enhance maternity rights, contributing to greater gender equality in the workplace and encouraging women's continued participation in the workforce.

The Maternity Benefit (Amendment) Act, 2017 introduced significant changes to strengthen support for working women during and after pregnancy. It increased the paid maternity leave to 26 weeks for women with up to two children and 12 weeks leave for mothers with more than two children. The amendment also introduced maternity leave for adoptive and commissioning mothers for up to 12 weeks from the date of handed over of child. Employers with 50 or more employees are now required to provide crèche facilities, and flexible work-from-home options may be offered based on the nature of the job. Employers must also inform women of their maternity rights at the time of joining. These changes aim to create a more inclusive and supportive work environment for women.

Protection against sexual harassment The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act) aims to ensure a safe working environment for women. It mandates that all workplaces with 10 or more employees establish an Internal Committee (IC) to handle complaints of sexual harassment. If the organization has less than ten employees or for any other valid reason, the complaint can be filed with the Local Committee (LC) constituted by the district officer. Currently, the complaint filing period is three months from the date of incident.

In 2024, the Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Amendment Bill, 2024 was proposed. The said Bill introduced key changes, including extending the complaint filing period to one year, with possible extensions by Internal or Local Complaints Committees. The Bill also removed the conciliation mechanism (provided under section 10 of POSH Act), which allowed informal settlement of complaints, as it risks pressuring the complainant. This ensures all complaints are handled through formal investigations. Additionally, the Bill requires the employers to adapt their complaint-handling systems to accommodate the extended filing period, raise awareness about the changes, and ensure internal committees are trained to handle formal investigations. Employers must comply strictly with the new provisions to avoid legal risks and reputational damage. The aforementioned Bill is currently under discussion, and it will be worthwhile to see how the proposed amendments take effect in providing better protection to women at the workplace.

No child below the age of 14 shall be required or allowed to work whether as an employee or otherwise, in any establishment notwithstanding that such child is a member of the family of the employer. No young person is allowed to work about the business of an establishment for more than six hours a day and cannot be employed continuously for more than three and a half hours without an interval of at least half an hour for rest or meals and the spread over shall not exceed eight hours on any day.

The Equal Remuneration Act, 1976 provides for payment of equal remuneration to men and women workers for the same work or work of similar nature and for the prevention of discrimination on grounds of sex. No employer shall, while recruiting for the same work or work of a similar nature, or in any condition of service subsequent to recruitment such as promotions, training or transfer, discriminate against women except where the employment of women in such work is prohibited or restricted by or under any law for the time being in force.

The Rights of Persons with Disabilities Act, 2016 aims to uphold the dignity of every person with a disability in the society and prevent any form of discrimination. The Rights of Persons with Disabilities Act, 2016 also facilitates full acceptance of people with a disability and ensures full participation and inclusion of such persons in the society.

The Contract labour (Regulation and Abolition) Act, 1970 has been established to regulate the employment of contract labour. It applies to every establishment and contractor employing 20 or more contract labourers. Certain registrations and licenses have to be obtained under the Contract labour (Regulation and Abolition) Act, 1970 by the principal employer and the contractor, respectively. Contract labourers are generally hired to perform functions like housekeeping, security, etc. Contract labourers are not engaged to perform core activities of an establishment.

To perform core activities, assignment/work can be outsourced by the engagement of independent contractors.

The major protections for employee rights protected by Indian law have been described in general terms above.

In addition to the above, it is important to highlight the following recent developments in India:

Introduction of Labour Codes To safeguard workers' rights such as access to minimum wages and social security, the Central Government consolidated various existing labour laws into four comprehensive Labour Codes: (i) the Code on Wages, (ii) the Code on Social Security, (iii) the Occupational Safety, Health and Working Conditions Code, 2020, and (iv) the Industrial Relations Code. These Codes merge a total of 29 central labour laws, streamlining compliance and enhancing the delivery of social security and workplace protections.

However, their implementation is still pending, primarily because States and Union Territories require additional time to draft, finalize, and notify their respective rules. This delay also accounts for necessary administrative preparations and consultations with stakeholders.

As of January 2025, over 18 States and Union Territories have implemented the majority of the labour reforms, while more than 32 States and UTs have pre-published their draft rules in preparation for the rollout of the Labour Codes.

Data Protection Law: Employer Obligations and Compliance Under the provisions of the Digital Personal Data Protection Act, 2023 (“DPDP Act”), companies/employers acting as data aggregators or data fiduciaries of employee data will be responsible for ensuring compliance with the law. This includes obtaining proper consent from employees for the collection of personal data, maintaining robust security measures to protect this data, ensuring that processing of data takes place in a secured manner, breach notification to employees and the data protection board and establishing a grievance redressal mechanism. Non-compliance with these obligations could result in liability for the employer company.

Introduction of Employment-Linked Incentive Schemes in the Union Budget 2024-25 With an aim to boost youth employment, enhance skill development, and support job creation, particularly in the formal sector, the Central Government in its union budget for 2024-25 introduced five employment-linked incentive (ELI) schemes, in line with the Central Government’s "Viksit Bharat 2047" vision. The schemes include:

• Part A: A wage subsidy (up to Rs. 15,000) for first-time employees registered with EPFO, paid in three instalments.
• Part B: Incentives for the manufacturing sector, reimbursing EPFO contributions for first-time employees for the first four years, with eligibility for those earning up to Rs. 1 lakh per month.
• Part C: A financial subsidy (up to Rs. 3,000 per month for two years) for employers hiring additional employees with salaries up to Rs. 1 lakh.
• Skilling Programme & ITI Upgrades: Equipping 20 lakh youth with skills over five years, upgrading 1,000 ITIs, and offering skilling loans and women-specific training.
• Internship Programme: Providing 12-month internships with a Rs. 5,000 monthly allowance for unemployed youth (aged 21–24) from low-income families.

Role of Judiciary In India, central and state labour law legislations (including amendments, notifications, and circulars/guidelines) outline employer obligations while strengthening worker rights and social security benefits. The judiciary, on the other hand, plays a critical role in enforcing these laws, ensuring fairness and transparency in employment practices. By interpreting and clarifying legal provisions, the judiciary sets important precedents that help guide employers in achieving compliance. For instance in 2024, the Supreme Court of India passed significant judgments on employment laws, highlighting the importance of ensuring fairness and transparency in workplace practices. These decisions reflect a growing trend towards holding organizations more accountable for upholding the rights of their employees.