India

Global Compliance Guide

Labor Requirements

FACTORIES ACT

The Factories Act, 1948 is applicable only factories and factory workers.

 

“Worker” means a person employed, directly or by or through any agency (including a contractor) with or without the knowledge of the principal employer, whether for remuneration or not], in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to, or connected with, the manufacturing process, or the subject of the manufacturing process but does not include any member of the armed forces of the Union;

 

“Factory” means any premises including the precincts thereof –

      • Whereon ten or more workers are working or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or
      • Whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on,- but does not include a mine subject to the operation  of a mobile unit belonging to the armed forces of the Union, a railway running shed or a hotel, restaurant or eating place.

The following compliances for workers fall under the Factories Act:

        • Work Hour
        • Overtime
        • Night Shift
        • Breaks
        • Annual Leave
        • Public Holiday
        • Special Leave (Earned Leave, Personal Leave)

SHOPS AND ESTABLISHMENT ACT

Commercial establishment means a commercial or trading or banking or insurance establishment, an establishment or administrative service in which persons employed are mainly engaged in office work, a hotel, restaurant, boarding or eating house, a cafe or any other refreshment house, a theatre or any other place of public amusement or entertainment and includes such establishments as the State Government may by notification declare to be a commercial establishment.

 

Employee means a person wholly or principally employed in or in connection with, any establishment whether working on permanent, periodical, contract or piece-rate wages, or on commission basis, even though he receives no reward for his labor and includes an apprentice, any clerical or other members of the staff of a factory or industrial establishment who falls outside the scope of the Factories Act, 1948, but does not include a member of the employer’s family; and “employed” shall be construed accordingly. The following compliances for employees fall under the state-specific Shops and Establishments Act:

      • Work Hour
      • Overtime
      • Night Shift
      • Breaks
      • Annual Leave
      • Public Holiday
      • Sick Leave

 

CONTRACT LABOUR (REGULATION AND ABOLITION) ACT

 It regulates the engagement and terms of employment of contractor, contract employee and principal employer.

Hours & Pay Regulations

Normal Working Hours

Working hours are governed by the state-specific Shops and Establishments Act and in the case of manufacturing facilities by the Factories Act. The typical six-day working week is Monday through Friday, 9:30 a.m. to 5:30 p.m., with a half day on Saturday. Under the Factories Act 1948, daily work hours cannot exceed nine and weekly work hours of 48. In the case of shops and commercial establishments.

 

Women may work in any factory, but only between the hours of 6 a.m. and 7 p.m. No women shall be employed between the hours of 10 pm to 5 am. There shall be no change of shifts except after a weekly holiday or any other holiday. Factories Act, 1948 – Sec 52,53 and 54.

Overtime

Employees covered by the Minimum Wages Act are entitled to double pay for hours worked in excess of the hours constituting a normal workday. Similarly, the Factories Act mandates that any work beyond nine hours per day or 48 hours per week is considered overtime and is entitled to overtime pay.

 

The Minimum Wages (Central) Rules, 1950 provide that, when a worker works for more than nine hours on a single day or for more than 48 hours in a single week, the worker is entitled to overtime pay as follows:

      • In case of employment in agriculture, at one and one-half times the ordinary rate of wages; and
      • In the case of any other employment, at double the ordinary rate of wages.

If employees are covered under the provisions of the Factories Act, 1948, those provisions apply instead of the provisions of the Minimum Wages Act. If a worker works in a factory for more than nine hours in a single day or for more than 48 hours in a single week, the worker is entitled to wages at twice the ordinary rate of wages.

 

The maximum number of overtime hours an employee can be required to work is 50 in a three-month period. Factories Act, 1948, No. 63, § 59; Minimum Wages Act, 1948, No. 11, § 14.

Night Work

Where a worker in a factory works on a shift which extends beyond midnight it is called night shift work. Factories Act, 1948 – Sec 57.

Breaks

Meal or rest breaks of half an hour to an hour are required for employees working a continuous period of five hours. The total number of hours worked by a worker without an interval should not exceed six hours. Factories Act, 1948 – Sec 52,53 and 54.

Work On Rest Days

All employees must receive a day of rest in every period of seven days and 12 hours rest period between shifts. The day of rest is ordinarily Sunday, but the employer may fix any other day of the week as the rest day. An employee may not be required or even allowed to work on a scheduled rest day unless he or she has or will have a substitute rest day for a whole day on one of the five days immediately before or after the rest day. In no situation shall the employee work for more than 10 consecutive days without a whole rest day. Factories Act, 1948 – Sec 52,53 and 54.

Sunday Work

 

Weekly Compensatory Off

No adult worker is required or allowed to work in a factory on the first day of the week unless he has or will have a holiday for a whole day on one of the three days immediately before or after the said day, and the manager of the factory has, before the said day or the substituted day whichever is earlier delivered a notice at the office of the Inspector of his intention to require the worker to work on the said day and of the day which is to be substituted, and displayed a notice to that effect in the factory.

 

In accordance to the paragraph above, where any worker works on the said day and has had a holiday on one of the three days immediately before it, that said worked day shall, for the purpose of calculating his weekly hours of work, be included in the preceding week.

 

Where a worker is deprived of any of the weekly holidays as stated above, he shall be allowed within a month in which the holiday was due to him or within the two months’ immediately following that month, a compensatory holiday of an equal number of the holiday lost.

 

No substitution shall be made which will result in any worker working for more than ten days consecutively without a holiday for a whole day. Factories Act, 1948 – Sec 52,53 and 54.

Public Holidays

India observes the following three national holidays:

      • Jan. 26: Republic Day
      • Aug. 15: Independence Day
      • Oct. 2: Birthday of Mahatma Gandhi

There is no Central level legislation in this respect. Different State level Acts (National and Festival Holiday Acts) govern the public holidays. In addition, an employer is required to provide five to nine festival holidays, the number depending on the state in which operations are located. Generally, a list of holidays is published by the state government every year, and employers are required to choose the holidays they will observe.

 

Holiday Pay – Employees who are required to work on a public holiday are entitled to double pay.

Annual Leave

Vacations commonly referred to as “annual” or “privilege” leave in any organization (other than a factory) are governed by the provisions of the relevant state-specific Shops and Establishments Act. These laws may differ from state to state.

 

According to the Factories Act, 1969, an adult employee shall be allowed to take one day of leave for every twenty days of work performed by him during the previous calendar year. This is a very common type of leave in India. Usually, employers have policies to allow their employees to take 18-24 days of leave in a calendar year. Some industries do not segregate leave into sick, casual and earned leave; instead, they allow their employees to take 30 days of earned leave in a calendar year. Earned leave is also called as Paid Vacation or Paid Time-Off.

 

For workers covered under the provisions of the Factories Act, if the employment of a worker who is entitled to leave as the case may be, is terminated by the occupier before he has taken the entire leave to which he is entitled, or the worker quits his employment before he has taken the leave, the occupier of the factory shall pay him the amount payable in respect of the leave not taken, and such payment shall be made, where the employment of the worker is terminated by the occupier, before the expiry of the second working day after such termination, and where a worker who quits his employment, on or before the next payday. Factories Act, 1948, No. 63, § 7.

Meal Breaks

Normally lunch break is for one hour, between 1:00 and 2:00 p.m. of the day.

Special Leave

Sick/Casual/Personal Leave

These leaves are generally governed by the state-specific Shops and Establishments Act. Not all states separately define casual and sick leave. The number of days of such leave to which employees are entitled varies from 7 to 12 depending on the state in which the workplace is located. Employers have policies to let their employees avail 6-12 days of casual leave.

 

In the manufacturing sector, casual/sick leave is governed by the Industrial Employment (Standing Orders) Act, 1946, under which employees are entitled to up to 10 days of leave. Casual/sick leave cannot be accumulated or cashed out. Emergency, accidents or unexpectedness is beyond the control of an employee. To address such situations, employees are allowed to take casual leave. Similar to sick leave, this leave is uncommon across industries. This leave is prevalent manufacturing set-ups.

Bereavement Leave

Some companies allow 3-5 days of bereavement leave in case of death in an immediate or extended family.

Maternity Leave

In 2017, new maternity benefit rules came into force requiring businesses with 10 or more employees to provide 26 weeks’ paid leave during an employee’s first two pregnancies and 12 weeks’ paid leave for adoptive and surrogacy commissioning mothers. Female employees who have worked for a given employer for at least 80 days in the 12 months immediately preceding the date of expected delivery are eligible for the extended benefits, provided they give the employer written notice seven weeks before the expected date of delivery. The 26­week leave entitlement applies only to the first and second pregnancy. For the third child and after, only the original 12 weeks are available. Adoptive mothers are entitled to paid leave under the new legislation only if the adopted child is less than three months old. Maternity Benefit Act, 1961, No. 53, §§ 5(2), 6(2), 9, 10, 12; Maternity Benefit Amendment Bill, 2016, § 4.

Paternity Leave

Allowing paternity leave of male employees is not a legal requirement in India. However, some employers have policies to let their male employees avail 3-5 days of paternity leave. If it is compulsory to be married to avail paternity leave is open for debate.

Birthday Celebration Leave

As a best HR practice, many companies in India allow their employees to avail paid day off on their birthday.

Wedding Anniversary Celebration Leave

As a best HR practice, many companies in India allow their employees to avail paid day off to allow them to celebrate their wedding anniversary.

Marriage Leave

As a best HR practice, many companies in India allow their employees to avail paid day off of 3-5 days for their marriage.

Last updated on: May 17th, 2019