Is It Legal to Hire Over 20 Employees Without Appointment Letters in a Proprietorship?

Hi Seniors,

I joined a real estate firm, and I am confused. Can we give appointment letters to the employees? The main reason behind this question is that it's not a registered company. The office is run on proprietorship, and the question is, is it legal to keep more than 20 employees at a time?

My owner is afraid of giving an appointment letter to employees as he is concerned about the labor department laws. For instance, in sales, if employees don't perform, they can be fired, or their 50% salary can be forfeited. However, I have not seen anything like this in the last 2 years. The problem of retention is very bad in this industry.

Your input will be helpful. Please advise.

Regards, Sonam

Dear Sonam, my personal opinion is that you should not stay in that organization. Leave it as early as possible.

Legal considerations for employment

An organization can be set up as a sole proprietorship, partnership, or as a company. The labor laws are the same for all such constitutions. Regarding the offer letter, I would say that an offer letter with acceptance by the employee therein is the basic document to show a legal relationship between the employer and the employee. There should not be any person in the establishment without an appointment order (you need not give a separate appointment order, but an offer letter with details of salary, place of posting, etc., with acceptance on it by the employee is sufficient to constitute a contract of employment).

You cannot run a business without following the labor laws. The applicability of labor laws to an establishment will depend only on the number of employees employed. For that, both direct employees and those engaged through a contractor should be taken into account. Even if you have only one employee, you are under the coverage of the law, say, Minimum Wages Act. You are expected to pay salary within 7 days following the Payment of Wages Act. If something happens to that employee during the course of employment, then you are liable to pay compensation as per the Employees' Compensation Act. If you employ one more person and you have one female employee and a male employee, the Equal Remuneration Act will come to apply to your establishment. When your number of employees becomes 10 and out of that you have one woman employee, then you have to grant her 26 weeks of maternity leave as provided under the Maternity Benefits Act. Subject to infancy protection allowed, the Payment of Bonus Act will become applicable to your establishment. Then the ESI Act will come into operation. The Payment of Gratuity Act will also be covered in your establishment. Once the number of employees becomes 20, the EPF Act will be covered.

You cannot hide your employees from the eyes of inspecting authorities. If you want to do business, you should follow certain rules. If your employer is not prepared to follow such rules, please move from there, let him do business in the way he wants to do, and never spoil your career by working under such an employer.

Hi Seniors,

I have recently joined a real estate firm and have encountered some confusion. Can we issue appointment letters to the employees? The main reason behind this question is that it is not a registered company; the office operates under proprietorship. I am uncertain about the legality of having more than 20 employees at a time.

My owner is hesitant to provide appointment letters to employees due to concerns about labor department laws. In sales, employees who underperform can be terminated, or their salary can be cut by 50%. However, I have not witnessed any such incidents in the past two years. Despite this, we are facing challenges with retention in this industry.

Your insights would be greatly appreciated. Please advise.