Employment & Labour Laws

Managing a workforce in India requires navigating a regulatory framework that is both extensive and actively changing. Employment and labour law in India spans individual employment contracts, collective industrial relations, statutory welfare and benefits obligations, data protection, workplace safety, and equal opportunity. Acuity Law’s Employment and Labour Laws practice advises employers across the full range of matters that arise over the employment lifecycle, from hiring and compensation structuring through to exits, retrenchment, and post-termination obligations. The practice acts for Indian companies, multinationals, and foreign investors, including companies with employees based in multiple states and those employing a mix of full-time, contractual, and seconded workers.

India’s labour law landscape is undergoing its most significant restructuring in decades. Four Labour Codes consolidate 29 central labour laws: the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health and Working Conditions Code, 2020. These Codes have materially changed compliance requirements across wages, social security, termination procedures, and workforce classification. The definition of ‘wages’ under the Code on Wages is substantially broader than under previous legislation, with direct consequences for how compensation packages are structured and how provident fund, gratuity, and overtime entitlements are calculated. Acuity Law advises employers on the implications of the Codes for existing employment contracts and HR policies, and on the readiness steps that employers need to take.

For multinational corporations and foreign investors, a recurring area of complexity is the secondment of personnel to and from India. A secondment that crosses borders involves overlapping obligations under employment law, the Foreign Exchange Management Act, 1999 (FEMA), and tax law, as well as potential permanent establishment risk for the foreign entity. Acuity Law advises on the full structure of secondment arrangements, working across the firm’s employment, tax, and corporate advisory practices to ensure that documentation, regulatory filings, and ongoing compliance are addressed in an integrated way. The practice has particular experience in inbound secondments involving Japanese corporations, where the firm’s Japan Desk provides support that bridges legal, procedural, and commercial considerations across both systems.

Our Employment and Labour Laws practice advises and assists clients across six areas:

Employment Documentation and Lifecycle Advisory

We advise on all aspects of appointment, continuity, and termination of employment, and draft the full suite of employment documentation:

• Employment agreements, appointment letters, offer letters, probation terms, and confirmation letters.
• Consultancy and independent contractor agreements, including classification risk analysis under current and proposed labour legislation.
• Confidentiality, non-disclosure, non-compete, and non-solicitation agreements.
• Service bonds and training recovery agreements.
• Termination letters, performance improvement plan documentation, and settlement agreements.
• Deputation and secondment agreements for domestic and cross-border arrangements.
• Human resource policies, including leave policies, code of conduct, grievance redressal mechanisms, and whistleblower policies.
• Employee Stock Option Plans (ESOPs) for listed and unlisted Indian companies and for Indian subsidiaries of foreign companies, including mirror plan documentation and board and regulatory compliance.

Wages and Compensation Structuring

The Code on Wages, 2019 introduces a unified definition of ‘wages’ that directly affects how compensation packages are structured and how statutory deductions and entitlements are computed. We advise employers on:

• The expanded definition of ‘wages’ under the Code on Wages and its implications for the structuring of CTC, allowances, and variable pay components.
• Compliance with minimum wages obligations under central and state government notifications, and the transition to the floor wage concept introduced by the Code.
• Calculation of provident fund contributions, gratuity, overtime, and bonus entitlements under the new wages definition.
• Restructuring of existing compensation packages to ensure Code-compliance while preserving commercial intent.
• Equal remuneration obligations and pay equity reviews.
• Wage compliance audits across manufacturing, retail, technology, and services sector clients.

New Labour Codes Advisory

The four Labour Codes represent a consolidation of 29 central labour laws. We advise employers on the implications of each Code and on readiness for their implementation:

• Code on Wages, 2019: implications for compensation structuring, allowance treatment, and computation of statutory entitlements across all categories of workers.
• Industrial Relations Code, 2020: changes to standing order requirements, revised thresholds for layoff, retrenchment, and closure, trade union recognition, and the new Industrial Tribunal framework.
• Code on Social Security, 2020: revised provisions for EPF, ESIC, gratuity, maternity benefits, and building and construction workers’ welfare; extension of social security coverage to gig and platform workers.
• Occupational Safety, Health and Working Conditions Code, 2020: working hours, leave entitlements, contractor regulation, and welfare facilities obligations across industries and establishments.
• Gig and platform worker classification: advising on the rights and obligations arising for businesses that engage gig workers, in light of the Social Security Code and emerging state-level regulations.
• Contract readiness reviews: assessing existing employment contracts, HR manuals, and standing orders against the requirements of the Codes and advising on amendments needed before notification.

Secondment Structures and Cross-Border Employment

Secondment of employees across borders involves interlinked obligations under employment law, FEMA, and tax law. An incomplete or poorly structured arrangement can create unintended employment law exposure in India, a taxable presence for the foreign entity, or regulatory non-compliance under FEMA. We provide integrated advice across all three dimensions:

• Structuring inbound secondments (foreign employee to Indian entity) and outbound secondments (Indian employee to foreign entity), including analysis of the appropriate legal characterisation for each party.
• Drafting secondment agreements, local employment letters, and shadow payroll documentation.
• FEMA compliance: advising on the regulatory treatment of secondment cost reimbursements between the Indian entity and the foreign employer, including cross-charge structuring, permissibility of reimbursements under FEMA, and the required regulatory filings.
• Tax analysis: advising on the taxability of the seconded employee in India, employer withholding obligations, permanent establishment risk for the foreign entity, tax equalisation frameworks, and the application of double taxation avoidance agreements.
• Social security treaty analysis and certificate of coverage applications where India has a totalization agreement with the relevant jurisdiction.
• Japan-India secondments: the firm’s Japan Desk provides specialist support for Japanese companies seconding employees to India, addressing employment law documentation, FEMA compliance, and tax structure in a single integrated engagement.
• Advisory on Shops and Establishments registration and compliance obligations for seconded employees working across multiple states.

Labour Law Compliance and Audits

We conduct comprehensive labour law compliance audits and advise on ongoing compliance across central and state-level legislation:

• Compliance audits covering applicable central and state labour laws, identifying gaps and recommending remediation.
• Shops and Establishments compliance across Karnataka, Maharashtra, Delhi, and other states where the firm’s clients operate.
• Contract labour compliance under the Contract Labour (Regulation and Abolition) Act, 1970, including principal employer obligations, contractor registration, and licence requirements.
• Provident fund, ESIC, and gratuity compliance, including registration, contribution, and claims administration.
• Apprenticeship compliance under the Apprentices Act, 1961.
• Advising on applicability and interpretation of labour legislation for new and expanding businesses, including threshold-based applicability analysis.
• Protecting confidential data and proprietary information accessible to employees, with particular focus on technology, IT services, and fintech sector clients.

Employee Disputes, POSH, and Litigation

We advise employers on all aspects of employee disputes, disciplinary proceedings, and workplace compliance:

• Advising employers on employee disputes, disciplinary proceedings, and domestic enquiry procedures.
• Planning settlement procedures, voluntary retirement schemes (VRS), and internal legal mitigation measures for workforce restructuring.
• Formulating and implementing retrenchment policies, including compliance with the Industrial Relations Code requirements.
• Representing employers before Labour Courts, Industrial Tribunals, and High Courts.
• POSH compliance: designing and implementing Internal Complaints Committees (ICCs), conducting POSH awareness programmes for management and employees, and advising on complaints, investigation procedures, and employer liability under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
• Advising on employer obligations under the POSH Act for remote and hybrid working arrangements.