Since 21 November 2025, India's four Labour Codes on wages, industrial relations, social security and occupational safety have replaced 29 older central labour laws. States still set minimum wages and many day-to-day rules. Here is what employers need to know about leave, pay, tax and ending employment.
Leave rules come from the Labour Codes and from each state’s Shops and Establishments Act, so entitlements for office staff can differ from state to state. Many employers offer more than the minimums.
Under the OSH Code, 1 day of paid leave for every 20 days worked, once the worker has worked 180 days in a year. State laws for shops and offices may be more generous.
Set by state Shops and Establishments Acts, commonly a handful of days each a year. Employees covered by ESI receive sickness benefit from the ESI scheme.
Paid by the employer at the average daily wage after 80 days of work in the preceding 12 months. Up to 8 weeks can be taken before the birth.
No statutory paternity leave in the private sector. Many employers offer it by policy.
Unused annual leave can be carried forward, generally up to 30 days, and must be encashed when employment ends.
Set up each Indian leave type in IceHrm, from earned leave to casual and sick leave, with its own accrual, carry forward and approval rules, and use leave groups to apply different rules to offices in different states. Employees see their live balance before they apply, and managers see who is away on a shared calendar. Leave management →
The Code on Wages gives every employee a legal right to a minimum wage. The central government sets a national floor wage, and each state fixes minimum wages at or above it by skill level and geographical area, usually with a dearness allowance revised twice a year.
Set by each state for unskilled, semi-skilled, skilled and highly skilled work. Check the current notification for each work location.
Normally 8 hours a day. Daily hours and spread-over limits are set in state rules.
Overtime must be voluntary and paid at at least twice the normal rate of wages.
Capture attendance and overtime in IceHrm and feed the hours straight into payroll, so double-rate overtime reflects what was actually worked. Time & attendance →
From 1 April 2026 personal income is taxed under the Income-tax Act, 2025. The new tax regime is the default; employees can opt for the old regime with its deductions instead. Employers deduct tax at source (TDS) from salary each month and issue an annual TDS certificate.
| Taxable income | Rate |
|---|---|
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,001 – ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Under the new regime, salaried employees get a ₹75,000 standard deduction, and a rebate of up to ₹60,000 means no tax is payable on taxable income up to ₹12 lakh.
On top of salary, employers contribute to the Employees’ Provident Fund (EPF) and, for lower earners, Employees’ State Insurance (ESI), and must budget for gratuity and statutory bonus.
Of basic wages, matched by 12% from the employee. 8.33% of wages up to ₹15,000 a month goes to the pension scheme (EPS), plus small EDLI and admin charges.
For employees earning up to ₹21,000 a month, with 0.75% from the employee. Covers medical care, sickness and maternity benefits.
15 days’ wages per completed year of service, paid when employment ends, capped at ₹20 lakh.
Some states also levy a professional tax (withheld from salary, up to ₹2,500 a year) and labour welfare fund contributions.
Build Indian pay the way you already structure it, with your own salary components, deductions and formula columns, such as basic, HRA, EPF and ESI columns. Want to know how well IceHrm handles payroll calculations for India? Contact us or see Payroll →
Protection depends on whether the employee is a “worker” under the Industrial Relations Code (broadly, non-managerial staff and supervisors below a wage threshold). For managerial staff, the employment contract largely governs termination. Misconduct dismissals require a fair internal inquiry.
| Situation | Notice |
|---|---|
| Retrenchment of a worker with 1 year or more of service | 1 month |
| Retrenchment in industrial establishments with 300+ workers | 3 months, with prior government permission |
| Managerial and other employees | As per contract |
| Payment | When it applies | Amount |
|---|---|---|
| Retrenchment compensation | Worker with at least 1 year of service | 15 days’ average pay per completed year of service |
| Worker re-skilling fund | Retrenchment | 15 days’ wages paid by the employer into the fund |
| Gratuity | After 5 years of service (1 year for fixed-term employees) | 15 days’ wages per year, up to ₹20 lakh |
| Leave encashment | All leavers | Unused accrued annual leave |
India has 3 national holidays that apply everywhere. Each state adds its own list of festival and regional holidays, and establishments must usually grant a set number of them each year under state law.
Commonly observed festival holidays include Holi, Eid, Diwali and Christmas, along with state days such as May Day or regional new year festivals. Dates for most festivals follow lunar calendars and change every year.
Leave groups give each office its own holiday calendar, so teams in Bengaluru, Mumbai and Delhi each get their state’s festival holidays automatically. Holiday calendars →
Under the Labour Codes every employee must receive an appointment letter. Fixed-term employment is allowed across all sectors, with the same wages and benefits as comparable permanent staff.
Probation is not regulated by statute. Periods of 3 to 6 months are common, with a shorter notice period during probation set in the appointment letter.
Send appointment letters for e-signing, store them on the employee’s record, and track onboarding steps like UAN linking and PAN collection with task lists so nothing is missed. Documents & e-signing →
This guide is general information to help you plan HR processes, not legal, tax or financial advice. Employment law and rates change regularly and awards, enterprise agreements and state rules may give employees more than the minimums shown here. Always confirm current requirements with the official sources or a qualified adviser.
Configure leave types, accrual rules and public holidays for India, keep employee records and contracts in one place, and run payroll with your own salary components. Want to know how IceHrm handles payroll calculations for India? Talk to us.
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