We have received numerous questions from companies about the current situation in India over the last few days. One of the most frequent questions related to the topic of Short-time workand whether this was also possible in Indian companies (subsidiaries).

Legal basis

The possibility of short-time work is (so far) not provided for in Indian law and accordingly does not exist as an instrument. On 20 March, the Ministry of Labour & Employment published a letter explicitly advising employers not to reduce wages or lay off workers at this time, so as not to exacerbate the crisis and demoralise employees by weakening their financial position.

In the current Aid package the government announced support for workers in the organised sector (or their employers). However, only companies that employ up to 100 employees are eligible. The salary of at least 90% of the employees must not exceed INR 15,000 per month. Thus, this government support should NOT be eligible for the bulk of the companies.

Intra-company agreements

Similarly, the employer cannot force his workforce to bring forward their annual leave. If it is already foreseeable that the financial resources will not suffice for much longer, it is of course an option to seek an open discussion with the Indian workforce and to agree on wage cuts (for all positions) by mutual consent - in the sense of the continued existence of the company.

In the meantime, we have received reports from our network of isolated examples of voluntary wage waivers by the Indian workforce (up to approx. 1/3 of the wage). Such proposals directly from the workforce naturally arise from fears of redundancies.

Update from 19 May

The Ministry of Home Affairs (MHA) regulation passed on March 29 that prohibited employers from cutting wages during the Covid-19 pandemic has been revoked and is no longer in effect as of today. Nevertheless, this notification does not mean a "free pass" by any means: the terms of the employment contract remain valid and only the mutual signing of a corresponding amendment agreement can justify the payment of a reduced wage.

If you have any questions in this regard (e.g. how to calculate and document such a wage sacrifice in the best and most socially acceptable way), please contact us by phone or e-mail.