India Employment Law & Compliance Guide for Employers
Key employment laws in India: what employers need to know
Employment in India is governed by four Labour Codes that came into force on 21 November 2025 and replaced 29 central labour laws, together with state Shops and Establishments Acts and state minimum wage notifications. Foreign employers are most often surprised that many rules, including minimum wages, leave and holidays, differ by state, and that provident fund and gratuity costs depend on the new 50% wage definition. This page summarises the core employer rules as of October 2026, with official sources.
India employment rules at a glance
| Topic | What the rule is | Official source |
|---|---|---|
| Minimum wage | No single national rate. States set minimum wages by skill level, zone and sometimes industry, often revised twice a year. Under the Code on Wages (in force 21 November 2025), no state rate may fall below the national floor wage set by the Centre. | PIB, Ministry of Labour and Employment: Four Labour Codes made effective (21 Nov 2025) |
| Standard working hours | 48 hours a week, normally 8 hours a day, with at least 1 weekly rest day under the OSH Code. Rules allow daily spans of up to 12 hours within the 48-hour week. State Shops and Establishments Acts add rules for offices. | PIB, Ministry of Labour and Employment: Four Labour Codes made effective (21 Nov 2025) |
| Overtime pay | Twice the ordinary rate of wages for work beyond daily or weekly limits, under the Labour Codes and state Shops and Establishments Acts. Overtime requires the worker's consent, and total overtime hours are capped by central and state rules. | PIB, Ministry of Labour and Employment: Four Labour Codes made effective (21 Nov 2025) |
| Paid annual leave | Under the OSH Code, a worker with at least 180 days of work in a calendar year earns 1 day of paid leave per 20 days worked. State Shops and Establishments Acts set leave for offices and shops, and entitlements differ by state. | PIB, Ministry of Labour and Employment: Four Labour Codes made effective (21 Nov 2025) |
| Public holidays | 3 national holidays apply everywhere: Republic Day (26 January), Independence Day (15 August) and Gandhi Jayanti (2 October). Each state adds festival and local holidays under its own law, so the total differs by state. | National Portal of India: Holiday calendar |
| Sick leave | No single national entitlement for private offices; state Shops and Establishments Acts set sick and casual leave, which varies by state. Employees covered by ESI can claim a cash sickness benefit from ESIC of about 70% of wages for up to 91 days a year. | Employees' State Insurance Corporation (ESIC) |
| Maternity and parental leave | 26 weeks of paid maternity leave for the first two children (12 weeks from the third); 12 weeks for adopting and commissioning mothers. Paid by the employer unless ESI covers the employee. No statutory paternity leave in the private sector. | Ministry of Labour and Employment: Labour Codes (Code on Social Security, 2020) |
| Probation period | Not set by statute. Probation is fixed by the employment contract or certified standing orders; 3 to 6 months is common. The Labour Codes and state law still apply during probation. | Ministry of Labour and Employment: Labour Codes (Industrial Relations Code, 2020) |
| Notice period | For workers with 1 year or more of service, retrenchment requires 1 month's written notice or pay in lieu under the Industrial Relations Code. Managers and senior staff follow their contract and state Shops and Establishments Act; 1 to 3 months is common. | Ministry of Labour and Employment: Labour Codes (Industrial Relations Code, 2020) |
| Severance pay | Retrenchment compensation of 15 days' average pay per completed year, plus 15 days' wages to a worker re-skilling fund. Gratuity of 15 days' wages per year is due after 5 years (1 year for fixed-term staff), capped at INR 20 lakh. | PIB, Ministry of Labour and Employment: Four Labour Codes made effective (21 Nov 2025) |
| Employer social contributions | EPF 12% of PF wages (8.33% to pension on wages up to INR 15,000 a month) plus about 1% EDLI and admin charges; ESI 3.25% for staff earning up to INR 21,000 a month; plus gratuity provision (about 4.8% of basic pay) and small state levies. | PwC Worldwide Tax Summaries: India, other taxes (professional source) |
| Employee social contributions | EPF 12% of PF wages (basic pay and dearness allowance); ESI 0.75% for employees earning up to INR 21,000 a month; state professional tax of up to INR 2,500 a year in states that levy it. | PwC Worldwide Tax Summaries: India, other taxes (professional source) |
| Income tax on salaries | Employers deduct tax at source (TDS) monthly. Default new regime: 0% to 30% in 7 slabs (30% above INR 24 lakh) plus 4% cess; a rebate removes tax on income up to INR 12 lakh. The Income-tax Act, 2025 applies from 1 April 2026. | PwC Worldwide Tax Summaries: India, taxes on personal income (professional source) |
| Mandatory bonuses and 13th-month pay | Statutory bonus of 8.33% to 20% of wages for eligible employees below a wage ceiling, in establishments with 20 or more workers, under the Code on Wages (formerly the Payment of Bonus Act). No 13th-month pay. | Ministry of Labour and Employment: Labour Codes (Code on Wages, 2019) |
| Work permits for foreign nationals | Foreign staff need an Employment Visa from an Indian mission, generally for skilled roles paying above USD 25,000 a year. Holders of visas over 180 days register with the FRRO [Foreigners Regional Registration Office], generally within 14 days of arrival. | Indian Visa Online: Visa categories (Government of India) |
| Employment contract requirements | A written appointment letter is mandatory for every employee under the Labour Codes. No language rule. Establishments register under the OSH Code or state Shops and Establishments Act; industrial establishments with 300+ workers need certified standing orders. | PIB, Ministry of Labour and Employment: Four Labour Codes made effective (21 Nov 2025) |
Employer obligations in India, topic by topic
Filter by primary service relevance
Does an employment contract in India have to be in writing, and what must it include?
What are the working hours and overtime rules in India?
How do minimum wages and the new wage definition work in India?
How much leave must employers give in India?
What does an employer pay for social security and payroll tax in India?
What notice, severance and gratuity does an employer owe on dismissal in India?
Can a company in India hire a foreign national, and which visa is needed?
Is it risky to use contractors instead of employees in India?
Key employment laws in India and official sources
- Code on Wages, 2019 — Sets minimum wages, the national floor wage, the 50% wage definition, payment deadlines, statutory bonus and equal pay.
- Industrial Relations Code, 2020 — Covers standing orders, fixed-term employment, retrenchment notice and compensation, the re-skilling fund and dispute resolution.
- Code on Social Security, 2020 — Consolidates provident fund, ESI, gratuity, maternity benefit and gig and platform worker schemes.
- Occupational Safety, Health and Working Conditions Code, 2020 — Requires appointment letters and registration, and sets working hours, overtime, annual leave and safety duties.
- Income-tax Act, 2025 — Replaced the Income-tax Act, 1961 for tax years from 1 April 2026 and governs TDS on salaries.
- Immigration and Foreigners Act, 2025 — Governs visas, entry, stay and registration of foreign nationals, including employer reporting duties.
FAQs: hiring employees in India
Can a foreign company hire employees in India without a local entity?
Not directly in most cases. Registering for EPF, ESI, TDS and state labour registrations generally requires an Indian legal presence. Without an entity, a foreign company can use an Employer of Record, which employs the person in India, runs payroll and statutory contributions, and issues the appointment letter. Engaging the person as a contractor is possible but carries misclassification and permanent establishment risk. For larger teams, companies usually set up a subsidiary, branch or liaison office.
How much does an employee cost in India on top of gross salary?
Roughly 13% of PF wages for EPF and its charges: the employer pays 12% (part goes to the pension scheme) plus about 1% in EDLI and admin charges. Add 3.25% ESI for employees earning up to INR 21,000 a month and a gratuity provision of about 4.8% of basic pay. Statutory bonus of 8.33% to 20% applies to lower earners. Under the Code on Wages, allowances above 50% of pay are added to wages, which can raise PF and gratuity costs.
What is the minimum wage in India in 2026?
India has no single national minimum wage. Each state sets rates by skill level, zone and sometimes industry, and many revise them twice a year through dearness allowance. Since the Code on Wages came into force on 21 November 2025, minimum wages apply to all employees, and state rates cannot fall below a national floor wage set by the Central Government. Check the current notification of the state where the employee works.
How much notice and severance does an employer owe when dismissing an employee in India?
For workers with 1 year or more of service, retrenchment needs 1 month’s notice or pay in lieu, compensation of 15 days’ average pay per completed year and 15 days’ wages to a re-skilling fund. Gratuity of 15 days’ wages per year is due after 5 years (1 year for fixed-term staff), capped at INR 20 lakh. Managers’ notice follows the contract, often 1 to 3 months. Large industrial employers need government permission to retrench.
Can a company hire a foreign national in India, and what permit is needed?
Yes. The employee needs an Employment Visa from an Indian mission before starting work, generally for skilled roles paying more than USD 25,000 a year. The employer must be a company or organisation registered in India, so a foreign company without an entity usually sponsors through an Employer of Record or a local affiliate. Visa holders staying over 180 days register with the FRRO after arrival. Business visas and e-Visas do not allow employment.
Is it risky to engage contractors instead of employees in India?
Yes. Courts and authorities look at control, integration and continuity rather than the contract label. A reclassified contractor can claim PF and ESI contributions, gratuity, bonus, leave and minimum wages, with interest and penalties. For a foreign company, long-term contractors working in India can also create a permanent establishment for corporate tax. Use contractors for defined projects, and employ long-term staff directly or through an Employer of Record.
Related NNRoad resources for India: Employer of Record in India · Payroll in India · Hiring foreign employees in India · Contractors and on-demand talent in India · India employer cost calculator
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Regulation Updates in India
Appointment of Authorities for Sanction of Prosecution under Chapters V and VI of the Code on Social Security, 2020
What it is: A government notification appoints the Chief Labour Commissioner (Central) and the Additional Chief Labour Commissioner (Central) as the authorities to grant prior sanction for prosecution of offences under Chapters V and VI of the Code on Social Security, 2020.
What it changes: The prior sanction for prosecution of offences related to gratuity and maternity under Chapters V and VI will be granted by the designated Chief Labour Commissioner (Central) and Additional Chief Labour Commissioner (Central) authorities.
Who is affected:
- Employers
What employers should do:
- Be aware that prior sanction for prosecution under Chapters V and VI may now be required to be obtained from the specified authorities.
- Prepare for compliance processes accordingly to align with the new sanctioning authority.
Notes: Effective month: 2026-05.
Social Security (Central) Rules, 2026
What it is: The Social Security (Central) Rules, 2026 were notified, replacing multiple legacy rules and establishing national procedures requiring employers to register establishments electronically and to operationalize new obligations related to social contributions, provident/insurance registrations and benefit administration.
What it changes: It introduces national procedures for electronic establishment registration and new obligations around social contributions, provident/insurance registrations, and benefit administration.
Who is affected:
- Employers
What employers should do:
- Register establishments electronically
- Implement the new obligations related to social contributions, provident/insurance registrations, and benefit administration
Notes: Effective month: 2026-05.
Notification regarding revision of minimum wages w.e.f 01st May 2026 in Punjab
What it is: A government notification revising minimum wage rates in Punjab, effective 01 May 2026.
What it changes: The notification revises the state’s minimum wage rates and creates new employer obligations for payroll to comply with the revised minimum wage, effective 01 May 2026.
Who is affected:
- Employers with payroll obligations in Punjab
- Workers covered by minimum wage requirements in Punjab
What employers should do:
- Adjust payroll to align with the revised minimum wage effective 01 May 2026.
Notes: Effective month: 2026-05.
Uttar Pradesh Minimum Wages Notification No. 374/36-2-2026-2041256
What it is: The Uttar Pradesh Minimum Wages Notification No. 374/36-2-2026-2041256 directs interim revisions to minimum wage rates for scheduled employments and creates a legal obligation on private employers to pay the revised minimum wage for affected districts and worker categories.
What it changes: It establishes an interim increase to minimum wage rates for scheduled employments and requires private employers to pay the revised minimum wage for the relevant districts and worker categories.
Who is affected:
- Private employers in Uttar Pradesh
- Workers in scheduled employments in the affected districts and worker categories
What employers should do:
- Ensure payment of the revised minimum wage to workers in the affected districts and worker categories
- Review payroll to align with the interim minimum wage revisions
- Document compliance with the revised minimum wage requirement for reporting and record-keeping
Notes: Effective month: 2026-04.
Discover the latest employment and compliance updates in India — helping you stay ahead in a changing regulatory landscape.