The Republic of India is a federal democracy that consists of 29 states and 7 union territories. It is the largest democracy and the 6th largest economy in the world. India has thriving manufacturing, technology, and service sectors. Since 2014, the rate of foreign direct investment (FDI) inflows to India has grown steadily as some key policy changes were incorporated by the government to facilitate this growth. Some strategic steps have been taken to revitalize India’s business environment including reforms to remove bottlenecks in key business areas, reducing minimum capital requirement, and simplifying the process of obtaining necessary licenses.
Principal Language: Hindi
Government: Parliamentary Democracy with Federal-state System
Capital City: New Delhi
Major Cities: New Delhi, Mumbai, Kolkata, Chennai
Indian employment law does not make it necessary for employers to communicate the contract in writing to the employees, except some states. Most employers still specify the terms and conditions of the employment to employees issuing a letter when they join.
An employment letter or contract typically includes the following information:
- Name and address of the employer and the employee
- Salary and benefits
- Job title or nature of the work (or a job description)
- Place of work
- Date of commencement of employment
- Probationary period, if any, and its terms
- Notice required for termination of employment
- Leave entitlement
- Contract type -- permanent or fixed-term
- Conditions for termination.
There is usually a 6-day working week in India from Monday to Friday, with 9:30 a.m. to 5:30 p.m. being the usual timings, and a half-day on Saturday. In some big cities such as Mumbai, businesses commence their work earlier to avoid traffic while commuting. Usually, lunch lasts for an hour, between 1:00 and 2:00 p.m.
Work on Sundays or public holidays, unless otherwise stated in a prior agreement, is required to be compensated for equivalent time off within 2 months. Workers cannot be made to work during 1 workday for more than 10.5 hours and more than 5 consecutive hours without a 30-minute break. Workers also cannot be forced to work for more than 10 days in succession.
According to the Factories Act 1948, daily work schedule cannot exceed 9 hours, and weekly work schedule can’t go beyond 48 hours. Some state governments permit only 8 hours during a work day. State-specific Shops and Establishments Act regulate working hours while Factories Act regulates manufacturing facilities.
Employees who come under the Minimum Wages Act get double pay for hours clocked more than the hours making up a work day. Similarly, the Factories Act requires that any work more than 9 hours a day or 48 hours a week is considered overtime and the worker is entitled to overtime pay. The maximum overtime that an employee can work is 100 hours in a quarter, up from 50 hours after passing of The Factories (Amendment) Bill, 2016.
Minimum statutory paid vacation leave for employees in India is 15 days. Except for senior professionals who may get more, most others get 15 days off annually. Annual leaves in any organization (other than a factory) are governed by the provisions of the relevant state-specific Shops and Establishments Act. Under the Factories Act, adult workers who have worked for a period of 240 days or more in a factory during the calendar year are entitled to 1 day of leave for every 20 days worked during the previous calendar year.
The total number of days that can be carried forward to an ensuing year cannot exceed 30. Manufacturing employers are covered by the Factories Act, 1948, and are required to provide employees with 19 days of annual leave and allow them to accrue up to 30 days' leave. If the terms of employment provide for more leave than required by law, the terms of employment would be valid.
In some sectors, Indian workers are entitled to 1 vacation day for every 20 days of work after working for an employer for at least 240 days in a 12-month period. Children aged 15 years or younger are entitled to 1 day of leave for every 15 days of work. Sales promotion workers, journalists, and news workers are entitled to paid leave of not less than 1 month for every 11 months’ service.
In 2017, new maternity benefit rules came into force requiring businesses with 10 or more employees to provide 26 weeks' paid leave during an employee's first 2 pregnancies and 12 weeks' paid leave for adoptive and surrogacy-commissioning mothers.
Female employees who have worked for a given employer for at least 80 days in the 12 months immediately preceding the date of expected delivery are eligible for the extended benefits, provided they give the employer written notice 7 weeks before the expected date of delivery. Before the new rules came into effect, the Maternity Benefits Act, 1961 provided up to 12 weeks' maternity leave, 6 weeks' leave in cases of miscarriage and 1 month's in cases of illness during pregnancy.
The 26-week leave entitlement applies only to the 1st and 2nd pregnancy. For the third child and after, only the original 12 weeks is available. In the event of complications related to pregnancy, such as premature birth and miscarriage, an employee gets approval for an additional month of leave.
There is no statutory provision of parental leave for men in the country, but some employers still consider offering a few days of paid childcare leaves for fathers.
Employees in India get 8 to 12 paid holidays in a year which vary based on states, religion, and local customs. The government does not make it mandatory for the employers to declare a holiday for most of these public holidays. India observes the following 3 national holidays:
- Jan. 26: Republic Day
- Aug. 15: Independence Day
- Oct. 2: Birthday of Mahatma Gandhi or Gandhi Jayanthi
In addition, an employer is required to provide 5 to 9 festival holidays, the number depending on the state in which the employees work. They are free to declare the other public holidays according to the composition of their employee strength or other considerations.
A list of holidays is published by the government every year, and employers are required to choose the holidays they will observe. Employees can select 2 additional holidays from a list of more than 30 “Restricted” holidays, including Christmas Eve and New Years' Day.
There is no nationwide retirement age. States are free to establish their own criteria. India's social security system covers the following types of programs:
- Disability, and
Some of the social insurances require employer contributions from all employers, some from companies with 10 or more employees, and some from companies with 20 or more employees. Providing medical insurance with or without deductions from salary is the most common non-statutory benefit that Indian companies provide.
Health or medical insurance range from the usual group coverage to reimbursement of pharmacy and outpatient bills, on-site doctor on call or discount arrangements with healthcare providers.
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