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Last updated on: January 19th, 2023
Labor Requirements
In India, there are a large number of labor and employment laws including but not limited to approximately 50 Central (Federal) Laws.
The Indian government, in 2019, introduced four Labour Codes (Occupational, Safety, Health and Working Conditions Code, 2020, Wage Code 2019, Industrial Relations Code 2020, Code on Social Security, 2020)with a view to consolidating and amending the major labor legislations currently enacted in the country. The Codes have been passed by both Houses of Parliament and have received the assent of the President as well. The Codes were expected to be enacted sometime in 2022; however, they have not yet fully been implemented because the state governments are yet to finalize the Rules for implementation of these Codes. It is anticipated that the Codes will be enacted soon as most states have now already formulated draft Rules.
The above codes govern the terms and conditions of employment such as working hours, holidays and rest periods, wages, overtime, and employment conditions at the federal as well as State levels respectively. The other acts that govern employment relationships are the Maternity Benefit Act of 1961 (last amended in 2017), and the Industrial Order Standing Order Rules of 1946.
Application of Shops and Establishments Act – The Shops and Establishments Act (SEA) is applicable to the majority of enterprises, including restaurants, retail stores, hotels, IT firms, etc. The SEAs typically regulate the conditions of work and employment including pay, working hours, paid time off, the maintenance of certain registers and records, the filing of returns with the labor authorities, etc. There is no central labor law for shops and commercial establishments, in contrast to the Factories Act.
The amalgamation of Indian Labor Laws
In India, there are a large number of labor and employment laws including but not limited to approximately 50 Central (Federal) Laws. In the year 2019, the Government of India took a gigantic step towards consolidating the numerous labor legislations in order to ease the manner of doing business in the country as well as to harmonize various aspects of working conditions for the working force in the country.
Below are the 4 consolidated Labor codes:
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- The Code on Social Security, 2020 (“Social Security Code”);
- The Code on Wages, 2019 (“Wage Code”);
- The Industrial Relations Code, 2020 (“IR Code”); and
- The Occupational, Safety, Health, and Working Conditions Code, 2020 (“OSHW Code”).
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The above 4 labor codes along with the State rules will integrate several key laws and bring out a commendable amount of changes within the labor and employment law landscape.
Hours & Pay Regulations
Normal Working Hours
The normal working hours shall not exceed 9 hours per day and 48 hours per week. The State governments are allowed to change the daily limit but in no case, the daily working hours inclusive of overtime work shall exceed 10 hours per day.
Spread Over – The period of work of a worker inclusive of the interval of rest shall not be spread over for more than 10.5 hours in a day. However, the government authority may increase the limit for up to 12 hours for certain reasons which shall be made in writing. The spread over of 12 hours (inclusive of overtime) in a day can be exceeded in the case of employees who are engaged in technical work and required to perform continuously, urgent repairs, work in the nature of preparatory or complementary work, etc.
Under the Shops and Establishments Act of respective states, an employee’s period of work inclusive of rest intervals generally ranges between 10 hours to 12 hours in a day (inclusive of overtime).
Restriction on Double Employment – A worker who has already been working in any factory shall not be allowed to work in any other factory on the same day except in circumstances as may be prescribed by the government authority.
Under the Shops and Establishments Act of the respective states, the daily working hours shall not exceed 8 hours or 9 hours per day and the weekly working hours shall not exceed 48 hours per week. No employee shall be allowed to work in an establishment for more than 6 days in a week, in exceptional circumstances shall not work more than 10 consecutive days without a rest day. Occupational Safety, Health, and Working Conditions Code, Sec 25.
Proposed Amendment – Under the draft rules for the Occupational Safety, Health, and Working Conditions Code 2020, the working hours shall be increased from 9 hours to 12 hours (inclusive of intervals for rest) per day with no change in the weekly working hours limit of 48 hours per week.
Recording Requirements
An employer shall maintain a record electronically or otherwise of each employee containing information of their normal working hours, days of rest, wages, leaves, and overtime hours either in electronic form or manual form (registers) for a period prescribed by the appropriate Government.
In case of records are being maintained electronically, shall be kept in the manner prescribed in Form VIII.
Provided that when the original record is lost or destroyed before the expiry of one year period, true copies, if available, shall be preserved for the prescribed period. Occupational Safety, Health, and Working Conditions Code, Sec 33.
Overtime
Any work performed by a worker beyond 9 hours per day or 48 hours per week is considered overtime work. The total working hours including overtime should not exceed 60 hours in a week and total overtime hours in a quarter should not exceed 50 hours.
Any exemption granted by State Government shall be subject to the following conditions:
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- the total number of hours of work in any day shall not exceed 12 hours;
- the spread over, inclusive of intervals for rest, shall not exceed 13 hours on any one day;
- the total number of hours of work in any week, including overtime, shall not exceed 60 hours;
- no worker shall be allowed to work overtime, for more than 7 days at a stretch and the total number of hours of overtime work in any quarter shall not exceed 75 hours.
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Pay – A employee who has worked overtime is entitled to receive a premium twice the rate of their ordinary wages.
Under the Shops and Establishments Act of respective states, any work performed by an employee beyond 8 hours/ 9 hours per day or 48 hours per week is considered overtime work.
Pay – An employee who has worked overtime is entitled to receive a premium twice the rate of their ordinary wage. Occupational Safety, Health, and Working Conditions Code, Sec 27.
Proposed Amendment – Under the draft rules for the Occupational Safety, Health, and Working Conditions Code 2020, employees who perform any overtime work performed between 15 minutes to 30 minutes after the completion of their regular hours of work per day, shall be entitled to overtime pay for a period of 30 minutes.
In calculating the wages or earnings in the case of an employee paid by the month, the daily wages shall be 1/26th of the monthly wages and in the case of any other employee, it shall be the daily wages or earnings, as the case may be.
But no employee shall be allowed to work for more than 125 hours of overtime work in any quarter.
Night Work
Night shift is a shift that extends beyond 12am. There is no extra premium pay for workers working the night shift. Where an employee in an employee works on a shift that extends beyond midnight, then-
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- a rest day for the whole day shall be given for a period of 24 consecutive hours beginning from the time when his shift ends; and
- the following day in such a case shall be deemed to be the period of 24 hours beginning from the time when such shift ends, and the hours after midnight during which such employee was engaged in work shall be counted towards the previous day.
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Women employees can be employed during the time period between 6 am to 7 pm only with their consent and the employer shall make proper arrangements such as safe transport facilities, adequate lighting at the workplaces, etc. The State Governments can grant exemption to any factory or group or class of factories, but no woman can be permitted to work from 10 pm to 5 am. Occupational Safety, Health, and Working Conditions Code, Sec 25 & 27.
Breaks
A worker shall not be allowed to work for more than 5 hours (in certain cases, the exemption can be granted to extend this period to 6 hours) without having an unpaid break of at least 30 minutes.
Under the Shops and Establishments Act of respective states, also an employee is generally allowed not to work for more than 4 or 5 hours without having an unpaid break period of at least 30 minutes. Occupational Safety, Health, and Working Conditions Code, Sec 25.
Weekly Rest Period
A worker shall be entitled to rest on the first day of the week i.e. Sunday which shall be a weekly holiday unless the worker has or will have a holiday for a whole day on one of the 3 days immediately prior to or after the said day of rest (Substitution day). However, no substitution shall be made where any worker has to work more than 10 consecutive days without a whole rest day.
Compensation for work on weekly holiday – A worker who was not given a weekly holiday shall be entitled to compensatory holidays of equal duration of holidays lost in the month in which it was due within 2 months immediately following that month.
Under the Shops and Establishments Act of respective states, an employee is generally entitled to 1 day of weekly rest each week.
Compensatory Rest Period – Some states (like Chennai) provide compensatory days off for working on weekly rest days. Occupational Safety, Health, and Working Conditions Code, Sec 26
Proposed Amendment – Under the draft rules for the Occupational Safety, Health, and Working Conditions Code 2020, compensatory rest day received for working on weekly rest day which an employee is entitled to shall be given in such a manner, that not more than 2 compensatory days are given in one week.
The compensatory holidays given to an employee before the employee is discharged or dismissed from employment, shall not be considered as part of the notice period which the employee is required to serve before such discharge or dismissal.
Public Holidays
There is no Central level legislation in respect of Public holidays. The Public holidays in various states are governed by the respective National and Festivals Act, which prescribes the list of public holidays from which an establishment shall decide and provide time off for public holidays to the employees. Public holidays are often called religious or festive holidays.
The number of public holidays can differ from state to state. However, Republic Day -26th January, Independence Day – 15th August, and Gandhi Jayanti- 2nd October are mandated public holidays and as such is applicable to all the states.
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Generally, various states in India provide for 5 to 9 other public holidays along with the three above-mentioned mandatory public holidays. The rest of the festival holidays depends on the discretion of the concerned States and establishments.
Basically, a list of holidays is published by the state government every year, and employers are required to choose the holidays they will observe. In certain states, employers are required to display the list of holidays in a conspicuous location in the workplace accessible to the employees.
Pay – As a general rule, an employee who is required to work on a public holiday is either provided double the amount of ordinary wages or a substitute time off for the amount of work performed on a public holiday with wages. Industrial Employment Act (Standing Order)(Schedule-I A), Sec 10.
Annual Leave
A worker who has worked for a period of 180 days or more in a factory during a calendar year at the rate of 1 day of leave for every 20 days worked. In the case of adolescent workers for 15 days of their work, and in the case of workers employed below ground mine, at the rate of one day for every 15 days of their work, in such a calendar year.
For the purpose of computing 180 days of employment, any period of layoff, maternity leave, or annual leave availed by the employee in such a calendar year shall be counted but the employee shall not earn leave for the period so counted.
An employee whose employment begins on a date other than on the 1st day of January shall be entitled to annual leave at the rate of 1 day for every 20 days worked if the employee has worked for one-fourth of the total number of days in the remainder of the calendar year.
Encashment of Leave – An employee who could not take annual leave in that year can also encash the leaves at the end of the calendar year. Employees can also encash the leaves which shall not exceed 30 days.
In calculating the annual leave, a fraction of leave of half a day or more shall be considered as one full day’s leave, and a fraction of less than half a day shall be ignored.
Note – The annual leave shall not include public holidays whether occurring during or at either end of the period of annual leave.
An employee whose employment begins on a date other than on the 1st day of January shall be entitled to annual leave at the rate of 1 day for every 20 days worked if the employee has worked for two-thirds of the total number of days in the remainder of the calendar year.
Annual Holiday Pay – Employees are paid their usual daily wage rates for the days of earned leave. Daily wages are the average of a worker’s total full-time earnings for the day on which the employee actually worked during the months immediately preceding the annual leave.
The daily wages are exclusive of any overtime and bonus but inclusive of dearness allowance and the cash equivalent of the advantage accruing through the concessional sale to the employee of food grains and other articles.
Payment in advance in certain cases – A worker who has been allowed leave for not less than 4 days, shall be paid the wages due for the period of the leave allowed before the annual leave begins.
Carry Forward of leave – Annual leave may be carried over to the succeeding calendar year, however, the total amount of leave that can be carried forward shall not exceed 30 days. However, a worker who was refused annual leave shall be allowed to carry forward the leave without any limit.
Annual leave in parts – A worker may apply for annual leave to be taken in whole or portions, provided that the worker gives at least prior 15 days’ notice from the date of availing the annual leave. The number of times in which the annual leave may be taken during any year shall not exceed 3 times.
Termination of employment – A worker whose employment is terminated shall be entitled to wages for the amount of leave not taken by the worker immediately before the termination of employment.
Under the Shops and Establishments Act of respective states, an employee is generally entitled to annual leave ranging between 12 to 15 working days in a year. Employees can carry forward 30 to 45 days of annual leave to the next year in various states. Employees are generally entitled to their daily regular wages for the period of annual leave. Occupational Safety, Health, and Working Conditions Code, Sec 79, 80,81,82.
Special Leave
Sick and Casual leave is generally governed by the State’s specific Shops and Establishments Act. The duration of leave to which employees are entitled varies from 7 to 12 depending on the state in which the place of employment is located and not all separately define casual and sick leave.
Most states provide up to 10 days of sick leave while some states provide casual leave entitlement of up to 10 days.
In the manufacturing sector, sick or casual leave is governed by the Industrial Employment (Standing Orders) Act, of 1946, under which employees are entitled to up to 10 days of leave. 15 days of sick leave is entitled under the Apprentices Act, 1961, and 30 days of sick leave for 18 months of service under the Working Journalist and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955. Casual/sick leave cannot be accumulated and carried forward or cashed out.
Pay– The amount of sick/casual leave pay differs depending upon the State and the establishment. Generally, the pay is around 70% of the average daily wage. Industrial Employment Act (Standing Order) (Schedule-I ), Sec 10.
A female employee who adopts a child under the age of 3 months is also entitled to 12 weeks of leave applicable from the date the child is handed over to the employee. Maternity Benefit Act 1961(last amended in 2017) – Sec 5(4).
A female employee is entitled to 26 weeks of paid maternity leave. The amount of leave that can be taken before the date of delivery is 8 weeks. An employee who already has two or more children is entitled to 12 weeks of maternity leave. The prenatal leave in such a case is 6 weeks. Employees who use surrogacy are entitled to 12 weeks of maternity leave.
A female employee shall be entitled to paid leave for a period of 6 weeks immediately following the date of miscarriage or medical termination of pregnancy.
In the case of tubectomy, a female employee is entitled to paid leave for a period of 2 weeks following the day of the operation. A female employee is also entitled to paid leave for a maximum period of 1 month in case of illness arising out of pregnancy, delivery, premature birth, still birth, medical termination of pregnancy, or tubectomy.
Pay – The maternity leave is provided with full wages on completion of at least 80 days of employment in an establishment in the 12 months prior to the expected date of delivery. The maternity benefit is given at the rate of the average daily wage for the period of an employee’s actual absence from work.
Breastfeeding Break
Employers are required to provide nursing breaks of prescribed duration for new mothers in order to express breast milk for nursing child/children. These breaks are paid and are available until a child reaches the age of 15 months. The duration of these prescribed breaks is not provided under the law. Maternity Benefit Act 1961(last amended in 2017) – Sec 3, 5,11.
