In my opinion, work-from-home is more or less similar to "out-work" as in vogue in the Beedi and Cigar Industry. It is discernible from your post that he is already a regular employee, and the only change required is that he should be permitted to work from home on a permanent basis. Hence, the employer-employee relationship and the conditions of employment continue as before after the approval of the proposal.
Since the allotment, monitoring, and control over the work assigned to such a work-from-home employee and the remuneration paid by the employer emanate from the premises of the employer, all the laws applicable to the establishment will also be applicable to him with necessary modifications. However, since the employee earns income working from home, PT is to be paid to the local body of his hometown. Refer to your State P.T Act as well as to the employee's State if it is different.