Employment laws in India: a complete guide for employers

Employment laws in India regulate wages, working conditions, employee benefits, termination and workplace safety. The country introduced four major Labour Codes in November 2025, changing the framework employers must follow. Businesses must also comply with applicable state-level rules, making the location of employment an important consideration when hiring.

Understanding the main employment laws in India

On 21 November 2025, the Indian government brought four Labour Codes into force, consolidating provisions previously covered by 29 central labour laws.

The four codes are:

• Code on Wages, 2019: Governs minimum wages, payment of wages and related requirements.
• Industrial Relations Code, 2020: Regulates industrial disputes, trade unions, retrenchment and certain employment conditions.
• Code on Social Security, 2020: Covers social security benefits, including provident funds, insurance, gratuity and maternity benefits.
• Occupational Safety, Health and Working Conditions Code, 2020: Establishes standards for workplace safety and working conditions.

The central government notified final rules under the four codes on 8 May 2026.

However, employers must also consider state-level rules. The applicable requirements depend on the establishment, industry and whether the central or state government is the appropriate regulatory authority.

Recruitment and employment contracts

The new framework places greater emphasis on formal employment documentation, including appointment letters containing employment particulars.

Employers should establish clear terms covering salary, working hours, job responsibilities, leave entitlements and termination.

Employee classification also matters. Different obligations may apply to permanent workers, fixed-term employees, contract labour and other categories.

For example, using a contractor to supply workers does not automatically remove the principal employer's statutory responsibilities.

Foreign nationals working in India also need the appropriate immigration permission. Employers should verify the individual's visa conditions and any applicable registration requirements before employment begins.

Working conditions and wage requirements

Minimum wages

The Code on Wages establishes a framework for minimum wages across employment categories.

India does not have one fixed minimum wage that applies uniformly to every job and location.

Applicable rates vary according to government notifications, location, occupational classification and other relevant factors.

Employers must ensure their salary structures satisfy the applicable minimum wage and payment requirements.

The new definition of wages also affects payroll calculations.

Where specified excluded remuneration components exceed 50% of total remuneration, the excess is generally added back into wages for relevant statutory calculations.

This can affect the basis on which certain employment benefits are calculated.

Working hours and overtime

Under the Occupational Safety, Health and Working Conditions Code, the standard working arrangement is generally eight hours per day and 48 hours per week.

The framework permits certain alternative arrangements subject to the applicable rules, worker consent and other conditions.

Qualifying overtime must generally be paid at twice the ordinary wage rate.

Employers operating across several Indian states should review the applicable working-hour rules before establishing shift patterns.

A payroll system configured for one state may need adjustments when the organisation expands into another.

Employee benefits and compulsory contributions

Provident fund and social security

The Code on Social Security brings several employee benefit arrangements within a consolidated framework.

The Employees' Provident Fund provides retirement-related benefits to eligible employees.

Employers and employees commonly contribute 12% each of applicable wages under the standard provident fund arrangements, subject to coverage, wage ceilings and relevant scheme rules.

The Employees' State Insurance system provides benefits related to sickness, maternity, employment injury and other qualifying circumstances.

Eligibility depends on establishment coverage and employee wage limits.

Employers should assess which statutory schemes apply before calculating employment costs.

Maternity benefits

Eligible female employees can receive up to 26 weeks of paid maternity leave for their first two surviving children.

The entitlement is generally 12 weeks where the employee already has two or more surviving children. Separate provisions apply in certain adoption and commissioning-mother circumstances.

Eligible establishments must also meet applicable requirements concerning nursing breaks and childcare facilities.

Gratuity

Gratuity provides a statutory benefit to qualifying employees when employment ends under specified circumstances.

The general framework has traditionally required five years of continuous service, with exceptions and distinct rules for certain employment categories.

The new Labour Codes also contain provisions affecting gratuity for fixed-term employees.

Employers should verify eligibility and calculate gratuity using the applicable wage definition rather than relying on historical payroll assumptions.

Termination of employment in India

Termination requirements depend on the employee's legal classification, length of service and applicable legislation.

The Industrial Relations Code establishes requirements concerning retrenchment, notice, compensation and government permissions.

For covered industrial establishments employing 300 or more workers, prior government permission is generally required for certain retrenchment, lay-off and closure actions.

Smaller establishments are not automatically exempt from notice, compensation or other statutory obligations.

For example, retrenching an eligible worker who has completed at least one year of continuous service may require statutory notice and retrenchment compensation.

Employers must also consider their employment contracts, disciplinary procedures and applicable state requirements.

Before terminating employment, you should establish the legal grounds, review the relevant worker classification and document the procedure followed.

Workplace safety and anti-harassment protections

The Occupational Safety, Health and Working Conditions Code establishes employer duties relating to workplace safety, welfare and employee protection.

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 also establishes specific obligations.

Workplaces with ten or more employees must generally constitute an Internal Committee to address sexual harassment complaints.

Employers should establish complaint procedures, provide appropriate training and maintain required records.

Sexual harassment prevention involves ongoing workplace responsibilities. Pre-employment screening cannot replace internal reporting and investigation procedures.

Employee data protection and background verification

Background verification is commonly used in India to check educational qualifications, employment history, identity and professional credentials.

However, employers must consider data protection requirements when obtaining candidate information.

The Digital Personal Data Protection Act 2023 and its 2025 rules are being introduced in stages. Several major processing obligations are scheduled to take effect in May 2027.

Until the relevant provisions commence, employers must continue complying with applicable existing laws, including requirements concerning sensitive personal data.

Candidates should receive clear information about screening, and employers should obtain any authorisation required for the checks being conducted.

Our guide to how background verification is done explains the practical steps involved.

For example, when recruiting a software engineer, verifying their degree and previous employment can establish whether the qualifications and experience claimed in their application are accurate.

Additional criminal-record or financial checks should depend on the responsibilities of the position and whether the information can lawfully be obtained.

Veremark provides employment background checks in India, covering several forms of candidate verification.

Maintaining employment compliance across Indian states

Following employment laws in India requires employers to account for both national legislation and local implementation.

Review your payroll calculations, employment contracts and statutory benefit arrangements following the Labour Code changes.

For organisations recruiting across several Asian markets, Veremark's APAC background screening guide explains how verification requirements differ between countries.

FAQs

What are the four Labour Codes in India?

They are the Code on Wages, Industrial Relations Code, Code on Social Security and Occupational Safety, Health and Working Conditions Code.

What is the standard working week in India?

The general standard under the occupational safety code is 48 hours per week, although applicable rules and permitted working arrangements can affect how these hours are scheduled.

Are employee background checks legally required in India?

There is no universal requirement to conduct the same background checks for every employee. Screening obligations vary according to industry, role and applicable regulations. Employers must handle candidate information lawfully.