Quick facts

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India, one of the largest economies in Asia, is known for its rapidly growing technology, manufacturing, and service industries. With a diverse and highly skilled workforce, India offers a favorable environment for both domestic and international businesses. The country has robust labor laws that provide essential protections and regulate employment practices, including contracts, working hours, and benefits.

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Employment Contracts

In India, employment contracts can be either permanent or fixed-term:

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• Permanent contracts are ongoing until terminated by either the employer or employee.
• Fixed-term contracts are used for specific projects or short-term work. These contracts specify the duration of employment, which must be reasonable but has no legal minimum or maximum limit.

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Probation Period

There are no specific laws governing probation periods, but the common practice in India is a probationary period lasting 3 to 6 months, during which either party may terminate the contract without providing extensive notice.

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Working Hours

Indian labor laws specify a maximum of 9 hours per day or 48 hours per week. Overtime is paid at twice the regular hourly rate for work beyond these limits.

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Vacation Days

The entitlement for vacation varies by state but generally includes:

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• 1 day of leave for every 20 days of work for adults, resulting in approximately 15 working days of annual leave.
• 20 working days of leave for young workers under 18 years of age.

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Employees receive their full daily wages during the term of their annual leave.

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Sick Leave

Employees are entitled to 7–12 days of paid sick leave annually, depending on state laws. Sick leave also includes bereavement and care for ill family members. Employees are paid 70% of their average daily wages during sick leave, and employers may require a medical certificate for absences longer than 3 days.

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Wages and Salary Payment

• Wages must be paid before the 7th day of the month for establishments with fewer than 1,000 employees and before the 10th day for larger establishments.
• The minimum wage is not fixed nationally and varies by state and sector, typically ranging between ₹17,500 and ₹23,000 per month.

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Public Holidays

India observes three national holidays:

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1. January 26: Republic Day
2. August 15: Independence Day
3. October 2: Gandhi Jayanti

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In addition, states designate several local and religious holidays based on regional customs.

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Employer Taxes

Employers are required to contribute to the following:

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• Provident Fund (PF): 12% of the employee's monthly basic salary, capped at ₹15,000.
• Employees' State Insurance (ESI): Employers contribute 4.75% of gross wages for establishments with more than 10 employees.

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Employee Taxes

Employees are taxed based on their income, with rates ranging from 5% to 30%. Other deductions include:

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• Provident Fund (PF): 12% of basic salary.
• Employees' State Insurance (ESI): 1.75% of gross wages.

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Notice Period

Notice periods vary by job level:

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• 1 week to 1 month for junior-level employees.
• 1 to 3 months for senior-level employees

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Termination must include a written notice specifying the reasons.

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Termination and Severance Pay

Indian law mandates gratuity payments instead of severance pay for employees who have completed 4 years and 9 months of continuous service. The gratuity formula is:

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• (15 days x last drawn salary x years of service) / 30.