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Employment policy in India

Contract terms and conditions in India

Extension of contract in India

Fixed-term contracts in India

Working hours in India

Remote work in India

Tailored employment contracts in 100+ countries

Employment contracts in India

When looking to expand your workforce in India, you need to make sure your employment contracts are compliant and legally enforceable.

In this full guide, we’ll cover various topics, including the details of employment contract laws in India, guidance on how to handle contract extensions, a breakdown of different types of employment contracts, and insights on navigating remote work in the country.

Employment contracts law in India

While India’s labour laws do not strictly mandate that an employment contract be in writing, it is a common and standard practice to have all terms and conditions of employment agreed upon and signed by both parties. Employers are recommended to formalise employment relationships through written contracts to outline crucial aspects such as job responsibilities, salary, benefits, working hours, termination conditions, and confidentiality agreements.

Some employment policies and regulations implemented by the Indian government include:

Occupational Safety, Health, and Working Conditions Code (OSH Code): This mandates employers to provide new employees with comprehensive appointment letters in the format prescribed by relevant authorities.
Recent adjustments to the Employee’s Compensation Act of 1923 (ECA) and the Maternity Benefit Act of 1961 (MBA): These changes have introduced a requirement for written communication to employees, detailing the benefits they are entitled to, enhancing clarity, and ensuring a well-informed workforce.
Rights of Persons with Disabilities Act of 2016 (RPWD Act): This mandates employers to formulate and disclose an equal opportunity policy. This policy should elaborate on the job roles accessible to people with disabilities, the provisions made to facilitate their work, and the employment selection process for such candidates to ensure an inclusive work environment.
Transgender Persons (Protection of Rights) Rules 2020: This employment regulation extends the ethos of inclusiveness, requiring employers to publish a detailed equal opportunity policy for transgender individuals, covering infrastructure, safety measures, and amenities, and advocating for a discrimination-free workplace.
The Industrial Employment (Standing Orders) Act, 1946 (IE(SO)A): It specifically protects ‘workmen’ employees by standardising contractual terms, providing a layer of uniformity and security. Should employers wish to alter any essential working conditions potentially detrimental to workmen, a minimum of 21 days’ notice is mandated, safeguarding employee interests.

Probationary employment contract in India

In India, the probationary period serves as a trial phase for new employees, allowing employers to assess their suitability for the position. While not legally mandated, implementing a probationary period is a prevalent practice among Indian employers. Typically, probation periods in India range from three to six months, providing both parties—employer and employee—a fair opportunity to evaluate the job fit before confirming the employment on a permanent basis.

The employment contract or the company’s policies often outline the terms regarding the probation period, including its length and specific conditions. It’s crucial for both employers and employees to be well-acquainted with these terms to avoid any potential misunderstandings or legal issues.

Moreover, understanding the rights and obligations during the probationary period, such as leave policies and the conditions for termination or confirmation, is essential for maintaining a transparent and equitable workplace.

Employment policy in India

Adopting policies is generally at the discretion of the employer and can be adjusted as deemed necessary, provided they are well-drafted. However, employers must communicate any changes to specific service terms and conditions with a minimum of 21 days’ notice for employees classified as workmen.

Beyond the scope of employment contracts, employers often establish a set of employment policies to clearly outline the rights and responsibilities of their employees, including, but not limited to, policies on leave.

Third-party approval in India

When forming employment contracts, no external endorsements are needed, except for standing orders, which require validation by the labour department. According to the Industrial Relations Code, when an employer chooses to implement the model standing orders formulated by the government, such orders are automatically recognised as certified, streamlining compliance for the employer.

Aadhaar-based registration in India

Aadhaar-based registration, as mandated by Section 142 of the SS Code (Social Security Code), is a provision that requires every employee, unorganised worker, or other individual, including their family members or dependents, to use their Aadhaar number for registration purposes to access the benefits under the SS Code. While the entirety of the SS Code is not yet operational, the activation of Section 142 signifies a significant move towards integrating Aadhaar into the fabric of employment-related benefits and compliance.

In light of Section 142’s enforcement, the Employees’ Provident Fund Organisation (EPFO) has further specified that electronic challan-cum-return shall only be processed for those employee members whose Aadhaar numbers are both seeded and authenticated with their Universal Account Number (UAN).

The implementation of Aadhaar-based registration aligns with India’s broader aim to leverage Aadhaar for improving governance. It also represents a step forward in harnessing technology to foster transparency, reduce fraud, and ensure compliance and benefit distribution.

Employment of relatives’ policy in India

In India, the implementation of policies regarding the employment of relatives can vary by organisation. Generally, companies may adopt policies aimed at preventing conflicts of interest, favouritism, and other potential issues related to the employment of family members or relatives within the same company.

While there is not a universal law against hiring relatives in India, most companies in India have internal policies in place to ensure that employment decisions are made on merit and not on familial relationships, to maintain fairness and transparency in the workplace.

Contract terms and conditions in India

In India, employment relationships can be either expressly stated or implied. Generally, employment contracts in India are considered to be ‘unlimited term’ contracts, meaning they are valid until either termination or superannuation, unless specifically stated as ‘fixed term’ contracts.

Typical elements that should be included in an employment contract in India are:

Job location, description, and title: Clearly state where the job is located and summarise the job role and title.
Duration of employment: While many contracts have an “unlimited term,” if the contract has a “fixed term,” it should specify the duration.
Salary or wages: Details on the compensation, including any performance-based bonuses or incentives.
Benefits: Outline any benefits, such as health insurance, retirement plans, or any other company-specific benefits.
Working hours: Clear terms about the daily or weekly working hours and any overtime compensation.
Probation period: If applicable, specify the duration of the probation period.
Termination conditions: How the employment can be ended by either party, including notice period requirements.
Retirement age: The contract should specify if the company has a set retirement age, usually at 60.
Dispute resolution: The means by which any disputes will be resolved, which can include arbitration or jurisdiction of local courts.

Some state-specific Shops and Establishments Acts may also require employers to record certain terms of employment, such as wages, designations, and work hours. It is important to note that once an employment contract is signed in India, the employee is protected under Indian labour laws, which means the contract must adhere to local regulations and statutory obligations.

Implied terms for employment contract in India

While many terms of an employment contract are explicitly stated, certain terms for contracts in India are implied and need not be recorded in writing. These include provisions relating to the payment of wages, bonuses, gratuity payments upon termination, and contributions towards employees’ provident fund and employees’ state insurance. Such provisions constitute implied terms of a contract of employment under the applicable labour laws in India.

Additionally, courts in India have recognised that principles of fidelity, good faith, including confidentiality, are ordinarily implied in contracts of employment. Terms can also be implied by practice or usage if an employer consistently follows a particular practice over time.

Unfair contract terms in India

Certain terms in employment contracts can be seen as unfair or biased towards the employer. These terms can create a significant imbalance in the rights and obligations between the employer and employee. Here are some examples of unfair contract terms:

Unilateral termination rights: It can be considered unfair practice to grant the employer the right to terminate the contract at their sole discretion without granting the employee the same right or without a fair notice period.
Non-compete clauses post-employment: While non-compete clauses are common, those that excessively restrict an employee’s right to seek employment or engage in a profession after leaving the company are generally unenforceable. The Indian Contract Act, 1872, considers agreements that restrain anyone from exercising a lawful profession, trade, or business to be void to the extent of such restrain.

Extension of contract in India

An employment contract in India is governed under the Indian Contract Act, 1872, which provides the foundational structure for employment contracts.

While there’s no specific legal cap on the number of times an employment contract can be renewed in India, any extension or renewal should be mutually agreed upon, documented, and in compliance with the laws applicable to the specific type of employment or industry sector. Companies and employees should consult the relevant state-specific laws and sector-specific guidelines to ensure compliance.

In general, Indian labour laws, such as the Industrial Employment (Standing Orders) Act, 1946, and the Shops and Establishments Act (applicable in various states), guide employment contracts but do not explicitly limit the number of times a contract can be renewed. The important factor employers should keep in mind is the mutual agreement between the employer and the employee and adherence to any applicable laws regulating employment terms for the sector in question. Extension of contract may also depend on:

Performance evaluation: An employee’s performance is commonly a determining factor in the decision to offer an extension. Consistent performance, alignment with company goals, and critical contributions to projects are often rewarded with extended employment.
Business needs: The continuity of employment can also depend on the strategic needs of the business, project timelines, expansions, and unforeseen circumstances.
Policy and terms: Businesses must craft clear policies regarding contract extensions, which should be communicated during the hiring process and included within the initial employment documentation. The terms should present the process for extension evaluation, any necessary notice periods, and the conditions under which extensions are granted.

There may be more detailed guidelines and limitations for specialised employment categories, such as foreign nationals working in India under specific visa categories (e.g., H1B visas). For instance, while not directly about Indian national employment law, H1B visa holders, often employed in India in the tech sector, face statutory limitations on the duration of their stay and work, though certain exemptions allow for extensions beyond these limits in specific circumstances.

Fixed-term contracts in India

In India, a fixed-term employment contract is an agreement between an employer and employee, where the employee is hired for a specific period as predetermined by both parties.

The concept of fixed-term employment was significantly enhanced with the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018, which extended the provision for fixed-term employment across all sectors. Under this arrangement, employers can hire workers for short-term projects, seasonal work, or any specific task with a defined timeline, without the commitment required for permanent employees. This regulatory framework ensures that employees on fixed-term contracts are entitled to the same benefits as permanent workers, including pay scales, allowances, and other statutory benefits, ensuring equitable treatment in the labour force.

Fixed-term contract employment law in India

The legal provision for fixed-term employment was notably enhanced with the amendment of the Industrial Employment (Standing Orders) Central Rules in 2018. This amendment allows employers across all sectors to engage fixed-term employees, a move aimed at providing flexibility to employers and ensuring that fixed-term employees enjoy the same benefits as permanent employees, such as wages, allowances, and other statutory benefits.

The amendment portrays fixed-term employment as a fully recognised employment category under Indian labour laws. Before this amendment, the application of fixed-term employment was more limited, making the amendment a substantial turn towards more flexible employment practices within the Indian legal landscape.

Workers’ rights under a fixed-term contract in India

Workers under fixed-term contracts in India enjoy a breadth of rights designed to ensure equal treatment and protection in the workplace, similar to their permanent counterparts. Some of the key provisions are:

Fixed-term employees should be treated on par with permanent employees in terms of wages, allowances, and other benefits.
Fixed-term employees are also ensured comparable working hours, the number of holidays, and other terms of employment that are equivalent to those of permanent workers.
Under the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018, workers under fixed-term contracts are eligible for gratuity on the condition that they serve for a period of one year or more under their contract. This provision marks a crucial benefit often reserved for long-term employees, now extended to fixed-term workers to ensure equitable treatment in acknowledgment of their service.

These regulations aim to provide businesses with the flexibility to handle varying project needs while protecting worker rights and preventing potential exploitation.

Working hours in India

Working hours law in India

The standard working hours are governed by the Fact and Establishment Act of 1948 and the Shops and Establishment Acts (SEA), which typically prescribe that the standard work hours should not exceed 9 working hours per day or 48 working hours per week. This usually includes a mandatory one-hour rest or meal break. Organisations in India usually follow 8 working hours per day.

Recent amendments to India’s labour codes have also brought some changes. The new Labour Codes, which are yet to be fully implemented nationwide as of early 2023, cap weekly and daily working hours at 48 and 12 hours, respectively. The new codes introduce the possibility of a 4-day work week, with 12 working hours for each of the 4 days. Additionally, the maximum allowable overtime for workers has been increased from 50 hours as per the Factories Act to 125 hours.

The implementation details for the new labour codes are still becoming more precise, and specific rules may differ slightly between states due to variations in state-level Shop and Establishment Acts.

Overtime in India

The overtime policy is primarily defined by the Factories Act, 1948, which states that workers are entitled to earn overtime pay at a rate of twice their normal wage for any work done beyond nine hours in a single day or 48 working hours a week. Additionally, the total number of overtime hours that a worker can work is capped at 50 hours for a quarter (a three-month period).

The provisions under Labour Laws also mandate rest intervals, where an employee cannot work for more than five hours without an interval, and the spread over (including interval period) cannot exceed 10.5 hours per day. When it comes to salaried employees, overtime may be calculated based on an implied hourly rate if their job is eligible for overtime, typically at 1.5 times the regular hourly rate for every hour worked beyond the standard 40-hour workweek.

Working week in India

Monday – Saturday

Remote work in India

When it comes to remote work policy, India does not have a dedicated law explicitly governing remote work. However, the Indian legal system does address flexible work practices such as work from home, remote working, and hybrid models of working through various laws and regulations, although there are no specific provisions that exclusively cover these formats. To implement a remote work policy in India, companies must consider the following:

Legal compliance and taxation: Ensure your remote work policies adhere to the Indian legal framework, including labour laws, tax obligations, and data protection regulations. Your remote work policy should be aligned with the Shops and Establishments Act pertinent to each state where workers are based, and the Information Technology (Amendment) Act, 2008, for data privacy and protection. Facilitating proper contracts that specify the nature of remote work and expectations can mitigate legal risks.
Infrastructure and technology support: Providing the necessary tools and technology is essential for a seamless remote working experience. This includes secure internet access, appropriate software, and hardware support. Implementing robust cybersecurity measures to protect company data, along with clear guidelines on its use and storage, assures both compliance and security.
Clear communication channels: Establishing effective communication channels and regular check-ins fosters teamwork and ensures alignment with company goals. Utilising project management tools and collaborative platforms can enhance productivity and ensure that team members stay connected, regardless of their physical location.
Performance and productivity measurement: Defining clear performance metrics suited to remote work environments is key. Setting tangible goals and outcomes, rather than focusing solely on activity or hours worked, can lead to more motivated employees and better results for your business.

Remote work visa in India

While India currently does not provide a designated Digital Nomad Visa, foreign nationals looking to work remotely within the country have viable visa alternatives at their disposal, subject to certain conditions. The tourist visa, which is relatively straightforward to secure, does not authorise formal employment, thereby limiting its suitability for digital nomads anticipating extended work periods. Digital nomads can also obtain multiple-entry business e-visa that allows them to stay in India for a year.

Tailored employment contracts in 100+ countries

Like any other country, India has its own set of regulations when it comes to employment contracts — and failing to adhere to these rules could land your company in hot water.

Thankfully, our dedicated team of experts is experienced in crafting tailored, compliant contracts in India (and more than 100 countries worldwide). That means that, when you partner with us, you won’t need to waste time worrying about compliance. Instead, you can focus on what matters most: growing your business.

Get in touch with us today and start building your global teams.

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FAQ's

1. What is the legal basis for employment contracts in India?

Employment contracts in India are governed primarily by the four Labour Codes that took effect on 21 November 2025, together with applicable state employment laws and the terms agreed between the employer and employee.

The four Codes are the Code on Wages, 2019; Industrial Relations Code, 2020; Code on Social Security, 2020; and Occupational Safety, Health and Working Conditions Code, 2020. Together, they consolidated 29 previous central labour laws.

These laws regulate areas including wages, working conditions, social security, industrial relations and termination. Employers must also consider state-specific requirements based on where the employee works. State Shops and Establishments legislation can affect working hours, leave, holidays, termination, record keeping and other contractual terms.

An employment contract in India cannot provide terms that fall below applicable statutory requirements. Employers should therefore check both central and state rules when preparing employment terms.

2. Are written employment contracts required in India?

Yes. Employers in India are required to provide employees with written documentation setting out the essential terms of their employment.

Since 21 November 2025, employers must issue an appointment letter under the Occupational Safety, Health and Working Conditions Code, 2020. This is the minimum statutory document and records key details such as the employee’s role, employment type, start date and pay.

An appointment letter is not necessarily separate from a full employment contract. An employment contract in India is more comprehensive and typically covers working hours, probation, leave, benefits, confidentiality, intellectual property, notice and termination.

International employers should therefore ensure that the employee receives the mandatory appointment letter and that the complete written documentation clearly sets out the wider employment terms. This may be achieved through one integrated agreement or through an appointment letter supported by a separate contract and policies, that clearly sets out the wider terms of the employment relationship.

3. What types of employment contracts exist in India?

Employment in India can be structured as regular, fixed-term or contractual employment. These are the three employment types listed in the appointment-letter format prescribed under the Occupational Safety, Health and Working Conditions (Central) Rules, 2026.

Regular employment is used for ongoing employment without a predetermined end date. Fixed-term employment is for a defined period under a written contract. Contractual employment is separately recognised in the prescribed appointment-letter format. These categories should not be treated as an exhaustive list of every lawful working arrangement or as having identical legal consequences.

“Contractual employment” in the appointment-letter format should also not automatically be equated with contract labour supplied by an outside contractor. The parties must identify the actual employer and the structure under which the person works.

Separately, the Industrial Relations framework and the 2026 Model Standing Orders classifies workers as permanent, temporary, apprentices, probationers, badli, fixed-term employees and casual workers. These are worker classifications, not seven different types of employment contracts.

For example, a probationer is someone provisionally employed in a permanent position while completing probation; probation is therefore better understood as an employment status or stage rather than a separate type of employment contract.

4. What must be included in an employment contract in India?

An employment contract in India should clearly state who is being employed, the type of employment, role, start date, wages, allowances and applicable social security benefits.

Under the current Labour Code framework, the prescribed appointment-letter format includes information such as the employee’s designation, employment type, skill category, date of joining, basic pay, dearness allowance, other applicable allowances and EPF or ESIC coverage.

A detailed employment contract should also address working hours, place of work, leave, probation, benefits, notice and termination. Depending on the role, employers may also include confidentiality, intellectual property, data protection and post-employment restrictions. The agreement should explain whether any bonus, incentive or variable payment is guaranteed, discretionary or performance based. It should also identify applicable policies and provide a process for changes to employment terms.

State laws and workplace policies may create additional requirements, so employers should avoid using the same contract unchanged across every location in India. Post-employment restrictions should be reviewed carefully because broad non-compete clauses are generally difficult to enforce after employment ends, while reasonable confidentiality, intellectual-property and non-solicitation protections may be treated differently.

5. How do fixed-term contracts work in India?

Fixed-term employees in India are hired directly for a defined period and are entitled to statutory protections and benefits comparable to permanent employees. Since 21 November 2025, a major change is that fixed-term employees become eligible for gratuity after one year of service.

The Ministry of Labour specifically confirms that a fixed-term employee becomes eligible for gratuity after rendering one year of service under the contract. The payment is calculated on a pro-rata basis in accordance with the Code on Social Security.

Fixed-term employment is also different from contract labour: the fixed-term employee is engaged directly by the employer rather than supplied through a contractor.

Employers should clearly document the contract duration, pay, benefits and conditions for expiry or termination.

6. Can employers modify or terminate employment contracts in India?

Yes. Employers in India can modify or terminate employment contracts, but they must follow the contract terms and applicable requirements under the Industrial Relations Code, 2020 and state employment laws.

For contract changes, employers cannot unilaterally reduce statutory rights. Changes to key employment terms should be documented, and certain changes to service conditions for workers covered by the Industrial Relations Code require 21 days’ notice before they take effect. This statutory notice requirement applies to changes involving matters listed in the relevant schedule, rather than automatically applying to every administrative amendment. Material contractual changes should generally be agreed with the employee and confirmed in writing.

For termination, the requirements depend on the reason and the employee’s legal classification. Where retrenchment rules apply, an eligible worker with at least one year of continuous service generally must receive one month’s notice or pay in lieu and retrenchment compensation equal to 15 days’ average pay for each completed year of continuous service, subject to the applicable provisions.

Larger establishments covered by the Industrial Relations Code may face additional requirements, including prior government permission for certain retrenchments. Under the central framework, this prior-permission regime generally applies to specified industrial establishments with at least 300 workers, although applicable notifications and state rules should be checked.

Termination may also be governed by state Shops and Establishments legislation, certified standing orders, collective arrangements and the individual contract. Employers should therefore avoid applying the retrenchment formula to every employee or every form of termination without first confirming coverage.

7. How have India's new Labour Codes changed employment contracts?

Since 21 November 2025, India’s four Labour Codes have changed employment contracts in five important areas: mandatory appointment letters, fixed-term employment, gratuity, wages and social security. The Codes replaced 29 previous central labour laws with a more consolidated employment framework.

The key changes for employers are:

Appointment letters are mandatory. Every employee must receive an appointment letter containing prescribed employment information.

Fixed-term employment is formally recognised, with fixed-term employees receiving protections and benefits comparable to permanent employees.

Gratuity eligibility has changed for fixed-term employees, who can qualify after one year of service rather than the usual five-year threshold.

The Code on Wages creates a common wage framework, affecting how employers’ structure and administer employee pay. Employers must consider the statutory definition of wages when structuring allowances and calculating employment benefits.

Social security coverage has been expanded and consolidated under the Code on Social Security, affecting employment benefits and employer obligations.

The 2026 central rules provide further detail on implementation, forms, records and procedures. State rules and notifications can still create location-specific obligations, so the reforms have not made every Indian employment contract identical.

8. How is a labour contract different from an employment contract in India?

The expression “labour contract” does not have one universal meaning in India and is sometimes used informally as another name for an employment contract. Where it refers to a contract-labour arrangement, however, it describes a structure involving a contractor, workers employed by that contractor and the principal employer that uses their services. Under an employment contract, the company directly employs the individual and is responsible for their wages, statutory benefits and other employment obligations.

Under a contract labour arrangement, workers are employed through a contractor and perform work for another business. The contractor and the business using the workers have specific responsibilities under India’s labour law, including requirements relating to wages, social security and working conditions. Depending on worker numbers and the nature of the establishment, registration or licensing requirements may apply under the Occupational Safety, Health and Working Conditions framework. The principal employer may also have residual responsibility where the contractor fails to meet certain obligations.

This is also different from fixed-term employment, where the employee is hired directly by the employer for a specified period.

9. What happens if an employment contract in India is not compliant?

If an employment contract in India contains terms that fall below statutory requirements, those terms cannot override the employee’s legal rights. The employer may also face financial penalties, orders to pay outstanding amounts and other enforcement action under the applicable Labour Code.

For example, an employer cannot use a contract to pay less than the applicable minimum wage, avoid required social security contributions or remove statutory employee entitlements. The legal minimum will apply regardless of what the contract says.

Non-compliance can also result in back payments for wages or benefits, unpaid EPF or ESI contributions with applicable interest or damages, and penalties for breaches of wage, social security or working-condition requirements.

Employers should also ensure the mandatory appointment letter and employment contract reflect the employee’s actual role, pay and employment status. Inconsistent documents can create disputes over classification, wages, benefits, notice and responsibility for the employment relationship.

A regular contract review helps employers keep templates aligned with the four Labour Codes, the 2026 central rules and the state requirements that apply where each employee works.

10. What makes CXC the best partner for compliant employment contracts in India?

CXC combines 30+ years of workforce experience with Employer of Record capabilities and local employment expertise to help international companies hire employees in India with compliant employment contracts and processes.

As an Employer of Record in India, CXC can manage the local employment relationship, including compliant contracts and appointment documentation, onboarding, payroll, statutory contributions, benefits and ongoing employment administration.

Businesses of all sizes can draw on local support to ensure employment documentation and workforce processes reflect the current framework rather than outdated requirements.

For companies hiring across multiple countries, CXC also provides a consistent global workforce solution while adapting employment contracts and processes to local requirements in India.

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With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.

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