Hiring, Terminating and Retaining Employees in India

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Hiring Employees in India:
Common Legal Issues
By Dezan Shira & Associates
ritesh Samuel
Human resource (HR) teams that have not worked
in India may find the country’s hiring process
complicated. Identifying and engaging talent can
be a time-consuming and tedious process, while
the administrative burdens of hiring employees
are also complicated for the uninitiated. HR teams,
however, that conduct some basic due diligence
can prepare themselves to manage the process
quickly and efficiently.
The hiring of workers can depend on numerous
factors, such as longevity of service, social
insurance, collective agreements, qualifications and
experience.While India has a large labor pool, skilled
workers and senior management are typically
difficult to recruit. Many employers use websites
such as or to source
employees, but the most successful employers
generally establish direct relationships with
universities for graduate talent and local recruiters
for experienced talent. Local consultancies that
produce market research can assist foreign
employers to gauge local labor markets and
establish the relationships needed to source
premium talent.
Separately, employers in India are increasingly
reporting instances of resume fraud during the
application process. This increase is largely a
result of incongruence between a candidate’s soft
skills and their actual experience. Although not
all employers are adversely affected by resume
fraud, employers in India should adopt a rigorous
application review process for technical and senior
personnel, verifying employment, education,
criminal records, as well as reference checks. Many
local service providers can provide employment
screening services for employees at any level, as
well as more in depth background investigations
for C-Suite candidates.
Beyond these general considerations, employers
need to be aware of various federal and state
mandated compliances. The vast majority of
labor laws that govern employment are found at
the national federal level, though employers will
also find some sub-national variation at the state
level, particularly through the various Shop and
Establishment Acts. Employers that are unfamiliar
with labor laws in India should engage a law firm
or professional services firm to review laws and
compliances that impact their business. Although
not comprehensive, here we outline some of
the key pieces of legislation that impact most
employers in India.
Contracts
Indian labor laws provide aminimumof guarantees
and benefits to all employees, and employers
should note that these laws supersede the
provisions of labor contracts. In general, however,
there are three types of employment contracts in
India:
• Permanent (direct) contract;
• Fixed contract;
• Temporary contract.