Labor & Employment Law

No exemption from PF coverage based solely on salary. EPF coverage (now under the Code on Social Security 2020, which subsumed the EPF Act 1952 from 21 November 2025) applies to establishments with 20+ employees, regardless of salary level. However, the statutory contribution rate (12% employer + 12% employee) applies only to "wages" up to Rs 15,000/month ceiling (called "excludable wages" when salary exceeds ceiling). For employees earning above Rs 15,000/month basic + DA, employer can choose: (1) restrict PF contribution to Rs 15,000 ceiling (Rs 1,800 employer + Rs 1,800 employee monthly); or (2) contribute on actual higher wages (voluntary higher contribution). Employee consent required if employer opts for higher voluntary contribution. Practical approach: many GCCs restrict PF to statutory ceiling for senior employees (reduces employer cost, employees prefer higher take-home) but contribute on actuals for junior employees (retention benefit). Foreign nationals covered by India social security agreements (in force with countries including Germany, France, Japan and the Netherlands; there is no India-US agreement) can obtain exemption via certificate of coverage from home country, avoiding dual social security liability during short-term assignments (typically < 5 years).

Gratuity is now governed by the Code on Social Security 2020 (in force 21 November 2025, subsuming the Payment of Gratuity Act 1972) and is calculated as: last drawn wages × 15/26 × number of completed years of service. Eligibility: 5 years continuous service for permanent employees; fixed-term employees become eligible after 1 year. The Labour Codes use a uniform definition of wages: where excluded components (such as HRA, conveyance and other allowances) exceed 50% of total remuneration, the excess is added back to wages. Loading CTC into allowances therefore no longer shrinks the gratuity base. Approach: (1) Model CTC so that wages (basic + DA + retaining allowance) are at least 50% of total remuneration, which avoids unplanned add-backs; (2) Re-run gratuity provisions and actuarial valuations for the new wage definition and the fixed-term 1-year rule; (3) Accrue gratuity provision annually in books (about 4.81% of wages), since termination-driven payouts without provisioning stress cash flows; (4) For fixed-term contracts, budget pro-rata gratuity from year one; (5) Statutory ceiling Rs 20 lakh as last notified, communicate the ceiling transparently to senior hires; (6) Contract clauses disclaiming gratuity are void, gratuity is social welfare legislation. Key: compensation structure planning at hiring stage, not ex-post rebalancing which triggers employee relations issues.

Employment visa (E category) process and timeline: (1) Sponsorship letter from Indian GCC to foreign national: includes role details, tenure, salary (minimum USD 25,000 annually or as revised by MHA), justification for specialized skills unavailable locally. Salary threshold not applicable to ethnic cooks, language teachers, or staff of embassies; (2) Application via Indian mission website or VFS center in home country: online form, passport, photographs, sponsorship letter, educational/experience certificates, company incorporation documents; (3) Processing time: 4-8 weeks standard, expedited processing ("Tatkal") available for additional fees but discretionary approval; (4) Visa validity: up to 5 years or project/contract duration, multiple entry permitted. Validity starts from date of issue, not date of travel; (5) Post-arrival FRRO registration: within 14 days if visa stamped so or if stay exceeds 180 days. Upload documents on FRRO portal, book appointment, physical verification at FRRO office with passport, visa copy, address proof, rental agreement, employer letter. Registration certificate issued; (6) Renewal: apply 60-90 days before expiry, similar documentation. Practical consideration: for urgent hires, explore business visa (B category) for initial 3-6 months while employment visa processes, but business visa prohibits employment, technically consultant role only. Dependent visas (X category) for spouse/children processed concurrently, no work authorization on X visa (require conversion to employment visa if dependent seeks employment).

Generally not enforceable for post-employment period. Section 27 of Indian Contract Act 1872 declares void any agreement restraining any person from exercising lawful profession, trade, or business. Courts consistently hold that once employment relationship terminates, employer cannot restrict employee's right to livelihood via non-compete. However, enforceability nuances: (1) During employment, reasonable restrictions permitted (e.g., cannot work for competitor while employed, no moonlighting clauses); (2) Non-solicitation distinguished from non-compete, post-employment clauses preventing solicitation of former employer's clients/employees for limited period (6-12 months) and limited geography upheld if: (a) employee had direct client interaction/relationship; (b) duration and geography reasonable (unlimited restraint fails); (c) legitimate business interest protected; (3) Confidentiality obligations, post-employment duty not to disclose trade secrets, confidential information enforceable without temporal limit (Trade Secrets Act jurisprudence); (4) Garden leave, during notice period, employer can prevent employee from joining competitor by placing on paid leave (salary continues, employee cannot work elsewhere), but reasonableness doctrine applies (excessive notice period unconscionable). Practical approach for GCCs: (1) Draft non-solicitation clauses carefully, specify clients/employees by role/territory, duration 6-12 months post-termination; (2) Embed robust confidentiality and IP assignment provisions (enforceable); (3) For critical employees, negotiate buy-out clauses, if employee joins competitor within 12 months, pays liquidated damages (courts scrutinize amount for reasonableness, cannot be penalty); (4) Use retention mechanisms, deferred bonuses, cliff-vesting ESOPs, to incentivize tenure without unenforceable restraints.