INDIALabor Laws

Overview of India and Indian law

India is a federal state consisting of twenty-eight states and eight union territories where legislative powers are distributed between the union (central government) and the states pursuant to Article 246 and the Seventh Schedule of the Constitution. Laws relating to labour, employment, and social security fall within the Concurrent List, and both Parliament and the state legislatures are vested with legislative competence in these matters. Where a state law is inconsistent with a central law, the central law shall, in principle, prevail pursuant to Article 254 of the Constitution. On the other hand, with respect to matters enumerated in the Concurrent List, where a state law has been enacted with presidential assent, such state law may prevail within that specific state; however, if Parliament subsequently enacts new legislation on the same matter, the central law shall again prevail. In the labour sector, significant variations among states exist because of state amendments to central enactments and state-specific rules. While the scope for state amendments is limited in areas requiring national uniformity, such as the definition of a worker, and in fields concerning the protection of socially vulnerable persons, such as the prohibition of night work by minors, numerous other areas are subject to state-specific regulatory frameworks.

As a result of this situation, it has been estimated that the total number of labour-related regulations, combining both central and state laws, exceeds 500. In order to rationalise and simplify this complex labour law framework, the government of India, through legislative reforms during 2019–2020, consolidated and integrated 29 central labour-related laws into the following four Labour Codes.

• Code on Wages 2019
• Occupational Safety, Health and Working Conditions Code 2020 (OSHW Code)
• Industrial Relations Code, 2020 (IR Code)
• Code on Social Security 2020 (SS Code)

However, because of various circumstances, the Codes had remained unenforced since their enactment; nevertheless, they were finally brought into force on 21 November 2025, pursuant to a notification by the Ministry of Labour and Employment.

However, as of March 2026, the rules required for the implementation of the Labour Codes have not yet been promulgated by the central government and many state governments. Even after the promulgation of such rules, it is anticipated that a substantial period will be required before practical operations are established. Therefore, for the time being, it is necessary to closely monitor future developments. Notwithstanding these circumstances, this article is, in principle, based on the provisions of the Labour Codes.

Concept of Protection of Workers

The new Labour Codes distinguish between three concepts regarding persons considered as employees or labourers: worker, nonworker, and employee, which is the collective term for the two. This article also follows this classification.
Prior to the enactment of the Labour Codes, Workers and non-workers and nonworkers were respectively referred to as workmen and non-workmen. The terminology was changed to gender-neutral expressions, and there has been no change to this basic structural framework. In terms of the concept, this distinction is similar to the distinction between managerial/supervisory employees and non-managerial employees under the Labour Standards Act of Japan. However, the legal consequences arising from the classification between worker and nonworker under Indian law extend far more broadly.

Whether an individual falls under the category of a worker or a nonworker is determined on the basis of the substance of the actual circumstances and cannot be decided solely on the basis of title or designation. Accordingly, it is crucial to thoroughly examine the status of an individual as a worker or nonworker and clearly state it in the employment contract or appointment letter to mitigate the risk of future disputes to the extent possible.

Identification of Applicable Legislation and Key Considerations

The labour law regulations in India are not uniform in the manner of the Japanese Labour Standards Act; rather, a notable characteristic is that the applicable legislation varies depending on such factors as the nature of the establishment (e.g., factory or office), the scale of the establishment and number of employees/workers, and the state in which it is located.

Even under the new Labour Codes, the applicable laws and regulations differ depending on the nature of the establishment. For example, in the case of offices, shops, or commercial establishments, the Shops and Establishment Act (1953)¹ is considered to apply. Since the Shops and Establishments Act is also a state law, attention must be paid to the fact that labour conditions, such as holidays, maximum working hours, and the number of days of annual leave, differ from state to state. On the other hand, in the case of factories, the OSHW Code (formerly the Factories Act, 1948, a Central law) principally applies, and prescribes standards relating to safety and health, as well as working conditions, including working hours.

Furthermore, an establishment employing 300 or more workers (including where such number was employed at any time during the preceding twelve months) is required to prepare statutory standing orders (work rules) that satisfy the prescribed legal requirements based on the IR Code. With the enactment of the new Labour Codes, although unification at the central level has progressed, much of the content of the former laws has been incorporated into the new laws and, furthermore, unique provisions by the states may be added; therefore, caution is necessary regarding the point that the labour conditions to be complied with may differ depending on the nature and scale of each of the company’s bases in India.

Overview of labour-related statues

In India, between 2019 and 2020, a reform of the complex labour law framework was undertaken, and a total of 29 central labour laws were rationalised and consolidated into the following four Labour Codes. The four new codes, namely, the OSHW Code, Code on Wages, IR Code, and SS Code, came into force on 21 November 2025.

Laws that play a central role in the labour-related matters in India are now explained in detail.

1. Code on Wages, 2019

   Promulgated in August 2019, this code consolidates four former wage-related acts, namely the Payment of Wages Act, Minimum Wages Act, Payment of Bonus Act, and Equal Remuneration Act. It comprehensively provides for a uniform definition of wages, a nationally applicable minimum wage framework, the obligation to pay bonuses, and the prohibition of wage discrimination on the basis of gender.

2. The Occupational Safety, Health and Working Conditions Code 2020 (OSHW Code)

   The OSHW Code consolidates 13 former laws, including the Factories Act, and sets out a legal framework to ensure humane working conditions, including workplace safety standards, working hours, and annual leave.
   The Code stipulates, among other things, the obligation to issue appointment letters to every employee, rules on working hours (in principle, up to eight hours per day), rest, holidays and overtime, the obligation to take safety precautions and risk prevention measures, and the protection of women. The provisions of the OSHW Code apply to all establishments employing 10 or more workers.

3. Industrial Relations Code, 2020 (IR Code)

   The IR Code consolidates three laws: the Trade Unions Act, Industrial Employment (Standing Orders) Act, and Industrial Disputes Act. It defines workers, sets out the obligation of establishments with 300 or more workers to have standing orders, conditions of dismissal and working conditions, strikes and other labour disputes and dispute resolution, and registration of trade unions.

4. Code on Social Security 2020 (SS Code)

   The SS Code consolidates nine laws² on welfare and social security. The Code stipulates provisions regarding the Employees’ State Insurance (ESI), Employees’ Provident Funds (EPF), maternity benefits, and gratuities. Furthermore, a social security framework for Unorganised Workers, including gig workers and platform workers, has been newly established.

System of Worker and Nonworker

1. Definition

   The term "worker" refers to a person employed to perform simple tasks for relatively low pay and is protected generously under laws. Meanwhile, the term "nonworker" refers to a person employed to perform administrative or supervisory work for relatively high pay, and protection under laws is limited on the grounds that a nonworker is considered to be a person whose position is substantially equivalent to a company.

   	Worker	Non-Worker
   Definition	Any person employed to do any manual, unskilled, skilled, technical, operational, clerical, or supervisory work (section 2 of the Code on Wages, and section 2 of the OSHW Code). However, this does not include any person (i) who is involved in the Air Force, Army, or Navy; (ii) who is employed as a police officer or employed by a prison; (iii) who is employed in a managerial or administrative capacity; or (iv) whose monthly wages exceed a certain amount3, who is employed in a supervisory capacity, or who functions mainly as a manager. Any person who corresponds to (i) to (iv) above does not correspond to a “worker.”	Any person who does not satisfy the definition of “worker” (any person who satisfies the requirements of exemption indicated in the left column).
   Legal status	As a person who is in a weaker position than a company, a worker is protected under all labor-related laws.	As a person whose position is substantially equivalent to a company, protection under labor-related laws is limited.
   Restrictions on dismissal under laws	Applicable	Not applicable

   As described above, the classification of workers and nonworkers is determined by whether an individual satisfies the definition of a worker. In the case of private-sector companies, this determination is based on whether the individual falls under item (iii) or (iv) of the proviso to the said definition.

   Since the statutory language is not necessarily clear, it is necessary to refer to the criteria established by the judicial precedents listed below, depending on the specific facts of each case.

2. Determination of whether or not a person corresponds to a worker

   Whether or not a person qualifies as a worker is determined in accordance with actual conditions. In judicial precedents, the following opinions were offered:

   1. Regardless of whether the person is employed on a permanent basis, on a temporary basis, or during a probationary period, the person may qualify as a worker.
   2. The mere fact that the person is incidentally performing supervisory functions does not, in itself, immediately negate worker status.
   3. In order to determine qualification as a worker, it is necessary to take note of the nature of assigned duties and not the specific title or position.
   4. Upon determining the qualification as a worker, the nature of assigned duties, and not wages, should be used as the primary judgmental standard.
   5. The mere fact that a person is in charge of a small business division does not by itself immediately negate the qualification as a worker.
   
   

   Moreover, the following factors are taken into consideration upon determining that a person in a managerial capacity, an administrative capacity, or a supervisory capacity corresponds to a nonworker:

   
   
   6. In cases where a person is undertaking various duties and the qualification as a worker becomes an issue, it is necessary to examine the basic and primary work description; the incidental work description does not change the nature of the duties. Consequently, even if a person who primarily engages in supervisory work incidentally or partially performs clerical, manual or technical work, it should be determined that the person was employed in a supervisory capacity.
   7. Because the meaning of "managerial capacity or administrative capacity" is not defined under the former Industrial Disputes Act or the IR Code, it should be interpreted according to the normal meaning. To be considered in a managerial capacity, the person does not necessarily need to be positioned at the top of the hierarchy, or possess absolute authority regarding all matters. Furthermore, the person does not even need to be in a position of independently managing an organization or a business division within an organization.
   8. Upon determining that a person falls within the category of nonworker by reason of being in a managerial capacity, an administrative capacity, or a supervisory capacity, courts gave consideration to the following specific facts: (a) the person is in a position of assigning others to various job positions, (b) the person is in a position to confirm the attendance of others, (c) the person is in a position to demand explanations from others, (d) the person is in a position of assigning work to others, and (e) the person is in a position to allow others to take leaves.

3. Cases where worker and nonworker are not differentiated

   The Factories Act, a former central law, prescribed matters mainly related to work hours, overtime pay, and the leaves in factories. Furthermore, the state-specific Shops and Establishment Act prescribes matters related to the work hours, overtime pay, and leaves of shops and commercial establishments in the respective states operated in India and their workers. The application of these regulations to nonworker is not excluded. In addition, the application of laws concerning the payment of wages, bonuses and gratuities, as well as social security systems such as the workers' compensation system, pension system, and insurance system, is not restricted based on the differentiation of worker and nonworker. As a result of the recent amendments to the labour laws, the above-mentioned regulations, with the exception of the state-specific Shops and Establishment Act, have been incorporated into the new Labour Code.

Issuance of Appointment Letter

In Japan, the formation of an employment contract itself is possible through an oral agreement. By contrast, in India, with the enforcement of the OSHW Code, it has become mandatory to issue an appointment letter to all employees. The appointment letter must clearly specify the matters prescribed under the Occupational Safety, Health and Working Conditions (Central) Rules 2025 (as of January 2026, the draft of such rules has been published). Furthermore, it is mandatory to issue such letters within three months of the enforcement of these rules even to employees who have not yet been issued an appointment letter containing the required particulars.

Work hours

Regarding the working hours of workers, the OSHW Code stipulates that the maximum working hours shall be 8 hours per day (Section 25(1)(a)) and up to six days per week (Section 26(1)). This eight-hour period does not include rest periods. However, overtime work based on consent is allowed, in which case twice the normal rate of wage must be paid separately as overtime pay (Section 27, the OSHW Code). For miners, motor vehicle transport workers, and journalists, there are separate regulations based on the nature of their work. The Code does not apply to establishments with fewer than 10 workers (Section 2(1)(v), the OSHW Code).

1. (1) Statutory work hours

   As a general rule, the work hours of a worker who is 15 years of age or older is limited to no more than 8 hours in any day (section 25 (1) a of the OSHW Code).

   Additional protection is offered for young workers (the Child and Adolescent Labour (Prohibition and Regulation) Act, 1986). Adolescents between the ages of 14 and 18 are not allowed to work overtime nor are they allowed to work between the hours of 7:00 p.m. and 8:00 a.m. (Sections 7 (4) and (5) of the Act).

   With regard to the working hours of women, although there was a law (Section 66(1)(b) of the Factories Act) prohibiting night work (from 7:00 p.m. to 6:00 a.m.), the new Code stipulates that night work is permitted with their consent, provided that the employer complies with laws and regulations regarding safety management and working conditions.

   (2) Overtime work

   The consent of a worker is required upon causing the person to work outside of work hours. Moreover, where work exceeds eight hours per day or six days per week, the employer must pay an extra fee that is double the standard wages of that worker (Section 27 of the OSHW Code). Although there are no clear regulations regarding the upper limit of overtime work, the government can stipulate the total number of hours of overtime work (section 27 of the Code), so it is possible that the upper limit will be set in each state in the future.

   Item	Overview
   Work hours	No more than eight hours in any day (excluding rest period)
   	Female workers Consent is required for the night work (from 7:00 p.m. to 6:00 a.m.)
   	Workers between the ages of 14 and 18 General rule: May work only between the hours of 8:00 a.m. to 7:00 p.m.
   Overtime work	No clear regulations regarding the upper limit Overtime pay is double the standard wages of that worker

Requirement for Preparation of Workplace Policies

In India, the establishment of comprehensive internal work regulations equivalent to work rules in Japan or certain other countries is not mandatory for all establishments. As an exception, there are standing orders under the IR Code. Such statutory standing orders are not required for all establishments; rather, the obligation to frame them is imposed only where an establishment employs not less than a prescribed number of workers. However, it should be checked whether any amendments, including the number of workers employed, have been made at the state level.

Moreover, certain laws, such as the Companies Act, 2013, and the Sexual Harassment of Women in the Workplace (Prevention, Prohibition, and Redressal) Act, 2013, mandate the preparation of certain workplace policies applicable to certain establishments that are meant to provide additional protection to the employees.⁴

Cases Where the Statutory Standing Orders is Required

The situations where statutory standing orders are to be prepared and submitted are provided in Chapter 4 of the IR Code. The Code stipulates the minimum standards of working conditions for workers and defines which employers fall within the ambit of the Code. Chapter 4 of the Code, concerning the framing of statutory standing orders, applies to every industrial establishments in which 300 or more workers are currently employed or were employed on any day of the preceding 12 months (Section 28 (1) of the Code). An industrial establishment to which the chapter applies is required to prepare and submit statutory standing orders (Section 30 of the said Code). Industrial establishment means an establishment or undertaking in which any industry is carried on (Section 2 (p) of the Code). The appropriate government (state or federal), may exempt, conditionally or unconditionally, any industrial establishment or class of industrial establishment by notification in the official gazette from the provisions of the Standing Orders (section 39 of the Code).

Procedures and Content of Statutory Standing Orders

Employers are required to submit draft statutory standing orders within six months from the date on which they fall within the definition of "Industrial Establishment" in the Code to the Certifying Officer (section 2g, 30 and the following of the Code). The Certifying Officer is, under the predecessor of the Industrial Employment Act, an officer who is designated by the Labour Commissioner, the Regional Labour Commissioner, or the appropriate government.

Employers need to specify the following eleven items (Schedule 1 of the IR Code), and other items deemed necessary, and describe these in their draft statutory standing orders. Given that statutory standing orders are to be framed based on the model statutory standing orders as of February 2026, the government released drafts of the model statutory standing orders for the service sector and for the manufacturing and mining sector, and it is expected that statutory standing orders will be required to be prepared for each industrial facility establishment.

The draft should be certified as final following an examination by the certifying officer, and the certifying officer subsequently needs to send a copy of the statutory standing orders that the officer certified to the trade union or representatives of the workers (section 30 of the IR Code).
The certifying officer may amend the provisions, if necessary, after considering input from both the workers and the employer. All provisions of the statutory standing orders need to be not only lawful but also fair and reasonable in order to be certified by the certifying officer. Generally, companies draft their statutory standing orders by following the model statutory standing orders.

Statutory standing orders come into operation upon the expiry of thirty days from the date on which authenticated copies are sent to the employer and to the trade union or other representatives of the workers (section 33 of the Code). Statutory standing orders that have been finally certified under the Code must be displayed in the prescribed language and in the prescribed manner (section 33 of the Code). The prescribed language and posting method will be specified in the relevant regulations. Under the previous Act, the statutory standing orders must be displayed on special boards near the entrance through which the majority of workers enter, and must be posted in English and in the language understood by the majority of workers.

Where an employer fails to comply with the obligation to establish statutory standing orders, the contents of the applicable model statutory standing orders shall be deemed to apply to the industrial establishment as if they were the statutory standing orders for that establishment (Section 29(2) of the Industrial Relations Code).

Penalties

An employer that fails to submit draft statutory standing orders or fails to follow the necessary procedures will be liable to pay a fine that shall not be less than 50,000 rupees (section 86 (10) of the Code).

Modification of Standing Orders

Employers or workers (or a trade union or other representative body of the workers) are able to apply to the certifying officer to have the statutory standing orders modified (section 35 (2) of the Code). However, for a period of six months following the date on which the statutory standing orders come into operation, the statutory standing orders may not be modified unless the workers (or a trade union or other representative body of the workers) and the employer have mutually agreed to do so (section 35 (1) of the Code). Modifications to the statutory standing orders need to be followed by process of certification in the same way that the first iteration of the statutory standing orders would (section 35 (3) of the Code).

Overview and Scope of Application

Matters regarding wages are regulated by the Code on Wages, 2019.⁵ The Code is intended to provide a uniform definition of wages, regulate the timing of and deductions from payment, eliminate unnecessary disputes in relation to unreasonably unpaid wages, imposition of fines, and deductions from wages, guarantee a minimum wage, and protect the rights of employees.

The scope of employee to whom the Code applies is broad. It covers all persons employed in an establishment for wages, whether the terms of employment are express or implied, except for apprentices engaged under the Apprentices Act, 1961 (Section 2(k) of the Code on Wages 2019).

Definition of Wages

Previously, the definition of wages differed from law to law. Following the reform, the definition of wages, which serves as the basis for the calculation of various allowances, has been unified under the new Labour Codes, and the treatment of allowances and deductions has been standardised. Pursuant to Section 2(y) of the Code on Wages, “wages” mean all monetary remuneration payable to a person employed in respect of the person’s employment under the terms of employment, and includes the following:

1. basic pay
2. dearness allowance
3. retaining allowance (if any)

The following allowances and contributions are, in principle, excluded from wages; however, where the aggregate of items (a) to (i) exceeds 50% of the total remuneration, the amount in excess of such threshold shall be deemed to form part of the wages.

1. (a) Statutory bonuses (not forming part of the remuneration structure under the terms of employment)
2. (b) The value of any house-accommodation, supply of water, electricity, medical attendance, or other amenity or service
3. (c) Employer contributions to any pension or provident fund, and the interest accrued thereon
4. (d) Conveyance allowance and travelling concession
5. (e) Sums paid to defray special expenses entailed by the nature of employment
6. (f) House rent allowance (HRA)
7. (g) Remuneration payable under any award, settlement, or order of a court or labour tribunal
8. (h) Overtime allowance
9. (i) Commission payable to the employee
10. (j) Gratuity
11. (k) Retrenchment compensation, retirement benefits, and ex gratia payments

However, for the purposes of ensuring equal wages to all genders and for the calculation of the payment of wages, the excluded items set out in (d), (f), (g), and (h) shall also be included within the scope of wages. Furthermore, where remuneration includes payment in kind, such payment shall be deemed to form part of wages up to a limit of 15% of the total wages.

Method and Time of Payment

Every employer is responsible for fixing the wage periods, and such wage periods must not exceed one month (section 16 of the Code). In case the salary is paid on a monthly basis, the payment must be made before the expiry of the seventh day of the succeeding month (section 17 (1) iv of the Code). In cases where the employment is terminated by the employer, or an employee resigns, the wages must be paid before the end of the second working day from the date of termination (section 17(2) of the Code).

All wages are to be paid in cash, by check, by way of bank transfer into the account of the employee, or by the electronic mode (section 15 of the Code).

Deductions

Deductions from wages are only permitted insofar as they are permitted in the Code on Wages (Sections 18 to 25). The Code on Wages specifies an exhaustive list of items for which deductions can be made, including fines, loss, damage, recovery of loans and advances, and more.

Minimum Wage System

Under the former law, only scheduled employment was covered, and minimum wages as well as applicable standards varied widely across states and across industries and occupations. Under the Code on Wages,⁶ the minimum wage applies to all employees, irrespective of industry or nature of employment, including those in the unorganised sector (Section 5).

The Code introduces a two-tier structure. The federal government shall fix a national floor wage, taking into account the living standards. State governments may independently fix the minimum wages; however, such state-level minimum wages must not be lower than such floor wage fixed by the central government (section 9 of the Code). This will maintain a uniform standard of minimum wages across industries. In practice, state governments frequently revise minimum wages on an annual basis.

Statutory Bonus

An establishment in which 20 or more persons are employed or were employed on any day during an accounting year is obligated to pay a statutory bonus in accordance with the following conditions (Sections 26 and 41(2) of the Code on Wages 2019):

1. (1) Eligible Employees

   Employees whose wages do not exceed the ceiling amount prescribed by the government (as determined by notification) and who have worked for at least thirty days in an accounting year.

2. (2) Basis of Calculation of Bonus

   • Minimum amount: 8.33% of wages or INR 100, whichever is higher (mandatory payment regardless of whether there is any surplus).
   • Maximum amount: 20% of wages (the upper limit where there is allocable surplus the upper limit where there is allocable surplus).
   • Calculation ceiling: Where the employee’s actual wages exceed the amount notified by the government, the notified amount shall be deemed to be the wages for the purpose of calculation (Section 26(2) of the Code).

Gratuity

1. Scope of Application

   In principle, the Code on Social Security (SS Code) provides that a gratuity shall be payable to an employee who has rendered at least five years of continuous service on any of the following events (Section 53):

   1. Superannuation
   2. Retirement or resignation
   3. Death or disability due to accident or disease (The five-year continuous service requirement is exempted.)
   4. Termination of contract period under fixed term employment (The five-year continuous service requirement is exempted.)

   The obligation to pay gratuities applies to every factory, mine, oilfield, plantation, port, and railway company, as well as to every shop or establishment in which 10 or more employees are employed, or were employed, on any day of the preceding twelve months (schedule 1(v) of the Code).

   However, an employee whose services have been terminated because of any act, willful omission, or negligence causing any damage or loss to, or destruction of, property belonging to the employer has no entitlement to gratuity to the extent of such damage or loss.

2. Amount of Payment

   In the case of a monthly rated employee, the amount calculated by the following formula shall be paid as the statutory minimum amount (section 53(2), Explanation 3):

   Gratuity Amount = (Last drawn monthly wages ÷ 26 ) × 15 × years of service (*)

   ^* Fractions exceeding six months shall be rounded up to one year (e.g., a service period of five years and seven months shall be calculated as six years).

   The company may, at its discretion, pay gratuities exceeding the minimum amount (Section 53(5)). If both parties have agreed upon a certain payment amount in the employment contract, the company must pay the agreed amount in full. However, the upper limit of the payment amount must not exceed the amount separately notified by the central government (currently 2 million rupees).

Overview

As a general rule, restrictions on dismissal under Indian labour laws are applicable only to workers and are not applicable to nonworkers. This can be described as the most significant feature of dismissal regulations in India. Since there are no dismissal restrictions for nonworkers prescribed under the IR Code, dismissals of nonworkers proceed based on the employment contract agreed upon between the company and the nonworker or the work rules (if applicable to said nonworker), provided they do not violate the Shops and Establishments Act or other applicable industry-specific laws and regulations.

The IR Code strengthens the protection of workers and imposes obligations on the employer to follow the statutory procedures and pay statutory compensation upon dismissing a worker. Furthermore, because the employer is required to dismiss workers in order from the worker who was last employed, the employer is not allowed to freely select the worker to be dismissed.

Similar to the labour laws of Japan, the IR Code merely prescribes the procedures that must be followed upon dismissing a worker and does not prescribe substantive standards regarding under what kind of circumstances the dismissal of a worker is allowed. Companies need to pay ample attention to this point. Moreover, an employer is not allowed to freely dismiss a worker at any time so as long as the procedures are correctly followed, and the judicial precedents (Labour Courts) have rendered judgment to the effect that due cause is required for dismissing workers. Thus, at least regarding workers, it is extremely difficult to casually dismiss a worker on the grounds of dismissal for the purpose of reorganization or poor performance. On a practical level, upon corresponding to the foregoing cases, the standard practice is to present favourable conditions to the worker to be dismissed and urge the person to voluntary resign from the company. As the means for dealing with such restrictions on dismissal, companies are implementing measures, such as 1) not granting formal employment from the initial stage but establishing a probation period of roughly three to six months; or 2) employing a worker based on fixed-term employment.

Requirements and Procedures for Retrenchment

Under the IR Code, retrenchment means the termination of employment of a worker by the employer (on grounds other than disciplinary punishment) but does not include the following cases (section 2(zh) of the Code).

1. Voluntary retirement of the worker
2. Retirement on reaching the age of superannuation where the contract of employment contains a stipulation to that behalf
3. Termination of employment as a result of the nonrenewal of the contract of employment upon its expiry, or of such contract being terminated under a stipulation contained therein
4. Termination of employment as a result of completion of the tenure of fixed-term employment
5. Termination of employment on the grounds of continued ill-health

1. (1) Notice

   The employer must give one month's notice in writing to a worker who has been in continuous service for not less than one year, indicating the rational reason for retrenchment (section 70 (a) of the IR Code). However, the employer is permitted to dispense with such notice by paying wages in lieu of the period of the notice. It is said that a rational reason is required for retrenchment, and such a reason must be adequate and reasonable, such as retrenching excess manpower. Thus, without the foregoing rational reason, retrenchment cannot be carried out as a matter of course.

2. (2) Payment of retrenchment compensation

   An employer must pay retrenchment compensation to a worker in an amount equivalent to 15 days' average pay, or average pay of such days as may be notified by the government for every completed year of continuous service (where any part thereof in excess of six months shall be calculated as one year) (section 70 (b) of the IR Code). Payment of the compensation for retrenchment is prescribed as being a precondition for retrenchment.

3. (3) Notification to government agency

   The employer is required to submit a prescribed notification to the prescribed government agency (section 70 (c) of the IR Code).

Retrenchment with enhanced protection

Under the IR Code, workers in certain industrial establishments are granted enhanced protection. For workers employed in factories, mines, and plantations where not less than 300 workers were employed on average per working day for the preceding 12 months, the retrenchment regulations are even more stringent than the standard retrenchment procedure described above. Specifically, to carry out retrenchment in an industrial establishment corresponding to a factory as defined in the Factories Act, a mine as defined in the Mines Act, 1952, or a plantation as defined in the Plantations Labour Act, 1951 (hereinafter collectively referred to as the "Special Industrial Establishment"), the employer must obtain special permission from the government, in addition to giving a retrenchment notice and paying compensation for retrenchment to the worker (Section 77 (1), (3), 79 (1) (b) of the IR Code). It is obvious that this system is designed to prevent large-scale unemployment as a result of casual retrenchment in the foregoing large-scale establishments. Thus, naturally, the government is basically maintaining a passive stance in permitting retrenchment. It should be noted that the requirement for the number of workers in Special Industrial Establishments, for which government permission is required for retrenchment, was 100 or more in the former Industrial Disputes Act, but has been amended to 300 or more in the IR Code, taking into account the requirements of industry associations that need to adjust the number of workers to meet demand.

1. Notice

   Foremost, when carrying out retrenchment in a special industrial establishment, the employer must give three months' notice to the worker indicating the reason for retrenchment (which, as described above, must be based on a rational reason), or pay wages in lieu of such notice (section 79 (1) of the IR Code). It is evident that the protection of workers has been enhanced in comparison to normal cases where one month's notice to the worker would be sufficient.

2. Payment of retrenchment compensation

   When approved by the appropriate government , the worker shall, at the time of retrenchment, be entitled to receive retrenchment compensation equivalent to 15 days' average pay for every completed year of continuous service, or any part thereof in excess of six months, in the same manner as applicable to general workers (Section 79(9) of the IR Code).

3. Approval of appropriate government

   In the case of retrenchment of a worker who was in continuous service for one year or longer in a special industrial establishment, the employer must specify the reason for retrenchment and obtain permission from the appropriate government as prescribed under the IR Code in advance (Section 79 (1)b of the IR Code). Upon applying for the foregoing permission, the employer must submit an application for permission that clearly states the reason for retrenchment (Section 79 (2) of the Code). The appropriate government will offer an opportunity for the employer, the worker, and other interested persons to be heard and will conduct an investigation regarding the genuineness and reasonableness of the reason for retrenchment and the interests of the worker and other circumstances (Section 79 (3) of the Code). Upon offering an opportunity for the employer, the worker, and other interested persons to be heard, the appropriate government will determine whether or not to grant permission by giving consideration to 1) the genuineness and adequacy of the reason asserted by the employer, 2) interests of the worker, and 3) all other relevant factors. If no conclusion is communicated even after the lapse of 60 days from the filing of the application for permission by the employer, it shall be deemed that the permission has been granted after the lapse of such 60 days (section 79 (4) of the Code).

Disciplinary dismissal

Disciplinary dismissal is not subject to the application of the foregoing restrictions on retrenchment. However, in order to clarify the grounds for disciplinary action, it would be desirable to prescribe in advance, in the employment policy or other documents, that the occurrence of specific events, such as misconduct and violations of confidentiality obligations, will constitute grounds for disciplinary action.

Retirement on superannuation

Under the labour laws of India, there are no express statutory provisions that stipulate the mandatory retirement system. While the model standing orders under the former Industrial Employment Central Rules prescribe 58 years as the age of superannuation, such model provisions do not preclude the stipulation of a different age under the contract of employment or the work rules to be individually prepared.

Deemed retrenchment rule

“Deemed retrenchment” refers to a system for securing, when the ownership or management of an undertaking is transferred from the original company to a new company, the rights of a worker who was in continuous service with the employer for one year or longer preceding such transfer, so that such worker is entitled to receive a prior notice and payment of retrenchment compensation as if the worker had been retrenched (Section 73 of the IR Code). For instance, in cases when a business transfer, merger, or company split is conducted, or when certain assets (factory etc.) are succeeded, together with the workers by a new owner or manager of the undertaking, this will result in the change of ownership or management of the company. Thus, this rule was established from the perspective of protecting workers in the foregoing cases.

This rule is subject to the following exceptions:

1. The service of workers is not interrupted by the transfer of business.
2. The conditions of service applicable to workers after such transfer are not in any way less favourable to the worker than those applicable to them immediately before the transfer.
3. When a worker is to be retrenched under the terms of transfer or other reason, the new company is legally obligated to pay the worker compensation on the basis that the service has been continuous and has not been interrupted by the transfer.

When all three of the requirements listed above are satisfied, this rule is not applicable. This is because, in such a case, the protection of workers has been sufficiently satisfied.

Last to come, first to go rule

The IR Code contains a provision to the effect that, unless a separate agreement has been reached between an employer and a worker, when an employer retrenches a worker, who is a citizen of India, as a general rule, the employer must retrench the worker who was employed last in that category (last to come, first to go rule) (Section 71 of the IR Code). In other words, the employer may not arbitrarily select the worker to be retrenched. However, if an employer is able to demonstrate that there are special circumstances in which the employer is unable to follow this rule, there may be cases where the employer is exempted from the application of this rule as an exception.

For the application of this rule, under the former Industrial Disputes Rules, the employer was required to prepare a list of all workers to be arranged according to seniority of years of service in the relevant business division and post such list in a conspicuous place within the establishment at least seven days before the retrenchment (Rule 77 of the Industrial Disputes (Central) Rules 1957). Details will have to await the enactment of IR Rules.

In cases where the respective business categories or divisions are not completely differentiated or separated, and workers are sometimes transferred between business divisions, judicial precedents indicate that all workers engaged in that business, and not affiliated with each business division, should be perceived as a single unit.

Principle of preference upon re-employment

Where any worker has been retrenched and the employer proposes to employ any person within one year of such retrenchment, the IR Code prescribes that the employer shall give the retrenched workers who are citizens of India an opportunity to offer themselves for re-employment. Such retrenched workers who offer themselves for re-employment shall be given preference over other persons (Section 72 of the Code). Consequently, upon re-employment, the employer is obligated to notify the retrenched worker of the details of the job duties for which the person will be reemployed. Moreover, upon re-employment, if the number of workers to be newly hired falls below the number of retrenched workers, the employer was only required to notify workers in a number that is double the number of vacancies to be filled in order from the most senior workers (worker with the most years of service), but the detailed rules for reemployment must await the enactment of the IR Rules. When an employer is to re-employ a retrenched worker, similar to the case of the ordinary retrenchment described above, the workers eligible for re-employment shall be considered based on each business division, and the perception of business divisions may be based on the foregoing judicial precedents.

Trade Unions

The registration criteria and rights of trade unions in India are prescribed under the IR Code. Regarding the registration criteria, an application must be made with the signatures of at least 10% of the workers or 100 workers, whichever is less (subject to a minimum of seven members), employed in the industrial establishment (Section 6(1) and (2) of the IR Code). Registration will not be granted if these criteria are not met, and an existing registration is subject to cancellation if the union fails to maintain these requirements. Persons aged 14 years or older may become a member of a trade union (Section 20 of the Code).

A registered trade union is granted the status of a body corporate, enabling it to own property, enter into contracts, and sue or be sued in its registered name (section 12 of the Code). Furthermore, criminal and civil immunity is granted regarding conspiracy or damages resulting from legitimate trade union activities, such as the furtherance of a labour dispute or inducing a breach of contract by others (Sections 16 and 17 of the Code). The existence of trade unions is common in India, and activities such as strikes are actively conducted as a means of negotiation, which may have a significant impact on labour relations.

Strikes and Lockouts

To conduct a strike or lockout: (i) notice must be given to the employer or the workers within 60 days prior to the date of commencement, and (ii) a minimum notice period of 14 days is required (Section 62(1)(a) and (b) of the Code). Specifically, when a strike is planned, notice must be served at least two weeks prior to the scheduled date. While it is possible to change the commencement date because of prolonged labour negotiations, the strike must still be conducted within 60 days of the initial notice and no earlier than 14 days after the said notice (meaning the notice itself is valid for 60 days, providing a 46-day window for the strike). For example, if the scheduled date for a strike is March 15, the notice must be served by March 1 at the latest. Even if the actual strike begins after March 15, the period during which it can be conducted lasts until April 30, when the 60-day notice expires. Any strike conducted thereafter would require a new notice.

Upon receipt of the notice of strike, the employer shall, within five days, report the same to the appropriate government and the conciliation officer (Section 62(6) of the Code). A strike shall not be carried out during the pendency of conciliation proceedings or proceedings before a tribunal and for seven days after their conclusion nor during the pendency of arbitration proceedings before an arbitrator and for 60 days after the conclusion of such proceedings (Section 62(1) of the Code). The same notice requirements apply to lockouts initiated by the employer (Section 62(2) of the Code).

Under the former Industrial Disputes Act, such restrictions on strikes were imposed only on the public sector(Section 23, 22 (1) of the former Industrial Disputes Act); however, under the IR Code, these restrictions have been extended to the private sector as well (Section 62(1)(a)-(g)). While the notice requirement affords employers a preparatory period to respond, it may be said that the implementation of strikes has become more difficult for trade unions and workers.

Overview

An industrial dispute is defined as any dispute or difference between employers, between employers and workers, or between workers (Section 2 (q) of the IR Code). Disputes between employers and nonworkers do not constitute industrial disputes under the IR Code. There are three main procedures for resolving industrial disputes: (1) arbitration procedures, (2) procedures by quasi-judicial bodies (such as Industrial Tribunals or National Industrial Tribunals), and (3) procedures by judicial courts (Labour Courts).

Arbitration

Industrial disputes may be settled through arbitration procedures based on the agreement of the parties (Section 42 (1) of the IR Code). Since it is generally understood that industrial disputes brought to the Industrial Tribunal tend to be judged in favour of the workers, employers have the advantage of being able to use the arbitration procedure and expect the dispute to be settled at an early stage.

Industrial Tribunals

One or both parties of an industrial dispute may apply to use a dispute resolution institution (Conciliation Officers, Industrial Tribunal, National Industrial Tribunal, and Labour Court) to resolve the dispute. As a dispute resolution body, it is common practice for workers to directly seek dispute resolution from the Industrial Tribunal (Section 44 of the IR Code), which is a quasi-judicial body. However, in cases where the dispute involves more than one state, the National Industrial Tribunal (section 46 of the Code) of the federal government is used instead of the state Industrial Tribunal.

There is an advantage for both employers and workers to use the Industrial Tribunal in that strikes and lockouts are prohibited while industrial disputes are pending before the dispute resolution body, and strikes and lockouts that have already occurred can be stopped by government order.
However, it should be noted that it often takes two to three years for the Industrial Tribunal to issue a decision, and that the Industrial Tribunal tends to issue decisions that are closer to the position of the workers.

With regard to disputes arising from the termination of an individual worker's contract, it is not possible to appeal to the Industrial Tribunal until 45 days have passed after the Conciliation of the dispute (section 4(10) of the Code). Where any person is aggrieved by an award or order of the Industrial Tribunal, the aggrieved party may appeal before the High Court.

Labour Courts

Under the former Industrial Disputes Act, the government determines the authority to which a labour dispute should be referred on the basis of an application by either or both parties to the dispute. The Labour Court, alongside the Industrial Tribunal, is one of the dispute resolution bodies and adjudicates labour disputes upon receiving a reference from the government. Furthermore, under the former Industrial Disputes Act, matters falling within the exclusive jurisdiction of the Labour Court included disputes relating to the application and interpretation of statutory standing orders, reinstatement or relief in cases of unfairly dismissed workers, the legality of a strikes or lockouts, and other matters not falling within the jurisdiction of an Industrial Tribunal (Section 7 and the Second Schedule of the Act). These provisions regarding the reference of disputes and the exclusive jurisdiction of the Labour Court are not stipulated in the IR Code. Therefore, it is necessary to monitor the future enactment of implementing rules and regulations to determine whether different operational procedures will be implemented.

Japanese nationals planning to enter India must obtain an appropriate visa regardless of the purpose of traveling be it sightseeing or business before entering India. Regarding business travel to India, the two primary visa categories are the business visa and the employment visa.

• Business Visa
  This visa is issued to foreign nationals conducting business in India, such as preparing for the establishment of a base, exploring business possibilities, conducting business negotiations with Indian companies, or developing new business partners. For Japanese nationals, a multiple-entry visa valid for up to 10 years is generally issued, provided that each stay does not exceed 180 days.
• Employment Visa
  This visa is granted to foreign nationals entering India for the purpose of employment. In principle, applicants must be highly skilled or qualified professionals who have a contractual or employment relationship with a company or organization operating in India. Furthermore, the applicant must be guaranteed a minimum annual income of USD 25,000 or more.
  
  A multiple-entry visa valid for up to five years may be issued depending on the applicant's nationality and occupation. There are no specific occupations for which employment is restricted solely due to holding foreign nationality. If an employment visa is valid for more than 180 days, the holder is required to register with the Foreigners' Regional Registration Office (FRRO).

In India, recent years have seen the enactment of state laws mandating private companies and others to employ a certain percentage of local residents. Amidst this situation, newly enacted state laws have faced opposition from various industrial groups with multiple lawsuits challenging its constitutionality and validity currently pending, attracting significant attention.

In Haryana, the Haryana State Employment of Local Candidates Act 2020⁷ was implemented in January 2022. This law mandates that private companies within the state employ 75% of employees earning less than 30,000 rupees per month from among state residents. Industry associations contesting this challenged the law in the Punjab and Haryana High Court, which issued a temporary suspension in February of the same year. Later, the Supreme Court of India revoked this suspension, citing insufficient grounds, and the case continued in the high court. In November 2023, the Punjab and Haryana High Court ruled the law invalid retroactively from its date of enforcement, citing violations of Article 19 of the Constitution, which guarantees freedoms of movement, residence, and choice of profession.
Currently, this law is invalid, but the state government subsequently appealed to the Supreme Court, and the case is still pending. The Supreme Court’s future decision on this state law could potentially impact employment policies and related laws in various Indian states, necessitating careful observation of future developments.

In Maharashtra, a law⁸ was enacted in 2018, assigning 16% of employment quotas in educational institutions and for appointments in the public services and posts (later amended to 12% and 13%, respectively) for the socially and educationally backward classes (SEBC),⁹ including the Maratha community, which constitutes about 30% of the state's population. However, as this would result in a Maratha employment percentage exceeding the 50% cap¹⁰ established by the Supreme Court precedent, the Supreme Court overruled the Bombay High Court’s decision upholding the state law in May 2021 and declared the law unconstitutional.
In response to this, the state government enacted a new law in February 2024, the SEBC Act of 2024,¹¹ replacing the previous SEBC Act, which once again established a 10% reservation for the Maratha community in education and public employment. This Act is currently being challenged before the Bombay High Court on the grounds that the total reservation, when combined with existing quotas, exceeds the 50% ceiling. Consequently, the implementation of this Act is subject to the final outcome of the said litigation, and there remains a possibility of further appeal to the Supreme Court.
In 2019, the state's industrial policy¹² stipulated that private companies planning large-scale projects and receiving state preferential incentives must employ 80% state residents.
Although there is no law in Maharashtra currently mandating a uniform percentage of state resident employment for private companies, companies seeking certain concessions must strictly manage the percentage of state residents among their employees.

Furthermore, the Andhra Pradesh Employment of Local Candidates in the Industries/Factories Act, 2019,¹³ which first introduced a law mandating a certain percentage of state resident employment in private companies, is also being contested in the high court regarding its constitutionality. Laws on preferential employment of state residents have also been announced in Madhya Pradesh and Karnataka but have not yet been implemented.

Should these laws be enacted in the future, they could potentially impact the recruitment activities of Japanese companies, necessitating close monitoring of future developments.