Hiring in India opens the door to a large, highly skilled talent pool, but navigating labor laws in India takes careful attention. While those laws apply at the federal level, individual states can set their own rules, and requirements often vary by job type and industry. India also recently consolidated dozens of legacy laws into four updated labor codes, creating a complex transition period for both domestic and international employers.
If you’re a global company looking to tap into India’s workforce, this guide is for you. From worker classification and termination rules to data protection, benefits, and workplace safety, here’s what you need to know to stay compliant—and support your team along the way.
Considerations about Indian employment and labor laws in 2025
India’s labor framework is undergoing a major shift, which means that, as a global employer, keeping up is a must. As of 2025, businesses must navigate a mix of national codes, state-level rules, and employee classifications that affect everything from benefits to dismissals—and require a more careful approach to compliance. Here’s what to keep in mind when hiring in India:
India’s labor laws are now consolidated
India has replaced 29 legacy labor laws with four streamlined labor codes: wages, industrial relations, social security, and occupational safety, health, and working conditions. The reform aims to reduce redundancy, but for employers, it also expands legal responsibilities and increases penalties for noncompliance.
The central government directed state governments to finalize their draft rules by March 2025, but many states have yet to fully implement the labor codes. These new laws regulate areas like minimum wage, working hours, and overtime payments.
While India’s parliament has enacted the codes, they’re not yet entirely in effect nationwide. Most states have drafted the necessary rules, but many still rely on legacy laws. This creates a dual compliance environment where employers must follow existing statutes while preparing to meet new regulatory requirements.
Different rules apply based on employee type
Indian labor law draws a legal distinction between what it considers “workmen” and "non-workmen." The terms may seem dated in some cultural contexts, but they remain the official classifications under laws like the Industrial Disputes Act and apply to all genders.
“Workmen” typically refers to employees in operational, clerical, or manual roles. These roles receive added legal protections, including formal procedures for termination, retrenchment, and access to grievance redressal mechanisms.
Non-workmen are generally managers, supervisors, or administrative staff and are governed more by individual employment contracts and state-specific Shops and Establishments Acts. Their protections are shaped by contract terms and local regulations rather than centralized labor statutes.
In other words, Indian courts assess job function, not job title. A person labeled “manager” may still qualify as operational-level staff under the law if their duties don’t involve genuine supervisory authority.
This classification is separate from the distinction between employees and independent contractors. Contractors are not covered by most labor laws and rely solely on their contractual terms. A misclassified contractor can lead to compliance risks, particularly around benefits, social security, and tax obligations.
Compensation structures also vary. Some employees receive a fixed monthly salary, while others may be paid hourly. Aligning pay with actual duties and classification helps ensure compliance with local regulations.
India doesn’t allow at-will employment
India doesn’t follow at-will employment, a system common in countries like the United States where employers can terminate employment without cause as long as the decision isn’t illegal or discriminatory. In India, letting someone go requires a valid reason. Employers need to cite specific grounds like misconduct, repeated absences, or serious policy violations.
Most new hires start with a probationary period that usually lasts three to six months. During this time, different notice rules may apply. The details should appear clearly in the employment contract.
Regulations around termination of employment depend on the employee’s role, the contract, and the labor laws that apply. But in most cases, aside from gross misconduct, employers must give advance notice or pay in lieu of notice before ending the employment relationship. They also need to give the employee a fair chance to respond.
Misclassifying workers can lead to penalties
Classifying someone as a contractor when they function as an employee creates serious compliance risks in India. Employees typically work under the direct supervision of a company, qualify for statutory benefits such as the Employees’ Provident Fund (EPF) and Employees' State Insurance (ESI), and usually have long-term arrangements.
Conversely, contractors work independently as self-employed individuals and do not receive these benefits.
Misclassification can result in fines, retroactive benefit payments, legal liabilities (including back wages, unpaid taxes, and social security dues), and even the suspension or loss of business licenses.
India’s employment laws and tax authorities increasingly scrutinize these classifications, which is why it’s important to revisit them with every new hire.
Indian law protects against workplace discrimination
The Indian Constitution and related legislation ban workplace discrimination based on race, religion, sex, disability, HIV status, and more. Employees are legally entitled to equal pay and fair treatment, with the Equal Remuneration Act ensuring wage parity and the Maternity Benefit Act safeguarding maternity leave and related rights.
Under the Maternity Benefit Act, eligible workers receive paid maternity leave and protection against dismissal during pregnancy. These safeguards are part of broader regulations regarding maternity leave in India, which allow workers to take legal action if they face discrimination. Employers found in violation may face claims for damages or reinstatement. Together, these protections help promote more inclusive working conditions across the country.
Indian workers have the right to join trade unions
Employees in India have the right to form and join trade unions under the Trade Unions Act and the Industrial Relations Code. If a union secures support from at least 51% of workers, employers must officially recognize it and engage in good-faith collective bargaining. Indian law also protects union members from retaliation when they advocate for workers’ rights within legal boundaries.
NDAs are enforceable in India—within limits
In India, courts recognize nondisclosure agreements (NDAs) under the Indian Contract Act, but the terms must stay fair and balanced. Courts often reject NDAs that try to block someone from working for a competitor or in the same industry after they leave a job. That said, formalizing an NDA under the Registration Act can make it easier to defend in court if needed.
Noncompete clauses are a different story. Indian law rarely allows employers to stop former employees from working in a similar role, for a competitor, or within the same industry. Courts tend to view these restrictions as unfair, especially when they limit a person’s ability to earn a living. Confidentiality provisions usually hold up, but post-employment noncompetes generally don’t.
Employers with Indian staff must follow health and safety standards
India’s Occupational Safety, Health, and Working Conditions Code outlines employer responsibilities across industries, such as safe working conditions and routine health checkups for eligible employees. It also requires digital records that track working hours and rest periods.
Both central and state government agencies have the authority to inspect worksites, and noncompliant employers may face fines of up to INR 500,000 or, in extreme cases, imprisonment.
These safety rules reflect a broader approach to statutory benefits in India, which also include access to medical care, leave entitlements, and job-specific working conditions. Together, they help protect employees’ health, safety, and quality of life at work.
Indian workplaces must prevent sexual harassment
Under India’s PoSH (Prevention of Sexual Harassment) Act, any workplace with 10 or more employees must establish an Internal Complaints Committee (ICC) to address sexual harassment claims. The law also requires employers to define and share anti-harassment policies, offer awareness training, and follow a structured, confidential process for managing complaints. To be compliant, ICCs must include a senior female presiding officer, two employee members, and one external member. Also, at least half the members must be women.
Protect employee personal data
Under the Digital Personal Data Protection Act, 2023, which redefines how privacy works in the workplace, employers act as data fiduciaries and must follow clear rules around consent, transparency, and how they handle employees’ sensitive information.
Before collecting any health records, government IDs, bank details, or data gathered during background checks, employers need clear, voluntary agreement from the employee. Many employment contracts now include terms explaining what data will be collected and how it will be used.
To stay compliant, companies hiring in India need strong data governance policies and a clear plan for reporting breaches.
Why hire in India
India has the second-largest labor force in the world, with more than 540 million people, second only to China. But its appeal goes far beyond numbers. With a strong foundation in STEM education and a steady stream of engineers, developers, and data professionals, it’s become a top choice for global companies building remote teams. Employers value the country's workforce for its technical skill, adaptability, and English fluency, which makes collaboration across borders easier.
Hiring in India also gives companies greater economic flexibility. The cost of hiring in India is generally lower than in many Western markets, allowing companies to scale while maintaining quality. Also, India’s time zone falls between Europe and Asia-Pacific, which makes it easier to work across regions. Teams in India can connect with Europe, Asia, and the Middle East at different times of the day. This helps global teams share progress, hand off work, and keep things moving—without needing everyone online at once.
Legal and payroll infrastructure has also matured. Employers are responsible for contributing to social programs such as the Employees’ Provident Fund (EPF) and Employees' State Insurance (ESI). While these statutory benefits add compliance obligations, they also reflect a growing framework that balances responsibility between employer and employee.
When you combine technical depth, labor market scale, cost efficiency, and a more developed compliance landscape, it’s easy to understand why more companies are turning to India to build distributed teams and support long-term growth.
Hire compliantly in India with Oyster
India gives you access to a large, highly skilled talent pool. But building a team there means navigating labor laws, evolving regulations, and rules around classification, benefits, and termination.
With Oyster as your employer of record (EOR) in India, you can hire full-time team members without setting up a legal entity. The Oyster platform offers compliant, competitive employment packages that align with India’s labor codes and social contribution laws. Every contract goes through legal review, and onboarding takes days—not months.
Oyster combines local expertise with a platform built for global hiring so you can focus on growing your team instead of decoding fine print.
Learn how Oyster’s employer-of-record solution makes hiring in India simpler, faster, and fully compliant. Book a demo today.
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
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