Introduction 

India’s booming economy and skilled workforce make it a prime destination for global businesses, but its labour law landscape is complex and ever-changing. For employers operating in states like Karnataka – home to tech hubs such as Bengaluru – understanding regional legal obligations is essential. With recent reforms under the Labour Codes and the ongoing evolution of employment practices, staying compliant means more than ticking boxes. It means protecting your business and your people in a fast-moving market.

Whether you're onboarding your first hire or scaling operations across the region, this article outlines what international employers need to know about labour laws in Karnataka, and how to navigate them with confidence.

Quick Tips

• Employment in India is governed at both central and state levels – always check regional amendments.

• Ensure offer letters and employment contracts align with Karnataka Shops and Establishments Act.

• Gratuity, PF, and ESI compliance are non-negotiable for eligible employees.

• Review working hours, leave policies, and wage payment cycles under new Labour Codes.

• Consult local advisors to manage contract labour, fixed-term workers, and contractor oversight.

Understanding the Legal Framework 

India is in the process of consolidating 29 national labour laws into four Labour Codes: Wages, Industrial Relations, Occupational Safety, and Social Security. While central laws provide structure, enforcement and additional rules vary by state. In Karnataka, the Karnataka Shops and Commercial Establishments Act governs most private-sector employment.

This Act regulates working hours (typically capped at 48 per week), leave entitlements, conditions of employment, and termination procedures. The state also sets its own minimum wages, which differ by job role and industry. For businesses in IT and services, navigating these nuances is critical.

A key risk? Applying one-size-fits-all contracts across Indian states. Employers should localise documentation, especially for fixed-term contracts, probation clauses, and termination provisions, to reflect Karnataka-specific rules.

Wages, Benefits, and Social Security 

India’s social security system is governed by schemes such as Employees' Provident Fund (EPF), Employees' State Insurance (ESI), and Gratuity. These are mandatory for most employers with 10 or more staff, though thresholds vary.

In Karnataka, enforcement is strict. Non-compliance with contributions or benefit remittances can trigger audits and penalties. The upcoming implementation of the Code on Social Security will streamline obligations, but employers must still prepare for payroll classification, wage ceilings, and proper registration.

Additionally, Karnataka mandates timely payment of wages – typically by the 7th of the following month – and requires detailed wage slips. Payroll errors can erode trust and trigger complaints with the Labour Commissioner.

Industrial Relations and Terminations 

The Industrial Relations Code introduces structured processes for dispute resolution, strikes, and layoffs. In Karnataka, employers with 100+ workers need prior approval for retrenchments or closures. Even in smaller firms, termination must follow due process: valid reasons, notice, and proper documentation.

At ThinkGlobal HR, I supported a European business facing mass redundancies in Bengaluru. With careful planning, local legal input, and sensitive communication, we managed the transition with zero claims. It’s a reminder that compliance doesn’t have to come at the cost of compassion – and that proactive HR makes all the difference.

A Real Example: Avoiding Costly Misclassification 

One US-based client engaged freelance developers in Karnataka via a global platform. On review, their working patterns, supervision, and exclusivity met the definition of full employment under Indian law. We helped them convert contracts, register for PF and ESI, and set up a local legal entity.

By shifting early, they avoided significant fines, tax liabilities, and reputational risk. For international firms, contractor misclassification is one of the most common – and preventable – compliance pitfalls.

Final Thoughts 

India’s legal environment is dynamic, and Karnataka, as a progressive state, is often at the forefront of implementation. For global businesses, success lies in understanding both the spirit and the letter of the law – and adapting quickly.

What’s next for your global people strategy? 

Book a free compliance check-in or HR audit with ThinkGlobal HR. We help businesses like yours navigate India’s complex employment landscape with confidence – so you can focus on growth, knowing your people are protected and your systems are sound.