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Hiring, compliance, payroll, leave, exits and people operations reference for Indian workplaces.
Employees' Provident Fund (EPF) is a mandatory retirement savings scheme for salaried employees in India. Both employer and employee contribute 12% of basic salary each month. EPF is managed by EPFO and offers tax-free interest, compounding, and withdrawal benefits.
| Component | Employee Contribution | Employer Contribution | Total | Where It Goes |
|---|---|---|---|---|
| EPF (Provident Fund) | 12% of Basic + DA | 3.67% of Basic + DA | 15.67% of Basic + DA | Employee PF account (accumulates with interest) |
| EPS (Pension Scheme) | N/A (included in 12%) | 8.33% of Basic + DA (max ₹15,000 wages) | 8.33% of Basic + DA | Pension fund — provides monthly pension after retirement at age 58 |
| EDLI (Insurance) | N/A (included in 12%) | 0.5% of Basic + DA | 0.5% of Basic + DA | Employee Deposit Linked Insurance — provides life insurance cover |
| EPF Admin Charges | N/A | 0.5% of Basic + DA (min ₹500 for companies with 20+ employees) | 0.5% | EPFO administrative charges — deducted from employer contribution |
Gratuity is a lump-sum benefit paid to employees by the employer as a reward for long service. It is governed by the Payment of Gratuity Act, 1972. Every employee who completes 5 years of continuous service is eligible for gratuity.
| Element | Details | Example |
|---|---|---|
| Formula | Gratuity = (15 × Last Drawn Salary × Years of Service) / 26 | |
| Last Drawn Salary | Basic + Dearness Allowance (DA) at the time of separation | If basic = ₹50,000 and DA = ₹10,000, last drawn salary = ₹60,000 |
| Years of Service | Complete years only (rounded down; last year: if > 6 months = 1 year, if < 6 months = dropped) | If service = 7 years 8 months, count as 8 years; if 7 years 4 months, count as 7 years |
| Maximum Gratuity | Capped at ₹25,00,000 (₹25 lakh) as per latest amendment | Even if formula gives more, maximum payable is ₹25 lakh |
| Tax Exemption | Gratuity is fully tax-exempt up to ₹25 lakh (for employees covered under the Act) | No income tax on gratuity up to ₹25 lakh; above this, taxable as per slab |
| Calculation Example | (15 × 60,000 × 8) / 26 = ₹27,69,231 — but capped at ₹25,00,000 | Employee with ₹60K last drawn salary and 8 years service gets ₹25 lakh (capped) |
| Rule | Details | Exception |
|---|---|---|
| Minimum Service | 5 years of continuous service (including probation period) | No minimum for death or disability of employee — gratuity is payable to nominee/dependent regardless of service length |
| Applicability | Establishments with 10+ employees (shops, factories, mines, plantations, offices) | Every employee is eligible regardless of salary level or employment type (permanent, contractual) |
| Death of Employee | Gratuity payable to nominee/legal heir; no 5-year service requirement | Nomination must be filed in Form F with employer; if not filed, gratuity goes to legal heir as per Succession Act |
| Termination | Even if terminated for misconduct, gratuity is payable for service rendered (employer can forfeit only for specific reasons under Section 4(6)) | Forfeiture allowed only for: (a) willful omission/negligence causing damage, (b) riotous/violent behavior, (c) moral turpitude |
Leave policy in India is governed by the Factories Act, Shops & Establishments Acts (state-specific), and the new Labour Codes (when implemented). Understanding leave entitlements prevents exploitation and ensures compliance.
| Leave Type | Entitlement | Accrual | Encashment | Carry Forward |
|---|---|---|---|---|
| Earned Leave (EL) / Privilege Leave (PL) | 15-18 days/year (varies by state and establishment type) | Accrues based on days worked; typically 1 day for every 20 days worked | Encashable on resignation/termination; unused EL must be compensated | Varies by state: some allow carry forward of 30-90 days; excess lapses at year-end |
| Sick Leave (SL) | 7-12 days/year (varies by state) | Usually granted upfront at start of year; no accrual | Generally NOT encashable; lapses if not used within the year | Usually NOT carry forward (lapses at year-end) |
| Casual Leave (CL) | 6-12 days/year (varies by state) | Granted upfront; typically 1-2 days per month | NOT encashable; lapses if not used | NOT carry forward (lapses at year-end) |
| Maternity Leave | 26 weeks (182 days) for first 2 children; 12 weeks for 3rd+ | Full pay from employer; can start 8 weeks before expected delivery date | N/A | N/A — must be taken within the eligibility period |
| Paternity Leave | 5-15 days (not mandated by central law; varies by company/state) | Usually within 15-30 days of child birth; full pay | NOT encashable | NOT carry forward |
| Compensatory Off | 1 day off for every day worked on weekend/holiday | Granted when employee works on a gazetted holiday or weekly off | NOT encashable | Usually must be used within 2-3 months; lapses after validity period |
The Maternity Benefit (Amendment) Act, 2017 is one of the most progressive women's rights legislation in India. It provides paid maternity leave, creche facilities, work-from-home options, and protection against dismissal during pregnancy.
| Provision | Details | Applicability |
|---|---|---|
| Maternity Leave Duration | 26 weeks (182 days) for first 2 children; 12 weeks for 3rd+ child | All establishments with 50+ employees (amended from 10 to 50 in 2017) |
| Leave Before Delivery | Maximum 8 weeks can be taken BEFORE the expected date of delivery | Balance 18 weeks available after delivery |
| Adoption & Surrogacy | 12 weeks maternity leave for adopting mother (child up to 3 months); 12 weeks for commissioning mother (surrogacy) | Available to adoptive mother from date of child placement; applies to both biological and adoptive mothers |
| Payment | Full average daily wage for the period of absence — employer pays, not government | Average of wages paid in the 3 months immediately preceding the date of expected delivery |
| Work From Home | Employer may permit work from home after maternity leave period, if nature of work permits | Mutual agreement between employer and employee; employer is not obliged but encouraged |
| Creche Facility | Mandatory for establishments with 50+ employees; creche within prescribed distance from workplace | Employer must provide; woman can visit creche 4 times a day (includes feeding breaks) |
| Protection Against Dismissal | Employer CANNOT dismiss a woman during pregnancy or maternity leave except for gross misconduct | Discharge/dismissal during pregnancy is void; employer must reinstate with full back wages |
| Medical Bonus | If employer does not provide free pre-natal/post-natal care, medical bonus of ₹3,500 is payable | Additional to maternity leave wages |
The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act) mandates every workplace with 10+ employees to constitute an Internal Complaints Committee (ICC). Non-compliance can lead to ₹50,000 fine and cancellation of business license.
| Requirement | Details | Penalty for Non-Compliance |
|---|---|---|
| Internal Complaints Committee (ICC) | Mandatory for workplaces with 10+ employees; minimum 4 members: (1) Presiding Officer (senior woman employee), (2) 2+ women employees, (3) 1 external member (NGO/social worker) | ₹50,000 fine; repeat offence: doubled + cancellation of registration/license |
| ICC Display | ICC composition, contact details, and complaint procedure must be prominently displayed at workplace (notice boards, intranet) | Same penalty as non-constitution of ICC |
| Annual Report | ICC must file annual report to employer and District Officer; includes number of complaints received, resolved, and pending | Non-filing is a compliance violation |
| Awareness Training | Conduct POSH awareness workshops for all employees at least once a year; new employees during induction | Best practice (not explicitly penalized but shows due diligence) |
| Zero Tolerance Policy | Organization must have a clear anti-sexual harassment policy; communicated to all employees; available on intranet/website | Legal liability in case of harassment complaint; employer vicariously liable |
| Confidentiality | Identity of complainant, respondent, and witnesses must be kept confidential during and after proceedings | Breach of confidentiality can lead to separate disciplinary action |
| Stage | Timeline | Action | Who is Involved |
|---|---|---|---|
| 1. Filing Complaint | Within 3 months of incident (extendable by 3 more months) | Written complaint to ICC or Local Committee; can also be filed by any person on behalf of victim | Complainant (victim) → ICC |
| 2. Conciliation | Optional; within ICC discretion | ICC may attempt conciliation (settlement) between parties; if complainant refuses or fails, proceed to inquiry | ICC → Complainant + Respondent |
| 3. Inquiry | Must be completed within 90 days | ICC conducts inquiry following natural justice principles; both parties present evidence and witnesses; respondent can cross-examine | ICC members (must include external member) |
| 4. Report & Recommendation | Within 10 days of inquiry completion | ICC submits report with findings and recommendation to employer; employer must act within 60 days | ICC → Employer |
| 5. Action | Within 60 days of receiving ICC report | Employer implements ICC recommendation: warning, demotion, transfer, termination, or other action as recommended | Employer (HR/Legal) |
Full & Final (F&F) settlement is the complete financial settlement when an employee leaves an organization. It includes payment of: last month salary, earned leave encashment, gratuity (if eligible), PF transfer/withdrawal, bonus, and deductions.
| Component | Calculation | Timeline | Legal Basis |
|---|---|---|---|
| Last Month Salary | Prorated basic + DA + HRA for days worked in last month | Due on last working day | Employment contract / Payment of Wages Act |
| Earned Leave Encashment | (Basic Salary / 26) × Unused EL days | At settlement | Factories Act / Shops Act / Company policy |
| Gratuity | (15 × Last Drawn Salary × Years of Service) / 26 | At settlement (if 5+ years service) | Payment of Gratuity Act, 1972 |
| Bonus (if applicable) | Prorated bonus for period worked in financial year | At settlement | Payment of Bonus Act, 1965 (minimum 8.33% / max 20%) |
| PF Transfer | Transfer to new employer via Form 13 OR withdraw via Form 19 | 30-45 days after claim submission to EPFO | EPF & MP Act, 1952 |
| TDS Certificate (Form 16) | Issued by employer for income tax deducted during employment | By June 15 of following year | Income Tax Act, 1961 |
| Deductions | Notice period recovery (if short), loan repayment, advance recovery, incomplete notice period pay | Deducted from settlement amount | Employment contract terms |
| Employee Type | Standard Notice Period | Buyout Option | Legal Position |
|---|---|---|---|
| Permanent Employee | 30-90 days (as per appointment letter) | Yes — employee pays salary equivalent to notice period (or balance) | If employee resigns without notice: employer can deduct notice pay; if employer terminates: must pay notice period salary |
| Probationary Employee | 15-30 days (usually shorter than permanent) | Yes — same buyout option applies | Employer can typically terminate with shorter notice during probation; check appointment letter |
| Fixed-Term Contract | As per contract terms; no notice required at contract end | N/A — contract simply expires | Early termination follows contract terms; penalties may apply as specified in agreement |
India has consolidated 29 labour laws into 4 Labour Codes: Code on Wages (2019), Industrial Relations Code (2020), Social Security Code (2020), and Occupational Safety, Health and Working Conditions Code (2020). These are passed by Parliament but state-specific implementation dates vary.
| Code | What It Consolidates | Major Changes | Impact on Employees |
|---|---|---|---|
| Code on Wages, 2019 | Minimum Wages Act, Payment of Wages Act, Bonus Act, Equal Remuneration Act | Universal minimum wage (floor wage) across India; uniform definition of "wage" (basic + DA + retaining allowance); annual bonus minimum 8.33% for salary up to ₹21,000/month | Higher minimum wage protection; standardized bonus calculation; no discrimination in wages |
| Industrial Relations Code, 2020 | Trade Unions Act, Industrial Disputes Act, Industrial Employment (Standing Orders) Act | Definition of "worker" includes gig/unorganized workers; 20+ workers to form trade union (earlier 10); fixed-term employees get same benefits as permanent; simplifies strike procedures | Gig workers get legal protection; fixed-term employees get PF/gratuity/leave; easier union formation; single worker dispute forum |
| Social Security Code, 2020 | EPF Act, ESI Act, Maternity Benefit Act, Employees Compensation Act, Gratuity Act, Unorganized Workers Act | Social security for gig/platform workers; universal PF coverage for 20+ employees; maternity benefit 26 weeks (same); national social security board | Gig/platform workers get PF, insurance, pension for the first time; improved maternity benefits; stronger enforcement |
| OSH Code, 2020 | Factories Act, Mines Act, Contract Labour Act, Inter-State Migrant Workmen Act, Shops & Establishments Acts | Single registration/license for all establishments; annual leave standardized (1 day per 20 days worked); mandatory crèche for 50+ employees; women can work night shifts (with safety conditions) | Simplified compliance; women get more workplace flexibility; standardized leave benefits; better safety standards |
An offer letter is a legally significant document that outlines the terms of employment. Both employers and employees should understand what must be included, what clauses to watch for, and what makes an offer letter legally binding.
| Clause | What It Should Include | Why It Matters |
|---|---|---|
| Designation & Department | Exact job title, department, reporting manager, and location | Defines role clarity; important for role-based disputes and legal proceedings |
| Compensation Breakup | Fixed CTC (Cost to Company) with detailed breakup: Basic, HRA, Special Allowance, PF, Gratuity, LTA, Medical, Variable Pay | Full transparency; variable pay percentage and payout conditions must be clearly stated |
| Date of Joining | Confirmed start date and time; location for joining | Sets employment commencement; important for probation period calculation |
| Probation Period | Duration (typically 3-6 months) and confirmation criteria | During probation, shorter notice period applies; employer has more flexibility for termination |
| Notice Period | Notice period for resignation (both sides) + buyout clause | Prevents sudden exits; buyout clause should specify if salary-in-lieu is acceptable |
| Working Hours | Standard hours (9-10 hours/day), weekly off, overtime policy | Protects against exploitation; ensures work-life balance compliance with state laws |
| Leave Policy | EL, SL, CL entitlements and company-specific leave benefits | Employees need to know leave rights upfront; must comply with state labour laws |
| Non-Compete Clause | Restrictions on joining competitor post-employment (duration, geography, industry) | IMPORTANT: Non-compete clauses are generally UNENFORCEABLE in India under Section 27 of Indian Contract Act — except for specific cases like sale of goodwill |
| Confidentiality / NDA | Obligation to protect company proprietary information, data, and trade secrets | Enforceable in India; reasonable in scope and duration; cannot prevent you from earning a livelihood |
| Arbitration / Dispute Clause | How employment disputes will be resolved (court vs arbitration vs conciliation) | Affects where and how you can file disputes; understand jurisdiction before signing |