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Labor Laws

March 2019

PERSOL HR DATA BANK in APAC

INDIA

　In India, the protection of employees who are classified as "workmen" (many employees other than those in a position of ownership, management or supervision correspond to "workmen") is quite heavy. For instance, due cause is required for dismissal, and the pay-ment of a severance allowance and the provision of a prior notice are required. Further-more, when a company wishes to dismiss a workman (as an ordinary dismissal) who has been in an ongoing employment relationship for 1 year or longer in an industrial facility, such as a factory of a certain size or larger, in which the protection of workmen is particu-larly reinforced, the company is required to clarify the grounds of ordinary dismissal and request the approval of a government agency that is designated according to India's Industrial Disputes Act. The minimum wage is also prescribed under laws. In addition, the definition of a "workman" is much broader in comparison to that of Singapore.

　Moreover, India adopts many provisions that are unfamiliar in terms of Japanese labor practice. For example, as a general rule, employers must dismiss workmen in order from those who were last employed in the business division to which that workman is affiliated; without limitation to cases where a workman is dismissed (ordinary dismissal), the work-man must be compensated according to an ordinary dismissal even in cases when there are changes to certain management level employees; when the employer is to newly hire a worker after dismissing a workman (ordinary dismissal), the dismissed workman must be given preference over others, etc. Thus, India has provisions that are unthinkable in terms of Japanese labor practice.

　It should also be noted that regionalism is persistent as represented by labor-related laws being prescribed in detail depending on regions.

　With regard to the employment of foreigners, while IT engineers with particularly sophisticated skills are able to acquire long-term visas relatively easily, it is not necessary easy for foreigners to acquire visas for general administrative positions.

introduction

INDEX

1. Key points regarding employment law, standard business practice and customs, andemployment policy in recent year ···················································································································································· 3

1-1.　Overview of India and Indian law ·································································································································· 31-2.　Distinction between "Workman" and "Non-Workman" ················································································ 31.3　Signing an Employment Agreement ······························································································································· 41-4.　Employment Condition ························································································································································ 41-5.　Visa Acquisition ··········································································································································································· 51-6.　Trade Union ··················································································································································································· 51-7.　Labor Law and Religion ························································································································································· 6

2. Overview of basic labor laws of India ·································································································································· 72-1.　Overview of labor-related statues ···································································································································· 72-2.　System of Workman and Non-Workman ·················································································································· 92-3.　Work hours ····················································································································································································· 11

3. Requirement for Preparation of Rules of Employment and Procedures ····································· 133-1.　Requirement for Preparation of Workplace Policies ··························································································· 133-2.　Cases Where the Preparation of Standing Orders is Required ···································································· 133-3.　Preparation of Standing Orders ········································································································································ 143-4.　Penalties ···························································································································································································· 153-5.　Modification of Standing Orders ···································································································································· 15

4. Laws and regulations regarding workers’ salaries, wages, bonuses, overtime pay and anyother forms of compensation ································································································································································· 16

4-1.　Overview ·························································································································································································· 164-2.　Scope ··································································································································································································· 164-3.　Payment Methods ······································································································································································ 164-4.　Deductions ······················································································································································································ 174-5.　Minimum Wage ·········································································································································································· 174-6.　Bonus ·································································································································································································· 174-7.　Gratuity ····························································································································································································· 19

5. System and points to consider regarding dismissal in India ······································································ 205-1.　Overview ·························································································································································································· 205-2.　Ordinary dismissal (retrenchment) ································································································································ 205-3.　Ordinary dismissal of a workman ··································································································································· 215-4.　Protection of workers against ordinary dismissal has been strengthened ············································· 225-5.　Punitive dismissal ······································································································································································· 235-6.　Mandatory retirement ····························································································································································· 235-7.　Constructive dismissal rule ·················································································································································· 235-8.　Last come first go rule ····························································································································································· 245-9.　Principle of preference upon reemployment ············································································································ 24

6. Visas for Foreign Nationals ······························································································································································ 266-1.　Overview ·························································································································································································· 26

6-2.　Main work visas ··········································································································································································· 26

About this document ······················································································································································································ 27About the information compiled in this document ············································································································ 27Contact information regarding this document ······················································································································ 27

Company profile ··································································································································································································· 28About PERSOL Research and Consulting ································································································································ 28About PERSOLKELLY Consulting ·············································································································································· 28

1. Key points regarding employment law, standard business practice and customs, and employment policy in recent year 3

1. Key points regarding employment law, standardbusiness practice and customs, and employment pol-icy in recent year

1-1.　Overview of India and Indian law

　The Republic of India is a federal republic consisting of twenty-nine states and seven union territories. As per the

Constitution of India, labor is a subject in the Concurrent List meaning both the federal as well as the state governments

have the power to enact Employment Laws (section 246 of the Constitution of India and Schedule 7 thereof ); although, as a

general rule federal laws are given precedence in application over the state enacted laws, there are certain exceptions where a

state law may override a federal law for that particular state. While state employment laws, in general, may be considered to

be subordinate to federal employment law (in case of a conflict), resulting in restrictions on the employment laws that state

parliaments may pass, actual restrictions on the powers of state parliaments to pass such laws are rare. Indeed, there are only a

few laws which are outside the remit of state parliaments to modify such as the definition of the "employee" (which is required

to be uniform across the nation), the prohibition on the use of child labor at night, and the necessary protection of the socially

vulnerable.

1-2.　Distinction between "Workman" and "Non-Workman"

　The employment laws in India uniquely classify employees into two different classes, "Workman" and "Non-Workman".

This classification is dependent on their status and authority. This concept first appeared in the Industrial Disputes Act (1947),

which is one of the fundamental laws regulating employment and industrial relationships in India. A Workman is considered

to be in a weaker position compared to a Non-Workman, therefore, when they are subject to normal dismissal, lay-off or

redundancy due to the winding up of the business, they are entitled to further protection as compared to a Non-Workman. An

employee’s status or position is not determinative of his/her as a Workman or a Non-Workman, but rather, such classification

is determined according to the individual factual circumstances.

　This classification is similar to that of supervisor and non-supervisor in the Japanese Labor Standards Act. According to the

Japanese Labor Standards Act, a supervisor is defined in the Article 41(i) as "Persons in positions of supervision or management

or persons handling confidential affairs, regardless of the type of Business". If a person is a supervisor, regulations regarding

working hours, holidays and rest are not applicable. Therefore, employers are not obligated to provide additional overtime

pay to supervisors and neither are they subject to the 8-hour working time limit. However, the Japanese law does not exclude

supervisors from being categorized labor and allows them certain levels of protection as labor. On the other hand, Indian laws


do not categorize Non-Workmen as labor and as such, they in essence cannot have the same protections as Workmen. Hence,

it is crucial to clarify whether an employee is a Workman or a Non-Workman1when he/she signs an employment contract.

1.3　Signing an Employment Agreement

　 In Japan, orally agreed employment agreements without being in writing are not unusual. On the other hand, in India, it

is common for employment agreements to be in writing.

　However, in practice, drafting a custom-made employment agreement for each individual can be difficult, so employers

often stipulate employment conditions that apply commonly used rules (such as those relating to attendance, leave, holiday,

and disciplinary procedures) as office regulations and reflect these regulations in their employment agreements. Only some

parts which must be individualized such as salary and benefits are specifically stipulated within the employment agreement

itself. Unlike Japan, Indian employment laws do not typically obligate employers to stipulate office regulations (except where

stated otherwise). Implying office regulations into employment agreements is merely a method for employers to simplify their

employment procedure. Therefore, employers are free to have employment agreements without including any of the contents

of their office regulations and to decide conditions with each employee individually.

1-4.　Employment Condition

　Similar to the Japanese Labor Standards Act, employers are required to comply with certain minimum standards apropos

of working conditions in India. However, in India, the standards of the working conditions which employers need to comply

with vary according to the employees’ working place and environment. For example, the Shops and Establishment Act

(1953)2applies to employees working at offices or stores and the act stipulates the minimum standards of working conditions

for those employees. However, the specifics of the law in relation to this area is established at the state level, so it is important

to understand that each state has its own minimum standards of working conditions. The Factories Act (1948), on the other

hand, applies to employees who work in factories.

　 If an employee is employed in a company wherein 100 or more workmen are employed, or had employed 100 or more

workmen on any day of the preceding 12 months, The Industrial Employment (Standing Orders) Act (1946) will apply.

Under the Industrial Employment Act, an employer is required to stipulate standing orders. In India, it should be understood

that the minimum standards for working conditions may differ depending on the location, nature and size of the company.

1.It will be described as Workmen or Non-Workmen when it necessary to specify the difference of the workers.

2.The Shops and Establishment Act, 1953 was enacted by the federal/central government as a model law for the state governments to follow. Different states in India have their own

Shops and Establishment Acts that are largely based on this model law.


1-5.　Visa Acquisition

　The government of India issues several types of visas including Tourist Visas, Business Visas, Employment Visas, and Student

Visas. The Employment Visa is the most relevant when considering the hiring of foreign employees.

Business Visa

　 Individuals who are doing business in India such as making sales or establishing contacts on behalf of a company outside

of India are eligible for a Business Visa. Business visa issued to Japanese Nationals may be valid for up to 5 years and is

valid for multiple entries. In principle, the duration of the visa can be extended to a maximum of five years.

Employment Visa

　Employment Visas are issued to foreigners who intend to work in India. In principle, an applicant for an employment

visa should be a highly skilled and/or qualified professional and should be engaged/appointed by a company/organization/

industry which operates its business in India. In addition, the applicant’s salary must be in excess of US$25,000 per year.

There are no jobs that an applicant is barred from performing on the basis of nationality.

1-6.　Trade Union

　The Trade Unions Act (1926) regulates trade unions. The Act provides for the formation and registration of trade unions

and the rights trade unions are entitled to. Trade unions are organizations with goals such as better work conditions and

resolving labor disputes. Their main activities are supporting and facilitating communication between labor and management.

Companies should not interfere with employees joining a labor union or discriminate against employees based on whether

they join a labor union or not, and if a company does so, it will be regarded as having engaged in unfair labor practices under

the Industrial Disputes Act, 1947. Any worker may set up a trade union and companies cannot unfairly prevent a worker from

participating in a trade union. Persons aged 15 or older are eligible for trade union membership (Under Section 21 of The

Trade Unions Act 1926).

　Members of trade unions are immune from certain types of both civil and criminal liability. Pursuant to section 17 of the

Trade Union Act, no members of registered trade unions shall be liable to punishment under sub-section (2) of section 120B

of the Indian Penal Code (45 of 1860) in respect of any agreement made between the members for the purpose of furthering

any such object of the Trade Union as is specified in section 15. Further, section 18 provides for the immunity of the members

of trade unions from civil suit when members have done any acts in contemplation or furtherance of a trade dispute and

such acts induce some other person to break a contract of employment, or that it is in interference with the trade, business or

employment of some other person or with the right of some other person. These rules only apply to trade unions which are


formally registered.

　As trade unions are common in India, and are involved in a lot of activities, they often have great influence in relation to

labor issues.

1-7.　Labor Law and Religion

　Positive statutory law and religious traditional law mutually coexist in Indian society. The statutes and customs pertaining

to employment law in India established by a Legislature which is not strongly influenced by religion. While labor laws are not

dictated by religious beliefs, certain other laws such as those relating to marriage and probate matters have a basis in religious

tradition.

2. Overview of basic labor laws of India 7

2. Overview of basic labor laws of India

2-1.　Overview of labor-related statues

　The Constitution of India prescribes the prohibition of forced labor (section 23 of the Constitution of India) and the

prohibition of labor by a child below the age of 14 in any factory (section 24 of the Constitution of India) as fundamental

human rights. Under circumstances where both the Indian Parliament and the respective Legislative Assemblies possess

legislative power regarding labor laws (more accurately, matters related to labor unions, labor disputes, social security and

social insurance, employment and unemployment, and welfare of workers), there are more than 50 labor-related federal laws

that have been enacted by the Indian Parliament, and the Legislative Assemblies are enacting their independent state laws to

the extent that they do not run counter to the federal laws. Thus, the labor laws of India constitute an extremely complicated

system.

　The key labor-related statues in India are as follows.


　Laws that play a central role in the labor-related matters in India are now explained in detail.

(1) Industrial Employment (Standing Orders) Act, 1946

　The Industrial Employment (Standing Orders) Act prescribes that uniform and stable conditions of employment shall

be granted to all workers in order to clarify the working conditions that are applicable to the workers. Specifically, this Act

grants essential conditions of employment to all workers by prescribing the obligations of companies to formulate work

rules (Standing Orders) under certain conditions, and the contents to be set out in such work rules. As a general rule,

every industrial establishment that is employing 100 or more employees, or were employing 100 or more employees on

any day of the preceding 12 months, must create work rules.

(2) Factories Act, 1948

　The Factories Act prescribes matters related to the registration obligation of factories, safety and hygiene measures to

be observed by factories, and work hours of workers in order to secure the safety of workers in factories, and only applies

to workers in factories. The Factories Act defines the term "factory" as the following type of establishment.

　 (i) An establishment in which 10 or more workers are working, or were working on any day of the preceding 12 months, and in

any part of which a manufacturing process is being carried on with the aid of power; or

　 (ii) An establishment in which 20 or more workers are working, or were working on any day of the preceding 12 months, and in

any part of which a manufacturing process is being carried on without the aid of power.

　The Factories Act additionally prescribes that the mere fact that an electronic data processing unit or a computer unit

being installed in an establishment or any part thereof shall not be construed to make such establishment a factory if no

manufacturing process is being carried on in such establishment.

　With regard to the working conditions to be applied to non-factory workers, the respective States have independently

enacted laws under the name of the "Shops and Establishment Act".


(3) Others

(i) Contract Labor (Regulation and Abolition) Act, 1970

　TheContract Labor (Regulation and Abolition) Act prescribes matters relates to the registration obligation of companies

and the license acquisition obligation of contractors in cases where a company requires labor but does not directly employ a

worker (workman), and uses the labor of such worker who was employed by a contractor and who is subject to the guidance

and supervision of such contractor. This Act applies to every establishment in which 20 or more workmen are employed

or were employed on any day of the preceding 12 months as a contract worker, and every contractor who employs or who

employed 20 or more workers on any day of the preceding 12 months. However, this Act does not apply to establishments

in which work only of an intermittent or casual nature is performed. The term "establishment" is defined as any place

where any industry, trade, business, manufacture or occupation is conduced.

(ii) Apprentices Act, 1961

　The Apprentices Act prescribes matters related to the qualifications and cultivation of apprentices, and contract of

apprenticeship. This Act is applicable to certain industries that were publicly announced such as agriculture, industrial

management, office management, building management, and ceramics. Under this Act, a person cannot qualify as an

apprentice to undergo apprenticeship training in any designated trade unless that person has reached the age of 14 and

18 years of age for designated trades related to hazardous industries, and satisfied predetermined standards of education

and physical fitness. This Act additionally imposes the obligation of concluding a contract of apprenticeship. When the

apprentice is a minor, his/her guardian is required to conclude the contract of apprenticeship.

(iii) Shops and Establishment Act

　The Shops and Establishment Act is a law that is prescribed in each State, and aims to protect non-factory workers and

extend certain protections and rights as are available to the workers under the Factories Act. The Shops and Establishment

Act prescribes matters related to obligations of companies to submit notifications within the period prescribed under laws,

holidays, wages, and work hours, as well as matters related to work restrictions of female and young workers and other

working conditions. Because different conditions are prescribed in each State, companies must confirm the applicable

regulations prior to employing workers.

2-2.　System of Workman and Non-Workman

(1) Definition

　The term "workman" refers to a worker employed to perform simple tasks for a relatively low pay, and is protected

generously under laws. Meanwhile, the term "non-workman" refers to a worker employed to perform administrative

or supervisory work for a relatively high pay, and protection under laws is limited on grounds that a non-workman is


considered to be a person whose position is substantially equivalent to a company.

　As described above, because the definition of "workman" is considerably broad and covers nearly all workers, whether

or not a person corresponds to a "workman" is generally determined based on whether he/she corresponds to the persons

who are excluded under (i) to (iv) above. Since the Industrial Disputes Act does not prescribe clear standards regarding

whether a specific worker corresponds to a "workman", it is necessary to determine whether a worker corresponds to a

"workman" in light of his/her duties and roles.

(2) Determination of whether or not a worker corresponds to a "workman"

　Whether or not a worker corresponds to a "workman" is determined in accordance with actual conditions. In judicial

precedents, the following opinions were offered.

　 (i) Irrespective of whether the employment status of a worker is permanent employment, temporary employment, or probationary

employment, that worker may correspond to a "workman".

　 (ii) Even if a worker is incidentally performing supervisory work, it does not mean that such worker’s correspondence to a "work-

man" is immediately denied.

　 (iii) In order to determine whether a worker corresponds to a "workman", it is necessary to take note of the nature of his/her

duties, and not his/her title or position.

　 (iv) Upon determining whether a worker corresponds to a "workman", the nature of his/her duties, and not his/her wages, should

be used as the primary judgmental standard.

　 (v) Just because a worker is the person in charge of a small business division, it does not mean that such worker’s correspondence

to a "workman" is immediately denied.

　Moreover, the following factors were taken into consideration upon determining that a worker employed in amanagerial


capacity, an administrative capacity, or a supervisory capacity corresponds to a "non-workman":

　 (vi) In cases where a worker is undertaking various duties, if such worker’s correspondence to a "workman" becomes an issue, it is

necessary to examine his/her basic and primary work description, and his/her incidental work description does not change the

nature of the worker’s primary duties. Consequently, even if a worker engaged in supervisory work incidentally or partially

performs clerical, manual or technical work, it should be determined that the worker was employed in a supervisory capacity.

　 (vii) Because the meaning of "managerial capacity or administrative capacity" is not defined under the Industrial Disputes Act,

it should be interpreted according to the normal meaning. In order to say that a worker was employed in a "managerial

capacity", the worker does not necessarily need to be positioned at the top of the hierarchy, or possess absolute authority

regarding all matters. Furthermore, the worker does not even need to be in a position of independently managing an

organization or a business division within an organization.

　 (viii) Upon determining that a worker corresponds to a "non-workman" on grounds that he/she was employed in a managerial

capacity, an administrative capacity or a supervisory capacity, a court gave consideration to the following specific facts: (a)

he/she is in a position of assigning workers to various job positions, (b) he/she is in a position to confirm the presence of

workers, (c) he/she is in a position to demand explanations from workers, (d) he/she is in a position of assigning work to

workers, and (e) he/she is in a position to allow workers to take leaves.

(3) Cases where "workman" and "non-workman" are not differentiated

　The Factories Act prescribes matters mainly related to the work hours, overtime pay and leaves of workers who work

in factories. Furthermore, the State specific Shops and Establishment Act prescribes matters related to the work hours,

overtime pay, and leaves of shops in the respective States operated in India and their workers. The application of these

regulations to non-workmen is not excluded. In addition, the application of laws concerning the payment of wages,

bonuses and retirement allowances, and social security systems such as the workers’ compensation system, pension system,

and state insurance system, is not restricted based on the differentiation of "workman" and "non-workman".

2-3.　Work hours

　The Factories Act prescribes the work hours in factories, and the Shops and Establishment Act of the respective States

prescribes the work hours in other establishments.

(1) Factories

(i) Statutory work hours

　As a general rule, the work hours of a workman who is 15 years of age or older in a factory is limited to be no more

than 9 hours in any day, and no more than 48 hours in any week (section 51 and 54 of the Factories Act). Furthermore,

a rest period of at least 30 minutes must be offered for every 5 consecutive hours of work in any day (section 55(1) of the


Factories Act), and the spreadover in any day must not exceed 10.5 hours, inclusive of the rest period. As an exception,

the Chief Inspector may increase the spreadover up to 12 hours upon specifying the reason.

　Additional protection is offered for female and young workers. As a general rule, the work hours of female workmen are

restricted to be between 6 A.M. and 7 P.M. (section 66 of the Factories Act). While the State Government is not restricted

from revising the foregoing work hours, the State Government may not authorize the work of any workwoman between

the hours of 10 P.M. and 5 A.M. (section 66 of the Factories Act).

　As a general rule, a workman who is 14 years of age or older but less than 15 years of age may work up to 4.5 hours

in any day, but is prohibited from working at night (12-hour period between 10 P.M. and 6 A.M.) (section 71(1) of the

Factories Act).

　While each StateGovernmentmay revise the work hours of non-workmen, persons in a position of handling confidential

information, and persons engaged in emergency repairs or special work (section 64 of the Factories Act), even in such a

case, as a general rule, the total work hours in any day shall not exceed 10 hours, and the total work hours in any week

shall be less than 60 hours, inclusive of overtime work.

(ii) Overtime work

　While there are no clear provisions concerning overtime work, the consent of a workman is required upon causing him/

her to work outside of work hours. Moreover, when an employer causes a workman to work more than 9 hours in any

day or more than 48 hours in any week, the employer must pay an extra fee that is double the standard wages of that

workman.

　 In the past few years, it has been discussed to amend the Factories Act, 1948, to encourage the development of industries.

If amended, it would allow state governments to extend some overtime hours.

(2) Establishments other than factories

　The work hours in establishments other than factories differ depending on the Shops and Establishment Act of each

State.

3. Requirement for Preparation of Rules of Employment and Procedures 13

3. Requirement for Preparation of Rules of Employ-ment and Procedures

3-1.　Requirement for Preparation of Workplace Policies

　Unlike Japan, employers are not required to prepare employment regulations (in India, these regulations are referred to

as "standing orders") except where the law so provides. Only industrial establishments which hire over a certain number

of Workmen are required to prepare standing orders. However, it should be checked any amendments have been made at

state level. Moreover, certain laws such as the Companies Act, 2013 and the Sexual Harassment of Women at Workplace

(Prevention, Prohibition and Redressal) Act, 2013 mandate preparation of certain workplace policies applicable on certain

establishments that are meant to provide additional protection to the employees/workmen.1

3-2.　Cases Where the Preparation of Standing Orders is Required

　The situations where standing orders are to be prepared and submitted are provided in the Industrial Employment (Standing

Orders) Act. The Act aims to stipulate the minimum standards of working conditions for employees and define which

employers fall within the ambit of the act. Industrial establishments in which one hundred or more workmen are currently

employed, or were employed on any day of the preceding twelve months are required to prepare and submit standing orders

(section 3 and 1(2) of the Industrial Employment Act). Industrial establishment means a brick and mortar service engaged

in carrying passengers or goods, providing air transport services, operating a dock, wharf, jetty, inland vessel, mine, quarry,

oilfield, plantation, construction site, factory, or railway, or an establishment employing workmen for the purpose of fulfilling

a contract with the owner of any industrial establishment (section 2(e) of the Industrial Employment Act). The appropriate

government (state or federal), may exempt, conditionally or unconditionally any industrial establishment or class of industrial

establishment by notification in the official Gazette from the provisions of the Industrial Employment Act (section 14 of

the Industrial Employment Act). However, section 14 is not intended to grant any additional rights to those industrial

establishments. Further, pursuant to section 1, it should be emphasized that where a company has at any time in the preceding

12 months fallen within the meaning of "Industrial Establishment" as defined in the Act, it remains compelled to adhere to

the provisions therein.

1.Section 177(9) of the Companies Act, 2013 mandates establishment of a vigil mechanism (whistle blower policy) by certain companies and section 19(b) of the Sexual Harassment

of Women at Workplace Act, 2013 requires an employer to display certain information (generally provided in the form of prevention of sexual harassment at workplace policy).


3-3.　Preparation of Standing Orders

　Employers are required to submit draft standing orders within six months from the date on which they fall within the

definition of "Industrial Establishment" in the Act to the Certifying Officer (Section 3 of the Industrial Employment Act).

The Certifying Officer is an officer who is designated by the Labor Commissioner, the Regional Labor Commissioner, or the

appropriate Government.

　Employers need to specify the following eleven items (section 3(2) of the Industrial Employment Act) and describe these in

their draft standing orders. In addition, the law encourages companies to mirror the contents of the Model Standing Orders

provided in the Industrial Employment (Standing Orders) Central Rules as far as possible.

　The draft will be certified as final following an examination by the CertifyingOfficer and the Certifying Officer subsequently

needs to send a copy of the standing order which he or she certified to the trade union or representatives of the workmen

(section 5 of the Industrial Employment Act). The Certifying Officer will amend the contents if necessary after considering

input from both the workmen and the employer. All provisions of the standing orders need to be not only lawful but also

fair and reasonable in order to be certified by the certifying officer (section 4 of the Industrial Employment Act). Generally,

companies draft their standing orders by following the Model Standing Orders.

　Standing orders come into operation upon the expiry of thirty days from the date on which authenticated copies are sent to

the employer and to the trade union or other representatives of the Workmen (section 7 of the Industrial Employment Act).

Standing orders which have been finally certified under the Act must be posted on special boards to be maintained for the

purpose of displaying standing orders at or near the entrance through which the majority of the workmen enter and by the

employer in English and in the language understood by the majority of the Workmen (section 9 of the Industrial Employment

Act).


3-4.　Penalties

　An employer that fails to submit draft standing orders or fails to follow the necessary procedures, will be liable to pay a fine

(section 13(1) of the Industrial Employment Act). If an employer fails to comply with the obligation to prepare standing orders,

the model standing orders are to be adopted as the applicable standing orders (Section 12A of the Industrial Employment Act).

3-5.　Modification of Standing Orders

　Employers or workmen (or a trade union or other representative body of the workmen) are able to apply to the Certifying

Officer to have the standing orders modified (section 10(2) of the Industrial Employment Act). However, for a period of six

months following the date on which the standing orders come into operation, the standing orders may not be modified unless

the workmen (or a trade union or other representative body of the workmen) and the employer have mutually agreed to do

so (section 10 (1) of the Industrial Employment Act). Modifications to the standing orders need to be followed by process of

certification in the same way that the first iteration of the standing orders would (section 10(3) of the Industrial Employment

Act).

4. Laws and regulations regarding workers’ salaries, wages, bonuses, overtime pay and any other forms of compensation 16

4. Laws and regulations regarding workers’ salaries,wages, bonuses, overtime pay and any other forms ofcompensation

4-1.　Overview

　The Payment of Wages Act stipulates the laws applicable to wages such as timing of and deductions to payment, in order

to avoid unnecessary disputes in relation to unreasonably unpaid wages, imposition of fines, and deductions from wages. The

Minimum Wages Act guarantees a minimum wage to protect the rights of employees.

4-2.　Scope

　The Payment of Wages Act (1936) sets out the laws applicable to wages regulating matters such as the method of payment

and deductions thereof. The provisions of the Act are applicable to workers who earn not more than 24,000 rupees1a month

and are employed in industrial establishments as defined in the Factories Act as a factory, mine, plantation, construction, or

other industrial establishment which is so designated by the government with a view to protecting workers (section 1(4),(6)

of the Payment of Wages Act).

4-3.　Payment Methods

　Every employer is responsible for fixing the period of payment (hereafter referred as "wage-periods") and such wage-period

must not exceed one month (section 4 of the Payment of Wages Act). If an industrial establishment has less than 1,000

employees, employers are required to pay wages before the end of the seventh day of the month. Other employers with 1,000

or more employees are required to pay wages before the end of the tenth day of the month (section 5 (1) of the Payment of

Wages Act). However, in cases where the employment is terminated by the employer, the wages must be paid before the end

of the second working day from the date of termination (section 5 (2) of the Payment of Wages Act).

　All payment must be made on a working day and forcing an employee to visit an office on a holiday in order to get their

wage paid is prohibited. Also, wages can be paid in cash, by cheque or by way of bank transfer into the account of the employee

1.http://egazette.nic.in/WriteReadData/2017/178375.pdf


(section 5 (4) of the Payment of Wages Act).2

4-4.　Deductions

　Deductions from wages are only permitted insofar as they are permitted in the Payment of Wages Act. The Payment of

Wages Act specifies an exhaustive list of 21 items for which deductions can be made including fines, absence from duty, and/

or house-accommodation supplied by the employer. Further, the provisions of the Act in essence permit deductions of up to

a maximum of 50% of wages (section 7(2),(3) of the Payment of Wages Act).

4-5.　MinimumWage

　The main purpose of the MinimumWages Act (1948) is to protect workers in traditionally low-wage industries. Therefore,

the Act is not applicable to all industrial establishments, but rather only to employees in those establishments specified in the

Parts of the Schedule to the Act and in an employment added to either part by notification by the appropriate government

in the official gazette (section 3(1) a of the Minimum Wages Act). The minimum rates of wages will be revised every 5 years

(section 3(1) b of the MinimumWages Act). In practice, the rate of minimum wage is set by individual states and it is common

for such rates to be amended every April.

　Since 2017, the government has been working on integrating and simplifying major labor-related laws including the

Minimum Wages Act, the Payment of Wages Act, the Payment of Bonus Act and the Equal Remuneration Act. If minimum

wage is set by the government as a result of this movement, it will become the uniform standard of minimum wage across the

industries.

4-6.　Bonus

(1) Overview

　The Payment of Bonus Act (1965) sets out the law surrounding the payment of bonuses for every person fulfilling the

following criteria (sections 1(3), 2(13), 8 of the Payment of Bonus Act).

　Every factory and every other establishment in which twenty or more persons are employed on any day during an

accounting year (however, the number of persons should be no less than ten for establishments at which a manufacturing

process is being carried out without the aid of power, or is ordinarily so carried on).

2.https://labour.gov.in/sites/default/files/PoWAct2017_0.pdf


　Workers who work at the abovementioned establishment and work at least 30 days in the relevant accounting year and

whose wages do not exceed 21,000 rupees monthly.

　Based on the fiscal year, workers shall be paid the higher amount of either 8.33% of workers’ wages for that year or 100

rupees (60 rupees if workers are under 15 years old at the beginning of the fiscal year) (section 10 of the Payment of Bonus

Act).

(2) Applicable Scope

　 (i) The Act is applicable to all Industrial Establishments mentioned in the overview part of this paper(section 1(3) of the Payment

of Bonus Act).

　 (ii) "Employee" in the Act covers workers (other than an apprentice) employed on a salary or wage not exceeding twenty-one

thousand rupees per month3who work in any industry doing any skilled or unskilled manual, supervisory, managerial,

administrative, technical or clerical work for hire or reward whether the terms of employment be express or implied.

Therefore, the Act will not apply to an employee who earns more than twenty-one thousand rupees monthly. Also, as

mentioned above, only employees who work more than thirty days in the relevant accounting year are covered by this Act

(section 8 of the Payment of Bonus Act).

(3) Calculation of Bonus

　According to the Act, every employer needs to pay a minimum bonus which is calculated as 8.33 per cent of the wage

during the accounting year or one hundred rupees, whichever is the higher (hereafter referred as "minimum bonus")

(section 10 of the Payment of Bonus Act).

　Also, if the allocable surplus (section 2(4) of the Payment of Bonus Act) exceeds the amount of minimum bonus payable

to the employees, the bonus will be an amount in proportion to the excess up to a maximum of twenty percent of the

salary or wages of the accounting year (hereafter referred as "maximum bonus") (section 2(4)b of the Payment of Bonus

Act). Allocable surplus is the amount which is calculated according to sections 2(4), 5, 6 of the Payment of Bonus Act. In

essence, it means 60% of the gross margin minus expenses such as depreciation and tax (section 2(4) b of the Payment of

Bonus Act).

　 In addition, when calculating the minimum and maximum bonus, where the salary or wage of an employee exceeds

7,000 rupees4, the bonus payable will be calculated as if the employee’s salary or wage was 7,000 rupees or the minimum

wage for scheduled employment, as fixed by the appropriate Government, whichever is higher (section 12 of the Payment

of Bonus Act).

3.http://labour.gov.in/wageboard/information-payment-bonus-1965

4.http://clc.gov.in/clc/sites/default/files/PaymentofGratuityAct.pdf


4-7.　Gratuity

(1) Applicable Scope

　The Payment of Gratuity Act (1972) provides that gratuity will be payable to an employee after he/she has rendered at

least five years of continuous service on any of the following events:

　 (1) His/her superannuation;

　 (2) His/her retirement or resignation; or

　 (3) His/her death or disablement due to accident or disease.

　The Act will apply to every factory, mine, oilfield, plantation, port and railway company as well as to every shop or

establishment in which ten or more persons are employed, or were employed, on any day of the preceding twelve months

(section 1 (3) of the Payment of Gratuity Act).

　However, an employee whose services have been terminated due to any act, willful omission or negligence causing any

damage or loss to, or destruction of, property belonging to the employer has no entitlement to gratuity to the extent of

such damage or loss. Further, where a cause of termination is (3) above, the requirement of 5-year’s continuous service

does not apply.

(2) Amount of Gratuity

　 In cases of monthly salaried employees, the amount of gratuity payable is calculated as follows: Last drawn wages ×15/26× Completed years of Service (including a part of year in excess of six months), to a maximum obligated amount

of 2,000,000 rupees (section 4(2), (3) of The Payment of Gratuity Act5). However, this is only the minimum standard

obligated by the law, therefore it is of course possible for an employer to pay more than the amount calculated as above

at the employer’s discretion (section 5 of The Payment of Gratuity Act). Also, where there is an employment agreement

stipulating a higher gratuity than the amount Act provides for, the employer must pay the sum stipulated in the agreement.

5.http://egazette.nic.in/WriteReadData/2018/184298.pdf

5. System and points to consider regarding dismissal in India 20

5. System and points to consider regarding dismissalin India

5-1.　Overview

　As a general rule, restrictions on dismissal under the Indian labor laws are applicable only to workmen, and are not applicable

to non-workmen. It could be said that this is one of India’s most unique characteristics regarding restrictions on dismissal.

Because restrictions on dismissal regarding non-workmen are not prescribed under laws, upon dismissal, the current condition

is that there is no choice but to proceed with such dismissal based on the employment contract concluded between the worker

and the non-workman.

　The Industrial Disputes Act is strengthening the protection of workmen, and imposes obligations on the employer to take

statutory procedures and pay statutory compensation upon dismissing a worker. Furthermore, because the employer is required

to dismiss workers in order from the worker who was last employed, the employer is not allowed to freely select the worker to

be dismissed.

　Similar to the labor laws of Japan, the Industrial Disputes Act merely prescribes "the procedures that must be taken upon

dismissing a worker", and does not prescribe substantive standards regarding "under what kind of circumstances the dismissal

of a worker is allowed". Companies need to pay ample attention to this point. Moreover, an employer is not allowed to freely

dismiss its workers at any time so as long as the procedures are correctly taken, and the judicial precedents (Labor Courts) have

rendered judgment to the effect that due cause is required for dismissing workers. Thus, in the least regarding workmen, it is

extremely difficult to casually dismiss a worker on grounds of dismissal for the purpose of reorganization or poor performance.

On a practical level, upon corresponding to the foregoing cases, the standard practice is to present favorable conditions to the

worker to be dismissed, and urge him/her to voluntary resign from the company. As means for dealing with such restrictions

on dismissal, companies are taking measures such as 1) establishing a probation period of roughly 3 months to 6 months

without employing a worker as a permanent employee from the very beginning, or 2) employing a worker based on fixed-term

employment.

5-2.　Ordinary dismissal (retrenchment)

　Under the Industrial Disputes Act, the term "ordinary dismissal (retrenchment)" refers to the termination of employment

of a workman by the company (on grounds other than disciplinary punishment), but does not include the following cases

(section 2 of the Industrial Disputes Act).

　 (1) Voluntary retirement of the workman

　 (2) Mandatory retirement in cases where a provision concerning mandatory retirement is stipulated in the contract of employment


　 (3) Termination of employment on grounds that the contract period has expired and will not be renewed, or on grounds that the

contract of employment is terminated pursuant to the provisions of such contract of employment

　 (4) Termination of employment on grounds of continued health problem

　Accordingly, various restrictions are imposed on companies upon dismissing a workman on grounds of ordinary dismissal.

5-3.　Ordinary dismissal of a workman

　When an employer is to dismiss a workman who was in continuous service for 1 year or longer on grounds of ordinary

dismissal, the company must satisfy the following procedures. As a general rule, when a worker has worked for not less than

240 days in a period of 12 months prior to the ordinary dismissal, it should be noted that the worker will be deemed to have

been in "continuous service under the employer".

(1) Notice

　The employer must give 1 month’s dismissal notice to the workman indicating the rational reason for ordinary dismissal

(section 25F (a) of the Industrial Disputes Act). However, the employer is also allowed to pay wages corresponding to the

foregoing period in lieu of giving the dismissal notice. It is said that a rational reason is required for dismissing a worker

on grounds of ordinary dismissal, and such reason must be adequate and reasonable, such as retrenching excess manpower.

Thus, without the foregoing rational reason, an employer may not dismiss a worker on grounds of ordinary dismissal as a

matter of course.

(2) Payment of compensation for dismissal

　An employer must pay compensation for dismissal to a worker in an amount equivalent to 15 days’ worth of the

average wage for each year that the worker was in continuous service under the employer, or for a year that the worker was

in continuous service under the employer in excess of 6 months (section 25F (b) of the Industrial Disputes Act). Payment

of the compensation for dismissal is prescribed as being a precondition of dismissal.

(3) Notification to government agency

　The employer is required to submit a prescribed notification to the Regional Labor Commissioner or another prescribed

government agency (section 25F (c) of the Industrial Disputes Act).


5-4.　Protection of workers against ordinary dismissal has beenstrengthened

　Under the Industrial Disputes Act, the protection of workmen working in certain industrial establishments is strengthened.

Restrictions on dismissal of workmen working in factories, mines and plantations in which not less than 100 workmen were

employed on average per working day for the preceding 12 months have been strengthened to further protect such workmen

by imposing obligations on employers to take supplementary procedures in addition to the foregoing procedures required

for ordinary dismissal. Specifically, in order for an employer to dismiss a worker on grounds of ordinary dismissal in an

industrial establishment corresponding to a "factory" defined in the Factories Act, a "mine" defined in the Mines Act, 1952,

or a "plantation" defined in the Plantations Labor Act, 1951 (hereinafter collectively referred to as the "Special Industrial

Establishment"), the employer must obtain a special permission from the government in addition to giving a dismissal notice

and paying a compensation for dismissal to the workman (section 25K and 25L of the Industrial Disputes Act). It is obvious

that this system was stipulated in order to prevent the occurrence of mass unemployment as a result of workers being casually

dismissed in the foregoing large-scale establishments. Thus, naturally, the government is basically maintaining a passive stance

in permitting ordinary dismissal.

(1) Notice

　Foremost, when an employer is to dismiss a worker on grounds of ordinary dismissal in a Special Industrial

Establishment, the employer must give 3 month’s dismissal notice to the workman indicating the reason of ordinary

dismissal (as described above, the dismissal must be based on a rational reason), or pay wages corresponding to the

foregoing period in lieu of giving the dismissal notice (section 25N (1) of the Industrial Disputes Act). It is evident

that the protection of workers has been strengthened in comparison to normal cases where 1 month’s dismissal notice to

the workman would be sufficient.

(2) Payment of compensation for dismissal

　When approved by the government agency, in the same manner as the compensation for dismissal described above for

normal cases, the workman is entitled to receive payment in an amount equivalent to 15 days’ worth of the average wage

for each year that the worker was in continuous service under the employer at the time that the workman is dismissed on

grounds of ordinary dismissal.

(3) Approval of government agency

　When an employer is to dismiss a workman, who was in continuous service under the employer for 1 year or longer,

on grounds of ordinary dismissal in a Special Industrial Establishment, the employer must specify the reason of ordinary

dismissal to, and obtain the permission from, the government agency prescribed under the Industrial Disputes Act in


advance (section 25N (1)b of the Industrial Disputes Act). Upon applying for the foregoing permission, the employer

must submit an application for permission which clearly states the reason for dismissal (section 25N (2) of the Industrial

Disputes Act). The government agency will offer an opportunity for the employer, the worker and other interested persons

to be heard, and conduct an investigation regarding the genuineness and reasonableness of the reason of dismissal, and

the interests of the worker and other circumstances (section 25N (3) of the Industrial Disputes Act). Upon offering

an opportunity for the employer, the worker and other interested persons to be heard, the government will determine

whether or not to grant permission by giving consideration to 1) the genuineness and adequacy of the reason asserted

by the employer, 2) interests of the workman, and 3) all other relevant factors. If no conclusion is communicated even

after the lapse of 60 days from the filing of the application for permission by the employer, it shall be deemed that the

permission has been granted after the lapse of such 60 days (section 25N (4) of the Industrial Disputes Act).

5-5.　Punitive dismissal

　Punitive dismissal is not subject to the application of the foregoing restrictions on dismissal . However, in order to clarify the

grounds for disciplinary action, it would be desirable to prescribe in advance, in the Employment Policy or other documents,

that the occurrence of specific events such as misconduct and violation of confidentiality obligations will constitute grounds

for disciplinary action.

5-6.　Mandatory retirement

　Under the labor laws of India, there are no express provisions that stipulate the mandatory retirement system. While the

model work rules prescribed under the Industrial Employment Central Rules prescribe the mandatory retirement age as being

58 years of age, such rules do not preclude the employer from prescribing a different age under the contract of employment

or the work rules to be individually prepared.

5-7.　Constructive dismissal rule

　The "constructive dismissal rule" is a system for securing, when the ownership or management of an undertaking is

transferred from the original company to a new company, the rights of a workman, who was in continuous service under

the employer for 1 year or longer preceding such transfer, so that such workman is entitled to receive a prior dismissal notice

and payment of a compensation for dismissal in the same manner as ordinary dismissal. For instance, in cases when business

transfer, merger or company split is conducted, or when certain assets (factory, etc.) are succeeded, together with the workmen,

by the new owner or manager of the undertaking, this will result in the change of ownership or management of the company.


Thus, this rule was established from the perspective of protecting workers in the foregoing cases. Furthermore, this rule is not

applied in cases where, for instance, the shareholder is merely changed based on the transfer or shares or other methods.

　This rule is subject to the following exceptions.

　 (1) The employment of workmen is not suspended due to the transfer of business.

　 (2) The conditions of employment applicable to workman are not in any way disadvantageous after the transfer of business in

comparison to the conditions of employment which had been applied immediately before the transfer.

　 (3) When a workman is to be dismissed on grounds of ordinary dismissal due to business transfer or other reasons, the new company

is legally obligated to pay the workman compensation that is calculated on the premise that the employment of such workman

is ongoing and not suspended due to the transfer.

　When all of the 3 requirements listed above are satisfied, this rule is not applicable. This is because, in such a case, the

protection of workers has been sufficiently satisfied.

5-8.　Last come first go rule

　The Industrial Disputes Act contains a provision to the effect that, unless a separate agreement has been reached between

an employer and a workman, upon dismissing the workman on grounds of ordinary dismissal, as a general rule, the employer

must dismiss the person who was employed last in the business division with which that workman is affiliated (last come first

go rule). In other words, the employer may not arbitrarily select the worker to be dismissed. However, if an employer is able to

demonstrate that there are special circumstances in which the employer is unable to follow this rule, there may be cases where

the employer may be exempted from the application of this rule as an exception.

　For the application of this provision according to the foregoing rule, the Industrial Disputes Act prescribes that the employer

is required to prepare a list of all workmen to be arranged according to the seniority of their years of service in the relevant

business division and post such list in a conspicuous place within the establishment at least 7 days before the ordinary dismissal

(Rule 77 of the Industrial Disputes (Central) Rules, 1957).

　 In cases where the respective business divisions are not completely differentiated or separated, and workers are sometimes

transferred between business divisions, judicial precedents indicate that all workmen engaged in that business, and not affiliated

with each business division, should be perceived as a single unit.

5-9.　Principle of preference upon reemployment

　When an employer is to newly hire a worker after dismissing a certain workman on grounds of ordinary dismissal, the

Industrial Disputes Act prescribes that the employer must offer an opportunity of reemployment to that workman who was

dismissed on grounds of ordinary dismissal in preference to other candidates. Consequently, upon reemployment, the employer

is obligated to notify the details of the job duties to the workman who was dismissed on grounds of ordinary dismissal for


which he/she will be reemployed. Moreover, upon reemployment, if the number of workers to be newly hired falls below the

number of workmen who were dismissed on grounds of ordinary dismissal, the employer is only required to notify workmen

in a number that is double the number of vacancies to be filled in order from the most senior workman (workman with the

longest years of service) who was dismissed on grounds of ordinary dismissal. When an employer is to reemploy a workman

who was dismissed on grounds of ordinary dismissal, similar to the case of ordinary dismissal described above, the workmen

eligible for reemployment shall be considered based on each business division, and the perception of business divisions may

be based on the foregoing judicial precedents.

6. Visas for Foreign Nationals 26

6. Visas for Foreign Nationals

6-1.　Overview

　 Japanese nationals planning to enter India must obtain an appropriate visa regardless of the purpose of traveling be it

sightseeing or business before entering India.

　The following are the main visas relevant for business travel.

　・Business Visa

　・Employment Visa

6-2.　Main work visas

About this document 27

About this document

About the information compiled in this document

The various data and commentary presented in this document has been compiled and written by One Asia Lawyers, based on

information released at the time of this document’s creation; its accuracy and completeness are not guaranteed. In addition,

One Asia Lawyers bears absolutely no responsibility for any damages incurred as a result of the use of the information in this

document.

●Author：One Asia Lawyers

●Writing date：June/2018

Contact information regarding this document

Persol Research & Consulting Co., Think Tank Headquarters

Overseen by the Persol HR Data Bank, APAC

E-mail:[email protected]

Tel.: +81-3-6385-6888

Company profile 28

Company profile

About PERSOL Research and Consulting

PERSOL Research and Consulting is the PERSOL Group’s think tank and consulting firm.

Through surveys and research, we uncover and clarify issues surrounding people and organizations in areas such as labor

markets, human resources development, new forms of employment, and working styles. We also work to investigate and

present solutions.

We provide solutions in areas including organizational and personnel consulting, people analytics, assessments, talent

management systems, human resources development, and employee training, based on the knowledge built up through our

survey and research activities.

We link these surveys, research, and solutions organically to help solve the various problems that arise in society and

corporations.

About PERSOLKELLY Consulting

PERSOLKELLY Consulting aspires to be a leading global human resource consulting and professional services organisation

committed to shape the future workforce by empowering individuals, organisations and societies.

To further align the corporate brand strategy, PERSOLKELLY Consulting is a rebrand of BTI Consultants in Asia and

Intelligence SMC in Hong Kong. These brands combine their vast experiences and knowledge in innovative talent

development, HR & Management advisory, organisational effectiveness and insights-driven HR solutions to achieve optimal

results for their clients in the regions.

Today, PERSOLKELLYConsulting is represented in 6 countries, includingHong Kong, India, Indonesia, Malaysia, Singapore

and China (operating under Intelligence Anchor Consulting). It is also in active collaboration with PERSOL Research and

Consulting in Japan.

PERSOLKELLY Consulting is an entity within the PERSOLKELLY company, a joint venture between PERSOL Group, and

Kelly Services, Inc, forming one of the largest recruitment companies in Asia Pacific.

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