Labour is a unique and vital resource for a business. Every countrys regulations, or the institutional mechanisms that make up its labour market, establish the framework for all labour contracts. The main focus of our research is the criticism of the increasing gap between the requirements of businesses and the actual implementation of employment contracts under present regulations. Whether the labour market and the firms regulatory institutional mechanism design are appropriate for the needs of the particular firm and the nations economy is the main economic matter at hand. The flexibility of contract between employers and employees was diminished during the 20th century as a result of the majority of employment regulations being tightened under the pretext of increased worker protection. The exact opposite was what businesses required and demanded: more flexible employment contracts. Because it controls employment relationships and establishes the parameters of contract flexibility, employment regulation is a crucial component of the legal business framework. These factors affect a firms ability to compete internationally as well as the overall health of the economy. We hypothesised that because regulations cause businesses to put off hiring, an employment climate that is less flexible will be less beneficial. We look into the labour markets challenges and the regulatory practises in a few areas of Vellore District. Flexibility in the labour market is a composite measure of a few chosen variables that are thought to eventually affect a countrys economic performance. Finding the variables that affect labour market flexibility and the chosen output variables like employment and productivity, among others is our goal.