Employee Labor Laws in India: What Companies Must Know

India continues to attract foreign investment thanks to its growing economy and skilled workforce. H&CO helps you understand that the country's labor regulations are crucial for companies that want to hire and operate legally, and assists you in opening a business in India to expand your investments into new territories.

In this article, we outline the key aspects of Indian labor law that every employer should know before entering the market.  The challenges for companies are understanding how to do business in India and its labor laws to ensure compliance.

A Unified Labor Framework: The Four Labor Codes

The passage of new laws by Parliament represents a significant step taken by the Central Government to improve workers' living standards. This development will have a positive and lasting impact on both workers and the country's overall progress. These labor reforms will promote business activity within the country and are expected to lead to increased job creation and enhanced worker productivity.

The benefits of the four Labor Codes will be available to workers in both the formal and informal sectors. But what are the 4 codes we're talking about?

1.    Right to a minimum wage for all

Labor Code (Wage Code) – 2019: Workers will benefit after 73 years of independence. Efforts are underway to provide wage security, social security, and health insurance for 500 million workers in both the formal and informal sectors.

The minimum wage guarantee is available to 500 million workers in both the formal and informal sectors. The minimum wage is reviewed every five years. Furthermore, the timely payment of wages to all workers is guaranteed.

For the first time, nearly 400 million workers in the country's informal sector have gained this right. To eliminate regional disparities in minimum wages, a guaranteed minimum wage provision has been introduced.

The determination of the minimum wage has been simplified and will be based on criteria such as skill level and geographical area. Since August 28, 2017, the Wage Payment Act has increased the salary cap from 18,000 rupees to 24,000 rupees.

2.    Social Security for everyone

The central government has consolidated nine labor laws into the Social Security Code to guarantee workers' rights to insurance, pensions, bonuses, maternity benefits, and other social security benefits. This Code aims to create a comprehensive legal framework for Social Security, ensuring that workers receive all the benefits they need.

Within this system, contributions from both employers and employees will be gradually institutionalized. These contributions cover:

• Through a small contribution, the benefit of free treatment is available under the hospitals and dispensaries of ESIC.
• The doors of ESIC will now be opened for the workers of all sectors, along with the workers of the unorganized sector.
• Expansion of ESIC hospitals, dispensaries, and branches up to the district level. This facility is to be increased from 566 districts to all 740 districts of the country.
• ESIC offers an opportunity for platform and gig economy workers who use new technologies to join.
• Plantation workers can also benefit from ESIC.
• Institutions operating in high-risk areas are required to register with ESIC.

Expansion of Social Security

• The benefits of the pension scheme (EPFO) are extended to all workers in the formal, informal, and self-employed sectors.
• The minimum seniority requirement for receiving the bonus has been eliminated for employees with fixed-term contracts.
• Employees with fixed-term contracts receive the same social security benefits as permanent employees.
• Employers with more than 20 employees are required to report job vacancies online.
• A Universal Account Number (UAN) for ESIC, EPFO, and unorganized Sector workers.

Right of security to workers in all situations

This code also guarantees the security of the interests of workers in factories, mines, plantations, the motor transport sector, workers in the bidi and cigar industry, subcontracted workers, and migrant workers.

Several provisions of the Occupational Safety and Health Code will make life easier for interstate migrant workers. The shortcomings of the 1979 Interstate Migrant Workers Act have been comprehensively addressed in the Occupational Safety and Health Code. Previously, only those hired by a contracting company were recognized as interstate migrant workers.

The empowerment of women through Labor Codes has granted them the right to work in all types of establishments. Women have been granted the right to work at night with their consent, and it has also been guaranteed that the employer will take appropriate measures to provide safety and facilities for female workers during the night.

Another advance of this law is the Maternity benefits that were modified in 2017 to increase paid maternity leave for working women from 12 to 26 weeks and guarantee the obligation to have nurseries in all establishments with 50 or more workers.

3.    Safety, Health, and Working Conditions Code

By integrating three labor laws into the Industrial Relations Code, the central government has taken steps to safeguard the interests of both unions and workers. This Code includes all possible measures to protect businesses and workers, thereby preventing future conflicts.

In the event of job loss, the worker will receive benefits under the Atal Bimit Vyakti Kalyan Yojna plan. Under this plan, a worker in the formal sector who loses their job receives financial assistance from the government. This is a type of unemployment subsidy, the benefit of which corresponds to workers covered by the Social Security Scheme for Employees (ESI).

Upon retrenchment, the employee would be provided with 15 days' salary for professional re-skilling. This salary would be paid directly into their bank account to enable them to acquire new skills.

Within the legal framework, the fastest justice for workers is through the Court. Labor disputes will be resolved within one year in the Court.

About trade unions, in industrial establishments where none of them obtains 51% of the votes, a negotiating council of trade unions will be formed to reach agreements with the employer.

4.    Welfare of Inter-State Migrant Workers

The government has been working for some time to improve the benefits for interstate migrant workers. Initiatives have been taken to strengthen the laws that protect them.

For interstate migrant workers and low-income individuals, the central government has implemented several programs, such as Garib Kalyan, which includes free home food delivery, among others.

Benefits of Coding

• Single registration, single license, single declaration: Minimum forms.
• Common definitions
• Reduced committees
• Online surprise inspections
• Use of technology: Electronic registration and licensing
• Reduced compliance costs and disputes.

Conclusion

India's labor reforms mark a turning point for both employers and workers. These changes not only improve protections for workers, especially those in the informal sector and migrant populations, but also reduce compliance burdens for companies.

At H&CO, we help companies navigate complex labor regulations with confidence. Whether you're hiring locally or expanding your global workforce, our team ensures full compliance with Indian labor laws while supporting your strategic growth.

This article is intended for informational purposes only and does not constitute legal advice. Labor laws in India are subject to change and may vary by state. We recommend consulting with a qualified legal or compliance advisor before making any employment-related decisions.