Resignation/ notice period depends from company to company. As per standing order/ service rule it is generally between 30-90 days and it has to be from both sides. There is no hard a fast rule under any law.
A 30 to 90-day notice period applies in order to terminate 'workmen' (as defined in the Industrial Disputes Act, 1947)
There are two types of notice period: statutory and contractual. Statutory notice is the minimum legal notice that can be given. Employers should give the employee:
Is notice period (3 months) legal in India?
It can be easily understood that the ambit and scope of section 23 of the Indian contract act 1872, is vast and therefore the applicability of its provisions is subject to scrutiny by the court of the consideration and object of an agreement and the agreement itself.
Therefore, in order to bring a case within the purview of section 23, it is necessary to show that the object of the agreement or consideration of the agreement or the agreement itself is unlawful.
I'll keep it short and simple:
Either party - employer or employee can terminate the contract by giving sufficient notice or compensating accordingly. In such a case, employer is bound to release the employee without any fuss, assuming that either of the above two conditions are met.
So, if your organization doesn't allow you to buyout the notice period, please feel free to knock on the doors of the Indian judiciary.
The following key issues should be highlighted:
- A 30 to 90-day notice period applies in order to terminate ‘workmen’ (as defined in the Industrial Disputes Act, 1947) – that is, employees whose role is not primarily supervisory, administrative or managerial) for convenience, with 15 days’ pay due for every year worked. In the case of manufacturing units, plantations and mines with 100 or more workmen, termination for convenience requires prior government approval; in other sectors, it requires only government notification.
- Termination for cause does not include non-performance – it includes only behaviour which qualifies as misconduct.
- The ‘last in, first out’ principle requires that the employer first terminate for convenience the last people to join the organisation in the same role. However, this requirement can be contracted out of. When hiring for the same role, workmen who were terminated for convenience should be given the opportunity to re-join the company.
- State laws generally provide for about 15 days of earned/regular leave a year. Employees also benefit from up to 10 days of sick leave and a possible 10 additional days of ‘casual leave’. This is generally more than what most organisations would ideally like to provide.
- Most state laws provide for ‘casual leave’ – the employee can opt not to come to work that day without applying for leave in advance. Many organisations find this disruptive.
- Most state laws restrict women from working at night; if women are to work at night, specific approval must be obtained. This exemption is granted only to limited business sectors (eg, IT sector). Further, the employer must offer door-to-door transport and meet some security-related requirements.
- Most state laws prescribe overtime for any hours worked beyond 48 hours in a week. However, this is seldom observed.
- Indian law regulates and in some cases prohibits the use of contract workers. To engage contract workers, the contractor must hold a licence and the employer must be registered as a ‘principal employer’.
- Non-compete agreements are not enforceable under Indian law, while non-solicitation clauses can be enforced only in limited ways.
- While the ‘work for hire’ principle applies under the Indian copyright regime, it does not apply under the Indian patent regime; employees must thus provide formal assignments.
- Indian laws require employers to maintain a plethora of registers and notices. Compliance with such requirements is difficult and full compliance is rare.
What do you consider unique to those doing business in your country?
Some of the points mentioned above are unique to India. In addition, while Indian employment law is mainly federal in nature, most states have a Shops and Establishments Act. These statutes are similar, but not identical. Further, some states have been permitted to make amendments to central laws, with which are thus applicable in a different manner in such states.
Is there any general advice you would give in the employment area?
India is heavily regulated in the employment arena. Legal assistance should be obtained with regard to employment contracts and employment terms of service. Practical advice should be sought on best practices and common practices, so that policies are HR friendly and legally compliant. Advice should also be obtained on areas where compliance is difficult, so that employers can adopt positions that balance convenience against risk.
Emerging issues/hot topics/proposals for reform Are there any noteworthy proposals for reform in your jurisdiction?
As part of the objective to make it easier to do business in India, the government has proposed that the federal labour laws be revised and possibly amalgamated into two or three labour codes. If this is accomplished, the filing requirements will be streamlined. Amendments have also been proposed to some federal laws relating to factories and the use of apprentices. There has been no progress taking these initiatives forward and it appears unlikely that the government will do so.
Key amendments to law in recent months include a substantial change to the Maternity Benefit Act 1961 through the Maternity Benefit (Amendment) Act 2016. Key features of this amendment include:
- an increase in paid time off for eligible female employees from 12 weeks to 26 weeks in case a female employee has fewer than two children. If she has two or more children, she is entitled to 12 weeks’ leave;
- the introduction of the concepts of a 'commissioning mother' and an 'adopting mother', which widens the scope of the law. Such mothers are entitled to 12 weeks’ leave;
- the option to work from home once the paid maternity leave period has ended, based on an agreement with the employer; and
- requiring an establishment with 50 or more employees to set up a crèche facility.
Overall, the amendments are progressive in nature. From an employer’s perspective, there will be greater financial implications due to the increased maternity leave payment and also the benefits to be paid to the new categories of eligible female employees.
In December 2016 the Employee’s State Insurance Act 1948 was amended, increasing the salary or wages threshold for coverage of an employee to Rs21,000 (approximately $309) per month from the previous wage cap of Rs15,000 (approximately $221) per month. The act applies to commercial establishments and provides for social security insurance for employees in case of sickness. The amendment has led to higher employee coverage under the law.
What are the emerging trends in employment law in your jurisdiction?
After decades of the government and courts adopting a somewhat socialist mind set, there has been a shift to a more pragmatic, business-friendly approach. The old approach, which focused on unskilled and daily wage workers, has given way to a focus on India’s growing service industry. There is heightened interest in rewriting the employment laws to make them more business friendly. India’s newest employment law on the prevention of sexual harassment is also leading to an increased number of sexual harassment complaints and additional processes to be followed.
Another important aspect is the move towards e-governance in the labour law sector. A new web portal launched by the government provides users with a unique labour identification number, facilitating online registration, the filing of self-certified, simplified and single online returns for specific federal laws, and a transparent labour inspection scheme on risk-based criteria. Some concessions have also been provided for start ups in terms of employment law compliances.
The employment relationship
Country specific laws What laws and regulations govern the employment relationship?
Some states require that the employer prepare an appointment order for new hires, although this is seldom observed. There are no direct laws dealing with probation on a general basis in India, which is, however, a common practice. The (federal) Industrial Employment (Standing Orders) Act1946 (which is applicable to workmen), provides for a probationary period of up to three months. Certain states have built in the probation concept indirectly into their local laws, which ranges from three to six months. Ideally, a probation period should not exceed 240 days, as several statutory social welfare laws apply to employees who have worked for such period. The Industrial Disputes Act 1947 (applicable to workmen), prescribes that if certain terms of service change, notice must be given to the employee. It also prescribes requirements for termination for convenience, including notice and compensation.
Who do these cover, including categories of worker?
There are essentially two types of employer and two types of employee. Employers are either:
- ‘establishments’ – a term which encompasses all employers; or
- ‘factories’ – a term which typically encompasses manufacturing units. Mines are sometimes covered along with factories.
Employees are either:
- ‘employees’ – a term which covers all employees in any kind of role; or
- ‘workmen’ (as defined in the Industrial Disputes Act, 1947) – that is, employees whose primary role is not supervisory, managerial or administrative.
In addition, certain state laws may exclude senior management employees from their scope of application.
Misclassification Are there specific rules regarding employee/contractor classification?
Indian law regulates and in some cases prohibits the use of contract workers. To engage contract workers, the contractor must hold a licence and the employer must be registered as a ‘principal employer’.
Contracts Must an employment contract be in writing?
Except in states which require an appointment order, Indian law does not explicitly require that an employment contract be in writing, although this is the typical practice followed by most employers.
Are any terms implied into employment contracts?
Certain legal terms are implied in the employment contract. A duty of care, a right to privacy and a duty to maintain confidentiality are implied in the employment contract.
Are mandatory arbitration/dispute resolution agreements enforceable?
Yes.
How can employers make changes to existing employment agreements?
Under Indian contract law, a contract requires the consent of both parties. Thus, the employer cannot unilaterally make changes to the employment agreement. Typically, compensation terms are set out in an annex to the agreement, which should provide that these will be subject to change from time to time. Standard terms of employment – such as working hours, vacation, benefits, security procedures and disciplinary procedures – are normally set out in the employment terms of service, rather than in the employment contract. The employment contract should state that these terms of service apply to the employee and will be subject to change from time to time.
An employer cannot change specified service conditions (eg, compensation, grade classification and customary concessions) for ‘workmen’ (as defined in the Industrial Disputes Act, 1947) without providing 21 days’ prior statutory notice and notice to the labour authorities. This should be considered when implementing changes to an employment agreement.
Foreign workers Is a distinction drawn between local and foreign workers?
A significant difference between local and foreign employees is evident in the law on provident funds, which is a type of pension. The threshold to qualify, the manner of deduction and the benefits are different for foreign employee, and differ further depending on whether the country of origin has a social service agreement with India. There are no other substantive distinctions between local and foreign employees.
Recruitment
Advertising What are the requirements relating to advertising positions?
Under the Employment Exchange (Compulsory Notification of Vacancies) Act, 1959, if the state so requires, a private sector establishment with 25 or more employees must notify vacancies to specific employment exchanges. However, this is seldom observed.
Background checks
What can employers do with regard to background checks and inquiries in relation to the following:
(a) Criminal records?
While it is possible to conduct criminal background checks, this is extremely difficult in practice because criminal records are not digitised and are not consolidated nationwide. Accordingly, where a criminal background check must be carried out, this is typically done at the police station with jurisdiction over the employee’s current place of residence or anywhere that he or she has lived for a reasonable period.
(b) Medical history?
Employees’ medical histories cannot be accessed easily, since these are not digitised and there is no repository of medical records. Employee consent is required to disclose medical records to the employer. However, some employers require employees to undergo medical checks and have the diagnostic centre send the report directly to the employer. Subject to certain specific restrictions (eg, pre-employment testing for HIV is not permitted), there is no prohibition against this practice under Indian law.
(c) Drug screening?
Indian law does not prohibit drug screening.
(d) Credit checks?
An individual is entitled to obtain information on his or her credit rating. The employer can also access this information, with the employee’s permission and on providing necessary proof of identity. Access to credit rating information is more common in banks and financial institutions.
(e) Immigration status?
Indian law does not specifically require an employer to check the immigration status of a foreigner. Indian law does not prevent the employer from checking whether a foreign employee holds the necessary visa to work in India. If a foreign individual on an employment visa wishes to change employment to another company, he or she must leave India and apply afresh for a visa. The only exception is where the foreigner is changing jobs between a registered holding company and its subsidiaries or vice versa, or between subsidiaries of a registered holding company. In such case the foreigner may not need to leave India, provided that he or she fulfils specific criteria, including obtaining prior government approval for the change in employment.
(f) Social media?
There is no bar against conducting background checks through social media.
(g) Other?
The most common background checks undertaken are of educational qualifications. The employee must consent to this and the employer (or an outsourced provider) will then write to the relevant institution requesting confirmation. The institution may charge a fee for providing this information. Most institutions have a procedure in place in this regard.
Wages and working time
Pay Is there a national minimum wage and, if so, what is it?
There is no national minimum wage. However, the central and state governments can issue notifications on minimum wages in specific industries. The federal government has set the recommended minimum wage to Rs176 per day and advised state governments to implement the same.
Are there restrictions on working hours?
By and large, working up to nine hours a day is permitted, with a weekly limit of 48 to 50 hours. There are laws that restrict women from working at night (between 8:00pm and 6:00am). Some states also have a maximum number of hours of overtime that can be worked.
Hours and overtime What are the requirements for meal and rest breaks?
Most state laws provide for a break of 30 to 60 minutes after four to five hours of work. In practice, it is typical to provide a one-hour lunch break in an eight-hour day.
How should overtime be calculated?
Overtime is usually calculated at twice the rate of normal wages. State law defines what the term ‘wages’ covers; this typically includes basic wages plus normal allowances, but excludes any bonus component.
What exemptions are there from overtime?
There are no exemptions from paying overtime. However, the overtime provisions are seldom observed – generally, companies do not pay overtime when employees stay late to complete their work. It is recommended that employers pay overtime at least when employees are required by the nature of the assignment to work overtime – for example, call centre employees.
Is there a minimum paid holiday entitlement?
Yes. This varies from state to state, but is generally about 15 days. Most states prescribe up to 10 days of sick leave and some states prescribe another entitlement of up to 10 days of casual leave. In addition, most states prescribe about 10 days of public holidays; four to five of these are mandatory national and state holidays, while the remainder are chosen by the employer from a larger list provided by the state.
What are the rules applicable to final pay and deductions from wages?
Final pay must be made within two days of the date of termination where the employee’s services are terminated by the employer. In case of the employee’s resignation, the final pay-out can be made as part of the company’s normal payment cycle.
Deductions are permitted from an employee’s wages, but only for specified reasons (eg, on account of fines, deductions for damage to or loss of goods expressly entrusted to the employee and recovery of loans or advances). Deductions are generally permitted only up to 50% of the employee’s wages.
