Employment law in India for foreign employers: applicable statutes, classification, and jurisdiction.

A reference to the statutory framework governing remote employees domiciled in India and employed by foreign organizations.

Indian employment law is a multi-layered framework drawn from the Constitution of India, central statutes enacted by Parliament, state legislation enacted by individual state legislatures, subordinate legislation in the form of rules and regulations, and judicial precedent established by the Supreme Court and High Courts. For foreign organizations that engage remote workers domiciled in India, this framework applies regardless of the employer's place of incorporation. This page describes the statutory rules that govern the employment relationship; it does not constitute legal advice, and foreign employers should consult qualified counsel regarding jurisdiction-specific obligations.

The publication covers central law as of May 2026, incorporating the status of the four new Labour Codes that came into force on 21 November 2025. State-specific obligations — including Shops and Establishments Acts and Professional Tax — are noted where relevant but are not exhaustively catalogued. Each section below identifies the governing statute by name and section number.

A. Sources of Indian employment law

The Constitution of India allocates legislative competence between Parliament and state legislatures through three Lists in the Seventh Schedule. Labour is a concurrent subject under List III (the Concurrent List), meaning both Parliament and state legislatures may enact legislation. Where central and state laws conflict, the central law prevails unless the state law received Presidential assent before the conflict arose.

The principal sources of employment law in India are as follows:

• Central statutes — enacted by Parliament and applicable across India. Examples include the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, the Industrial Disputes Act, 1947, and the four Labour Codes (2019–2020) that came into force on 21 November 2025.
• State statutes — enacted by state legislatures and applicable within the relevant state only. The most significant for foreign employers are the Shops and Establishments Acts, which regulate working hours, leave, and conditions of service for establishments not covered by the Factories Act.
• Subordinate legislation — rules, regulations, and notifications issued under the authority of central or state statutes. Examples include the Employees' Provident Funds Scheme, 1952 (issued under § 5 of the EPF Act) and the Maternity Benefit Rules.
• Judicial precedent — decisions of the Supreme Court of India are binding on all courts and tribunals. High Court decisions are binding within their respective jurisdictions. Judicial interpretation of statutory terms — such as "workman" under the Industrial Disputes Act, 1947 — materially shapes the application of statutory provisions.

B. Central statutes governing the employer-employee relationship

The central statutes most directly relevant to foreign employers engaging remote workers domiciled in India are listed below. Each statute is identified by its short title and year of enactment. Primary-source URLs are cited in the footnotes.

• Employees' Provident Funds and Miscellaneous Provisions Act, 1952 — governs mandatory provident fund contributions by employers and employees. Codified at IndiaCode.
• Employees' State Insurance Act, 1948 — establishes the Employees' State Insurance scheme providing health and social insurance coverage. Administered by the ESI Corporation (ESIC). Codified at IndiaCode.^[2]
• Payment of Gratuity Act, 1972 — mandates payment of gratuity to employees upon separation after five years of continuous service.^[3]
• Payment of Bonus Act, 1965 — requires payment of an annual bonus to eligible employees. Now partially subsumed under the Code on Wages, 2019.
• Maternity Benefit Act, 1961 (as amended 2017) — provides 26 weeks of paid maternity leave under § 5 (as amended by Act 6 of 2017).
• Industrial Disputes Act, 1947 — governs the resolution of industrial disputes and prescribes procedural requirements for retrenchment, layoff, and closure. Codified at IndiaCode.^[5]
• Payment of Wages Act, 1936 — prescribes timely payment of wages to employees. Subsumed under the Code on Wages, 2019 (in force from 21 November 2025).
• Minimum Wages Act, 1948 — requires payment of minimum wages for scheduled employments as notified by the appropriate government. Subsumed under the Code on Wages, 2019.
• Industrial Employment (Standing Orders) Act, 1946 — requires establishments with 100 or more employees to define and certify conditions of service (standing orders). Partially subsumed under the Industrial Relations Code, 2020.

C. State statutes — Shops and Establishments Acts

Under Indian law, each state maintains its own Shops and Establishments Act governing establishments (including offices and IT/ITES companies) that are not factories within the meaning of the Factories Act, 1948. These state Acts regulate working hours, overtime, weekly rest, annual leave, and conditions of service. A foreign employer with remote employees in India is generally required to register its Indian place of business (or the employee's work location) under the applicable state Act.

Two states — Karnataka and Maharashtra — host significant concentrations of India's technology and professional-services workforce and are referenced here as exemplars.

• Karnataka — governed by the Karnataka Shops and Commercial Establishments Act, 1961, as amended. Establishes rules on working hours (generally 48 hours per week), rest intervals, leave entitlements, and employer registration obligations.
• Maharashtra — governed by the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017, which modernized the earlier 1948 Act. The 2017 Act introduced electronic registration and expanded coverage.

Foreign employers whose remote employees work from home may be subject to the state Act applicable in the state where the employee is domiciled. This is a contested area of interpretation; qualified counsel should be engaged to confirm registration and compliance obligations in each state.

D. Employee vs. independent contractor classification

Indian courts and tribunals apply a multi-factor test to determine whether a person engaged for services is an employee (subject to the protections of Indian labour law) or an independent contractor (not so protected). The applicable tests are derived primarily from judicial decisions interpreting the Industrial Disputes Act, 1947 and related statutes. No single statute codifies a definitive "employee vs. contractor" test; the analysis is fact-specific.

The principal judicial markers applied by Indian courts include:

• Control test — whether the engaging party controls not only the result of the work but also the manner in which it is performed. A high degree of control over daily work activities is indicative of an employment relationship.
• Integration test — whether the person is integrated into the organization of the engaging party, or whether the person performs work that is peripheral or accessory to the engaging party's business.
• Economic-reality test — whether the person is economically dependent on the engaging party as a primary source of income, or operates independently as a business.

In Hussainbhai v. Alath Factory Tezhilali Union and Others (1978) 4 SCC 257, the Supreme Court of India held that the relationship of employer and employee depends on the totality of facts, including the control of the alleged employer over the alleged employee. The Court emphasized that the right to control the method of work — not merely the outcome — is a strong indicator of employment.

The classification as "workman" under § 2(s) of the Industrial Disputes Act, 1947 is separately important and is addressed in Section E below. A person may be an "employee" for purposes of provident fund or ESI coverage while not qualifying as a "workman" under the ID Act.

E. The Industrial Disputes Act, 1947 — "workmen" classification

The Industrial Disputes Act, 1947 (India) is the central statute governing the resolution of industrial disputes and the procedural rights of employees upon termination. Its protections apply specifically to persons who qualify as "workmen" within the meaning of § 2(s) of the Act.

Under § 2(s) of the Industrial Disputes Act, 1947, a "workman" is any person (including an apprentice) employed in any industry to do manual, skilled, unskilled, technical, operational, clerical, or supervisory work for hire or reward. The definition expressly excludes persons employed primarily in a managerial or administrative capacity, persons employed in a supervisory capacity who draw wages exceeding the ceiling notified by the appropriate government from time to time, and persons subject to the Air Force Act, Army Act, or Navy Act.

The significance of "workman" status is procedural: a person who qualifies as a workman may not be retrenched (i.e., terminated for operational reasons other than misconduct or incapacity) without satisfying the conditions prescribed in § 25F of the Industrial Disputes Act, 1947. Those conditions — a month's notice, retrenchment compensation, and notification to the appropriate government — are described in the statutory employer obligations reference for India.

Employees in managerial, administrative, or senior supervisory roles typically do not qualify as "workmen." However, software developers, analysts, and technical staff in similar positions have been held to qualify as "workmen" in several judicial decisions, because such roles involve skilled or technical work within the meaning of the statutory definition. Whether a specific role qualifies requires a fact-specific analysis.

F. Labour Codes (2019–2020)

Between 2019 and 2020, Parliament enacted four Labour Codes to consolidate and rationalize India's pre-existing stock of 29 central labour statutes. The four Codes are:

• Code on Wages, 2019 — consolidates the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976. Codified at Ministry of Labour.
• Industrial Relations Code, 2020 — consolidates the Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946.
• Code on Social Security, 2020 — consolidates the Employees' Provident Funds Act, 1952, the Employees' State Insurance Act, 1948, and seven other social security statutes. Extends coverage to gig workers and platform workers.
• Code on Occupational Safety, Health and Working Conditions, 2020 — consolidates 13 statutes including the Factories Act, 1948, the Mines Act, 1952, and the Contract Labour (Regulation and Abolition) Act, 1970.

All four Labour Codes came into force on 21 November 2025, pursuant to a notification issued by the Government of India on that date. However, the Codes require both Central Rules and State Rules to be notified before they can be implemented in full. As of May 2026, the Central Government has notified the Code on Wages (Central) Rules, 2026 and the Code on Social Security (Central) Rules for select provisions. State governments continue to finalize their respective rules. During this transition period, existing regulations — including EPF and ESI contribution requirements — continue to apply.

G. Foreign employers and remote employees — applicability of Indian law

A common question for foreign organizations is whether Indian employment law applies when the employer is incorporated outside India and the employee works remotely from India. Under Indian conflict-of-laws principles, courts consider the place of performance of the contract as a significant connecting factor. Where an employee performs work from India, Indian labour statutes — particularly those administered by government bodies such as the Employees' Provident Fund Organisation (EPFO) and the Employees' State Insurance Corporation (ESIC) — generally apply to the employment relationship regardless of the employer's domicile.

The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (India) applies to any establishment employing 20 or more employees in India, including establishments of foreign employers. Similarly, the Employees' State Insurance Act, 1948 applies to specified factories and establishments in India meeting the coverage criteria, irrespective of whether the employing entity is Indian or foreign.

Foreign employers typically manage this exposure through one of two approaches: direct employment with a registered Indian entity (a subsidiary, liaison office, or branch) that assumes employer-of-record status under Indian law; or engagement of a third-party employer-of-record (EOR) or managed-workforce provider that employs the worker in India and bears direct statutory obligations under Indian labour law. F5 Hiring Solutions is one example of a managed-workforce provider that employs remote professionals in India and bears the statutory employer obligations described on this site. The choice between these arrangements involves legal, tax, and permanent-establishment considerations that fall outside the scope of this reference publication.

Where a foreign employer directly employs a worker in India — without a registered Indian entity — the employer-employee relationship is still subject to the applicable Indian central statutes for purposes of EPFO and ESIC coverage. The appropriate government authority may assert jurisdiction, and penalties for non-compliance accrue under the applicable statutes.

For information on how citations are verified and what sources are used, see the Methodology page.