10 FAQs on Labour Laws in India – Answered

The New Labour Codes have introduced several changes. This has resulted in a lot of doubts among the stakeholders, such as whether work shifts can be of 9 hours or 12 hours, about the 50 percent basic salary, changes to gratuity rule, etc. Law Chronicle addresses ten most common FAQs on Labour Laws in India, answered with explanation of the applicable law.  

Labour Laws in India – Frequently Asked Questions Answered 

Question: Is a 12 hour shift legal in India? 

Answer: A 12-hour shift can be legally permissible in limited circumstances as per the Occupational Safety, Health and Working Conditions Code, 2020. The Code maintains a general framework of 48 working hours per week and typically contemplates 8-hour daily work. However, it also regulates the “spread-over” (including rest intervals) to ordinarily not exceed 12 hours in a day.  

Accordingly, a 12-hour shift may be allowed only where work is structured with adequate rest breaks, does not breach weekly hour limits, and complies with overtime provisions for hours worked beyond prescribed limits. In practice, such extended shifts are usually implemented through shift-based or compressed work arrangements and must adhere to applicable rules, state-specific regulations, and health and safety safeguards; they cannot be imposed arbitrarily as a routine substitute for standard working hours. 

Question: Is a 9 hour work day legal in India? 

Answer: Yes, a nine-hour workday is generally permissible under Indian labour law, including the OSH & WC Code, 2020, subject to prescribed conditions. The Code recognizes work limit of 48 hours per week, and it also allows flexibility in distribution of daily hours. The labour rules under various establishments have historically permitted up to nine hours of work per day, provided that the total weekly limit is not exceeded. 

In addition, the law requires compliance with mandatory rest intervals and stipulates that the overall spread-over of working hours, including breaks, should ordinarily not exceed 12 hours in a day. Accordingly, a nine-hour workday is legally valid, as long as it complies with the weekly hour limits, break requirements, and overtime provisions, as applicable. 

Question: What is the new Labour law for working hours per day in India? 

Answer: The Occupational Safety, Health and Working Conditions Code, 2020 prescribes that a worker shall not be required or permitted to work for more than eight hours in a day, with a corresponding weekly cap of 48 hours, and any work beyond this threshold attracts overtime wages at the prescribed rate. At the same time, the OSH &WC Code allows flexibility in structuring work schedules (such as compressed workweeks), provided that the overall weekly limit is not exceeded and prescribed rest intervals are maintained; additionally, the total “spread-over” of working hours, inclusive of rest breaks, is generally not to exceed 12 hours in a day. 

Accordingly, while the new labour regime continues to recognise an eight-hour workday as the statutory norm, it introduces calibrated flexibility subject to overtime compensation and health and safety safeguards. 

Question: Will India adopt a 4-day work week? 

Answer: India has not formally adopted a four-day work week under its labour law framework, including the Occupational Safety, Health and Working Conditions Code, 2020. The Code retains the standard limit of 48 working hours per week. 

However, the new Labour Codes introduce flexibility in the distribution of these hours, thereby permitting compressed work schedules. A four-day work week with longer daily hours, subject to compliance with maximum daily working hour limits, rest intervals, and overtime provisions, is allowed. As a result, while a four-day work week is legally permissible in principle, it is not mandated by statute and remains contingent on employer policy, employee consent, and adherence to prescribed safeguards relating to health, safety, and working time regulations. 

Question: Is 50% basic salary mandatory? 

Answer: No, a fixed requirement of “50% basic salary” is not mandated under the new labour laws. The Code on Wages, 2019 (read with the Code on Social Security, 2020) defines “wages” to include basic pay, dearness allowance, and retaining allowance. Hence, wages must constitute at least 50% of the total remuneration.   

The law does not prescribe that basic pay alone must be 50%. Instead, it sets out a threshold for the aggregate of wage components, while allowing certain exclusions such as house rent allowance, bonuses, overtime, and commissions, subject to a cap beyond which such exclusions are reclassified as wages. 

Question: Can I pay 50% basic and 50% benefits to employees? 

Answer: As mentioned earlier, the Code on Wages, 2019 (read with the Code on Social Security, 2020) does not mandate that employers must structure compensation as exactly 50% basic pay and 50% benefits. Rather, it requires that “wages” (i.e., basic pay, dearness allowance, and retaining allowance) must constitute at least 50% of the total remuneration, after accounting for specified exclusions.  

Therefore, a compensation structure of 50% basic (or wages) and 50% benefits is generally compliant, provided that the excluded components (such as HRA, bonuses, overtime, commissions, and certain allowances) do not exceed the permissible threshold; if they do, the excess is reclassified as wages for statutory purposes. In effect, while a 50:50 structure is legally permissible and commonly adopted, employers must ensure that the overall salary design adheres to the statutory definition of wages, as this directly impacts contributions toward provident fund, gratuity, and other social security benefits. 

Question: What is CTC as per New Labour Code? 

Answer: The Code on Wages, 2019 or the Code on Social Security, 2020 does not expressly define “CTC”. However, CTC is a commonly used term for “Cost to Company” in the corporate sector, synonymous with the statutory concept of “wages”. The New Labour Codes introduce a uniform definition of wages, requiring that basic pay, dearness allowance, and retaining allowance together constitute at least 50% of the total remuneration. The remaining portion comprises specified exclusions such as bonuses, house rent allowance, overtime, and statutory contributions like provident fund and gratuity. 

Any structuring of salary must comply with the 50% wages threshold, which has a direct impact on components like provident fund and gratuity that are calculated on “wages.” 

Question: What is the new Labour Code for gratuity? 

Answer: The new gratuity provisions are governed under the Code on Social Security, 2020. It did not introduce any significant change for regular or permanent employees in India. For them, gratuity is payable after 5 years of continuous service. However, a significant difference has been unveiled for Fixed-Term Employees (FTEs). After 1 year of service, they are eligible for payment of gratuity, payable on a pro-rata basis.  

A major change in calculation has ignited several doubts among stakeholders, since wages are now defined as minimum 50% of the total salary, significantly impacting gratuity payout in upcoming cases. The 5-year condition is not required in case of death or disablement of the employee, or completion of fixed-term contract.   

Question: What is the maximum number of leave days that can be encashed under the applicable Labour Code? 

Answer: As per the Occupational Safety, Health and Working Conditions (OSH) Code, 2020, there is no prescribed maximum limit for leave encashment. However, there is an important distinction between carry-forward limits and encashment limits. Leave exceeding 30 days, if applied but not granted by the employer, can be encashed at the end of the calendar year. At the time of separation from service, the worker is entitled to encash the leave to his/her credit. The State laws or company policies may prescribe an upper limit on encashment of leaves. 

Question: What is the notice period requirement according to New Labour Law? 

Answer: Under the Code on Social Security, 2020 read with the broader framework of the Industrial Relations Code, 2020, the concept of notice period is not rigidly or uniformly applicable across India. It is instead governed by employment contracts, standing orders, and applicable state-specific rules, subject to statutory minimum safeguards.  

To protect interests of workers, the New Labou Laws require termination of employment to be carried out only after providing due notice or wages in lieu thereof. Employers in practice follow a notice period ranging from 30 to 90 days depending on the category of employee and industry norms.  

For retrenchment of “workmen”, the Labour Code prescribes a minimum of one month’s notice or wages in lieu, in compliance with additional conditions such as retrenchment compensation where applicable.