Labour Laws in India

If your business needs labour employment, you must be aware of some essential laws in India. Cherish this guide and get all info on which laws your company must follow before you start hiring labour. Learn about employment and labour laws and regulations in India.

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Labour laws in India have undergone significant changes, reflecting the evolving nature of work and the need to protect employees’ rights while balancing employers’ interests. The Central Government’s new employment and labour laws, effective from July 1, 2022, introduce comprehensive reforms across various sectors. These laws aim to enhance working conditions, ensure fair wages, and improve social security benefits for workers. Understanding these changes is crucial for both employers and employees to navigate the new legal landscape and ensure compliance with the updated regulations. This blog will look into the key aspects of these new labour laws in India and their implications.

Employment and Labour Laws in India

The Central Government’s new employment and labour laws in India took effect on July 1, 2022. These laws bring significant changes across all sectors, transforming how we work. Key changes include revised rules for working hours in India, provident fund contributions, and salary structures. For instance, employees are now limited to working 48 hours a week, with provisions for vacation based on the number of hours worked daily.

Female employees benefit from increased maternity leave to 26 weeks and improved security measures for night shifts. The new laws also mandate that at least 50% of an employee’s CTC is basic pay, impacting the calculation of gratuity and provident fund contributions. States like Uttarakhand, Chhattisgarh, Odisha, and others have already framed regulations under these new laws, indicating widespread adoption and implementation.

Key Points of New Employment and Labour Laws in India

The employees will have permission to take three weeks off
They must be on the job for a period that is not longer than 48hrs. Those who work eight hours daily will only have one week of vacation
Individuals who work 12 hours per day within an organisation will grant three weeks of vacation. Also, those who are working 9 hours per day will get two weeks off
The new labour laws in India will result in a total modification to the complete and final rules
Professionals who leave the country must be dealt with. The final settlement is done within 2 days from the date of departure from the business
Female employees will be able to benefit from the increase in their maternity leave to 26 weeks. Employers must obtain approval from female employees to work the night shift
Security and facilities must be in good order to be guaranteed to the female employees of the organisation
The structure of pay will be different according to the changes made
The element of the basic salary will get an increment, and the provision fund calculations based on the basic salary will get a raise as well
This means that the provisional employee fund will increase while the salary paid in cash will likely decrease
After adopting the code, workers will grant vacation each 180-day instead of 244 days as per the previous rules. In India, the full and final payment is due within 45 days of the end of an organisation.

What Are the Regulations, Employment and Labour Laws in India?

1. Gratuity cost of companies to increase

The new labour laws in India limits the maximum amount of basic pay to 50% of CTC, which effectively increases the gratuity bonus that the employees receive.
Also, the new wage code will calculate the number of gratuities based on the salary base, which will comprise basic pay and allowances, like a special allowance for wages. Also, it will likely increase the cost of gratuity for businesses.
While increasing Social Security (pension) elements of wages act, the new rules will likely reduce employees’ salaries.

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2. Basic pay to be 50% of CTC

The new wage code makes it mandatory for employers to ensure that at least 50 per cent of the employees’ CTC is basic pay. In comparison, the remaining 50 per cent includes other allowances for employees, such as overtime, house rent, etc.
If the business pays additional allowances or exemptions which exceed 50% of the CTC, the amount is treated as an additional amount to the salary.

3. 15 Minutes Overtime Payment

Companies must pay overtime to the employees. Any time over 15 minutes of working is the subject of employee overtime payments after the shift of 8 hours is completed.

Use our GST calculator Online to determine the exact amount of GST to be paid before registering for GST.

4. Provident Contributions to The Fund

Another major change coming under the new labour laws in India is the ratio between the take-home pay and the employer and employee’s contribution to the Provident Fund.
An employee’s base salary will be 50% of their gross salary. In addition, the PF contributions of the employer and employee will rise, while the take-home pay will be lower, especially for employees working in the private sector.

5. 48 Hours Set Work Time for One Week

The government clarified that 48 hours are the maximum time limit for the work week, and employers have the flexibility to select this time of work and offer it in four days, five days or a 6-day week-long schedule.

6. Leaves Number

The amount of time off during the year will be the same, but employees now get an hour of leave for every 20 days of working instead of 45. This is an excellent thing.
In addition, new employees will now be eligible to take leave after the first 180 days of employment contract . It won’t be 240 working days like the current system.

7. Structure of Salary for Employees

The new employment and labour laws in India states, that an employee’s base wage must be at a minimum of 50% of their gross amount. This means that employees will make greater contributions toward their EPF accounts, and gratuity deductions will increase as well. It will reduce the take-home pay for the majority of employees.

Use our PF Interest Calculator to simply your pf calculations.

8. Hours of Operation

The working hours in India of employees across all sectors are set to undergo a radical change. Currently, working hours in India are based on Factories Act, 1948, at the national level for employees in factories and other workplaces.
It is also governed by each state’s Shops and Establishment Acts for office employees and other workers. According to the new labour laws in India, the working hours in India for a day are 12 hours, while the weekly hours of work are 48 hours.
That means that companies or factories can work a full week. The overtime has increased from 50 to 125 hours per quarter across different sectors.

9. Terms and Conditions of Employment

The terms and conditions of employment outline the rights and responsibilities of both the employer and employee. They are typically set out in a written contract of employment, but they may also be included in company handbooks, policy manuals, or job postings.

Key elements of terms and conditions of employment include:

Job title and description: This outlines the employee’s specific duties and responsibilities.
Compensation: This includes the employee’s salary, wages, and any other forms of compensation, such as bonuses or commissions.
Working hours in India: This specifies the employee’s regular work hours, including overtime and on-call pay.
Benefits: This includes the employee’s health insurance, retirement plans, vacation time, and other benefits.
Terminations: This outlines the procedures for termination of employment, including notice periods and severance pay.

10. Termination of Employment

There are a number of reasons why an employment contract may be terminated. These include:

Voluntary resignation: The employee chooses to leave their job.
Dismissal for cause: The employer terminates the employee’s employment due to a breach of contract or other misconduct.
Redundancy: The employer terminates the employee’s employment due to a business reorganization or downturn.

11. Maternity and Family Leave Rights

Employees may be entitled to maternity and family leave rights under employment law or company policy. These rights may include:

Maternity leave: Leave to take care of a newborn child.
Paternity leave: Leave to take care of a newborn child or to bond with a new child.
Adoption leave: Leave to take care of an adopted child.
Parental leave: Leave to take care of a sick or injured child.
Carer’s leave: Leave to take care of a sick or injured adult relative.

12. Data Protection and Employee Privacy

Employers have a legal obligation to protect the personal data of their employees. This includes data such as names, addresses, contact information, and employment records. Employers must take steps to ensure that employee data is secure and is not used for unauthorized purposes.

Employees also have rights regarding their personal data. These rights include:

The right to access their personal data: Employees have the right to request a copy of their personal data from their employer.
The right to rectification: Employees have the right to request that their employer correct any inaccurate personal data.
The right to erasure: Employees have the right to request that their employer erase their personal data.
The right to restrict processing: Employees have the right to request that their employer restrict the processing of their personal data.
The right to data portability: Employees have the right to request that their employer transfer their personal data to another controller.
The right to object: Employees have the right to object to the processing of their personal data.

Conclusion

It’s clear that the Pandemic had a great impact on the rules and regulations between employers and employees. In the end, we can say that the new employment and Labour laws in India constitute welfare laws that seek to ensure workers’ welfare at the company’s cost. It is still to be determined how state governments will go in the same way and make adjustments to add extra balance between the employer and employees.

FAQs

What are normal working hours in India?

Normal working hours in India typically range from 9 AM to 6 PM, constituting an 8-hour workday. However, actual hours may vary based on industry practices, job roles, and company policies.

What are the working hours in India for IT?

In the IT sector in India, working hours can extend beyond the standard 9 AM to 6 PM, often involving flexible schedules and additional hours based on project demands and deadlines.

Is 12 hours working legal in India?

A 12-hour workday may be legal in certain situations, subject to compliance with labour laws in India and regulations. However, it's essential to ensure adherence to statutory provisions, including overtime compensation and employee consent.

Does 8 hours of work include lunch in India?

Generally, the standard 8-hour workday in India doesn't include lunch hours. Lunch breaks are typically separate and not considered part of the official working hours in India. Employees are entitled to a designated break for meals as per labour laws in India and company policies.

Is a 9 hour work day legal in India?

A 9-hour workday is legally acceptable in India, subject to adherence to labour laws in India. Employers must comply with regulations governing maximum working hours in India, overtime compensation, and employee welfare to ensure the legality and fairness of extended workdays.

Labour Laws in India – Employment and Regulations