Hiring in India

India's labor law system is one of the most layered in the world. You're not just dealing with one set of rules. The central government sets the baseline through major legislation, but each of India's 28 states (and 8 union territories) can add their own Shops and Establishments Acts, minimum wage orders, and local holiday calendars on top. That means an employee in Maharashtra and an employee in Karnataka might have different leave entitlements, working hour rules, and registration requirements, even though both fall under the same central statutes. If you're hiring across multiple Indian states, you need to track compliance in each one separately.

The big central laws you'll run into are the Employees' Provident Fund (EPF) Act, the Employees' State Insurance (ESI) Act, the Payment of Gratuity Act, and the Industrial Disputes Act. Under the EPF Act, both employer and employee contribute 12% of basic salary plus dearness allowance to the provident fund, and this is mandatory for establishments with 20 or more employees. ESI covers health insurance for employees earning up to 21,000 INR per month, with the employer paying 3.25% and the employee paying 0.75% of gross wages. After five years of continuous service, employees become eligible for gratuity, calculated at 15 days of wages for each completed year. The Industrial Disputes Act governs terminations and layoffs, and establishments with 100 or more workers need government permission before retrenching anyone.

Notice periods in India typically run from 30 to 90 days, depending on the employment contract and seniority. Most white-collar roles in the tech sector have a 60 to 90 day notice period baked into the offer letter, which can make quick transitions tricky. Terminations require documented cause, and final settlement (including earned leave encashment, gratuity if applicable, and any pending salary) must be paid within two working days under the new labor codes.

For leave, employees are entitled to a minimum of 15 to 18 days of earned leave per year (the exact number varies by state and whether you fall under the Factories Act or a state Shops and Establishments Act). India observes 3 national holidays (Republic Day on January 26, Independence Day on August 15, and Gandhi Jayanti on October 2), plus another 10 to 15 state and festival holidays depending on location. Maternity leave is 26 weeks for the first two children, with the employee receiving 100% of average daily wages. For the third child onward, it drops to 12 weeks.

India implemented four new Labour Codes in late 2025, consolidating 29 older laws into four codes covering wages, social security, industrial relations, and occupational safety. One of the biggest changes is the wage definition: allowances and non-basic components can't exceed 50% of total remuneration, which effectively increases the base on which PF, ESI, and gratuity are calculated. Fixed-term employees now qualify for gratuity after just one year of service instead of five. These codes also standardize rules around gig workers and platform workers for the first time.