Cecily Zamora
India's labour laws underwent a major update with the Industrial Disputes Act of 1947, and have since been added to and amended by various acts and policies. The laws cover all aspects of employer-employee interaction, from working hours and wages to the height of urinals in workers' washrooms. There are three types of employment contracts in India: permanent, fixed, and others. Employees are broadly classified into two categories: workmen and non-workmen. Workmen are those who perform non-supervisory work and are subject to greater statutory protections. Non-workmen are employees in managerial, administrative, and supervisory roles, whose service conditions are governed by their employment contracts and internal policies. India's labour laws also cover minimum wages, overtime, leaves, gratuity, and social security.
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What You'll Learn
Worker classifications
Workmen
The 'workmen' category encompasses employees performing non-supervisory work, including manual, unskilled, skilled, technical, operational, or clerical tasks for hire or reward. This classification specifically excludes individuals employed in managerial or administrative roles earning more than INR 10,000. The term 'workmen' is used to describe blue-collar employees, and most of the legislations in India focus on regulating the service conditions and providing statutory protections for this group.
Non-Workmen
On the other hand, 'non-workmen' refers to employees predominantly engaged in managerial, administrative, and supervisory duties. The service conditions for non-workmen are typically outlined in their employment contracts and governed by state-specific laws, terms, and conditions. It's worth noting that the legal structure for non-workmen, including white-collar employees, is less comprehensive and has evolved through judicial pronouncements.
The determination of whether an employee is classified as a 'workman' or 'non-workman' is made on a case-by-case basis, considering factors such as the nature of their work, place of work, and the number of employees at the establishment.
In addition to these broad classifications, Indian labour laws also recognise different types of employment contracts, including permanent (direct) contracts, fixed contracts, and confidentiality, non-disclosure, and non-compete agreements. Permanent contracts typically offer a comprehensive benefits package, detailed job descriptions, and stringent termination clauses. Fixed contracts, on the other hand, specify a predetermined duration of employment and are commonly used for project-based work or temporary vacancies.
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Minimum wages and working hours
India's labour laws underwent a major update in the Industrial Disputes Act of 1947, with an additional 45 national laws expanding or intersecting with the 1947 Act, and 200 state laws controlling worker-company relationships. The Minimum Wages Act of 1948 requires companies to pay the minimum wage set by the government, with wages differing across occupations, skills, sectors, and regions. Central and state governments have discretion to set wages according to the kind of work and location, ranging from ₹143 to ₹1120 per day for work in the central sphere. State governments have their own minimum wage schedules. The Payment of Wages Act of 1936 mandates the timely payment of wages on the last working day of each month via bank transfer or postal service. The Factories Act of 1948 and the Shops and Establishment Act of 1960 mandate 18 working days of fully paid vacation or earned leave and seven casual leave days. Employees are entitled to gratuity payments after five years of continuous service.
The Payment of Gratuity Act of 1972 applies to establishments with ten or more workers. Gratuity is payable to employees upon resignation or retirement, at the rate of 15 days' salary for each completed year of service, up to a maximum of ₹2,000,000. The Industrial Employment (Standing Orders) Act of 1946 requires employers to outline terms, including working hours, leave, productivity goals, and dismissal procedures. The Equal Remuneration Act of 1976 mandates equal pay for male and female workers performing similar tasks.
The Contract Labour (Regulation and Abolition) Act of 1970 regulates contract labour, aiming to place it on par with direct labour. Women are permitted to work night shifts (10 pm to 6 am). The Workmen Category includes non-supervisory workers performing manual, unskilled, skilled, technical, operational, or clerical work. The Non-Workmen Category includes employees in managerial, administrative, or supervisory roles. The determination of whether an employee is a workman is made on a case-by-case basis.
The Indian government has proposed codifying employment laws under four codes: the Code on Wages, the Code on Social Security, the Industrial Relations Code, and the Occupational Safety, Health, and Working Conditions Code. These codes aim to streamline compliance for businesses and emphasise worker safety, fair wages, and social security. While the codes have been enacted, most provisions are yet to be enforced.
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Employment contracts
There are three types of employment contracts in India:
- Permanent (direct) contracts: These typically offer a full range of benefits, including a detailed job description, salary and benefits package, working hours, leave entitlements, and termination clauses.
- Fixed contracts: These specify a predetermined duration of employment and are commonly used for project-based work or to fill temporary vacancies. Key features include clear start and end dates, project-specific responsibilities, renewal conditions, and limited benefits compared to permanent contracts.
- 'Unlimited term' contracts: These contracts are valid until termination or superannuation, unless specifically identified as a 'fixed-term' contract.
Some common provisions included in employment contracts are:
- Location, description, and title of the job
- Date of commencement, duration, and type (part-time or full-time)
- Details of any probationary period (which cannot exceed six months)
- Leave entitlement
- Salary details and other benefits
- Terms governing termination of employment
- Restrictive covenants, such as exclusivity, non-compete, non-solicitation, lock-in periods, and confidentiality
- Governing law and dispute resolution
It is important to note that certain provisions, such as employment terms and service conditions for 'workmen' employees, may require prior written notice of 21 days or, in some states, 42 days before being changed.
While the Indian government has proposed consolidating various employment laws under four codes, these are yet to be fully implemented and enforced.
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Trade unions
> 'any combination, whether temporary or permanent, formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen, or between employers and employers, or for imposing restrictive conditions on the conduct of any trade or business'.
The Trade Unions Act outlines the rules for the regulation and monitoring of trade unions. The registration of a trade union under the Act does not equate to automatic recognition. Recognition is granted when an employer agrees to negotiate with union representatives on working conditions, wages, etc. on behalf of a particular group of workers. Certain state laws provide for and regulate the recognition of trade unions, and the rules differ according to state requirements. For example, the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971, allows a registered trade union to apply to the Industrial Court for recognition if at least 30% of employees are members of the union.
The Indian government has proposed the codification of various employment laws under four codes, including the Occupational Safety, Health and Working Conditions Code, 2020, which mandates comprehensive health and safety standards and requires employers to ensure adequate working conditions.
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Worker safety
The Occupational Safety, Health, and Working Conditions Code is one of the four proposed codes. It mandates comprehensive health and safety standards and requires employers to ensure adequate working conditions. This includes regulating the height of urinals in workers' washrooms and how often a workspace must be lime-washed. Inspectors can examine workspaces at any time and fine employers for violations.
The scope of worker safety in India's labour laws extends to various sectors, including factories, mines, plantations, shops, and commercial establishments. For example, the Mines Act, 1952, and the Factories Act, 1948, contain provisions to ensure the health and safety of workers in these industries.
In addition to these industry-specific regulations, there are also broader protections in place. The Industrial Disputes Act of 1947 and the Trade Unions Act govern the relationships between workers and companies and the process of forming and registering trade unions. Employees have the right to unionise, and unions can negotiate basic wage rates, benefits, and conditions of employment through collective bargaining.
Furthermore, the Contract Labour (Regulation and Abolition) Act, 1970, regulates the employment of contract labour, aiming to place them on par with directly employed labour. This includes provisions for equal remuneration for male and female workers undertaking similar tasks.
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Frequently asked questions
The Equal Remuneration Act, 1976 (“ERA”), mandates the payment of equal remuneration to male and female workers who undertake similar tasks.
Employees in India are broadly classified into two categories: Workmen and Non-Workmen. Workmen are those who perform non-supervisory work, including manual, unskilled, skilled, technical, operational, or clerical work. Non-Workmen are employees who perform predominantly managerial, administrative, and supervisory duties.
The Minimum Wages Act, 1948, limits working weeks to 40 hours (9 hours a day, including an hour of breaks). Overtime is discouraged, with a premium of 100% of the total wage.
Formally employed workers are entitled to privileged leave, sick leave, casual leave, and other types of leave as established by the company, such as marriage leave, private affairs leave, paternity leave, and bereavement leave. The number of leave days and holidays should follow the prescribed numbers under applicable state laws.
While employees have the fundamental right to unionise, the formation and registration of a trade union are governed by the Trade Unions Act. Certain state laws provide for and regulate the recognition of trade unions, and the rules differ across states.
