Employment in India part one: legislation
The first of an informative three part series of articles from QX Corporate Advisors is on employment legislation in India
For any business looking at India for expansion or business set-up, there are countless considerations to be made and one of the important areas that should be fairly top of your mind after you work out where and how you are going to set up your business, are the employees. As in the UK, US and the majority of countries across the world, there is extensive legislation in place to govern recruitment and conditions of employment that you will need to make yourself aware of. This is the first of three articles which provide a top level view of some of the key elements you should be aware of regarding employment in India.
The bulk of employment law was developed during the British rule with the first one being enacted in 1926. Those initial laws were focused on employment in the manufacturing sector and particularly protected the white workers, though since independence and the expansion of the economy, many more service industry related legislations have been introduced together with a total overhaul of the original legislation. There were many pressures that were brought to bear from many sides in the development of these laws which provide the terms of employment and conditions of labour of the massive Indian workforce.
The service sector, for example, is primarily governed by the following legislations/Acts for day-to-day operations:
- Minimum Wages (differs from state to state within India);
- Shops & Establishments Act (differs from state to state). This Act defines the working hours, paid leave, overtime, Public Holidays, health & safety standards, records maintenance, etc;
- Employee Provident Fund Act (Central Act – uniform across states). This covers retirement benefits;
- ESIC (Employee State Insurance Corporation) Act (central Act – uniform across states). This covers medical needs;
- Payment of Gratuity Act (central Act – uniform across states). This also covers retirement benefits;
- Payment of Bonus (central Act – uniform across states);
- Maternity Benefits Act (central Act – uniform across states); and
- Industrial Disputes Act.
The employment laws in India are there to provide a fair employer and employee relationship and to guide labour practices. They also govern the benefits across sectors and provide both social security and guidelines when creating jobs and give protection for employees against unfair dismissal, discrimination, equal pay and so on. There is also protection for underage workers with an amendment in 2006 to the original Child Labour (Prohibition and Regulation) Act 1986 which introduced an expansion of the law forbidding employment of children under 14 years to cover non-hazardous roles such as in restaurants or in domestic employment.
For an employer new to India, it is strongly recommended you obtain the support of an HR or legal firm to guide you with your employment practices, contracts and terms of employment. QX Corporate Advisors has a team of experts in place to assist and advise businesses across all the key areas you will need to confront when setting up a business in India.