In India’s post-reform labour landscape, HR professionals must navigate a complex web of legal obligations from the moment an employee is hired to the day they exit. With the Industrial Relations Code (2020), Code on Wages (2019), and Code on Social Security (2020) now in force, employment contracts, probation, termination, and documentation are no longer just HR formalities, they are compliance-critical processes.
Explore our comprehensive free compliance checklist, outlining the pivotal legal requirements necessary to ensure your HR operations remain robust, transparent, and protected from legal challenges.
Appointment & Employment Contracts: Legal + HR View
Employment contracts are governed by:
- Indian Contract Act, 1872
- Shops & Establishments Act (State-specific)
- Industrial Employment (Standing Orders) Act (for applicable establishments)
Key Legal Sections HR Must Know
- Section 10 – Valid Contract Essentials
- Free consent
- Lawful consideration (salary)
- Lawful object
- Competent parties
- Sections 13 & 14 – Free Consent
- Consent must not be obtained through force, fraud, misrepresentation, or undue influence
- Section 27 – Restraint of Trade
- Post-employment non-compete clauses are mostly void in India
- In-service non-compete and confidentiality clauses are valid
What HR Must Define in Appointment Letters
- Designation & duties
- CTC + salary breakup
- Probation clause
- Confirmation terms
- Notice period (both sides)
- Transfer clause
Best Practice: Written confirmation and extension must be documented to avoid disputes.
Probation, Confirmation & Termination: Legal Framework
Covered under:
- Employment Contract
- Standing Orders Act
- Industrial Disputes Act (for workmen)
- Shops & Establishments Act
Probation Rules
- Must be defined in appointment letter or standing orders
- Typical duration: 3–6 months
- Extension must be written and time-bound
- Confirmation must be formally issued
If an employee continues working without a confirmation letter, termination may be legally invalid.
Misconduct Termination: HR Process
Follow these steps to ensure procedural fairness:
- Charge sheet
- Show cause notice
- Domestic inquiry
- Inquiry report
- Termination order
Failure to follow this sequence can lead to reinstatement orders under Section 25F of the Industrial Disputes Act.
Retrenchment, Layoff & Closure: Large Units
Applicable to establishments with 100+ workmen:
- Section 25M – Layoff requires prior government permission
- Section 25N – Retrenchment requires prior approval
- Section 25O – Closure requires notice, permission, and compensation
Retrenchment without compliance triggers industrial dispute litigation and potential reinstatement with back wages.
HR Compliance Documentation Checklist
Most labour court cases arise due to:
- No proper appointment letter
- No documented termination process
- No inquiry record
- No notice pay or compensation
- No documentation trail
Maintain a compliance file for each employee with signed contracts, confirmation letters, inquiry records, and exit documentation.
Disclaimer: This blog is for educational purposes only. HR compliance may vary based on state-specific rules, establishment type, and judicial interpretations. For case-specific advice, consult a certified Labour Law Consultant or practicing advocate.