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Labour Law

Employment and Labour Laws and Regulations in India

If your business needs labour employment, you must be aware of some essential laws in India. Cherish this guide and get all info on which laws your company must follow before you start hiring labour. Learn about employment and labour laws and regulations in India.

The Central government’s new laws on labour took effect on July 1st 2022. This means there will be huge transformations in all sectors and industries and how we’re accustomed to working.

Everything will undergo modifications. For example, the rules governing working hours for employees and the provisional fund to the salary structure and provident fund.

There has been an official announcement regarding this issue until now. The new laws on labour could affect payout, social security (pension or gratuity), health, safety, welfare for workers, and working conditions (including the working conditions for women).

The reports suggest that 23 states, including Uttarakhand, Chhattisgarh, Odisha, Arunachal Pradesh, Uttar Pradesh, Madhya Pradesh, Haryana, Jharkhand, Himachal Pradesh, Punjab, Manipur, Bihar, and UT of Jammu and Kashmir, have framed regulations under the new labour laws.

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Key Points of New Labour Laws and Employment in India

  • The employees will have permission to take three weeks off
  • They must be on the job for a period that is not longer than 48hrs. Those who work eight hours daily will only have one week of vacation
  • Individuals who work 12 hours per day within an organisation will grant three weeks of vacation. Also, those who are working 9 hours per day will get two weeks off
  • The new labour codes will result in a total modification to the complete and final rules
  • Professionals who leave the country must be dealt with. The final settlement is done within 2 days from the date of departure from the business
  • Female employees will be able to benefit from the increase in their maternity leave to 26 weeks. Employers must obtain approval from female employees to work the night shift
  • Security and facilities must be in good order to be guaranteed to the female employees of the organisation
  • The structure of pay will be different according to the changes made
  • The element of the basic salary will get an increment, and the provision fund calculations based on the basic salary will get a raise as well
  • This means that the provisional employee fund will increase while the salary paid in cash will likely decrease
  • After adopting the code, workers will grant vacation each 180-day instead of 244 days as per the previous rules. In India, the full and final payment is due within 45 days of the end of an organisation.

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What Are the Labour Laws, Employment and Regulations in India?

1. Gratuity cost of companies to increase

The new labour law limits the maximum amount of basic pay to 50% of CTC, which effectively increases the gratuity bonus that the employees receive.

Also, the new wage code will calculate the number of gratuities based on the salary base, which will comprise basic pay and allowances, like a special allowance for wages. Also, it will likely increase the cost of gratuity for businesses.

While increasing Social Security (pension) elements of wages act, the new rules will likely reduce employees’ salaries.

2. Basic pay to be 50% of CTC

The new wage code makes it mandatory for employers to ensure that at least 50 per cent of the employees’ CTC is basic pay. In comparison, the remaining 50 per cent includes other allowances for employees, such as overtime, house rent, etc.

If the business pays additional allowances or exemptions which exceed 50% of the CTC, the amount is treated as an additional amount to the salary.

3. 15 Minutes overtime payment

Companies must pay overtime to the employees. Any time over 15 minutes of working is the subject of employee overtime payments after the shift of 8 hours is completed.

4. Provident contributions to the fund

Another major change coming under the new labour laws is the ratio between the take-home pay and the employer and employee’s contribution to the Provident Fund.

 An employee’s base salary will be 50% of their gross salary. In addition, the PF contributions of the employer and employee will rise, while the take-home pay will be lower, especially for employees working in the private sector.

5. 48 hours set work time for one week

The government clarified that 48 hours are the maximum time limit for the work week, and employers have the flexibility to select this time of work and offer it in four days, five days or a 6-day week-long schedule.

6. Leaves number

The amount of time off during the year will be the same, but employees now get an hour of leave for every 20 days of working instead of 45. This is an excellent thing.

In addition, new employees will now be eligible to take leave after the first 180 days of employment contract. It won’t be 240 working days like the current system.

7. Structure of salary for employees

The new labour law states that an employee’s base wage must be at a minimum of 50% of their gross amount. This means that employees will make greater contributions toward their EPF accounts, and gratuity deductions will increase as well. It will reduce the take-home pay for the majority of employees.

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8. Hours of operation

The working hours of employees across all sectors are set to undergo a radical change. Currently, working hours are based on Factories Act, 1948, at the national level for employees in factories and other workplaces.

It is also governed by each state’s Shops and Establishment Acts for office employees and other workers. According to the new laws on labour, the working hours for a day are 12 hours, while the weekly hours of work are 48 hours.

That means that companies or factories can work a full week. The overtime has increased from 50 to 125 hours per quarter across different sectors.


It’s clear that the Pandemic had a great impact on the rules and regulations between employers and employees. In the end, we can say that the new Labour Codes constitute welfare laws that seek to ensure workers’ welfare at the company’s cost. It is still to be determined how state governments will go in the same way and make adjustments to add extra balance between the employer and employees.

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