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2018-05-03 22:20:46HR Policies and LawsEnglishCheck out some of India's most important labour laws. Review state and union laws related to overtime pay, rest time, employee privacy, and... Key Labour Laws for Indian Small Businesses

6 Key Labour Laws for Indian Small Businesses

4 min read

Whether you’re getting ready to hire your first employee or expand your business with new workers, you may want to spend some time reviewing labour laws before you take the plunge. Unions and states have dozens of laws designed to protect employees, and familiarity with the ones that affect your business helps protect your bottom line. These are some of the most common labour laws you should know.

1. Anti-Discrimination Laws

Under the Equal Remuneration Act of 1976, you can’t discriminate based on gender whether you’re recruiting or have already hired a worker. For instance, if you’re thinking about promoting one of your employees, you can’t legally avoid choosing a female employee just because of gender. Additionally, the constitution bans discrimination based on race, religion, caste, and place of birth. If your employees believe you’re being discriminatory, they have the right to file a complaint with the labour courts.

2. Maternity Leave

If you have female employees who’ve worked at least 80 continuous days during an accounting year, they’re entitled to paid maternity leave for 12 weeks. Under the Maternity Benefits Act of 1961, mothers are entitled to 12 weeks paid maternity leave, and they can start their leaves six weeks before their due dates. During leaves, you have to pay these women their usual daily wages, and if you don’t offer pre- or post-natal care, you may also have to issue them medical bonuses. Most importantly, you can’t dismiss women on maternity leave or change their employment terms.

Women may also take a paid month off if they suffer an illness related to pregnancy or in instances of premature childbirth. In the case of miscarriage, she is also entitled to six weeks off and up to two weeks off for tubectomy operations.

3. Notice of Termination

You can dismiss employees for misconduct at any time, but you should hold a disciplinary proceeding first so your employees can defend their position. In cases where misconduct isn’t involved, you must give the employee notice. Most states require employees be notified of their dismissals at least a month in advance, but if your employee’s contract demands a longer time frame, you have to keep that in mind.

After the dismissal, you can require employees to go through a “garden leave,” which means they get paid but don’t have to come to work. As of 2018, when you dismiss an employee, you have to pay for the notice period. Additionally, if the employee earns less than INR 21,000 per year, you have to pay a statutory bonus. Also, workers who’ve been with you for five continuous years get a gratuity. This means they get 15 days in wages for every year they’ve been with your company, and partial years count as full years if they run over six months. For this gratuity, you only have to pay up to INR 1 crores, but of course, you can offer more if you like.

4. Employee Privacy

When you’re recruiting employees, you have the right to do background checks on them. But once you hire workers, you have to let them know about any information you hold on them and provide copies on request. Beyond that, you must also store all employee data safely and have a documented security program in place.

Although your employees are entitled to privacy with their personal communications, you have the right to monitor all official emails, phone calls, and computer usage.

Ideally, you should outline your policies in your human resources documents so your employees know what to expect. Similarly, the law also allows you to craft a policy banning your employees from posting derogatory statements about your company on their social media profiles.

5. Worker Rest

If you want your employees to give you their best efforts, you need to give them time to rest, and in fact, the law requires you to give 12 paid days off to every employee who works at least 240 days per year. In particular, you must award your workers one day of leave for every 20 days of work, and if you have workers under the age of 15, they earn a day off for every 15 work days.

If your employees don’t take all their leave days, you must roll unused days into the next year, but you only have to do this for a maximum of 30 days. On top of those days off, employees get paid days off for Republic Day, Independence Day, and Mahatma Gandhi’s birthday.

6. Overtime Pay

When your employees work over a certain amount of hours, you must pay them overtime. The threshold varies based on the industry, but in all cases, the overtime rate is two times the worker’s usual hourly rate. The law also requires you to track the overtime hours, and you can simplify that process by using a time tracking system or app that syncs with your QuickBooks accounting software. Doing so saves you time and helps you stay on top of your records.

To learn more about labour laws, contact an employment lawyer or employment litigation firm. These lawyers can help you understand your obligations and ensure you’re ready to take on extra help. You may also want to choose apps and tools to help you with the compliance and record-keeping aspect of India’s labour laws.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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