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India: Operating a Business

Legal Forms of Companies | The Active Population in Figures | Working Conditions | The Cost of Labor | Management of Human Resources

Legal Forms of Companies

Types of Companies and Capital (Max/Min)	Number of Partners/Shareholders and Liability
Sole Proprietorship No minimum capital	One Unlimited liability.
Partnership No minimum capital	Minimum number is 2, while as the maximum number can be 10 in case of banking business and 20 in all other types of business. Liability of the partners is unlimited.
Private Limited Minimum paid up capital of INR 100,000	Minimum number is 2, while as the maximum number can be 50 Limited liability to the amount contributed.
Public Limited Minimum paid up capital of INR 500,000	Minimum number is 7; while as there is no limit on the maximum number of members/shareholders. The liability of a member is limited to the face value of the shares he owns.
Co-operative No minimum capital requirement	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. The liability of a member is limited to the extent of his capital contribution.
Hindu United Family Business (HUF) No minimum capital	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-parceners'. 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.

Enterprises Federation: Federation of Indian Micro and Small & Medium Enterprises
The Associated Chamber of Commerce and Industry of India
Indian Industries Association (IIA)

Business Setup Procedures

Setting Up a Company	India	South Asia
Procedures (number)	12.00	7.10
Time (days)	29.00	24.60

Source: Doing Business.

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 Centres.
Kerala Trade Register
The Competent Organization: Registrar of Companies (ROC)

Company Law Board

The Active Population in Figures

	2010
Labor Force	478,300,000

Source: CIA - The world factbook

	2009	2010
Total activity rate	-	57.60%
Men activity rate	81.10%	-
Women activity rate	32.80%	-

Source: UN - United Nations

For Further Statistics: Ministry of Statistics and Program Implementation
For Further Information About the Labor Market: Employees State Insurance Corporation, New Delhi
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.
Women are banned from working in night except in certain sectors like Information Technology and Medical services.

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 Labor 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 Labor Market: The informal labor is called ‘unorganized labor’ in India. As per the latest report ((Year 2007) of National Commission for Enterprises in the Unorganised Sector –NCEUS (www.nceus.gov.in), there are 396 million workers in India's unorganised sector, which constitute 93% of the total labour force available in India.

The Cost of Labor

Pay

Minimum Wage: From April 1, 2011 the National Floor Level of Minimum Wage has been raised to INR 115 per day.
Average Wage: On an average, the industrial wages range from about USD3 per day for unskilled workers, to over USD150 per month for skilled production workers.
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 and survivor (deposit-linked) insurance, pension scheme, gratuity scheme, social assistance.

Contributions

Contributions Paid By the Employer:

	Contributions by Employer
Provident Fund	3.67% of monthly payroll, plus 1.1% of monthly payroll for administrative costs.
Survivor (deposit-linked) Insurance	0.5% of monthly payroll, plus 0.01% of monthly payroll for administrative costs.
Pension	8.33% of monthly payroll.
Gratuity	An average of 4% of monthly payroll.
Social Assistance	None

Contributions Paid By the Employee:

Contributions by Employee

Contributions by Government

Provident Fund

12%

None

Competent Organization

Ministry of Labor and Employment
Employees’ Provident Fund Organization
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)
JobsAhead.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.

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 and IDA
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.
Unionization Rate: Although there are more than 7 million unionized workers, unions represent less than 25% of the workers in the organized sector (primarily in state-owned organizations), and less than 2% percent of the total work force.
Regulation Bodies: Ministry of Labor and Employment

Labor Bureau

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