Starting April 1, companies will be required to provide appointment letters to all workers under the new Labour Codes. Employers who fail to comply will face penalties. The government has mandated that every employer must issue an appointment letter to every employee. If an employee does not have one by the time the Code takes effect, it must be issued within three months.
The Labour Codes make appointment letters mandatory for all workers. Previously, written terms existed in parts of the law but were not uniformly enforced or standardised across the labour market. According to the Occupational Safety, Health and Working Conditions Code, 2020, the responsibility to issue appointment letters lies with employers.
What did Sandeep Sachdeva say?
Sandeep Sachdeva, Co-Founder and CEO of Safe In India Foundation (SII), called this a game-changer for empowering workers. The SII Foundation collaborates with Indian workers to improve safety, well-being, and productivity. Sachdeva noted that in their experience working with 50,000 workers, 97% did not have an appointment letter; the majority of workers were part of the automotive value chain.
“Three out of four workers do not receive salary slips, and many lack the Employee State Insurance Corporation (ESIC) card, which provides access to ESIC or ESI State hospitals in case of accidents or health crises,” he explained. This is not just an issue for small units; many affected workers are in factories with over 100 employees.
He pointed out that these labour-friendly measures and improved working conditions would significantly enhance productivity and benefit both businesses and the economy. The appointment letter will serve as legal proof, which informal workers often lack. Without it, workers miss out on coverage under the ESIC, healthcare benefits, provident fund access, and overtime pay.
Prime Minister Narendra Modi and Labour Minister Mansukh Mandaviya have prioritised the issuance of appointment letters under the new Labour Code.
The government aims to formalise this process, a significant step toward improving labour conditions, Vinit Kaul, an HR advisor and mentor, said. While employers and companies should begin implementing these measures, it remains to be seen how quickly they will do so.
Clear and transparent employment terms are essential; employees must understand their roles, wages, working hours, and the benefits they are entitled to, instead of opaque and vague employment terms, Kaul said. pointed out that there will be an impact on wages, wage structures, and retirement benefits, especially gratuity, and companies are starting to recognise the cost implications. However, they may take time to address practical issues, causing delays in implementation.
The penalties for failing to issue an appointment letter can range from Rs 200,000 to Rs 300,000. While the Code does not specify a separate penalty for failing to issue appointment letters, a general penalty for violations applies.
If an employer continues to violate the rules after being convicted, they may incur an additional penalty of up to Rs 2,000 per day until the violation is resolved (Section 94 – general penalty). Enforcement will depend on the rules set by the “appropriate government” (central or state) regarding the inspection and penalty procedures, as well as compounding provisions.