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March 24, 2026

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A guide to employment laws in India for HR teams

The Human Resource Management of India deals not only with hiring and engaging employees but also ensuring that the organisation is compliant with all Employment Laws of the country. Since Employment Laws evolve frequently through Government updates and Labour Code changes, Human Resource Managers will have to continually stay informed about all developments like these, or risk facing both penalties from the law and possible disputes between the company and employees who may have been wronged by the Law.

Why Employment Laws Matter for HR Teams

In India, Employment Laws protect Employee Rights and promote Fair and Lawful Consideration by Employers. Compliance with Employment Laws, therefore, is not only a requirement for HR Teams but also a major method of Responsible Workforce Management, and adherence to Employment Laws allows Organizations to protect themselves from Legal Liability while building a Strong Employer Brand for themselves. Compliance with employment regulations assures the HR team that:

They will not be subject to any fines, citations, or costly labour dispute litigation
They will maintain ethical, transparent, and standardised HR practices
They will build trust and morale among employees and improve employee retention
They will facilitate statutory audits, inspections, and/or regulatory reporting.

Refer here: AI and What It Means for Indian Labor Laws: What to Expect

Key Employment Laws in India Every HR Must Know

Indian Labour Codes (New Framework)

The Indian Government has merged 29 central labour laws into a new framework, forming four new labour codes which are:

Code on Wages, 2019
Industrial Relations, 2020
Social Security Code, 2020
Occupational Safety, Health and Working Conditions, 2020

The Codes' purpose is to simplify the compliance process for Employers. Most states have still not fully implemented these Codes as of this writing.

Code on Wages, 2019

The Code on Wages governs:

Minimum wages
Timely payment of wages
Equal payment to male and female employees

HR Responsibilities are:

Employers are legally required to pay employees no less than the minimum wage set by law. Employers also cannot discriminate against female employees with regard to their pay. Employers also must maintain records that document the wages and salaries of the employees.

Industrial Relations Code, 2020

This Code is concerned with the following areas:

Hiring and Termination
Layoffs, Retrenchment and Closure
Trade unions and dispute resolution

As an HR professional, it is your responsibility to:

Follow appropriate procedures when terminating an employee
Understand the content of a company's standing order
Manage industrial relations disputes in a lawful manner

The Social Security Code of 2020 applies to:

The Indian Government has merged 29 central labour laws into a new framework, forming four new labour codes which are:

EPF
ESI
Gratuity/Maternity

As an HR professional, it is your responsibility to:

Make contributions to EPF and ESI on time
Calculate and pay gratuities
Provide social security for gig workers and contract workers

The Occupational Safety, Health and Working Conditions Code of 2020 is based on the following:

The Indian Government has merged 29 central labour laws into a new framework, forming four new labour codes which are:

Workplace safety
Working hours and leave
Health and Welfare Facilities

As an HR professional, it is your responsibility to:

Ensure that working conditions are safe
Implement workplace policies
Maintain records of safety and inspection procedures

Other Important Employment Laws for HR

Shops and Establishments Act

Maximizes opportunities for commercial establishment-related working time limits, such as the weekly day of rest, statutory holidays and number of leave days HR departments throughout the State should ensure they register with the State, renew on time and comply with the requirements regarding Attendance and Leave.

Payment of Bonus Act

Provides for the payment of bonuses to eligible employees as a function of their profits and performance HR Departments must determine that the employee meets eligibility requirements, accurately calculate bonuses, and distribute bonuses timely, in accordance with statutory requirements.

Payment of Gratuity Act

Provides retirement benefits for employees who complete 5 years of continuous service with their employer HR must accurately determine gratuity amounts owed and pay them promptly when an employee resigns from employment, retires or is terminated from employment.

Maternity Benefit Act

Maternity leave is being provided to maternity leave and maternity leave taken to be being provided to protect the rights of women employees of the organisation. The Human Resource Division (HRD) will provide for Policy on Maternity, statutory maternity leave and protection from discrimination due to either being pregnant or due to maternity.

Sexual Harassment of Women at Workplace (POSH) Act

This Act requires that organizations create and maintain a POSH policy, establish an Internal Complaints Committee (ICC) and provide regular training and awareness programs regarding this policy to all employees.

Hiring, Contracts, and Termination: HR Best Practices

Use appointment letters & employee contracts that clearly define all aspects of employment; including the terms, responsibilities, salary, and workplace policies are documented to reduce the potential for any disputes that could arise in the future.
Clearly define the timeframes, performance measures and exit criteria for the staff member so that both the Employer and the Employee understand them.
Adhere to State laws regarding layoffs and terminations, such as providing sufficient notice to employees as required by law and using appropriate processes in order to reduce both litigation and reputational risks.
Maintain all records related to actual employees for audit and compliance purposes. You must maintain accurate records of contracts, performance evaluations, payroll records, statutory filings, etc.

Common Compliance Mistakes HR Teams Should Avoid

Improper Structures of Pay

HR departments that incorrectly structure Basic Pay, Allowances and other statutory components, risk underpayment of wages below the minimum wage standard while simultaneously increasing the liability associated with making insufficient contributions to the EPF. Therefore, employers are subject to audits and, in turn, a re-assessment of the employers’ liability(s) as a result of these audits.

Failure to Comply with the POSH Act

The inability to establish an Internal Complaints Committee (ICC), to conduct training on the Prevention of Sexual Harassment (POSH) and to file annual reports, may have significant legal implications for an employer and damage the employer’s public image.

Misclassifying Contractual or Gig Workers

Classification of workers for the purpose of not providing them the benefits associated with being employed would have the effect of providing for reclassifying of those workers by the authority having jurisdiction over that matter, and in so doing, creating an obligation upon the employer to provide all statutory benefits related to that position retroactively, including (but not limited to) EPF, ESI, gratuity, etc.

Common HR Compliance Risks and Preventive Actions

Compliance Risk	Common Mistake	Impact on Employer	HR Best Practice
Statutory Filings	Missing due dates	Penalties and interest	Maintain compliance calendar
Wage Structuring	Incorrect salary breakup	Audit and backdated liability	Align wages with minimum wage laws
POSH Compliance	No ICC or training	Legal action and reputational risk	Regular training and reporting
Worker Classification	Misclassification of workers	PF/ESI disputes	Clear contract terms and role review

Conclusion

HR must have a thorough understanding of Employment Laws in India as they are constantly changing. Having this knowledge is essential to protect the company against liability and to create an honest and productive workforce. As representatives of the company, HR is responsible for looking out for the company and taking actions to help ensure HR can interpret and comply with India's very complicated Employment Law system.

Suggested Read: Functions and Importance of HRM

FAQs

1. Why are employment laws necessary to HR teams in India?

To ensure compliance with laws, protect employees' rights and avoid penalties and disputes.

2. Which four labour codes currently exist in India?

Wages Code, Industrial Relations Code, Social Security Code and OSH Code

3. Are labour codes currently implemented in India?

Not all labour codes are currently being implemented in India; it is dependent upon state notifications.

4. What are the roles of HR according to the POSH Act?

HR must set up an Internal Complaints Committee, create policies related to the Act and provide training for employees on providing POSH.

5. How can HR Teams remain up-to-date with New Employment Laws?

HR Teams should perform regular audits for their organisation, monitor for updates regarding Employment Law, conduct Compliance checks, and take advantage of legal consulting services.

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