Engagement and Dismissal

India has the world's third-largest pool of scientific and technical personnel, which serves as an important attraction for foreign investors. Most managerial and technical people, and many skilled workers, speak English, and many have studied or worked abroad. Unemployment and underemployment are high, providing an abundant supply of potential employees. Although there is a large pool of underemployed educated personnel, as in much of the developing world, illiteracy acts as a brake on labor productivity in the workforce as a whole. The current 148 industrial policy provides for hiring of foreign technicians without prior government approval.

The RBI (Reserve Bank of India) has raised the remittable per-diem rate from USD 500 to USD 1000, with an annual ceiling of USD 200,000 for services provided by foreign technicians payable to a foreign firm.

Technical personnel can remit up to 75 percent of their monthly net income through authorized exchange dealers. Total duration of employment of a technician is limited to 12 months at a time. Employment in excess of 12 months requires clearance by the Ministry of Home Affairs.

India is a member of the International Labor Organization (ILO) and adheres to 37 ILO conventions protecting worker rights. Industrial relations are governed by the Industrial and Disputes Act of 1947. The Act curbs unfair labor practices by employers, workers or trade unions through imposition of fines and imprisonment. Workers may form or join unions of their choice. Nevertheless, although unionized workers affiliated with national federations number more than seven million, their unions represent less than one fourth of the workers in the so called modern sector (subject to the Factories Act of 1948), primarily in state-owned concerns, and less than two percent of the total work force. Where workers are unionized, wage increases are negotiated between unions and management. Most unions are linked to political parties and their politicization has, in the past, created problems for domestic and foreign employers. Labor militancy has declined in recent years, however, even among the formerly strident Communist-Marxist unions of West Bengal. Workdays lost to strikes and lock-outs have declined every year since 1991. Worker rights are broadly protected under Indian law.

The Industrial Disputes Act established freedom of association and collective bargaining rights. The Factories Act regulates working conditions in mechanized factories employing more than 10 employees or non-mechanized factories employing more than twenty, prescribing standards for working conditions, working hours, handling and storage of materials, etc. Other laws regulate employment of women and children and prohibit bonded labor.

Enforcement of these laws has been imperfect, however, and working conditions for workers not subject to the Factories Act are often quite poor. Payment of wages is governed by the Payment of Wages Act, 1936 and Minimum Wages Act, 1948. Industrial wages range from about USD 3 per day for unskilled workers, to over USD 150 per month for skilled 149 production workers. Retrenchment, closure and layoffs are governed by the Industrial Disputes Act, which requires prior government permission to carry out layoffs or closure of businesses employing 100 or more workers. In practice, permission is not easily obtained. However, private firms
have successfully downsized using voluntary retirement schemes.