India

The India Skills Report 2021 expects a 4% increase in recruitments in 2021. The growth of the remote work culture in the last year and a half and a robust digital framework have contributed toward the increase in cross-state and cross-border hiring in the country.

The Skills Report further states that almost 40% of employable talent in the country is in the age group of 18 to 21 years. The report discusses the existing talent gap, the need to upskill the talent pool in the country. It estimates that India has about 45.9% of employable youth in 2021.

RemoteStaff can provide you with all the details you need for your expansion efforts in India, from the availability of talent to hiring costs. Talk to a RemoteStaff expert today!

Overview of India

Population

The population of India is 1.39 billion.

Gross Domestic Product (GDP)

The GDP is USD 2.86 trillion (INR 195.68 lakh crore) (FY21).

Economic Overview

Before FY17, India recorded a commendable growth rate of about 8.3%. Between FY17 and FY20, the growth rate decelerated to about 4% amid COVID-19 and the national lockdown in 2020.

Market Size

The McKinsey Global Institute forecasts the need to create about 90 million jobs in India between 2023 and 2030 in the non-agricultural sectors. Estimates suggest that the net employment rate should increase by 1.5% to help the GDP rates stay afloat between 8% to 8.5%.

Employment Landscape in India

The issue of bonuses and appraisals, maternity benefits, state insurance, and employee provident funds are all covered under Indian labour regulations. The working class of the Indian people has laws in place to safeguard their interests.

However, foreign nationals employed in India must also abide by these regulations. The law governing provident funds also applies to foreign nationals who work for Indian businesses. The rules of the social security agreement between India and the worker’s native country are what will determine this.

Indian labour regulations apply to Indian employers who are contracted by Indian organisations to perform work-related travel overseas. However, this incentive does not apply to Indian employers who work for a foreign firm.

An organisation may save a lot of time and effort throughout the growth process by being aware of these items. As a result, working with an EOR turns out to be an effective choice.

Some of the provisions of Employment Laws to note before hiring in India are:

Title	Explanation
The Employees Provident Funds & Miscellaneous Provision Act, 1952	These clauses mostly deal with post-retirement benefits or benefits for elderly people who find it difficult to find work. Benefits include payments from the Social Security Provident Fund, pensions (individual, superannuated, and family), and insurance related to deposits.
The Industrial Disputes Act, 1947	It mostly applies to administrative and management roles, but not to physical, clerical, skilled, unskilled, technical, operational, or supervisory employment. The Act shields employees from wrongful terminations and dishonest business activities. Additionally, it guarantees compensation in the event that such a circumstance occurs, such as when a business decides to cease operations.
The Maternity Benefit Act, 1961	It is applicable to any business with a staff size of more than 10 people. Following the 2017 change to the statute, expectant women may now request up to 26 weeks of paid maternity leave. Depending on the type of job and understanding, the firm must also provide a creche facility if it has more than 50 workers. After the 26 weeks are up, it could provide a work-from-home alternative.
Indian Contract Act, 1872	When a business employs independent contractors or freelancers, it is crucial to establish a contract that is enforceable under Section 2(d) of this act. Contract employees’ rights may be safeguarded by this act’s clauses like the Rights of Surety on Payment and Performance Implied Promise to Indemnify Surety.

Timings, Holidays, And Leave Policies In India

Entitlements	Explanation
Statutory Working Hours	In India, a typical workday lasts for eight hours.
Job-Specific Working Hours	Factories Act, 1948 In a factory, workers are limited to nine hours every day. Shops and Commercial Establishments Act the 48-hour workweek for personnel working in business settings. The precise figures, however, might differ from state to state because the Shops and Commercial Establishments Act is a state law.
Rest Period	Indian employees are required to take at least ten and a half hours off in between workdays before reporting back to the office.
Public Holidays	Indian employees are entitled to 10 public holidays annually, during which the company pays them. Compulsory Public Holidays: Republic Day (26th January) Independence Day (15th August) Gandhi Jayanti (2nd October) When it comes to choosing the other holidays, there is no set formula. It depends on local conventions and the employer’s judgement.
Maternity Leave	The Maternity Benefit Act grants female employees 26 weeks of maternity leave.
Annual Leave Accrual Entitlement	For businesses and retail spaces, Each state has different legislation regarding yearly leave. 12 days must be taken off from work each year at a minimum, however, this can go up to 30 days depending on the state in which a business is located. Most states need 15 days of leave per calendar year on average.
Compensatory leaves	For each weekly designated holiday or legal holiday that an employee has worked, one is awarded. They can either be used right now, at a later time, or changed into an option that can be cashed in.

Contractors vs. Full-time Employees

Over 2.8 crore students enrol in over 51 000 higher education institutions each year, which is a staggering quantity for the Indian educational system. These students include a sizable percentage of knowledge workers who are interested in creative and IT-related careers. More than 27 lakh students opt to further their specialisation by enrolling in post-graduate courses. The Apprentices Act of 1961 governs the framework for apprenticeships provided to this young population.

The number of remote employees has impressively increased by three in recent years, which has greatly boosted the already-existing remote hiring system. No matter where they are physically located right now, a lot of competent professionals are now being employed electronically and taking up remote roles in businesses. Employers may access talent from all around the nation thanks to remote working, which removes geographical distance-based restrictions and increases the talent pool. Remote working has greatly increased in popularity as businesses adopt more digital work methods.

Different laws exist in an organisation to protect the rights of various worker types. Indian law consists of a variety of rules that apply to both employees and non-workers. Workers might be engaged in manual, unskilled, skilled, operational, technical, clerical, or supervisory labour, among other jobs. Non-workers, on the other hand, work mostly in management or administration within an enterprise.

The hiring of contract workers for a company can also be greatly aided by intermediate contractors. This group of employees is recognized by Indian law as being separate from the ones previously described. Instead of the Industrial Disputes Act, the Contract Labour (Regulation and Abolition) Act of 1970 governs the employment of contract employees.

These workers are guaranteed minimum pay, fundamental insurance protection, and protections for their health and safety under the Contract Labour Act. However, they are not entitled to advantages like salary, job protection, or union participation.

Although it is not required, it is strongly advised that businesses in India create specific employment contracts with every category of employee, stating the terms of their employment.

Scope of Negotiating Terms

Given the sociocultural framework, the negotiating process in India could differ from that in other nations. Similar to Indian families, businesses have hierarchical structures where decisions are made at the top-down level, potentially adding time to the process.  The usage of phrases like “I will get back to you” is also frequent since both employers and candidates do not want to politely reject any offer straight away.

Because of the hierarchical structure, job titles also take on a lot of significance for employees. They are virtually as significant as the compensation received in cash. By doing this, employers are given a crucial negotiating tool.

In India, there are many sorts of allowances for different work positions, including housing rent, leave and travel expenses, phone expenses, special allowances, and others. Many of these are based on a portion of the base wage. Employees may agree to certain wage splits, such as provident fund contributions, through negotiation.

Recruiting in India

India’s hiring procedure follows a pretty simple procedure. Employers have the choice to use an internal team or work with an agency to locate qualified candidates for the position after the hiring needs have been determined and the job description has been established.

To find talent for a range of career opportunities, recruiters in India largely rely on professional social networking platforms like LinkedIn. Additionally, a big part in connecting companies with potential applicants is played by well-known websites like Naukri, Shine, and Monster.

Before being shortlisted, candidates who satisfy the requirements mentioned in the job description must pass an important background check. After being shortlisted, candidates go through a series of panel interviews, including technical and HR rounds, to determine whether they are a good fit for the position and the organisation’s culture.

The most qualified individuals are chosen after a thorough screening, and they are then presented with a letter of intent or a job offer. These applicants become legally recognized as employees of the business following successful negotiation and signature.

In India, hiring through job boards, social media postings, or adverts has its benefits, including access to a sizable pool of potential employees and reducing the danger of a talent shortage. It also requires the difficult process of sorting through countless applications and figuring out who the best applicants are, especially at the preliminary screening stage, which is essential for precise candidate selection.

Although programs like LinkedIn have grown in popularity, they still have a restricted audience in India and might not be the only place to find talent, particularly when looking for highly qualified workers.

It might be difficult to find skilled individuals in a timely manner. Partnering with an Employer of Record (EOR) in India may be the best course of action in these circumstances. Organisations may devote more time and resources to other facets of globalisation, such as project management and inventory management, by working with an EOR. While using their understanding of domestic employment standards and virtual onboarding technologies to speed up the recruiting process, the EOR handles compliance and legal issues. Leading EORs also include e-signing options, facilitating quicker onboarding with digital paperwork.

We, for instance, assist other crucial human resources tasks like payroll administration, time and expense management, security and compliance, and tax filing in addition to facilitating quick recruiting. These features help both the company and the applicants have a quicker, more affordable, and smoother experience.

Probation & Termination

There are no particular rules in India that specify how long a worker’s probationary term must last. However, it usually lasts between three and six months, and if required, it may even be prolonged up to a year in some circumstances. The employer has the authority to terminate an employee’s services and give performance as the cause if the employee’s performance during this time is subpar.

There is no set process in India for terminating an employee’s job. When firing an employee, the employer must take into account both the contract conditions and any provisions of the appropriate Act that apply to that employee’s employment category.

It is significant to note that an employer may be subject to legal action for wrongful termination in the Indian judicial system if their acts do not comply with the state’s Shops and Commercial Establishments Act. An employee typically has a right to a written notice period of 30 days, or in some circumstances, pay equal to those 30 days.

Under Section 73 of the Indian Contract Act, contracted workers and independent contractors who are protected may file a claim for damages and begin legal action for contract violation.

Employers of Record (EoR) can help companies make sure their actions comply with local regulations, reducing the possibility of legal issues in the future. EoRs can help firms create trustworthy labour contracts that adhere to legal standards.

EoR Solution

EoR is the greatest option to join the Indian workplace since it has so many advantages, including eliminating the need to create a new corporation, freeing up time and resources to concentrate on other parts of your expansion plans, and simplifying regulatory compliance. Our experience enables an organisation’s expansion to go more quickly, more cheaply, more smoothly overall without the need to create a new business to handle all the staff management procedures.

While businesses can choose to form a company and handle personnel, employee management, and payroll administration on their own, doing so can be time-consuming and subject to legal risks.

Outsourcing Employment Through An EoR in India

You may save a lot of time by working with an Employee of Record instead of setting up the full employment procedure, payroll administration, tax management, and other similar services.

Working with a reputable EoR also has other advantages, such as creating contracts specifically for your needs, ensuring that all procedures are compliant with local regulations, making it simple to alter current contracts, and seamless e-signing of papers.

Types Of Visas In India

Visa Category	Explanation	Duration
Employment Visa	Proof of employment, such as a detailed contract, is required for foreigners working in India for a registered organisation. It may be prolonged.	Up to 5 years or the period of the contract
Business Visa	It is intended for foreign citizens doing business in India or searching for business possibilities there. If visitors want to remain longer than 180 days, they must register with the Foreigners Regional Registration Office. They permit several entries. They demand a letter outlining the specifics of their venture or concept.	Up to 5 years or the period of the contract
Project Visa	Only highly trained foreign specialists travelling to India to work in the steel or power sectors are granted Special Project Visas. They are only effective while the project is up and running. They need a document outlining the precise details of the undertaking.	The actual duration of the project or up to a year
X Visa or Entry Visa	Valid for people of Indian descent or for relatives of those who are in possession of a business, employment, or project visa. Depending on the reason for the visit, they demand a letter of invitation, a marriage certificate, or a birth certificate.	Up to 5 years

Work Permits

Depending on their length of stay and place of origin, foreign citizens can apply for an employment visa in India by paying a cost between $125 and $1000. After then, no more work permits are necessary unless the applicant is from one of a few prohibited nations, such China, Afghanistan, or Pakistan.

Payroll & Taxes in India

You must be familiar with the regional laws and the statutes controlling those laws in order to set up payrolls in India. Knowing your personnel profile is crucial since it will enable you to determine which act to refer to. 

You also need to pay close attention to the essential taxation process. Working with an EOR will help you save time and money up front in this situation as well, allowing you to concentrate on the expansion’s aims and objectives.

Payroll Details

Process	Details
Applying for a Tax Deduction Account Number or Tax Collection Account Number (TAN)	Either online or in their local Tax Information Network Facilitation Center, businesses must register. There is a processing charge and an applicable Goods and Services Tax of up to 18%.
Choosing a Payroll System	Payroll systems must be chosen with a number of considerations in mind, including accommodating perks like health insurance, the needs, the business’s development strategy, etc. The maximum amount for Social Security or the Provident Fund is 12% of the employee’s pay. It is significant to remember that before receiving payroll deductions, employees must complete a withholding allowance certificate.
Note Down All Employee Information	The fundamental details, such as pay and normal working hours for employees. Using software or a cloud-based service will make entering and maintaining the data easier.

Taxation in India

Tax	Explanation
Income Tax applied on an employee’s salary (Two structures exist for this and employees can choose which one they want to follow)	Annual Taxable Income under new regime (4% cess added) Up to $3,140 No Tax Between $3,140 and $6,280 5% on income above $3,140 Between $6,280 and $9,421 10% on income above $6,280 Between $9,421 and $12,562 15% on income above $9,421 Between $12,562 and $15,702 20% on income above $12,562 Between $15,702 to $18,842 25% on income above $15,702 Greater than $18,842 30% on income above $18,842 Annual Taxable Income under old regime (3% cess added) Up to $3,140 No Tax Between $3,140 and $6,280 5% of (Total income – $3,140) Between $6,280 and $9,421 $314 + 20% of (Total income – $6280) Above $12,562 $1413 + 30% of (Total income – 12,562)
Tax rebate	Yes, for workers whose Net taxable income is $6,280 or less.
Financial Year End date	31st March
Tax documents	Form 16, Form 10 BA, Form 2E
Corporate tax	Yes, for workers whose Net taxable income is $6,280 or less.
Withholding Tax (For Non-residents)	no dividends Interest: 20% of interest paid by the Indian government or an Indian company. 10% of the income from Indian bonds is interest. 5% of the interest on loans made in foreign currencies. 10% in royalties
Payroll Tax	It might be fixed or proportionate to the employee’s salary level.
Sales Tax	State and Central GST ranging from 0% to 28%
Employer Contribution Towards Social Security	1.67% to 3.67% towards Employees’ Provident Fund Scheme. 8.33% towards Employee Pension Scheme. 0.5% towards Employees’ Deposit Linked Insurance.
Employees’ Contribution Towards Social Security	12% of specified salary

There are four key phases to establishing a subsidiary in India, all of which call for close attention and a thorough knowledge of the laws and practices there.

Filling out Form No. INC-1, the Application for Reservation of Name, is the initial step. This key stage is picking a name that fits the subsidiary and confirming that no other business has already registered the same name.

The second phase will include collaboration between the organisation and the Ministry of Corporate Affairs, which speaks for the Indian government. This entails setting up a Distributed Control System (DCS) and receiving an identifying number known as the DIN (Director identifying Number).

The third phase comprises the completion of the Memorandum of Association and Articles of Association, as well as the payment of registration fees and stamp duty. The company’s goals, organisational structure, and internal governance framework are described in these legal papers.

The last stage is filing Form INC-22 for tax purposes and Form DIR-12 to the Registrar of Companies for the appointment of directors and managerial employees.

It is crucial to approach these phases with a thorough awareness of the entire procedure and a working knowledge of how local agencies operate. This reduces the possibility of running into problems or delays throughout the application procedure, ensuring a subsidiary’s setup goes more smoothly.