Employee rights and labour law in India: What employers owe

You’ve taken over HR for a team based in India just as the four Labour Codes came into force. The contracts, registers and exit practices you inherited were written for laws that no longer exist. Mostly compliant isn’t compliant, and last year’s paperwork is mostly compliant at best. That’s a lot to untangle, and we get it.

The four Labour Codes started taking effect on 21 November 2025, replacing 29 central Acts, including the Industrial Disputes Act, the Payment of Wages Act and the Factories Act. Only specified provisions of the Code on Social Security are in force so far. The final Central Rules under all four Codes followed on 8 and 9 May 2026.

Under the Code on Wages, an “employee” covers anyone employed on wages to do skilled, semi-skilled, unskilled, manual, operational, supervisory, managerial, administrative, technical, or clerical work. The definition excludes apprentices and members of the Armed Forces. Minimum wages and payment deadlines follow this broad definition, and the Occupational Safety, Health and Working Conditions (OSH) Code uses a similarly broad definition for duties such as appointment letters.

A “worker” is narrower. Under the Industrial Relations (IR) Code, it covers manual, unskilled, skilled, technical, operational, clerical and supervisory work, including supervisors earning up to ₹18,000 a month. Individuals employed mainly in managerial or administrative roles fall outside it. Redundancy rights, standing orders and much of the OSH working-time regime depend on this definition. Actual duties decide the label, so a well-paid software engineer may be a worker, while a lower-paid manager with genuine authority may not be. Contractors have their own test, and it’s worth running properly rather than assuming. Getting it wrong creates misclassification risk.

Headcount thresholds add further duties, set out below.

The OSH Code sets eight hours as the normal working day, and the final Central Rules set 48 hours a week for workers who are not daily-rated. An employer pays overtime at twice the rate of wages and needs the worker’s consent, and the Central Rules cap it at 144 hours a quarter. A weekly rest day is typically due every seven days.

These limits are worker rights in covered establishments, and state rules decide rest intervals and exemptions for IT and IT-enabled services. Office staff who are not workers, including managers, take their hours from the state Shops and Establishments Act and the contract. Hours-of-work rules therefore differ by state.

Take an illustrative worker under the Central Rules earning ₹300 an hour who works 52 hours in a week. The employer pays the first 48 hours at ₹300 and the remaining four hours at double, so overtime adds ₹2,400 for that week.

Every employee must receive at least the minimum wage notified by the appropriate Government. Rates vary by skill, geography, and the hazardous nature of the work, so each role needs mapping to the current notification for its state.

Every employee must have an appointment letter. Anyone already in post when the rule took effect should have received one within three months. If they didn’t, issue one now. The Central Rules prescribe the format. A non-central establishment uses its state’s final format where one exists. At a minimum, the employer’s file should record the employer, work location, designation, employment category, start and end dates, wage components, hours, leave and notice terms.

Standing orders, the certified rules on attendance, shifts, leave, misconduct and grievances, apply to an industrial establishment with 300 or more workers on any day in the preceding 12 months. The Central Government issued Model Standing Orders for services, manufacturing and mining in May 2026, which employers use as the base for their drafts.

The Wage and OSH Codes also require registers of employees, attendance, hours, overtime, wages, deductions, fines, advances and leave, along with wage slips and returns. Keep bank-transfer proof with each wage slip.

India sets no single statutory notice period for every employee. Notice comes from the contract, the state Shops and Establishments Act, standing orders, a fixed-term contract, or the IR Code’s redundancy rules. A dismissal for misconduct follows the standing orders or service rules and natural justice (a fair hearing before a decision), with a documented charge sheet, inquiry and reasoned decision.

Redundancy, the IR Code’s term for a redundancy-type termination, has a statutory definition that excludes voluntary retirement, retirement at the contractual age, qualifying fixed-term expiry and termination for continued ill health. A worker with at least one year of continuous service can only be made redundant once the employer has done all four of the following.

• Given one month’s written notice stating the reasons, or paid wages for that month in lieu.
• Paid compensation at the time of redundancy of 15 days’ average pay for each completed year of service, counting any part-year over six months as a full year.
• Served notice on the appropriate Government in the prescribed manner.
• Contributed 15 days’ last-drawn wages to the Worker Re-skilling Fund, which credits the money to the worker within 45 days. How you pay into the fund depends on the applicable rules, which can differ by state.

Take a worker with four years and seven months of service and average pay of ₹2,000 a day. The seven months exceed six, so the service counts as five years. Five years at 15 days each gives 75 days, and 75 × ₹2,000 is ₹1,50,000. The employer also pays the re-skilling contribution of 15 days’ last-drawn wages.

Specified non-seasonal industrial establishments averaging 300 or more workers need prior government permission for lay-off, redundancy and closure, generally with three months’ notice or pay in lieu. States can alter that threshold. Managers outside the worker definition rely on their contract and the Shops Act, whose termination notice rules vary by state.

A fixed-term employee needs a written contract for a specified period. Hours, wages, allowances, and other benefits must match those of a permanent employee doing the same or similar work, and statutory benefits apply in proportion even where the usual qualifying period is not completed. Gratuity eligibility starts after one year of service.

Record the dates, renewal position, and pay-parity comparison. Rolling someone from one fixed term to the next to avoid making them permanent can create unfair termination risk.

The Sexual Harassment of Women at Workplace (POSH) Act requires every workplace with 10 or more employees to set up an Internal Committee to hear complaints. The committee must be set up by written order, and each separate office or unit is tested against the threshold on its own.

The employer must display the committee’s details, provide training, treat harassment as misconduct, and make sure the committee’s annual report is filed, covering complaints, cases pending over 90 days, and action taken. Failing to set up the committee or file its annual report can draw a fine of up to ₹50,000, as the Ministry of Women and Child Development’s 2015 POSH employer handbook sets out.

Women may work before 6 a.m. or after 7 p.m. with prior written consent, and the Central Rules add safe transport, lit washrooms, drinking water and CCTV in specified areas. Lawful maternity absence is protected from dismissal or disadvantage. Separate statutes add duties: a complaints officer under the Transgender Persons Act, an equal-opportunity policy under the Rights of Persons with Disabilities Act, and confidentiality under the HIV and AIDS Act.

An establishment may need OSH, Shops and Establishments, and contract-labour registrations, depending on activity and headcount. Each Code sets its own penalties, shown below. Most come down to the basics, and the checklist that follows covers them.

Standing order breaches also attract monetary penalties, with the exact amount set by the IR Code provision charged.

Work through these steps for each location.

• List every establishment and record its appropriate Government.
• Classify each person as employee, worker, manager, fixed-term employee, or contractor, by actual duties.
• Match every role to the latest minimum-wage notification and test pay structures against the 50% wage rule.
• Confirm monthly wages are paid by the seventh day, and deductions stay within 50%
• Issue compliant appointment letters to anyone without one.
• Constitute and train the POSH Internal Committee at each qualifying workplace.
• Before any exit, classify the event, confirm worker status, and calculate each payment separately.

India’s Codes spread liability beyond the contractual employer. A contractor may be an employer under the Codes, while the host business may be the principal employer, with residual duties for welfare facilities, wage defaults, registration, and supervision. A contractual indemnity does not remove statutory liability where a Code names the client or principal employer. That’s why the EOR you choose matters as much as the contract you sign with them. For genuine contractors, an Agent of Record (AOR) is the better fit. An AOR checks that each person really is a contractor under local law, structures the contract, and handles payments, without becoming their employer.

Whoever you work with, ask them these four questions. We’re happy to answer them too.

• Which state’s rules govern each work location, and has that state finalised them?
• Who issues appointment letters and keeps the registers?
• Who constitutes the POSH Internal Committee, and how do complaints reach it from the client’s premises?
• Who approves a termination, serves notices and makes the statutory payments?

A good provider will answer each one for every location you employ in, in detail. If the answers are vague, that tells you something.