Hire in India

It is not mandatory to have company employment rules registered in India. However, policies related to leave, notice period and working hours are to be complied with the respective Acts. Generally, companies with a headcount of a specific minimum size (e.g. 20 or more) will usually prepare an employee handbook for the purpose of administration and ensuring all laws are complied with.

Service industry (IT, ITES, Professional services, etc.) work rules are governed by the Shops and Establishment act of the state, in which the establishment is registered.

Probation periods are not mandatory in India. The common practice for multinational companies (MNCs) is three to six months depending on the seniority of the employee.

During a probation period, an employer can release its employee without giving prior notice and with no legal penalty.

Gratuity and leave encashment are payable at the time of termination, irrespective of reason (e.g. termination on retirement, resignation, etc.). Gratuity is applicable only for employees who serve for more than five continuous years.

Retrenchment compensation is mandatory under the Industrial Disputes Act (applicable for industrial workers). In other cases, it is paid on mutually agreed terms.

Payment of Gratuity Act becomes applicable to establishments having 10 employees or more

Severance pay, apart from the above, is not mandatory. Companies may pay additional amounts on compassionate grounds. Moreover, contractual terms need to be considered.

Employment contracts generally detail the terms of the leave. However, the Maharashtra Shop and Establishment Act allows 8 days of casual leave annually. Employees who work 240 days or more during a calendar year are given one day of leave the following year for every 20 days they worked in the previous calendar year. Each employee can carry forward up to 45 days of paid leaves.

Annual leave eligibility is dependent on location/state. It varies for each state.

In MNCs, generally, if employees work beyond normal working hours, they are paid a reimbursement of food and conveyance. Or, companies have a policy to pay shift allowances or on-call allowances if employees work on odd hours or on holidays. Those below the managerial level are typically eligible for overtime.

Employers must provide a 30-day notice (or payment in lieu), as per the Industrial Disputes Act. Senior employees may be required to give a 60-day or 90-day notice.

The notice period is driven by the terms and conditions in the employment agreement.

Generally, if the termination is for a reason other than a justifiable cause (such as non-performance or misconduct) then there should be a mutual agreement to terminate. The terms of the agreement should be documented. In such cases, there may also be a payment made on account of the termination, such as redundancy pay.

It is not uncommon to terminate employees in other sectors.

Statutory bonus is payable as per the Payment of Bonus Act, 1965 and applies to establishments employing 20 or more persons. Every employee receiving salary or wages up to INR 21,000 per month and has worked for at least 30 working days in the year is eligible to receive a statutory bonus. The minimum bonus payable is at 8.33% while the maximum bonus payable is at 20% of eligible amount. This is payable within eight months of the end of the accounting year (e.g. before November of every year.

A performance bonus can be paid at the discretion of the company. There is no mandatory 13th or 14th month bonus in India.

In India, salary is broken down into various pay elements, as each pay element has specific tax implications. Some pay elements offer tax saving opportunities to employees with no additional costs or risks to the company.

Generally, the Basic Salary is fixed – at 50% of the Gross Salary. The retirement benefits, like provident fund, gratuity and leave encashment, are calculated based on basic salary. The company may give the option to opt for various other tax-saving elements.

Provident fund contribution is calculated as a percentage of the employee’s basic wage, which includes basic pay as well as dearness allowance (DA).

Employee Provident Fund (EPF) is implemented by the Employees Provident Fund Organization (EPFO) of India. An establishment with 20 or more workers in any industry should register with the EPFO. The actual amount of EPF contribution is calculated based on the employee’s basic salary and dearness allowance. For most employees, the EPF contribution is 12% of the basic salary.

Salaries in India are generally paid at the end of the month via bank transfer.

Online payslips via Employee Self Service (ESS) is the most common method to share payslips.

Generally, 10 holidays are observed in a year, including three national holidays and other major festival holidays.

Public holidays differ from region to region and range from between four to ten days’ holiday each year.

Workers can be required to work on public holidays. There is no central level legislation restricting this practice. Different state-level acts (e.g. National and Festival Holidays Act) provide that in circumstances where workers have to work on official holidays, they are entitled to receive wages at a premium rate of 200% of the normal hourly wage rate. Employees working on weekly rest days are entitled to premium pay at the rate of 200% of the normal wage rate. A worker may be provided with twice the wages for working on a public holiday or with a substitute holiday with pay. A worker who is required to work on a rest day must be paid wages at the overtime rates, meaning twice the rate of normal wages.a

The commencement of the leave period is the start of the calendar year. Employment contracts generally detail the terms of leave.

As per the Shops and Establishment Act:

Every worker who has worked for a period of two hundred and forty days or more in an establishment during a calendar year shall be allowed during the subsequent calendar year, leave with wages for a number of days calculated at the rate of one day for every twenty days of work performed by him during the previous calendar year.

Subject to the provision of clause above every worker, who has been employed for not less than three months in any year, shall for every sixty days on which he has worked during the year be allowed leave, consecutive or otherwise, for a period of not more than five days. (5) Every worker shall be permitted to accumulate earned leave upto a maximum of forty-five days.

Annual leave eligibility varies depending on location/state.

If the employment contract expires before a worker could take his/her annual leave, compensation for leave is made in proportion to the number of months and numbers of working hours in a week.

Sick leave is the leave an employee can apply when he or she is out of work due to illness. This can be taken for a minimum of a half day to a maximum of seven days. This is paid.

There is no sick leave carry-forwards or encashment. Upon the completion of the calendar year, any available sick leave will automatically lapse.

For all absences exceeding two or three days, depending on company policy, a medical certificate usually needs to be enclosed.

Sick leave can be appended with earned leave. New joiners and resigned employees are entitled to prorated sick leave.

Different provisions are provided under different acts:

• 15 days of sick leave is provided for by Apprentices Act, 1961
• 30 days of sick leave for 18 months of service is outlined under the Working Journalist and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955
• At least 1/18th of the period working under Sales Promotion Employees (Conditions of Service) Act, 1976. (http://www.esic.nic.in/benefits.php)

Casual leave is granted for certain unforeseen situations or when an employee is required to go take a one-day or two-day leave to attend to personal matters (not for vacation). In case of casual leave, normally, a company’s strict policy is up to a maximum of three days in a month. In such cases, the person must obtain permission in advance.

Casual leave can be taken for a minimum of a half day to a maximum of three days. In cases of more than three days leave, it should be taken as annual leave. If three leaves are taken together, employees must obtain advance permission.

As per the rules under The Shops and Establishment Act, an employee is entitled to eight days of casual leave.

There are no casual leave carry-forwards. At the close of the year, any unused casual leaves will lapse automatically. This is not encashable.

Casual leave cannot be appended with annual leave or sick leave.

The Maternity Leave Policy in India is applicable to all women working in private as well as public sector organizations. It means that female employees in private companies, government organizations, factories, plantations, etc., with more than 10 employees, are entitled to maternity leave.

Note that the Maternity Benefit Act does not apply to self-employed women and those working with a firm that has less than 10 employees.

In order to be eligible for maternity leave in a company, the woman must have worked for a minimum of 160 days in the period of 12 months before her expected date of child delivery.

Maternity leave is a type of long-term paid leave granted to a pregnant employee in an organization. It is a mandatory leave that a company or employer must provide to their eligible female employee before or after their delivery.

All pregnant female employees are entitled to a maternity leave of 26 weeks for their first and second child. One can take up to 8 weeks’ leave before their expected delivery date and up to 18 weeks after giving birth to their child.

For the third or subsequent pregnancy, expecting mothers are eligible to take maternity leave of 12 weeks.

Adopting mothers are eligible for a 12-week maternity leave, which starts from the day their newborn is handed over to them.

In case of medical termination or accidental miscarriage, a woman employee can take 12 weeks of maternity leave. However, in this case, medical proof of miscarriage is required.

Besides, additional paid leaves can also be granted based on the health and situation of the mother and her baby.

If a female employee’s job requires her to work from home, the employer may permit her to do so after she has used the maternity benefit for the time period and on the terms that the employer and the woman may mutually agree upon.

An employer must also inform a female worker of her rights under the Act at the time of her appointment. The information must be concluded in writing and in electronic form (email).

While paternity leave is offered to government employees, there is no law making it mandatory in the private sector. Therefore, paternity leave is offered at the company’s discretion.

Some types of leave vary depending on the industry or state of employment. Some are paid, unpaid or half-paid leaves (e.g. study leave, bereavement leave and leave for voting). These are left at the organization’s discretion.