Employment Laws of India

Labour and Employment Laws of India

The labour enactments in India, is divided into 5 broad categories, viz. Working Conditions, Industrial Relations, Wage, Welfare and Social Securities. The enactments are all based upon Constitution of India and the resolutions taken in ILO conventions from time to time.

Indian labour law refers to laws regulating employment. There over fifty national laws

and many more state-level laws. Traditionally Indian Governments at federal and state

level have sought to ensure a high degree of protection for workers through enforesement of labour laws.

While conforming to the essentials of the laws of contracts, a contract of employment should adhere also to the provisions of applicable labour laws and the rules contained under the Standing Orders of the establishment. Indian labour laws divide industry into two broad categories:


Factories are regulated by the provisions of the Factories Act, 1948 (the said Act). All Industrial establishments employing 10 or more persons and carrying manufacturing activities with the aid of power come within the definition of Factory. The said Act makes provisions for the health, safety, welfare, working hours and leave of workers in factories. The said Act is enforced by the State Government through their ‘Factory’ inspectorates. The said Act empowers the State Governments to frame rules, so that the local conditions prevailing in the State are appropriately reflected in the enforcement. The said Act puts special emphasis on welfare, health and safety of workers. The said Act is instrumental in strengthening the provisions relating to safety and health at work, providing for statutory health surveys, requiring appointment of Safety officers, establishment of canteen, crèches, and welfare committees etc. in large factories.

The said Act also provides specific safe guards against use and handling of hazardous Substance by occupiers of factories and laying down of emergency standards and Measures

The Shops & Establishment Act

The Shops and Establishment Act is a state legislation act and each state has framed its own rules for the Act. The object of this Act is to provide statutory obligation and rights to employees and employers in the unauthorized sector of employment, i.e., shops and establishments. This Act is applicable to all persons employed in an establishment with or without wages, except the members of the employers’ family.

This Act lays down the following rules:

Working hours per day and week

Guidelines for spread-over, rest interval, opening and closing hours, closed days, national and religious holidays, overtime work

Employment of children, young persons and women

Rules for annual leave, maternity leave, sickness and casual leave, etc.

Rules for employment and termination of service

Payment of Wages Act 1936

Under the Payment of Wages Act 1936 the following are the common obligations of the


  • Every employer is primarily responsible for payment of wages to employees. The employer should fix the wage period (which may be per day, per week or per month) but in no case it should exceed one month;
  • Every employer should make timely payment of wages. If the employment of any person is being terminated, those wages should be paid within two days of the date of termination; and
  • The employer should pay the wages in cash, i.e. in current coins or currency notes. However wages may also be paid either by cheque or by crediting in employee’s bank account after obtaining written consent.


Payment of Bonus Act 1965

The payment of Bonus Act provides for the payment of bonus to persons employed in certain establishments on the basis of profits or on the basis of production or productivity. The Act is applicable to establishments employing 20 or more persons. The minimum bonus, which an employer is required to pay even if he suffers losses during the accounting year is 8.33% of the salary.


Payment of Gratuity Act 1972

The Payment of Gratuity Act provides for a scheme for the payment of gratuity to all

Employees in all establishments employing ten or more employees to all types of workers, Gratuity is payable to an employee on his retirement/resignation at the rate of 15 days salary of the employee for each completed year of service subject to a maximum of Rs. 350,000.


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