What is the Difference Between Labour and Employment Law?

What is the Difference Between Labour and Employment Law?

Legal & Compliance

Vakilsearch Staff

Vakilsearch Staff

93 week ago — 8 min read

Are you feeling confused about what is the difference between labour and employment law in India? Worry not. All your questions about labour and employment laws will be cleared in this guide.


The most significant distinction between labour law and employment law concerns the relationship between an employer and an employee. When the law deals with relations between individuals or employers, then this generally falls under employment law. If the law concerns relationships between employers and groups of individuals (such as an organisation), it is covered under labour law.


Both terms are frequently utilised interchangeably and have certain similarities. However, they are two distinct types of practice. Attorneys can specialise in one field or another. Therefore, it is essential to know whether representation is by an employment law lawyer or an attorney in labour law.


When the law deals with relations between individuals or employers, then this generally falls under employment law. If the law concerns relationships between employers and groups of individuals (such as an organisation), it is covered under labour law.


What is the Labour Law in India?

Labour law is the field of law that reflects the connection between the trade union and a worker and the government in general. It plays a significant function in ensuring workers’ rights, wages, and unions and establishing connections between the government and workers. It’s a code of protection for workers, labourers, and employees in educating them about their rights. It also helps to create a standard legal framework for the practice of working in the workplace.

The law of labour is often misunderstood as Employment law. In reality, Employment law is the legal area that addresses the relationship between employers and an employee.

What is an Employee Agreement?

The Agreement sets out the conditions of employment agreed upon between the employer and the employee. Suppose they explicitly state it in the contract or not. In that case, the employer and employee are obligated to maintain trust and mutual confidence and only make legally-based and reasonable demands on one another. The Agreement can cover various types of employment, including full-time, part-time and fixed-term.

This Agreement provides all employment conditions, including job responsibilities, working hours, pay and benefits, privacy, annual leave, and other important terms.

  • Salary
  • Benefits
  • Work schedule
  • Allotment to vacation
  • Restrictions on confidential information
  • Protect the interest of employers
  • Set Expectations
  • Checklist Down Laws of Employment


In most cases, when an employer decides to hire a new employee and the parties wish to start immediately, employers may prefer to start by providing an employee with a letter that clarifies some of the terms in more detail. 

In these cases, employers might use a Letter of Intent for Employment and follow up with an Employment Agreement.

An Employment Agreement is not always appropriate for contractors to use. We recommend contractors use a different legal agreement known as a Service Agreement.


What is the Employment Law in India?

Employer Laws in India are traditionally governed by contracts and multiple and diverse legislations at both the central and state levels. The Ministry of Labour and Employment (“Ministry”) proposed four bills in 2019 to combine 29 central government laws concerning labour law. The core reason was to facilitate harmonisation and consolidation of various laws that deal with:

  • Employment
  • Social security
  • industrial disputes
  • Other pertinent employment and labour issues


These bills were codified and adopted as follows:

  • The Code of Wages, 2019
  • The Industrial Relation Code, 2020
  • The Occupational Safety, Health and Working Conditions Code 2020
  • The Code on Social Security, 2020


Who is involved in Labour Law and Employment Law?

Although every person who works is indeed involved in some manner, not everyone is in close contact with employment or labour law regularly. The chance of constant interactions between these two areas of law and HR roles is the highest. Making sure that a business and its employees comply with federal, provincial and health and safety regulations is a key part of the job of an HR professional.

To ensure their organisation and their employer are operating fairly and legally at work, Union leaders depend on their knowledge of labour laws. Understanding the rules of employment can be beneficial to employers as well.


Labour and Employment Laws of India

The legislation governing labour in India is classified into five broad categories. The enactments are built on the Constitution of India and the resolutions adopted by ILO conventions at times. Indian law on labour refers to laws that regulate the work environment. There are more than fifty national laws and numerous state-level laws.

In the past, Indian governments at both the state and federal levels have sought to provide the highest level of protection for their workers by enforcing labour laws. While adhering to the basic requirements of the law on contracts that govern employment contracts, they must also adhere to the applicable provisions of labour laws besides the outlined rules.


The Standing Orders of the Establishment

Indian law on labour divides the industries into two categories of broad classification. Read the following to learn about these two categories:

1. The Shops & Establishment Act

Each state has their own rules for this Act. The Shops and Establishment Act is state-wide law legislation. Also, this Act aims to give employees and employers in the unlicensed sector of employment – namely, shops and establishments – statutory obligations and rights.  Apart from the immediate family members of employers, this Act applies to anyone employed in an enterprise, no matter if they are paid or not.


2. Factory

The Factories Act of 1948 contains rules that govern factories (any industrial facility that carries out manufacturing and employs at least ten employees). A factory is any operation that requires an application of electricity. The referenced Act stipulates the health, welfare and working conditions as well as the time off for factory employees.

The mentioned Act confers on the State Authorities the power to make rules so that the current state reality is accurately represented in the implementation. The Act includes safety precautions against the handling and using dangerous substances by workers in factories. It also takes care of the setting of emergency guidelines and procedures.



The information in this article is based on official research of the rules and regulations of India. It’s accurate and reliable at the time of publication.  However, the accuracy of the information could be affected by circumstances changes after the publication date. We hope you understand all laws and the major difference between labour and employment laws.


To explore business opportunities, link with us by clicking on the 'Connect' button on our eBiz Card.


GlobalLinker in partnership with Wadhwani Foundation hosted a webinar, featuring legal experts from Khaitan Legal Associates, to understand the impact of the Labour Law reforms on SMEs. Access the webinar presentation on this link and watch the webinar recording below.


Image source: Canva


Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker 


Posted by

Vakilsearch Staff

Greetings! We would love to work with you and your company. We look forward to connecting with business houses and MSME's.