Operating a Business

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India: Operating a Business

In this page: Legal Forms of Companies | The Active Population in Figures | Working Conditions | The Cost of Labour | Management of Human Resources

Legal Forms of Companies

Sole Proprietorship: Number of partners: One
Capital (max/min): No minimum capital
Shareholders and liability: Unlimited liability.
Partnership: Number of partners: Minimum number is 2, while as the maximum number can be 20 in case of a General Partnership and with no maximum for all Limited companies.
Capital (max/min): No minimum capital
Shareholders and liability: Liability of the partners is unlimited.
Private Limited Company: Number of partners: Minimum number is 2, while as the maximum number can be 50
Capital (max/min): Minimum paid up capital of INR 100,000
Shareholders and liability: Limited liability to the amount contributed.
Public Limited Company: Number of partners: Minimum 7 partners; while as there is no limit on the maximum number of members/shareholders. Minimum 3 directors.
Capital (max/min): Minimum paid up capital of INR 500,000
Shareholders and liability: The liability of a member is limited to the face value of the shares he owns.
Co-operative: Number of partners: Minimum number is 10; while as there is no limit on the maximum number of members. However, the members must be residing or working in the same locality.
Capital (max/min): No minimum capital requirement
Shareholders and liability: The liability of a member is limited to the extent of his capital contribution.
Joint Hindu family business: Number of partners: All members of a Hindu undivided family can do business jointly under the control of the head of the family who is known as the 'Karta'. The members of the family are known as 'Co-partners'. Minimum two members.
Capital (max/min): No minimum capital
Shareholders and liability: The Karta has unlimited liability while the liability of the other members is limited to the value of their individual interests in the joint family.

Business Setup Procedures

Setting Up a Company	India	South Asia
Procedures (number)	10.00	7.12
Time (days)	17.50	14.56

Source: The World Bank - Doing Business, Latest data available.

The Competent Organisation: Ministry of Corporate Affairs

Company Law Board
For Further Information: Consult Doing Business Website, to know about procedures to start a Business in India.
Ministry of Corporate Affairs, List of registered Certified Filing Centers.

Financial Information Directories

Dun & Bradstreet - Worldwide directory with financial information on businesses

Kompass India - Business directory for India

The Active Population in Figures

	2018	2019	2020
Labour Force	-586,110,788	-579,009,121	-602,052,834

Source: International Labour Organization - ILOSTAT, Latest data available.

	2017	2018	2019
Total activity rate	52.52%	52.15%	52.13%
Men activity rate	80.15%	79.70%	79.57%
Women activity rate	22.45%	22.16%	22.26%

Source: International Labour Organization - ILOSTAT, Latest data available.

For Further Statistics: Ministry of Statistics and Program Implementation
For Further Information About the Labour Market: Employees' Provident Fund Organization, New Delhi
ILO, The representation of the International Labor Organization in India

Working Conditions

Opening Hours
Legal Weekly Duration: Maximum 48 hours (9 hours a day).
Maximum Duration: The total number of working hours (including overtime) should not exceed 60 in a week and the total overtime hours should not exceed 50 in a quarter.
Night Hours: 10 pm until 7 am.

Working Rest Day: In general, Saturday and Sunday are not working days, but this is not the case in all companies.
Paid Annual Vacation: The number of leave days varies from State to State. The total number of leaves may vary from 15 days to 30 days in a year.
Retirement Age: It varies from 58 to 65 years. Early retirement schemes called Voluntary Retirement Scheme (VRS) also exist in the country.
Child Labour and Minimum Age For Employment: Though the Child Labor Act -1986 prohibits work by children under 14 years in factories, mines, domestic work, roadside eateries and other hazardous industries. However, a child assisting his/her family is exempt from the provisions of the Act.
Informal Labour Market: The informal labor is called ‘unorganized labor’ in India. As per the latest report (Year 2007) of National Commission for Enterprises in the Unorganized Sector –NCEUS, there are 396 million workers in India's unorganized sector, which constitute 93% of the total labor force available in India.

The Cost of Labour

Pay

Minimum Wage: The minimum wage fluctuates a lot between states, sectors and skill levels and is regulary revised. In April 2022, the minimum wage for unskilled agricultural worker was set at 382 Indian rupees for an eight-hour work day.
Average Wage: The average wage fluctuates a lot depending on activity sectors and States. According to a study by Salary Explorer, the average monthly salary was INR 31,900 in 2021.
Other Forms of Pay
Pay For Overtime: Any worker working for more than the maximum prescribed time is entitled to wages in respect of such overtime work at twice the ordinary rate of wages.

Industrial units are required to pay a minimum bonus to his employees even if the unit suffers losses during the fiscal year.

Social Security Costs

The Areas Covered: Provident fund, pension, survivor deposit-linked schemes and gratuity for long-service workers (five years or more)
Contributions: Contributions Paid By the Employer: The Employees' Provident Fund (EPF) Scheme is funded by the employer at 3.67% of monthly salaries (plus 0.5% of monthly salaries for administrative costs). 8.33% of the salary is compulsorily contributed to the pension scheme. If the monthly salary of employees exceeds INR 15,000, this contribution is allocated to the pension fund. Finally, the employer must contribute to Employer Liability with an average of 4% of the monthly payroll.
Contributions Paid By the Employee: The Employees' Provident Fund (EPF) Scheme is 12% contributed by the employee, the Employee Pension Scheme (EPS) is not contributed to by the employee.
Competent Organization: Ministry of Labor and Employment
Employees’ Provident Fund Organisation
Employees’ State Insurance Corporation

Management of Human Resources

Recruitment

Method of Recruitment: Advertising, Employment Exchanges, Educational Institutions, Direct recruitment.
Recruitment Agencies: National Employment Exchanges (Public), Employment Agencies (Private), Labor Contractors (Private)
Recruitment Websites: The Directorate General of Employment and Training (DGET)
Naurkri.com (a web-based private job site in India)
MonsterIndia.com (a web-based private job site in India)
Careerjet (an employment search engine for India)

The Contract

Type of Contract: 1. Permanent (more than 90%)
2. Temporary
3. Fixed-term

Breach of Contracts

Retirement

Several forms: general resignation, resignation for one’s own convenience, resignation by agreement, resignation by employee’s request, voluntary retirement, etc.

Dismissals

According to the Indian law, an employer has a right to terminate the services of an employee without giving a reason, though this position has been weakened through various court orders.

However, employees cannot be dismissed while they are on sickness leave or disablement leave or on maternity leave.

Other Possible Methods

Collective dismissals due to economic reasons, disciplinary dismissals, resignation as per the terms of contract.

Labour Laws

Consult Doing Business Website, to obtain a summary of the labor regulations that apply to local entreprises.

Dispute Settlement

Conciliation Process

Cases of Dispute: Wages and allowance (21.5%), Personnel (9.4%), Indiscipline (41%), Bonus (3.5%), Retrenchment and lay-offs (0.6%), Charter of demands (7%), Work norms (1.1%).
Legal Framework: Under sec. 2(a) of the IESA, a worker dissatisfied with his or her termination of employment is entitled to raise the matter as a labor dispute with an officer from the conciliation department of the Ministry of Labor. The officer will attempt to conciliate the matter and must submit a report to the Government if conciliation fails, pending a decision from the governmental authority on whether the matter merits adjudication before the Labor Court or Tribunal.
Procedure: The Industrial Employment (Standing Orders) Act (IESA), 1946, and the Industrial Disputes Act (IDA), 1947.

Judicial Structures

Legal Framework: IESA
Competent Legal Body: The Labor Court, Industrial Tribunal and National Tribunal.

Social Partners

Social Dialogue and Involvement of Social Partners: With some exceptions, India has company unions rather than trade unions. These are often affiliated with national labor organizations. Political parties promote various trade unions. The bargaining power of the unions is declining as the government pushes forward its reform agenda.
Unionisation Rate: Although there are more than 20 million unionized workers, unions represent less than 25% of the workers in the organized sector (primarily in state-owned organizations), and less than 5% percent of the total work force.
Regulation Bodies: Labor Bureau

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