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Indian labour law


Indian labour law

Indian labour law refers to laws regulating labour in India. Traditionally Indian governments at federal and state level have sought to ensure a high degree of protection for workers, but in practice, legislative rights only cover a minority of workers. India is a federal form of government and because labour is a subject in the concurrent list of the Indian Constitution, labour matters are in the jurisdiction of both central and state governments. Both central and state governments have enacted laws on labour relations and employment issues.


  • History 1
  • Constitutional rights 2
  • Contract and rights 3
    • Scope of protection 3.1
    • Employment contracts 3.2
    • Wage regulation 3.3
    • Working time 3.4
    • Health and safety 3.5
    • Pensions and insurance 3.6
  • Workplace participation 4
    • Trade unions 4.1
    • Management participation 4.2
    • Collective action 4.3
  • Equality 5
    • Sex discrimination 5.1
    • Migrant workers 5.2
    • Vulnerable groups 5.3
  • Dismissal regulation 6
  • Unemployment 7
  • State laws 8
    • Gujarat 8.1
    • West Bengal 8.2
  • International comparison of Indian labour laws 9
  • Criticisms and reforms 10
  • See also 11
  • Notes 12
  • References 13
  • External links 14


Indian labour law is closely connected to the Indian independence movement, and the campaigns of passive resistance leading up to independence. While India was under colonial rule by the British Raj, labour rights, trade unions, and freedom of association were all suppressed. Workers who sought better conditions, and trade unions who campaigned through strike action were frequently, and violently suppressed. After independence was won in 1947, the Constitution of India of 1950 embedded a series of fundamental labour rights in the constitution, particularly the right to join and take action in a trade union, the principle of equality at work, and the aspiration of creating a living wage with decent working conditions.

Constitutional rights

In the Constitution of India from 1950, articles 14-16, 19(1)(c), 23-24, 38, and 41-43A directly concern labour rights. Article 14 states everyone should be equal before the law, article 15 specifically says the state should not discriminate against citizens, and article 16 extends a right of "equality of opportunity" for employment or appointment under the state. Article 19(1)(c) gives everyone a specific right "to form associations or unions". Article 23 prohibits all trafficking and forced labour, while article 24 prohibits child labour under 14 years old in a factory, mine or "any other hazardous employment".

Articles 38-39, and 41-43A, however, like all rights listed in Part IV of the Constitution are not enforceable by courts, rather than creating an aspirational "duty of the State to apply these principles in making laws".[1] The original justification for leaving such principles unenforceable by the courts was that democratically accountable institutions ought to be left with discretion, given the demands they could create on the state for funding from general taxation, although such views have since become controversial. Article 38(1) says that in general the state should "strive to promote the welfare of the people" with a "social order in which justice, social, economic and political, shall inform all the institutions of national life. In article 38(2) it goes on to say the state should "minimise the inequalities in income" and based on all other statuses. Article 41 creates a "right to work", which the National Rural Employment Guarantee Act 2005 attempts to put into practice. Article 42 requires the state to "make provision for securing just and human conditions of work and for maternity relief". Article 43 says workers should have the right to a living wage and "conditions of work ensuring a decent standard of life". Article 43A, inserted by the Forty-second Amendment of the Constitution of India in 1976,[2] creates a constitutional right to codetermination by requiring the state to legislate to "secure the participation of workers in the management of undertakings".

Contract and rights

Scope of protection

Indian labour law makes a distinction between people who work in "organised" sectors and people working in "unorganised sectors". The laws list the different industrial sectors to which various labour rights apply. People who do not fall within these sectors, the ordinary law of contract applies.

India's labor laws underwent a major update in the Industrial Disputes Act of 1948. Since then, an additional 45 national laws expand or intersect with the 1948 act, and another 200 state laws control the relationships between the worker and the company. These laws mandate all aspects of employer-employee interaction, such as companies must keep 6 attendance logs, 10 different accounts for overtime wages, and file 5 types of annual returns. The scope of labour laws extend from regulating the height of urinals in workers' washrooms to how often a work space must be lime-washed.[3] Inspectors can examine workspace anytime and declare fines for violation of any labour laws and regulations.VVG

Employment contracts

Among the employment contracts that are regulated in India, the regulation involves significant government involvement which is rare in developed countries. The Industrial Employment (Standing Orders) Act 1946 requires that employers have terms including working hours, leave, productivity goals, dismissal procedures or worker classifications, approved by a government body.[4]

The Contract Labour (Regulation and Abolition) Act 1970 aims at regulating employment of contract labour so as to place it at par with labour employed directly.[5] Women are now permitted to work night shifts too (10pm to 6am).[5]

The Latin phrase 'dies non' is being widely used by disciplinary authorities in government and industries for denoting the 'unauthorised absence' to the delinquent employees. According to Shri R. P.Saxena, Chief Engineer, Indian Railways, dies-non is a period which neither counted in service nor considered as break in service.[6] A person can be marked dies-non, if

1.Absent without proper permission.
2.When on duty left without proper permission.
3.While in office but refused to perform duties.

In cases of such willful and unauthorised absence from work, the leave sanctioning authority may decide and order that the days on which the work is not performed be treated as dies non-on the principle of no work no pay. This will be without prejudice to any other action that the competent authority might take against the persons resorting to such practises.[7] The principle of "no work no pay" is widely being used in the banking industry in India.[8] All other manufacturing industries and large service establishments like railways,posts and telecommunications are also implementing it to minimise the incidences of unauthorised absence of workers. The term 'industry' infuses a contractual relationship between the employer and the employee for sale of products and services which are produced through their cooperative endeavor.

This contract together with the need to put in efforts in producing goods and services imposes duties (including ancillary duties) and obligations on the part of the employees to render services with the tools provided and in a place and time fixed by the employer. And in return, as a quid pro quo, the employer is enjoined to pay wages for work done and or for fulfilling the contract of employment.Duties generally, including ancillary duties, additional duties, normal duties, emergency duties, which have to be done by the employees and payment of wages therefor. Where the contract of employment is not fulfilled or work is not done as prescribed, the principle of 'no work no pay' is brought into play.

Wage regulation

The Payment of Wages Act 1936 requires that employees receive wages, on time, and without any unauthorised deductions. Section 6 requires that people are paid in money rather than in kind. The law also provides the tax withholdings the employer must deduct and pay to the central or state government before distributing the wages.[9]

The Minimum Wages Act 1948 sets wages for the different economic sectors that it states it will cover. It leaves a large number of workers unregulated. Central and state governments have discretion to set wages according to kind of work and location, and they range between as much as INR 143 to 1120 per day for work in the so-called central sphere. State governments have their own minimum wage schedules.[10]

The Payment of Gratuity Act 1972 applies to establishments with 10 or more workers. Gratuity is payable to the employee if he or she resigns or retires. The Indian government mandates that this payment be at the rate of 15 days salary of the employee for each completed year of service subject to a maximum of INR 1000000.[11]

The Payment of Bonus Act 1965, which applies only to enterprises with over 20 people, requires bonuses are paid out of profits based on productivity. The minimum bonus is currently 8.33 per cent of salary.[12]

Working time

  • Weekly Holidays Act 1942
  • Beedi and Cigar Workers Act 1966

Health and safety

The Workmen's Compensation Act 1923 requires that compensation is paid if workers are injured in the course of employment for injuries, or benefits to dependants. The rates are low.[13][14]

Pensions and insurance


  • List of Indian labour laws - includes only laws enacted by the central government, each Indian state has additional laws
  • Post-Liberalization India and the Importance of Legal Reform by Sanjeev Sanyal
  • Provisions of the Factories Act, 1948
  • Deadly Labor Wars Hinder India's Rise
  • Important citations regarding contract labour management in India

External links

  • Government of India Planning Commission, Report of the Working Group on Labour Laws And Other Labour Regulations (2007)
  • CK Johri, Labour law in India (2012) KNS1220 J71
  • S Routh, Enhancing Capabilities through Labour Law: Informal Workers in India (2014)
  • PM Cawthorne, 'Of Networks and Markets: The Rise and Rise of a South Indian Town, the Example of Tiruppur's Cotton Knitwear Industry' (1994) 23(1) World Development 43
  • E Hill, 'The Indian Industrial Relations System: Struggling to Address the Dynamics of a Globalizing Economy' (2009) 51 Journal of Industrial Relations 395-410
  • S Routh, 'Forms of Solidarity for Informal Workers in India: Lessons for the Future?' (2013) LLRN Working Paper


  1. ^ Constitution of India, article 37
  2. ^ a b See Constitution (Forty-second Amendment) Act 1976 s 9
  3. ^ Mehul Srivastava, India Labour Laws Bloomberg Businessweek
  4. ^ Industrial Employment (Standing Orders) Central Rules 1946
  5. ^ a b c d e Aditya Gupta. "How wrong has the Indian Left been about economic reforms?". 
  6. ^
  7. ^ Rule 62,P&T manual Vol III, Government of India
  8. ^ C.Krishnamurthi .Dies Non (No Work No Pay) in Banking Industry ISBN 978-81-8387-226-3
  9. ^ Payment of Wages Act 1936
  10. ^ Minimum Wages Act 1948
  11. ^ Payment of Gratuity Act , Gratuity Act 1972
  12. ^ Payment of Bonus Act 1965
  13. ^ Workmen’s Compensation Act 1923
  14. ^ "Social Security in India". The Government of India. 2010. 
  15. ^ Employees Provident Fund and Miscellaneous Provisions Act 1952
  16. ^ See Employees' State Insurance Act 1948
  17. ^ Maternity Benefit Act 1961
  18. ^ Trade Unions Act 1926
  19. ^ As Gandhi said, "my advice to the employers would be that they should willingly regard the workers as the real owners of the concerns which they fancy they have created" in 'Harijan' (31 March 1946) reproduced in R Iyer (ed), The Moral and Political Writing of Mahatma Gandhi (1987) vol 3, 197-199
  20. ^ Ministry of Law, Justice and Company Affairs, Report of the High-Powered Expert Committee on Companies and Maintenance of Restrictive Trade Practices Acts (1978)
  21. ^ 1983 AIR 75, 1983 SCR (1) 9. Noted by J Cottrell, 'Indian Judicial Activism, the Company and the Worker: A Note on National Textile Workers Union v Ramakrishnan' (1990) 39(2) The International and Comparative Law Quarterly 433
  22. ^ Industrial Disputes Act 1947
  23. ^ Fundamental Rules, Government of India
  24. ^ RS Srivastava, 'Bonded Labor in India: Its Incidence and Pattern' (2005) Cornell University Working Paper
  25. ^
  26. ^ India Labour Regulations OECD
  27. ^ Parul Sharma (February 2007). "Split Legal Regime in India‘s Labour Laws". 
  28. ^ Basu et al, Retrenchment, Labor Laws and Government Policy: An Analysis with Special Reference to India, The World Bank
  29. ^ Lalit Bhasin, Labour and Employment Laws of India United Nations
  30. ^ Financial Times, Sleepy System, 21 January 2005
  31. ^ Supreme Court of India, Bharat Forge Co. Ltd vs Uttam Manohar Nakate on 18 January, 2005, CASE NO.: Appeal (civil) 4399 of 2002
  32. ^ Industries (Development and Regulation) Act 1951
  33. ^ a b Goldman Sachs says reforms to create 110 mn jobs for economy in 10 yrs Business Today, March 2014
  34. ^ Goldman Thumbs Up for Gujarat Model The Times of India
  35. ^ "Employing Workers - 2011 data (based on input from ILO, OECD, local governments and private employers)". The World Bank. 2012. 
  36. ^
  37. ^
  38. ^
  39. ^ Gordon, Li, Xu (12 August 2010). "Labor regulation, economic complexity, and the China-India gap". Hamilton University. 
  40. ^ Adhvaryu, Chari and Sharma (December 2009). "Firing costs and flexibility:evidence from firms employment responses to economic shocks". Yale University. 
  41. ^ "IMF calls for urgent reform in Indian labour laws". 
  42. ^ Kaushik Basu, Gary S. Fields, and Shub Debgupta. "Retrenchment, Labor Laws and Government Policy: An Analysis with Special Reference to India". World Bank. 
  43. ^ R. C. Datta / Milly Sil. "Contemporary Issues on Labour Law Reform in India". 
  44. ^ "Economic survey of India 2007: Policy Brief".  
  45. ^ Basu, Kaushik (27 June 2005). "Why India needs labour law reform". BBC. 
  46. ^ a b c "India Country Overview 2008". World Bank. 2008. 
  47. ^ "A special report on India: An elephant, not a tiger". The Economist. 11 December 2008. 
  48. ^ Gurcharan Das (July–August 2006). "The India Model". Foreign Affairs. 
  49. ^ World Bank, India Country Overview 2008
  50. ^ "New labour laws needed, says Manmohan". The Hindu (Chennai, India). 10 December 2005. 
  51. ^ "World Bank criticizes India's labor laws". 


See also

In Uttam Nakate case, the Bombay High Court held that dismissing an employee for repeated sleeping on the factory floor was illegal - a decision which was overturned by the Supreme Court of India. Moreover, it took two decades to complete the legal process. In 2008, the World Bank criticised the complexity, lack of modernisation and flexibility in Indian regulations.[46][51]

Prime Minister Manmohan Singh has said that new labour laws are needed.[50]

Many observers have argued that India's labour laws should be reformed.[41] [42] [43][44] [45][46] [47] [5][48] The laws have constrained the growth of the formal manufacturing sector.[46] According to a World Bank report in 2008, heavy reform would be desirable. The executive summary stated,

Criticisms and reforms

Relative regulations and rigidity in labor laws[35]
Practice required by law  India  China  United States
Minimum wage (US$/month) 6000 (US$97) /month[36][37] 182.5 1242.6
Standard work day 8 hours 8 hours 8 hours
Minimum rest while at work 30 minutes per 5-hour None None
Maximum overtime limit 200 hours per year 432 hours per year[38] None
Premium pay for overtime 100% 50% 50%
Dismissal due to redundancy Yes, if approved by government Yes, without approval of government Yes, without approval of government
Government approval required for 1 person dismissal Yes No No
Government approval required for 9 person dismissal Yes No No
Government approval for redundancy dismissal granted Rarely[39][40] Not applicable Not applicable
Dismissal priority rules regulated Yes Yes No
Severance pay for redundancy dismissal
of employee with 1 year tenure
2.1 week salary 4.3-week salary None
Severance pay for redundancy dismissal
of employee with 5-year tenure
10.7-week salary 21.7-week salary None

The table below contrasts the labour laws in India to those in China and United States, as of 2011.

International comparison of Indian labour laws

The West Bengal government revised its labor laws making it virtually impossible to shut down a loss-making factory.[33] The West Bengal law applies to all companies within the state that employ 50 or more employees.[34]

West Bengal

In 2004 the State of Gujarat amended the Industrial Disputes Act to allow greater labour market flexibility in the Special Export Zones of Gujarat. The law allows companies within SEZs to lay off redundant workers, without seeking the permission of the government, by giving a formal notice and severance pay.[33]


Each state in India may have special labour regulations in certain circumstances.

State laws

The Industries (Regulation and Development) Act 1951 declared that manufacturing industries under its First Schedule were under common central government regulations in addition to whatever laws state government enact. It reserved over 600 products that can only be manufactured in small scale enterprises, thereby regulating who can enter in these businesses, and above all placing a limit on the number of employees per company for the listed products. The list included all key technology and industrial products in the early 1950s, including products ranging from certain iron and steel products, fuel derivatives, motors, certain machinery, machine tools, to ceramics and scientific equipment.[32]


  • [31][30]

The dismissed worker has a right to appeal, even if the government has granted the dismissal application. Indian labour regulations provide for a number of appeal and adjudicating authorities – conciliation officers, conciliation boards, courts of inquiry, labour courts, industrial tribunals and the national industrial tribunal – under the Industrial Disputes Act.[29] These involve complex procedures. Beyond these labour appeal and adjucating procedures, the case can proceed to respective State High Court or finally the Supreme Court of India.

A permanent worker can be terminated only for proven misconduct or for habitual absence.[27] The Industrial Disputes Act (1947) requires companies employing more than 100 workers to seek government approval before they can fire employees or close down.[5] In practice, permissions for firing employees are seldom granted.[5] Indian laws require a company to get permission for dismissing workers with plant closing, even if it is necessary for economic reasons. The government may grant or deny permission for closing, even if the company is losing money on the operation.[28]

Some of India's most controversial labour laws concern the procedures for dismissal contained in the Industrial Disputes Act 1947. A workmen who has been employed for over a year can only be dismissed if permission is sought from and granted by the appropriate government office.[26] Additionally, before dismissal, valid reasons must be given, and there is a wait of at least two months for government permission, before a lawful termination can take effect. Redundancy pay must be given, set at 15 days' average pay for each complete year of continuous service. An employee who has worked for 4 years in addition to various notices and due process, must be paid a minimum of the employee's wage equivalent to 60 days before retrenchment, if the government grants the employer a permission to layoff.

Dismissal regulation

Child labour in India is prohibited by the Constitution, article 24, in factories, mines and hazardous employment, and that under article 21 the state should provide free and compulsory education up to a child is aged 14.[25] However in practice, the laws are not enforced.

Bonded Labour System (Abolition) Act 1976, abolishes bonded labour, but estimates suggest that between 2 million and 5 million workers still remain in debt bondage in India.[24]

Vulnerable groups

Migrant workers

  • Randhir Singh v Union of India Supreme Court of India held that the principle of equal pay for equal work is a constitutional goal and therefore capable of enforcement through constitutional remedies under Article 32 of Constitution
  • State of AP v G Sreenivasa Rao, equal pay for equal work does not mean that all the members of the same cadre must receive the same pay packet irrespective of their seniority, source of recruitment, educational qualifications and various other incidents of service.
  • State of MP v Pramod Baratiya, comparisons should focus on similarity of skill, effort and responsibility when performed under similar conditions
  • Mackinnon Mackenzie & Co v Adurey D'Costa, a broad approach is to be taken to decide whether duties to be performed are similar

Article 39(d) of the Constitution provides that men and women should receive equal pay for equal work. In the Equal Remuneration Act 1976 implemented this principle in legislation.

Sex discrimination

Article 14 states everyone should be equal before the law, article 15 specifically says the state should not discriminate against citizens, and article 16 extends a right of "equality of opportunity" for employment or appointment under the state. Article 23 prohibits all trafficking and forced labour, while article 24 prohibits child labour under 14 years old in a factory, mine or "any other hazardous employment".


According to fundamental rules (FR 17A) of the civil service of India, a period of unauthorised absence- (i) in the case of employees working in industrial establishments, during a strike which has been declared illegal under the provisions of the Industrial Disputes Act, 1947, or any other law for the time being in force; (ii) in the case of other employees as a result of action in combination or in concerted manner,such as during a strike, without any authority from, or valid reason to the satisfaction of the competent authority; shall be deemed to cause an interruption or break in the service of the employee, unless otherwise decided by the competent authority for the purpose of leave travel concession,quasi-permanency and eligibility for appearing in departmental examinations, for which a minimum period of continuous service is required.[23]

The Industrial Disputes Act 1947 regulates how employers may address industrial disputes such as lockouts, layoffs, retrenchment etc. It controls the lawful processes for reconciliation, adjudication of labour disputes.[22]

Collective action

The Industrial Disputes Act 1947 section 3 created a right of participation in joint work councils to "provide measures for securing amity and good relations between the employer and workmen and, to that end to comment upon matters of their common interest or concern and endeavour to compose any material difference of opinion in respect of such matters". However, trade unions had not taken up these options on a large scale. In National Textile Workers Union v Ramakrishnan[21] the Supreme Court, Bhagwati J giving the leading judgment, held that employees had a right to be heard in a winding up petition of a company because their interests were directly affected and their standing was not excluded by the wording of the Companies Act 1956 section 398.

It was the view of many in the Sachar Report recommended legislation for inclusion of workers on boards, however this had not yet been implemented.[20]

Management participation

The Trade Unions Act 1926, amended in 2001, contains rules on governance and general rights of trade unions.[18]

Article 19(1)(c) of the Constitution of India gives everyone an enforceable right "to form associations or unions".

Trade unions

Workplace participation

The Maternity Benefit Act 1961, creates rights to payments of maternity benefits for any woman employee who worked in any establishment for a period of at least 80 days during the 12 months immediately preceding the date of her expected delivery.[17]

The National Social Security Board.

The Employees' State Insurance provides health and social security insurance. This was created by the Employees' State Insurance Act 1948.[16]


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