Labour Laws in India

India’s labour and employment laws stand out for their unique features, differing considerably from those in other jurisdictions. These laws are in a constant state of transformation, adapting to the rapid evolution of workplaces influenced by advancements in technology, the rise of digitalization, and growing workforce mobility. This dynamic shift is further driven by the Indian government’s push to create a more investor-friendly business environment. For foreign businesses operating in India, gaining a clear understanding of these laws and keeping abreast of recent changes is critical to mitigating potential risks and liabilities arising from their operations.  

General Framework

Unlike many countries, India does not have a single consolidated code governing labour and employment matters. Instead, the legal framework is comprised of numerous laws enacted by both the Central and State Governments. While Central legislations provide a foundation, each State introduces its own specific laws and supplementary rules, leading to a complex and layered regulatory structure. To simplify these complexities and enhance the ease of doing business, the Indian government has initiated substantial labour law reforms. The applicability of these laws varies based on factors such as the industry sector, the size and type of the organization, the nature of the employee’s work, and salary thresholds. Broadly, these laws can be categorized into four key areas:

Categorization of Industries

Indian labour laws further classify industries into two primary categories:

Factories and the Factories Act, 1948

The Factories Act, 1948, serves as the basis for regulating industrial establishments engaged in manufacturing activities. Factories employing 10 or more workers using power fall under its ambit. This legislation focuses on the welfare, health, and safety of workers while specifying guidelines for working hours, leave entitlements and workplace conditions.

State governments enforce the Act through dedicated inspectorates and have the authority to frame rules tailored to local conditions. Key provisions include mandatory health surveys, the appointment of safety officers, and the establishment of welfare facilities such as canteens, crèches, and welfare committees in larger factories. Specific safeguards are also outlined for handling hazardous substances, along with standards for emergencies.

Shops and Establishments Act

The Shops and Establishments Act is a state-specific legislation designed to govern employment terms in commercial establishments, including shops and other non-industrial workplaces. It extends to all employees, irrespective of their wage status, except family members of employers. This law ensures a structured and fair environment in the unorganized sector.

The Act prescribes regulations concerning:

• Working hours per day and week.
• Rest intervals, overtime, and holiday guidelines (including national and religious holidays).
• Restrictions on the employment of children, young persons, and women.
• Rules for various types of leave, including annual, maternity, sickness, and casual leave.
• Procedures for hiring and termination of employees.

Key Central Labour Laws

India’s central labour laws address a range of issues, including wages, social security, compensation, and industrial relations. Some of the prominent legislations include:

Social Security Legislations

As a social welfare state, India upholds the principle of protecting its workforce through a comprehensive framework of social security laws. These legislations aim to provide financial stability and support to employees during critical life events such as retirement, illness, maternity, or workplace accidents. By mandating contributions from both employers and employees, these laws ensure a collective effort towards securing the well-being of workers, for equitable growth and social justice. These include the following:

Recent Developments

To enhance the ease of doing business in India, the Central Government introduced four consolidated labour codes: the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health, and Working Conditions Code, 2020.

These codes aim to streamline the regulatory framework by reducing redundancies in definitions across various laws, minimizing the number of compliance authorities, and integrating technology into enforcement mechanisms. This reform is expected to improve transparency, foster accountability, and align the interests of workers and industries, ultimately driving job creation across the nation.

Conclusion

India’s labour laws, rooted in its commitment to a social welfare state, provide a robust framework to safeguard workers’ rights while addressing the needs of industries. The recent codification of labour laws into four comprehensive codes marks a significant step towards simplifying compliance, enhancing transparency, and fostering accountability. This reform is not only aimed at improving the ease of doing business but also at harmonizing the interests of workers and employers, creating a balanced and inclusive work environment. However, with the complex interplay of central and state-specific legislation, businesses must remain vigilant and proactive in adhering to these evolving regulations. As India continues its journey toward economic growth, these reforms will play a pivotal role in promoting equitable and sustainable development.

King Stubb & Kasiva,
Advocates & Attorneys

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