Labor & Employment Law

No exemption from PF coverage based solely on salary. EPF Act 1952 applies to all employees in 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 social security agreements (19 countries including US, Germany, France, Japan) can obtain exemption via certificate of coverage from home country, avoiding dual social security liability during short-term assignments (typically < 5 years).

Gratuity under Payment of Gratuity Act 1972 is calculated as: (Last drawn basic wages + DA) × 15/26 × number of completed years of service. Liability crystallizes after 5 years continuous service. Strategies: (1) Clearly define "basic wages" in employment contract—exclude all allowances, commissions, performance incentives to restrict gratuity base. Ensure basic wages constitute reasonable proportion (typically 30-40%) of CTC to avoid recharacterization by authorities; (2) Structure total compensation with higher proportion in allowances (HRA, special allowance, conveyance) rather than basic—lowers gratuity base while maintaining CTC competitiveness; (3) Accrue gratuity provision annually in books (4.81% of basic wages)—sudden termination-driven gratuity payments without provisioning stress cash flows; (4) For fixed-term contracts, ensure clear documentation that employment relationship ends on completion of specified term—resignation vs termination distinction impacts gratuity forfeiture risk; (5) Maximum gratuity payable Rs 20 lakh (increased from Rs 10 lakh in 2018)—for ultra-high earners, communicate ceiling transparently; (6) Do NOT attempt to circumvent via contract clauses disclaiming gratuity—Payment of Gratuity Act is social welfare legislation, contractual waivers void. 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.