Labor Laws in India: What Global Employers Should Know 2026

Thinking about hiring in India to build your global team? India offers a deep, diverse talent pool, but navigating the hiring process here requires understanding the complexities of its labor laws. Each state has its own set of regulations, adding another layer of compliance challenges. Additionally, India has recently consolidated several legacy labor laws into four new codes, creating an evolving landscape for employers, domestic and international alike.

For companies considering hiring in India, this guide will help you understand the essentials you need to know. From worker classifications to termination rules, data protection, employee benefits, and workplace safety, we’ll guide you through the critical compliance areas to ensure you stay on the right track while supporting your team effectively.

Introduction[toc=Introduction]

India's labor laws govern one of the world's largest workforces. The country produces 1.5 million engineering graduates annually and stands as a global talent powerhouse. Our role as India's employer of record has shown us how these regulations transformed from decades-old rules into four modern labor codes:

• The Code on Wages
• The Occupational Safety, Health, and Working Conditions Code
• The Industrial Relations Code
• The Code on Social Security

Managing employment laws in India creates distinct challenges for businesses. The regulations change based on state boundaries, industry types, and company sizes.

Businesses planning to hire in India must grasp these intricate requirements. Our years of helping multinational companies have led us to create this piece that explains India's labor law framework.

The content explains the essential aspects of managing your Indian workforce. You'll find details about employee classifications and termination procedures that will help your business stay compliant while tapping into India's talented workforce.

The Evolution of India's Labor Laws:[toc-hide]

India's labor laws mix federal and state rules, making it complex for new businesses. Businesses struggled to deal with over 29 central and 200 state labor laws. This created a compliance nightmare for employers.

India has introduced the India labor codes, four unified laws that change workplace rules. The 2024 amendments by the Ministry of Corporate Affairs make it easier for businesses to follow the rules.

The four labor codes :

The Indian government started a mission to unite 29 central labor laws into four detailed codes:

1. The Code on Wages, 2019: Unites laws related to wages, bonuses, and equal remuneration
2. The Industrial Relations Code, 2020: Deals with trade unions, industrial disputes, and employment conditions
3. The Code on Social Security, 2020: Covers provident funds, insurance, and maternity benefits
4. The Occupational Safety, Health and Working Conditions Code, 2020: Deals with workplace safety and employee wellbeing

These changes try to find a balance between giving employers freedom and protecting workers. Employers need to check their policies to make sure they follow these new rules. The Ministry of Labor and Employment keeps updating the rules to help everyone stay in line.

On November 21, 2025, India introduced a landmark overhaul of its labor law framework. The Industrial Relations Code (2020) and the Occupational Safety, Health, and Working Conditions (OSHWC) Code (2020) became fully enforceable across the country. Additionally, most provisions of the Code on Wages (2019) and the Code on Social Security (2020) also came into effect. Below, we outline the major legal changes, their impact, and some of the challenges that both employers and employees may encounter.

What are the recent changes in labour laws in india?[toc=Recent Changes]

India’s labor laws have recently undergone a major overhaul. These changes aim to simplify compliance, establish a uniform wage definition, and enhance worker protection. Key reforms include national floor wages, clearer overtime rules (double pay), expanded social security for gig workers, and shifting the role of inspectors to facilitators.

For a detailed comparison of the labor law ecosystem before and after the reforms, refer to the table below:

How does the Code on Wages impact salaries and equal pay in India?[toc=The Code on Wages]

The Code on Wages, 2019 consolidates four previous laws related to wages, bonuses, and equal pay including the Equal Remuneration Act into a single framework. It aims to simplify wage-related compliance while ensuring fair pay practices across industries.

Key Provisions

• National Floor Wage: Sets a minimum threshold that no state can go below, but states can determine their specific minimum wage based on this floor.
• Uniform Wage Definition: At least 50% of total compensation must consist of basic pay, dearness allowance (DA), and retaining allowance, ensuring higher statutory contributions like PF, ESIC, and gratuity.
• Equal Pay for Equal Work: Mandates gender-neutral pay policies, explicitly including transgender employees.
• Timely Wage Payments: Requires weekly wages within 7 days and monthly wages by the 7th of the following month.

Scope & Applicability

• Applies to all employees across organized and unorganized sectors, including those in supervisory or managerial roles.
• Covers all establishments, including factories, shops, and service providers.

How does the Industrial Relations Code simplify employment relations?[toc=The Industrial Relations Code]

The Industrial Relations Code, 2020 consolidates three previous laws related to trade unions, industrial disputes, and employment conditions. It aims to streamline industrial relations by balancing worker rights with employer flexibility in managing layoffs and fixed-term contracts.

Key Provisions

• Fixed-Term Employment: Fixed-term employees now have entitlement to the same benefits as permanent employees (e.g., provident fund, gratuity) without requiring long-term commitments from employers.
• Layoff Flexibility: The threshold for no government approval for layoffs has been raised to 300 employees from 100, giving employers more flexibility in managing workforce reductions.
• Grievance Redressal Committees: Mandatory for establishments employing 20 or more workers, as prescribed under the Industrial Relations Code, subject to state implementation.
• Strikes & Lockouts: Workers must provide a 14-day notice before initiating strikes or lockouts, simplifying the process of managing industrial action.
• Trade Unions Recognition: Unions with 51% membership in an establishment can be officially recognized as Negotiating Unions, granting them exclusive rights in collective bargaining and grievance redressal. If a union doesn't meet this threshold, a Negotiating Council is formed with representatives from unions with at least 20% membership.

Scope & Applicability

• Applies to all industries and establishments employing workers under formal contracts or agreements.
• Covers both workers employed under fixed-term or permanent contracts and employers managing establishments with more than 20 employees.

How does the Code on Social Security benefit gig workers and employees?[toc=The Code on Social Security]

The Code on Social Security, 2020 merges nine previous laws related to provident funds, insurance schemes, maternity benefits, gratuity payments, and employee compensation into one unified framework. It expands social security coverage to gig workers and platform workers while strengthening existing benefits for traditional employees.

Key Provisions

• Universal Social Security Coverage: Extends PF, insurance, maternity leave, and gratuity to gig/platform workers and inter-state migrants.
• Maternity Benefits: Provides 26 weeks of paid leave for women (for the first two children) and additional leave for miscarriage or medical termination.
• Gig Worker Contributions: Aggregators like Uber and Zomato must contribute 1–2% of annual revenue to the social security fund for gig workers.
• Social Security Fund Contribution: The 1–2% revenue contribution from aggregators is new, but more details are needed on how this works for platform-based businesses.

Scope & Applicability

• Applies to all workers in organized sectors as well as gig/platform workers in unorganized sectors.
• Covers traditional employees registered under applicable schemes as well as companies employing formal staff or engaging gig/platform workers.

How does the OSH Code improve workplace safety standards?[toc=The OSH Code]

The Occupational Safety, Health, and Working Conditions (OSH) Code consolidates thirteen previous laws related to workplace safety into one comprehensive framework. It focuses on ensuring safe working environments across industries while standardizing working hours and welfare measures.

Key Provisions

• Workplace Safety Standards: Employers must ensure hazard-free workplaces by conducting regular safety audits and providing necessary safety equipment (e.g., PPE), which aligns with the OSH code.
• Working Hours & Overtime Rules: Maximum working hours are capped at 8 hours/day, 48 hours/week, with overtime paid at twice the regular rate, but limited to 125 hours per quarter.
• Crèche Facilities & Welfare Measures: Establishments with more than 50 employees must provide crèche facilities for children of working parents. Welfare provisions also include sanitation facilities, drinking water, and canteens (in larger workplaces).

Scope & Applicability

• Applies across industries such as factories, mines, construction sites, IT firms, and other establishments employing ten or more workers.
• Covers both workers employed in hazardous industries or establishments with formal contracts as well as businesses employing ten or more workers across sectors.

How are employees classified under Indian Labor laws?[toc=Employee Classification]

Understanding how employees are classified in India is crucial for businesses to stay compliant with labor laws.

In our experience helping global companies hire, pay, and manage employees in India, we have seen many businesses struggle with the legal distinctions between different types of workers.

Whether you are an employer expanding into India or an employee seeking clarity on your rights, knowing these classifications is essential.

Workmen vs. Non-Workmen: What’s the Difference?

Indian labor laws classify employees as workmen or non-workmen under the Industrial Disputes Act, 1947. This distinction is important because workmen receive stronger labor protections, while non-workmen (typically managerial or administrative employees) are governed by company policies with fewer protections.

Workmen include employees engaged in:

• Manual or technical work
• Operational or clerical duties

Workmen are entitled to:

• Overtime pay
• Retrenchment benefits
• Grievance redressal mechanisms

Non-Workmen include employees in:

• Managerial or administrative roles
• Supervisory positions earning above a certain salary threshold

Non-Workmen don’t receive the same protections as workmen but remain covered under:

• Employment contracts
• Company policies

Note: Non-workmen now have less protection under the new labor codes. The Industrial Relations Code, 2020 has shifted some protections, making it easier for employers to manage these employees flexibly.

Contract Workers vs. Fixed-Term Employees: What’s the Difference?

Many businesses today use flexible employment models, but contract workers and fixed-term employees (FTEs) are not the same.

Contract Workers:

• Hired through a third-party contractor
• Not direct employees of the company
• The contractor handles wages, benefits, and compliance
• The principal employer is still responsible for working conditions

Fixed-Term Employees (FTEs):

• Hired directly by the company for a set duration
• Receive the same benefits as permanent employees during the contract
• Eligible for provident fund, medical benefits, and gratuity (if tenure exceeds one year, not 5 years as before)

Note: Fixed-term employees are now entitled to the same benefits as permanent employees during the contract period and are eligible for gratuity if employed for one year (not five years). This is a significant update under the Code on Industrial Relations, 2020.

Gig Workers vs. Platform Workers: What’s the Difference?

The gig economy has reshaped employment in India. The Code on Social Security, 2020 now recognizes both gig workers and platform workers.

Gig Workers:

• Freelancers or on-demand workers
• Work for multiple employers
• Include consultants, drivers, delivery partners

Platform Workers:

• Work via digital platforms like Uber, Zomato, Swiggy, and Ola
• Paid per task, not fixed salaries

Under the new labor codes, gig and platform workers are entitled to:

• Social security schemes
• Health insurance
• Provident fund (PF)
• Maternity benefits

Note: Gig and platform workers are now formally recognized under the Code on Social Security, 2020 and are covered for social security benefits such as health insurance, PF, and maternity benefits. The contribution by platforms like Uber and Zomato to social security funds needs further clarification.

Overall Comparison of Employee Classifications in India

What should foreign employers know about minimum wages in India?[toc=Minimum Wages]

With our experience helping global companies stay compliant with India’s wage and payroll laws, we’ve seen how the right pay structures protect both employer and employee, and prevent costly compliance slip-ups.

The Code on Wages, 2019 established a national "floor wage" that serves as a baseline minimum wage for all states and sectors. States can set their own minimum wages but must stay above this central floor wage. This creates a varied compliance landscape where rates differ substantially between regions, as states have the flexibility to set higher wages based on local factors.

Multinational companies we guide through India's employment landscape should know that minimum wages have two key components:

• Basic minimum wage: A fixed amount
• Variable Dearness Allowance (VDA): Adjusted periodically based on the Consumer Price Index

Minimum wages in India follow multiple categories:

• By geographical area (Zone A, B, or C)
• By industry sector
• By skill level (unskilled, semi-skilled, skilled, and highly skilled)
• By occupation type

The revision cycle makes things more complex. The central government reviews minimum wages every five years, while many states revise them more frequently, some as often as twice a year. Companies must watch these changes carefully, as non-compliance can lead to penalties up to ₹50,000, and repeat offenders may face imprisonment for egregious violations.

What should global employers know about employment contracts in India?[toc=Employment Contracts]

Employment contracts are a cornerstone of legal compliance and employee management in India. While written contracts are not legally mandated by Indian federal labor law, our experience as an Employer of Record in India has shown that having a well-drafted employment contract is essential for protecting both employer and employee interests.

A well-laid-out employment contract should include:

• Job title and detailed description of duties and responsibilities
• Compensation structure including salary, bonuses, and benefits
• Employment duration (indefinite or fixed-term)
• Termination clauses with notice periods and severance calculations
• Confidentiality provisions and intellectual property ownership
• Probationary period terms (typically 6 months, but it may be extended for certain roles)
• Dispute resolution procedures, including the conciliation process before moving to tribunals or courts.

Our experience guiding multinational companies shows that employment contracts are crucial to the onboarding process. They protect both employer and employee interests while clarifying duties and rights.

What are India's mandatory Social Security Contributions?[toc=Social Security Contributions]

Through our hands-on work managing PF, ESI, and gratuity under India’s EOR and payroll frameworks, we’ve learned how structured social contributions create stability for both workers and employers.

India's social security system revolves around three main programs that every employer must join:

• Employees' Provident Fund (EPF): Required for companies with 20+ employees. Both employer and employee contribute 12% of basic salary and dearness allowance. Employees earning above ₹15,000 can join voluntarily, and the EPF contribution can be reduced to 10% in certain situations (e.g., during pandemics).
• Employees' State Insurance (ESI): Applies to workplaces with 10+ employees earning up to ₹21,000 monthly (₹25,000 for differently-abled employees). Employers contribute 3.25% and employees 0.75%. ESI now includes gig and platform workers under the Code on Social Security, 2020.
• Gratuity: Mandated for companies with 10+ employees after five years of service, with 15 days' wages per completed year. Fixed-term employees are eligible after one year of service under the new Code on Social Security, 2020, a key update.

What are the registration and documentation requirements for hiring employees in India?[toc=Registration Requirements]

From our experience onboarding employees across multiple Indian states, we’ve seen that getting registrations right upfront avoids most downstream compliance issues.

Before hiring in India, employers must complete a few core registrations:

• Tax registrations: Employers must obtain a Tax Deduction Account Number (TAN) to deduct and deposit salary taxes. Employees need a PAN only if they have taxable income in India. Foreign nationals may rely on DTAA provisions initially, but PAN becomes mandatory once Indian tax liability applies.
• Social security registrations: EPFO registration is mandatory for establishments with 20 or more employees and continues even if headcount later falls. ESIC registration applies to establishments with 10 or more employees, covering workers earning up to ₹21,000 per month. International Workers may be covered under EPF regardless of salary thresholds.
• Shops and Establishments registration: All commercial establishments must register under the state-specific Shops and Establishments Act. Timelines, documents, and ongoing update requirements vary by state, and many states require registration before or immediately after the first hire.

These registrations form the compliance backbone for hiring in India, and missing even one can delay onboarding or trigger penalties later.

What are the working hours and overtime regulations in India?[toc=Working hours & Overtime]

Having managed workforce compliance for distributed teams, we’ve seen how defining clear working hour policies and overtime rules protects companies from penalties and keeps teams productive.

• Indian law limits standard working hours to 48 weekly, usually spread over six days. Daily working hour limits vary by state and establishment type, but are generally capped at 9 hours per day and 48 hours per week.
• Work beyond these limits counts as overtime. The Factories Act and state rules require double pay for overtime hours. Managers, supervisors, and government employees don't get overtime benefits.
• Though laws set maximum work hours, enforcement differs between organized and unorganized sectors. Our experience with multinationals shows that clear overtime policies help maintain compliance and keep workers happy.

Do you need help setting up compliant compensation and benefits in India? Our team knows how to guide global businesses through these requirements while keeping their workforce satisfied. Contact us!

What are the leave entitlements for employees in India?[toc=Leave Entitlements]

Leave entitlements are a vital compliance area for businesses hiring in India. Our experience as an Employer of Record in India has helped numerous global companies navigate these mandatory provisions that affect employee satisfaction and legal compliance.

• Annual Leave (Earned Leave): Employees earn one day of leave for every 20 days worked, typically 15–30 days per year, depending on the state.
• Casual and Sick Leave: Most employees are entitled to 8–10 casual leave days and 7–14 sick leave days annually. These vary by state and company policy.
• Maternity Benefits: The Maternity Benefit Act provides 26 weeks of paid leave for the first two children and 12 weeks thereafter. Companies with over 50 employees must also provide crèche facilities.
• Paternity Leave: While not mandated by central law, many employers offer 1–2 weeks of paid paternity leave as part of competitive HR policies.
• Public Holidays: India observes three national holidays: Republic Day, Independence Day, and Gandhi Jayanti, plus 5–10 regional holidays depending on the state.

Exact earned leave entitlements vary by state law and establishment type.

What are the workplace safety requirements for employers in India?[toc=Workplace Safety]

Through our work helping companies set up compliant HR operations and equipment provisioning in India, we’ve seen how proactive safety measures go hand in hand with higher productivity and morale.

• Applicability of the Code: The Occupational Safety, Health and Working Conditions Code applies to establishments employing 10 or more workers.
• Employer Responsibility: Employers must ensure workplaces are free from hazards that can cause injury or illness.
• Health Examinations: The Code mandates free annual health check-ups for specific categories of employees.
• Workplace Environment Standards: Employers must maintain proper ventilation and temperature control, Sanitation, and lighting, and Facilities for clean drinking water and waste disposal
• First-Aid Requirements: First-aid boxes must be available and accessible during all working hours.
• Safety Oversight: The Code establishes national and state-level safety boards to advise on standards and compliance.
• Workplace Safety Committees: Certain establishments must form safety committees with representatives from both employers and workers.
• Safety Audits and Accident Prevention: Employers should conduct regular safety audits and take preventive measures to minimize workplace accidents.

What are the sexual harassment prevention requirements under India’s POSH Act?[toc=India's POSH Act]

With our background supporting global employers in setting up compliant HR frameworks, we’ve helped teams implement POSH policies that protect employees and strengthen workplace culture.

• Applicability: Applies to all employers with 10 or more employees.
• Internal Complaints Committee: Each branch must have an ICC to handle harassment complaints.
• Policy Requirement: Employers must create and circulate a clear anti-harassment policy.
• Awareness Programs: Regular training should inform employees about their rights and duties.
• Annual Filing: Employers must submit yearly reports on complaints and actions taken.

Companies can face penalties up to ₹50,000 for violations. Compliance is vital for legal and reputational reasons.

What are the legal requirements for termination and separation in India?[toc=Terminations & Separation]

Companies must carefully follow legal procedures that depend on employee classification and separation reasons when ending employment in India. Our experience with multinational companies has shown how mistakes in these procedures can get pricey and might lead to reinstatement orders.

Notice Period & Severance Pay

Employers must provide notice or compensation before terminating an employee. In most cases, the standard notice period is 30 days or salary in lieu. However, for industrial establishments with 300+ employees, retrenchment requires three months’ notice and government approval.

Severance pay obligations depend on the type of termination. In cases of retrenchment, employees are entitled to 15 days’ wages per completed year of service. Additionally, employees with five or more years of service qualify for gratuity act, which equals 15 days’ wages per year and is tax-free up to ₹20 lakh.

Termination Process & Documentation

A legally compliant termination requires employers to follow due process. This includes issuing a notice, conducting an inquiry in cases of misconduct, and providing a termination letter outlining the reasons. Employees must also receive their full and final settlement, including unpaid salary, leave encashment, gratuity, and bonuses. Experience and relieving letters should be provided to ensure a smooth transition.

Types of Terminations in India

Different types of termination require different legal considerations:

How Wisemonk helps you navigate Employment Laws in India?[toc=How Wisemonk helps]

Wisemonk is a specialized Employer of Record (EOR) in India, built for global companies looking to hire, pay, and manage employees in India without the complexities of setting up a local entity. Wisemonk provides end-to-end workforce solutions tailored to India’s regulatory landscape, ensuring seamless compliance, payroll, and dedicated HR support for your offshore teams.

We help global businesses manage everything from minimum wage compliance, leave entitlements, and termination procedures to POSH Act implementation and social security registrations like EPFO and ESIC.

In addition to India’s labor law compliance, we also help global companies with:

• Payroll management and compliance
• Tax optimization and filings
• Employee benefits administration
• Background verification and onboarding support
• GCC (Global Capability Center) setup
• Company registration and legal entity support in India
• Offshore team building and HR operations

Do you need help managing your Indian workforce the right way? Our team is ready to help you navigate India's labor regulations. Contact us!‍