Labour Laws in India: A Guide for Employers and Employees

India boasts the world’s largest population, with more than 1.4 billion people — and a labor force full of talent, ambition and optimism. There’s a reason that the country is now the home to scores of global companies: its competitive, well-educated work force. But before you hire or establish operations in the country, it’s important to have a grasp of India’s labour laws.

The labor laws in India are formulated to safeguard workers' rights and to ensure safe, fair and compliant practices by businesses. These laws cover such vital areas as wages, hours, safety in the workplace, benefits and termination. For employers, they are a model for minimizing legal risks. To employees, they offer job security, equitable compensation and dignity at work.

The No-Nonsense Guide to India’s Complex Labour Laws

A Brief History of Labour Laws in India

India’s first labour laws date to the era of British colonialism, when the Factories Act of 1881 was enacted to deal with unsafe work conditions. Over time, further rights were legislated to protect workers, and to ensure that there was some equity between workers and their employers, including rights to workplace safety, to collective representation and to freedom of association.

Key milestones:

• Before Independence: Laws such as the Trade Disputes Act, 1929 addressed the issues of industrial conflicts.

• After Independence: Laws like the Industrial Disputes Act, 1947 established the foundation for current industrial labor relations.

• Recent Reforms: India rationalized 29 different laws into four simplified labour codes, easing burden on businesses.

India’s New Labour Codes: What’s Changed?

In order to consolidate and amend various old laws to bring them in line with the current situation, India brought in four major labour codes:

1. The Code on Wages, 2019

Combines four laws related to employee wages, including the Minimum Wages Act and Payment of Bonus Act.

Key focus:

• Defines “wages” clearly
• Ensures minimum wages for all workers
• Requires equal pay for equal work

2. The Industrial Relations Code, 2020

Simplifies rules around strikes, layoffs, and dispute resolution.

Key focus:

• Simplifies hiring and firing
• Proposes a reskilling fund for laid-off workers
• Improves dispute resolution mechanisms

3. The Social Security Code, 2020

Combines pension, insurance, and benefit laws, including EPF and ESI.

Key focus:

• Expands coverage to gig and platform workers
• Merges multiple schemes for better access to benefits
• Ensures health, retirement, maternity, and injury protection

4. The Occupational Safety, Health and Working Conditions Code, 2020

Merges laws concerning health and safety at the workplace.

Key focus:

• Mandates basic facilities (clean water, toilets)
• Simplifies compliance
• Applies to all workplaces with 10+ workers

Understanding Key Labour Laws in India

India’s employment laws are categorized across different areas of workforce management. Here’s a breakdown:

1. Laws Governing Industrial Relations

Purpose: Maintain harmony between employers, employees, and unions.

🔹 Industrial Disputes Act, 1947

Provides mechanisms for resolving industrial conflicts through conciliation, arbitration, or legal proceedings.

🔹 Trade Unions Act, 1926

Legalizes the formation of trade unions and protects the rights of workers to organize collectively.

Key employer responsibilities:

• Follow due process before retrenching or closing a business
• Issue notice before strikes or lockouts
• Respect rights of workers to unionize

2. Laws Related to Wages

Purpose: Ensure fair pay, prevent wage exploitation, and promote equal compensation.

🔹 Minimum Wages Act, 1948

Guarantees a basic minimum salary, adjustable by state governments based on cost of living.

🔹 Payment of Wages Act, 1936

Ensures timely payment of wages and limits unlawful deductions.

🔹 Payment of Bonus Act, 1965

Mandates bonuses for employees based on company profitability or productivity.

🔹 Equal Remuneration Act, 1976

Requires equal pay for men and women doing similar work.

Key employer responsibilities:

• Pay minimum wages as per state mandates
• Avoid gender-based discrimination in pay
• Disburse bonuses and maintain transparent wage records

3. Laws on Working Hours, Conditions, and Employment Terms

Purpose: Regulate hours, safety, and conditions at work.

🔹 Factories Act, 1948

Sets rules for safety, health, and working hours in factories.

🔹 Mines Act, 1952

Specifies safety and welfare standards in mines, including equipment and ventilation rules.

🔹 Shops and Establishments Acts (State-specific)

Each state has its own version, regulating working hours, holidays, and conditions for businesses like shops, restaurants, and offices.

Key employer responsibilities:

• Limit work to 9 hours a day and 48 hours a week (with overtime pay)
• Provide facilities like drinking water, first-aid, and restrooms
• Prohibit child labour in hazardous jobs

4. Laws on Social Security and Employee Benefits

Purpose: Provide financial protection during retirement, illness, maternity, or workplace accidents.

🔹 Workmen's Compensation Act, 1923

Requires employers to compensate workers for job-related injuries or death.

🔹 Employees’ State Insurance (ESI) Act, 1948

Offers medical benefits, sickness leave, and maternity support to employees.

🔹 Employees’ Provident Funds (EPF) Act, 1952

Ensures long-term retirement savings through joint employer-employee contributions.

🔹 Maternity Benefit Act, 1961

Grants up to 26 weeks of paid maternity leave and ensures job security during pregnancy.

🔹 Payment of Gratuity Act, 1972

Provides a lump sum payout to employees who have worked for at least five continuous years.

Key employer responsibilities:

• Enroll eligible employees under EPF and ESI
• Ensure maternity benefits and job protection
• Pay gratuity to long-term employees

5. Laws on Termination and Job Security

Purpose: Ensure fair processes for terminating employees and protect their rights during layoffs.

🔹 Industrial Employment (Standing Orders) Act, 1946

Defines rules for discipline, leave, and termination in larger companies.

🔹 Industrial Disputes Act, 1947

Also regulates layoffs and requires advance notice or government permission in some cases.

Key employer responsibilities:

• Serve proper notice or offer compensation during layoffs
• Follow prescribed process for disciplinary action
• Pay retrenchment benefits as applicable

6. Laws to Promote Equality and Prevent Harassment

Purpose: Create a safe, respectful, and non-discriminatory workplace.

🔹 Equal Remuneration Act, 1976

Prevents pay discrimination based on gender.

🔹 Sexual Harassment of Women at Workplace Act, 2013

Mandates a grievance redressal mechanism for sexual harassment complaints.

Key employer responsibilities:

• Set up Internal Complaints Committees (ICCs)
• Train staff on anti-harassment practices
• Take swift action on complaints

Challenges Employers Face with Indian Labour Laws

Despite recent reforms, navigating labour laws in India isn’t always straightforward:

🔸 Complex and overlapping laws

Central and state laws often differ, which can confuse employers trying to stay compliant.

🔸 Frequent changes

Laws are revised regularly, requiring businesses to stay updated or risk penalties.

🔸 Heavy documentation

Compliance requires detailed record-keeping—wage slips, attendance logs, benefits paperwork—which can overwhelm smaller teams.

🔸 Managing a diverse workforce

Employers must meet the needs of permanent staff, contractors, and gig workers—all governed by different rules.

Why Businesses Choose to Hire in India?

India has emerged as a global hub for skilled talent, giving businesses access to a diverse and capable workforce. Here’s why hiring in India could be a strategic advantage for your company:

Vast Talent Pool

India boasts one of the largest and most adaptable talent pools worldwide. Whether it's IT, engineering, healthcare, finance, or the creative sector, Indian professionals offer deep expertise, innovation, and a strong work ethic.

Cost Efficiency

Hiring in India can substantially lower your operational expenses without sacrificing quality. The country’s competitive labour costs, coupled with highly qualified professionals, make it a top choice for companies looking to get more value from their investment.

Thriving Economy

As one of the world’s fastest-growing economies, India presents a dynamic and opportunity-rich business landscape. Its young, driven workforce contributes fresh perspectives and sustainable growth potential.

Supportive Government Policies

Government-led initiatives like Make in India and Digital India actively promote foreign investment and global collaboration. These programmes offer policy and infrastructure support, encouraging international businesses to partner with local talent and establish a strong presence in the Indian market.

How Can DevX EOR Help You Hire in India?

DevX EOR offers dedicated Employer of Record (EOR) services exclusively in India, helping businesses seamlessly hire and manage talent without the need to establish a legal entity.

With DevX EOR, you can delegate all the complexities of hiring — from drafting compliant employment contracts and managing payroll to handling taxes and social security contributions. Our deep understanding of Indian labour laws ensures your hiring process stays fully compliant and stress-free.

Whether you're looking to onboard a single employee or build an entire team, DevX EOR enables you to tap into India’s skilled workforce quickly, affordably, and with complete administrative support. We make hiring in India simple, so you can focus on growing your business.

Conclusion

Clear labour laws are essential for setting workplace standards and fostering strong employer-employee relationships. In India, understanding and adhering to these regulations is crucial for creating a fair, safe, and efficient work environment. These laws not only protect employees’ rights but also help employers operate within legal boundaries, minimizing the risk of disputes.

By complying with Indian labour laws, businesses can access the country’s vast talent pool while building a culture of respect and trust. Whether you’re hiring or working in India, being aware of your legal responsibilities and rights ensures a smooth and rewarding experience in the country’s rapidly growing economy.