Understanding Employment Norms in India: A Comprehensive Guide
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Hiring in India? Read on to find out the employment norms (like taxes, payroll and benefits) and EOR (Employer on Record) norms in India.

Employment Norms in India

India, one of the fastest-growing economies globally, is rich in human and natural resources. It is the most populous country and stands seventh in terms of area in the world. Its robust development in economies, infrastructure, and liberal labor laws have allured investors. The country has been a prime target of an array of businesses owing to its large consumption market.

General Information:

  • The Indian currency is the Indian Rupees (INR).
  • New Delhi is the capital of India.
  • Hindi and English are among the 22 official languages of India. Documentation can be in English or Hindi.
  • As of 2021, the GDP of India was reported to be USD 3176.30 billion.
The labor laws in India are governed by the Indian constitution and the ILO laws. Indian labor laws include employee benefits like social security, minimum wage, payroll, work hours, leaves, etc.
India map

Table of Contents

  • Agreements
  • Onboarding Process
  • Visa
  • Minimum Wage
  • Payroll Cycle
  • Annual Bonus
  • Health Benefits
  • Working Hours and Overtime
  • Leaves
  • Social Security
  • Taxes for Employers
  • Taxes for Employees
  • Probation
  • Termination
  • Severance Pay
  • Employees or Contractors
  • Final Words


The language of the agreement must be either English or Hindi. The translation of the agreement into another language can be provided if asked. India has three types of employment agreements:
  • Indefinite or open-term agreement: If an employment agreement isn't assigned otherwise, it is regarded as a permanent employment contract. A permanent employment agreement may specify either full- or part-time work. Employees with this contract often receive all types of statutory perks and rights.
  • Fixed-term agreement: Fixed-term agreement in India can be for a term of lesser than 4 years. If the term under this agreement exceeds 4 years, it is considered an indefinite contract. Fixed-term employment offers employment security along with the advantages that a permanent employment contract could have to offer.
  • Casual employment agreement: This type of contract can be terminated only when services are required for a certain job or period. This employment may be available daily, weekly, or monthly.
Onboarding Process

Onboarding Process

The hiring process in India is as follows.
  • A job description is prepared by the HR teams. They collaborate with the unit that has a job vacancy.
  • The description is then uploaded on the official website of the company along with other platforms like LinkedIn.
  • Some companies may even publish job vacancies in local newspapers. The advertisement can remain for a couple of days to a week.
  • Candidates apply for the job by proving their eligibility. They are further shortlisted based on rounds of screenings and interviews.
  • Final shortlisted candidates then negotiate their terms and conditions with the employer. After the mutual agreement, the candidate is hired as an employee.


India has three main types of Visas:
  • Short-term visa: Visas that are valid for a 1-year duration are under this category. This type of visa includes a medical visa or project visa.
  • Long-term visa: The long-term visa is issued for up to 5 years. This type of visa includes purposes like employment, entry, business, and research. It can be extended for 1 year.
  • Transit visa: Visas extended as a permit to travelers for crossing the country. It is issued for 15 days.

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Minimum Wage

Minimum Wage

The minimum wage in India is set according to the Minimum Wages Act of 1948. There are no legal provisions for minimum wages for corporates but only for factory workers. The minimum wage varies from state to state.
The national average minimum wage for factory workers is INR178 per day
Payroll Cycle

Payroll Cycle

The payroll cycle in India is monthly and given by the end of the month.
Annual Bonus

Annual Bonus

It is mandatory to give the 13th month's salary in India. It must be given within 8 months of the end of the current financial year.
Health Benefits

Health Benefits

  • The health benefits in India include the Employees' State Insurance Scheme (ESIC), Employees' Provident Fund, Gratuity, statutory leaves; and Maternity Leave.
Working Hours and Overtime

Working Hours and Overtime

  • Work hours: An employee is expected to work about 9 hours per day. The standard work hour in India must not exceed 48 hours per week.
  • Break: Employees are entitled to an unpaid lunch break of about 30 minutes between working hours.
  • Overtime: Overtime in India under corporates must not exceed 12 hours per week. The employer must give 200% of the regular wage during overtime.


The employer has to pay for the following leave

Sick Leave

  • Employees are entitled to 12 days of paid sick leave in India.

Maternity leave

  • A pregnant female employee is entitled to 26 weeks of paid maternity leave in India, 8 weeks before and 18 weeks after childbirth.

Parental leave

  • There is no legal provision for paternal leave in India. It depends on the employer.

Annual leave

  • Employees are entitled to 12 days of paid annual leave.

Casual leave (CL)

  • An employee gets a maximum of 3 days of CL per month and 6 CL per year. If unused by the end of the year, the CL lapses automatically.

Public Holidays (for the Calendar year 2023)

India has National and state-wise public holidays. Below is the list of national holidays.
  • New Year's Day - (1st January)
  • Pongal, Makarsankranti - (14 Jan)
  • Republic Day - (26 Jan)
  • Holi - (8 Mar)
  • Good Friday - (7 Apr)
  • Id-Ul-Fitr - (22 Apr)
  • Bakrid - (29 Jun)
  • Muharram - (29 Jul)
  • Independence day - (15 Aug)
  • Gandhi Jayanthi - (2 Oct)
  • Dussehra - (24 Oct)
  • Diwali - (12 Nov)
  • Day after Diwali - (13 Nov)
  • Christmas - (25 Dec)

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Social Security

Social Security

Social security in India covers pension and health insurance. Both employer and the employee contribute to it.
Taxes for Employers

Taxes for Employers

An employer has to pay
  • Provident Fund - 12%
  • Health Insurance - 3.25%

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Taxes for Employees

Taxes for Employees

There are 2 tax regimes in India - the old regime and the New Personal Tax Regime (NTPR). Employees can choose from either of these.
  • Provident Fund - Minimum 12%
(until 31st March 2023) (From 1st April 2023)
  • Below 2,50,000 NIL NIL
  • Above INR 2,50,000 5% NIL
  • Above INR 3,00,000 5% 5%
  • Above INR 5,00,000 10% 5%
  • Above INR 6,00,000 10% 10%
  • Above INR 7,50,000 15% 10%
  • Above INR 9,00,000 15% 15%
  • Above INR 10,00,000 20% 15%
  • Above INR 12,00,000 20% 20%
  • Above INR 12,50,000 25% 20%
  • Above INR 15,00,000 30% 30%


There is no fixed duration of probation in India. It can be for up to 6 months and must not exceed 6 months.

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The following scenarios can result in the employment relationship being terminated:
  • Resignation by the employee
  • Retirement age
  • Expiration or non-renewal of the job contract;
  • Employee dismissal for grave wrongdoing (such as theft, fraud, etc.);
  • Collective dismissal for financial reasons (such as bankruptcy, restructuring, etc.).
  • The employee must get a notice period of 30 days before the termination. The termination letter must state a valid reason for the termination.
Severance Pay

Severance Pay

Employees in India are entitled to severance pay based on the reason for termination. Usually, an employee who has worked for 1 year gets 15 days of severance pay.
Employees or Contractors

Employees or Contractors

  • A person who works for a company and earns a wage or salary is called an employee.
  • An organization or person who hires people to work for them is called an employer or contractor.
  • A duty of payment of overhead surcharges is paid by the company if found guilty.
  • The company has to pay all the related interests and sanctions on the behalf of a misclassified employee.
Final Words

Final Words

India is a country with a fast-growing economy and liberal employment norms. It offers an attractive opportunity with a skilled working population. The IT sector in India has been in great demand across the globe. If a company is looking to expand its outreach, India is a great option.

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