EMPLOYER OF RECORD IN INDIA

Grow your team and business in India with Velocity Global’s Employer of Record solution. Our EoR solution and Global Work Platform™ handle all hiring, payroll, taxes, immigration, and benefits, making it simple for businesses to hire a distributed team in India. An India EoR (also known as International PEO) makes business expansion easy and hassle-free.

Benefits of hiring in India

• India is one of the world’s fastest-growing countries in regard to both population and GDP. India’s GDP is projected to grow to $5 trillion by 2025 and $8.4 trillion by 2030.
• India’s diverse business sectors offer companies from all industries a chance to increase their global market share. In particular, tech firms find India’s booming tech industry one of the world’s most promising talent pools.
• India is the world’s second-largest online marketplace, surpassed only by China, with over 560 million internet users. By 2025, India’s connectivity is estimated to reach over 850 million, which is more than the combined populations of all G7 countries.
• India is home to the second-largest English-speaking population in the world, ranked only behind the United States. India has around 265 million English speakers, with 88% residing in urban areas with diverse economic opportunities.

Challenges of hiring in India

• India consists of 28 different states, and they all have different laws. When a business expands into India, it must understand that the laws surrounding its products and services can vary from state to state. Companies must also consider India’s central, state, and local taxes and how they apply. Relying on an employer of record in India helps firms navigate these often complex laws and ensures compliance.
• India’s infrastructure may present hurdles with customs, logistics, and tracking. Businesses considering expanding into one of India’s more rural areas must examine how the region’s less-developed infrastructure impacts their mobility, exports, and overall operations.
• Much like legal differences, companies must anticipate and navigate cultural and geographic differences between states. India is the world’s seventh-largest country by land area, with starkly different geographies home to numerous ethnic groups, castes, religions, and sects. Companies must consider that what works in one state may not in another.

Cultural nuances and must-knows of doing business in India

• India has the second-largest population in the world; therefore, the country is a pluralistic society with vast cultural differences between regions. Be aware of the cultural diversity and be cautious of generalizations.
• Use formal gendered titles to greet clients and during conversation, such as Dr., Professor, madam, or sir.
• English is the official language of business but be wary that some English phrases may not translate correctly.
• Shake hands during introductions; however, expect some Indians to introduce themselves with the namaste, a customary Hindu non-contact manner of respectfully greeting by pressing both palms together with a slight bow of the body.
• There is a formal and hierarchical relationship between managers and employees. Be sure to first greet the most senior member during a team meeting when doing business in India.
• Indians place great value on relationships; consequently engaging in small talk and discussing family with colleagues is encouraged.
• Be prepared for meetings to begin and end late and for interruptions to occur.
• Refrain from forceful negotiation and understand a deal may take more time than expected to finalize. Many Indians base final decisions on trust and intuition, in addition to data; positive working relationships are vital in solidifying decisions.

Minimum wage and salaries in India

• There is no nationally applicable minimum wage in India that applies to all employees throughout the country. In India, the central and state governments can set minimum wages at varying rates for different types of employment. As a result, the minimum wage differs both across the states of India and by various industries, sectors, and occupations. India uses a complex method of setting minimum wages that defines nearly 2,000 different types of jobs and over 400 categories of employment, with a minimum daily wage for each type of job.
• For example, in the state of Karnataka for the year 2021, the minimum monthly wage for a computer operator or a data entry operator is 15,744.47 rupees ($201.85), while a manager has a rate of 18,146.20 rupees ($232.64). The federal government has set the recommended minimum wage in India to 176 rupees ($2.26) per day and advised state governments to implement the same.

Probation period rules in India

• India’s Industrial Employment Act 1946 provides for a probationary period of up to 3 months. Probation periods are not required but are considered common practice. Certain states have the probation concept indirectly built into their local laws, which ranges from 3 to 6 months.

Bonus payment rules in India

• India’s Payment of Bonus Act 1965 provides a minimum bonus of 8.33% (or 100 rupees, whichever is higher) and a maximum bonus of 20% of wages during the accounting year.

Onboarding in India

• When employing an individual in India, entering into a written employment contract is not mandatory. According to India’s Industrial Employment Act 1946, some statutes require the employee to disclose prescribed particulars in writing. Where an employment contract is written, the following is included:
  • The employee’s position and duties
  • Compensation, including benefits such as bonus pay and retirement savings plan options
  • Working hours, holidays, and leave entitlements
  • Term of employment (where applicable) and termination provisions
  • Dispute resolution provisions in relation to key employees

Termination and notice periods in India

• As defined in India’s Industrial Disputes Act 1947, all employers must give a 30 to 90 days notice period to employees whose primary roles are not supervisory, administrative, or managerial. Severance includes 15 days’ pay due to employees for each year worked. Certain sectors require government approval before termination; most only require government notification.

Annual leave in India

• Employees in India earn a minimum of 15 days’ leave a year; however, laws vary between states. Employees can also benefit from ten additional days of casual leave, where an employee can opt not to come to work that day without applying for leave in advance.

Parental and maternity leave in India

• The Maternity Benefit Act 1961 provides salary-paid leave to pregnant women during the maternity period and protection against dismissal during their leave. This applies to eligible female employees who have completed 80 working days with the same employer in the 12 months immediately preceding the expected due date.
• In 2016, the Maternity Benefit Act 1961 was amended to include:
  • An increase in paid time off for eligible female employees from 12 weeks to 26 weeks if a female employee has fewer than two children. She is entitled to 12 weeks’ leave if she has two or more children.
  • The introduction of the concepts of a “commissioning mother” and an “adopting mother.” Such mothers are entitled to 12 weeks’ leave.
  • The option to work from home once the leave period has ended is based on an employer’s agreement.
  • Requiring an establishment with 50 or more employees to organize childcare for female employees’ children.
• A female employee is also entitled to an additional six weeks of paid maternity leave in the event of a miscarriage or medical termination of the pregnancy.
• Furthermore, a woman suffering from an illness arising out of pregnancy, delivery, premature birth, miscarriage, or medical termination of pregnancy is entitled to an additional month of paid maternity leave. A medical bonus of 3,500 rupees ($44.84) is provided to these employees, and they are entitled to certain prescribed nursing breaks.
• There is no law mandating paid paternity leave in India for private sector businesses. However, India’s federal and most state governments allow married male employees to take two weeks of paid leave within six months of the child’s birth.

Sick leave rules in India

• State laws regarding sick leave vary, but most states offer around 10 days of paid sick leave. Any unpaid time off provided to an employee is purely at the employer’s discretion.

National and regional holidays in India

• Public holidays in India vary from state to state. However, most states prescribe about 10 days of public holidays per year, with paid time off provided to allow employees to vote. Of the 10 public holidays, four to five of these are mandatory national holidays, while the remainder are chosen by employers from a larger list provided by the state. Public holiday entitlement is generally covered by the employment contract.
• Regional and national holidays in India include:
  • Lohri (January 13)
  • Republic Day (January 26)
  • Maha Shivaratri/Shivaratri (March 11)
  • Dolyatra (March 28)
  • Holi (March 29)
  • Good Friday (April 2)
  • Ambedkar Jayanti (April 14)
  • Rama Navami (April 21)
  • Mahavir Jayanti (April 25)
  • Ramzan Id/Eid-ul-Fitar (May 14)
  • Buddha Purnima/Vesak (May 26)
  • Bakr Id/Eid ul-Adha (July 21)
  • Muharram/Ashura (August 9)
  • Independence Day (August 15)
  • Janmashtami (August 30)
  • Mahatma Gandhi Jayanti (October 2)
  • Dussehra (October 15)
  • Milad un-Nabi/Id-e-Milad (October 19)
  • Diwali/Deepavali (November 4)
  • Guru Nanak Jayanti (November 19)
  • Christmas (December 25)

• Mandatory employment benefits in India are covered under five key statutes.
  • Employees’ State Insurance Act 1948: medical insurance, disability insurance, and unemployment benefits
  • Employees’ Provident Fund Act 1952: pension fund
  • Maternity Benefit Act 1961: paid parental leave
  • Payment of Gratuity Act 1972: employee separation and retirement benefits
  • Employees’ Compensation Act 1923: employee death, injury, partial disability, and occupational disease insurance

• Residents and resident companies are taxed on global income, while non-residents and non-resident companies are taxed only on income generated in India. Once non-residents stay in India for 182 days or more during the relevant tax year, they are considered residents.
• India established a Goods and Services Tax (GST) in 2017, implementing a tax structure to eliminate double taxation, which cascaded from the manufacturing level to consumers. The tax rate is a sliding scale from 0% to 28%, depending on the goods and services.

Tax thresholds in India

• For the financial year 2021 to 2022, the following income tax rates apply for employees under 60 years of age (this is measured in lakh, where 1 lakh is equivalent to 100,000 rupees):
  • Income of 0 lakh up to 2.5 lakh: 0%
  • Income of 2.5 lakh up to 5 lakh: 5%
  • Income of 5 lakh up to 10 lakh: 20%
  • Income above 10 lakh: 30%
• Employer contributions include up to 12% for the Employees’ Provident Fund (pension fund), 3.25% for health insurance, 0.50% for the Employees’ Provident Fund Administration Fee, and a fixed amount for Employee Deposit Linked Insurance.

Health insurance in India

• The Employees’ State Insurance Act 1948 provides subsidized healthcare insurance for employees who earn monthly wages of up to 21,000 rupees. This law applies to factories and establishments with ten or more employees. Employees contribute 0.75%, and employers contribute 3.25% of the employee’s earnings.

Pension in India

• The typical retirement age in India is between 58 to 60 years of age, which is governed by the Employees’ Provident Fund Act 1952 and the Industrial Employment Act 1946. The Employees’ Provident Fund Act 1952 applies to establishments that employ more than 20 employees and to employees who earn up to 15,000 rupees per month. The employer and employee must make contributions to various funds (pension and deposit-linked insurance) for the employee. These employer and employee contributions equate to 12% in total of the employee’s earnings.

• There are a few important considerations when it comes to payroll laws in India. Navigating these laws is made simple with the help of an employer of record in India.

Tax due dates in India

• In India, the due date for filing an income tax return varies based on the taxpayer’s category. Salaried individuals are usually required to file their income tax returns by July 31. Businesses are typically required to conduct audits, and they are required to file their returns by October 31 unless extended by the government.

Payroll cycle in India

• The payroll cycle in India is generally monthly, with wages paid on or after the 28th of each month.

Average weekly working hours in India

• Working hours are capped at 48 hours a week with 9 hours of work per day, with a break period of half an hour after five hours of work.

Overtime rules in India

• Overtime is payable when an employee exceeds the working hour limits regulated by their employment contract. Under India’s Minimum Wages Act 1984, overtime wages are double the amount of ordinary wages, although individual states in India have certain rights to modify these limits on a regional basis.