Glossary
Staffing and labour law terms, in plain words
The words a plant HR head, a contractor or a contract worker meets every month: PF, ESIC, contract labour, minimum wages, gratuity, the Labour Codes and more. Each entry names its official source.
- Appointment letter
A written letter given to an employee when they join, stating the job, the wages and the social security they are entitled to. Under the OSH Code every employer must issue one to every employee. For a job seeker it is also the simplest proof that an offer is real.
- Apprentice
A trainee engaged under the Apprentices Act, 1961 to learn a trade on the job for a set period, on a stipend rather than wages. Under the National Apprenticeship Promotion Scheme the government shares part of the stipend, paid straight into the apprentice’s bank account. Apprentices are not counted as employees under the Codes.
- Attrition
The rate at which people leave a workforce over a period, usually shown as a percentage of average headcount. On a shop floor high attrition means constant hiring and training and gaps on the line, so it is worth tracking by shift, role and reason for leaving.
- Background verification
Checking that what a candidate says is true before they join: identity documents, address, education and trade certificates, past employment and references. For shop floor roles it usually also means checking the trade itself, by a practical test, before deployment.
- Contract labour
Workers hired by a contractor and deployed at another company’s establishment to do its work. The contractor is their employer and pays them, while the company where they work is the principal employer. Since 21 November 2025 the rules for contract labour sit in the Occupational Safety, Health and Working Conditions Code, 2020.
- Contractor licence
The licence a labour contractor needs to supply or engage contract workers. Under the OSH Code, a contractor employing 50 or more contract workers must hold one. It is valid for five years, is applied for online, and a contractor working in several states can take a single all-India licence.
- Core and non-core activities
The split the OSH Code uses to decide where contract labour may be used. Core activities are the main work of the establishment. Contract workers may do core work only where it is ordinarily done through contractors, is intermittent, or involves a sudden rise in volume that must be finished on time.
- Employees’ Pension Scheme (EPS)
The pension part of a worker’s EPFO membership. Of the employer’s provident fund contribution, 8.33 per cent of wages goes into the Employees’ Pension Fund, and the Central Government adds its own share. The worker does not pay into EPS separately; it comes out of the employer’s share.
- ESIC (Employees’ State Insurance)
Health insurance and cash benefits for workers, run by the Employees’ State Insurance Corporation. It covers employees earning up to Rs 21,000 a month (Rs 25,000 for persons with disability). The employer pays 3.25 per cent of wages and the employee 0.75 per cent, and the employer deposits both.
- Fixed term employment
Direct hiring for a set period, written into the contract. Under the Labour Codes a fixed term employee gets the same wages and benefits as a permanent worker doing the same work, including leave and social security, and gratuity after one year. It covers only people hired directly, not workers supplied by a contractor.
- Form 16
The certificate an employer issues every year showing salary paid and income tax deducted from it, which the employee uses to file the return. Form 16 is its name under the Income-tax Act, 1961. The Income-tax Act, 2025 came into force on 1 April 2026 with new forms, so later years carry a new number.
- Full and final settlement
The last payment when someone leaves: pending wages, leave encashment, bonus due, gratuity where it applies, minus any lawful recovery. Under the Code on Wages all due wages must be paid within two working days of leaving, whether by resignation, dismissal or termination, and gratuity within 30 days.
- Gratuity
A lump sum paid when employment ends after continuous service: normally after five years, and after one year for a fixed term employee. It is 15 days’ wages for each completed year, subject to a ceiling, and must be paid within 30 days. For contract workers, the contractor as employer pays it.
- Grievance redressal committee
A committee of equal employer and worker members that hears individual workers’ complaints. Every industrial establishment with 20 or more workers must have one under the Industrial Relations Code, with women represented at least in proportion to their share of the workforce. It must finish a case within 30 days.
- Insured person (ESI)
A worker covered under ESI. The insured person and the family can get medical care, and cash benefits for sickness, maternity, disablement from an employment injury, dependants’ benefit and funeral expenses. The old paper identity cards gave way to e-Pehchan, and Aadhaar can now be used to identify insured persons.
- Inter-state migrant worker
A worker from another state employed at an establishment. Under the OSH Code, where 10 or more such workers were employed on any day of the past 12 months, the employer must pay each one a yearly lump sum journey allowance for the trip home and back.
- ITI (Industrial Training Institute)
A government or private institute that trains people in a specific trade, such as fitter, welder, electrician, machinist or turner, and awards a trade certificate. On a shop floor, an ITI trade certificate is the usual proof that a worker has formal training for skilled and semi-skilled roles.
- Labour Codes
The four laws that replaced 29 central labour Acts: the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the OSH Code, 2020. They took effect on 21 November 2025. Old rules stay in force until new rules are notified, where they fit the Codes.
- Labour welfare fund (Maharashtra)
A fund run by the Maharashtra Labour Welfare Board for workers’ welfare schemes. Contributions are paid every six months for each employee on the register on 30 June and 31 December. The employer pays three times the employee’s share, and the state government also contributes.
- Minimum wages
The lowest wage the law allows for a job, fixed by the appropriate government. Under the Code on Wages, 2019 every worker has a right to the minimum wage, not only workers in listed (scheduled) employments as before. An employer may not pay less than the notified rate, and minimum wages are different from agreed wages.
- Muster roll
The attendance register of an establishment, listing who worked on which day. Under the Code on Wages it is kept as an attendance register cum muster roll, together with registers of wages, overtime and fines and deductions. Records can be paper or electronic and must be kept for five years.
- Notice period
The time between giving notice and the last working day, as set in the appointment letter or standing orders. The law also sets notice in some cases: before retrenching a worker, an employer must give one month’s notice, or three months’ in a factory, mine or plantation with 300 or more workers.
- Onboarding
Everything between an accepted offer and productive work: documents, appointment letter, PF and ESI registration, site induction, safety briefing and the first days on the job with a supervisor. Good onboarding is the main defence against early exits in the first weeks.
- Overtime
Work beyond normal hours. Under the Labour Codes normal hours are 8 a day and 48 a week; a worker who works more than either is paid overtime at least twice the normal rate of wages, at the end of the wage period. The employer keeps an overtime register.
- Payroll outsourcing
Handing the monthly work of paying people to an outside firm: salary calculation, wage slips, PF, ESI, professional tax and labour welfare fund deductions and deposits, and the related returns. The employees stay on the client’s rolls; only the processing moves out.
- Principal employer
The owner or occupier of the establishment where contract workers do the work. Under the OSH Code the principal employer must provide welfare facilities such as drinking water, toilets and rest rooms, and must pay the contract workers if the contractor fails to pay their wages on time or pays short.
- Professional tax (Maharashtra)
A state tax on employment, collected in Maharashtra under the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975. An employer registers for a PTRC number, deducts the tax from salaries and deposits it with the state. The employer is liable for the tax even if it forgot to deduct it.
- Provident fund (EPF)
A retirement savings fund run by EPFO. Under the EPF Scheme the employee and the employer each contribute 12 per cent of wages. Coverage is compulsory for employees earning up to Rs 25,000 a month from 17 September 2026, and the Code applies it to establishments with 20 or more employees.
- Replacement
Sending another suitable worker when a deployed one leaves, is absent long term or does not fit the role. In an outsourcing or staffing contract the replacement terms say how quickly the agency must replace someone and at whose cost, so they are worth reading before signing.
- RPO (recruitment process outsourcing)
Handing all or part of hiring to an outside firm: sourcing, screening, interview scheduling, offers and joining. Unlike a one off placement, RPO usually covers a stream of roles over months, and the people hired join the client’s own rolls.
- Shift allowance
Extra pay for working a night shift, a rotating shift or other hours outside the normal day, set by the employer’s policy or the terms of employment. It is an allowance, so it counts towards the half of total pay that the Labour Codes use when deciding what is added back to wages.
- Statutory bonus
An annual payment the law requires for employees earning up to the limit set by the government. Under the Code on Wages it is due to anyone who worked at least 30 days in the accounting year starting 1 April. The rate is at least 8.33 per cent and at most 20 per cent of wages earned.
- Turnkey manpower
An arrangement where an outside firm takes responsibility for running a whole function or line with its own people, supervision and compliance, and is measured on the output rather than on headcount supplied. The client defines the result; the provider manages the team.
- UAN (Universal Account Number)
A 12 digit number EPFO gives each member, which stays the same for the whole working life. Every new employer links its PF account to the same UAN, so savings follow the worker. Transfers between employers work once the UAN is linked with verified Aadhaar, bank account and PAN.
- VDA (variable dearness allowance)
The part of the minimum wage that moves with the cost of living. In Maharashtra the minimum wage has a basic rate plus a special allowance that the government revises for each half year. Payroll has to switch to the new figure from the date it applies, so it is worth checking each new notification.
- Wage slip
The statement an employee gets with each payment, showing earnings, deductions such as PF and ESI, and the amount paid. The Labour Codes require employers to issue wage slips to all employees, in the prescribed form, on or before the day wages are paid.
- Wages under the Labour Codes
One definition of wages now used across all four Codes: basic pay, dearness allowance and retaining allowance. If allowances and other excluded items together exceed half of total pay, the excess is added back to wages. This affects PF, gratuity and other statutory calculations from 21 November 2025.
This is a plain summary for general information, not legal advice. Laws, rates and limits change; check the official source before acting on a figure.
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