How To Hire And Pay Employees In India

Emerald Technology's guide to hiring employees in India

CURRENCY

Indian Rupee is the official currency of India. Its currency symbol is , INR.

CAPITAL CITY

New Delhi is the capital of India and a part of the National Capital Territory of Delhi.

LANGUAGE

There are 22 official languages, with Hindi, Bengali and Marathi the most popular. Over 528,000,000 people speak Hindi in India.

POPULATION The current population of India is 1.393 Million 2021 based on World bank numbers.
PAYROLL FREQUENCY

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

PUBLIC HOLIDAYS

India has public holidays.

GROW YOUR TEAM IN INDIA

NO ENTITY, NO PROBLEM

To start growing your team in India, you must establish a local entity- including an account with a local bank, a local office and an address registered as a subsidiary. This allows you to manage payroll, tax, benefits and compliance for your employees, but can take several months. 

Emerald can hire and payroll your workers, quickly and compliantly with their ready to go entity. Make growing your team simple with Emerald as a global partner.

PROS AND CONS OF HIRING IN INDIA

India is a country with a population of 1.3 billion people and is the second most populous country in the world. It has a diverse culture, which makes it an attractive destination for many companies to do business.

The Indian economy is growing at a rapid pace and it has been one of the fastest-growing economies in the world for many years now. The Indian government has also been trying to make India more attractive for foreign investors by making changes to its tax system, labor laws, and other regulations.

However, there are some challenges that companies face when they want to do business in India. For example, India’s infrastructure is not as developed as other countries like China or Japan so it can be difficult for companies to transport their goods from one place to another within the country.

WHY INDIA IS GOOD FOR REMOTE WORKERS

Remote working in India has many benefits. Good quality internet, affordable costs, and a large population are just a few of them. There are also many companies and entrepreneurs who choose to work from home because of the country’s favorable conditions. In addition, the country is constantly expanding its broadband network, which makes it easier for people to connect from anywhere in the world.

START GROWING YOUR REMOTE WORKFORCE NOW

WORKING TIME AND OVERTIME IN INDIA

The work week in India is 40 hours, with a standard workday of 8 hours. Employees are entitled to 10.5 hours between workdays. Work hours should not exceed more than 50 hours per week, or 9 hours per day. There is no legal requirement to pay overtime apart from to factory workers, who are entitled to receive 2x salary payments for any hours worked over 8 hours per day or 48 hours per week.

ANNUAL LEAVE AND PUBLIC HOLIDAYS

The Factories Act provides 12 days of annual leave of all employees who have worked at least 240 days in a given year. Annual leave allowances differ between adult workers, who are entitled to one day of earned leave for every 20 days service (15 days per year), and you workers under the age of 15, who get one day of earned leave for every 15 days of service (20 days per year). 

India has 3 public holidays 

January 26th: Republic Day 

August 15th: Independence Day 

October 2nd: Mahatama Gandhi's Birthday

PROBATION PERIOD IN INDIA

The typical probation period in India is six months and can be extended by a period of three months at a time. The maximum probation period must not exceed two years.

RESIGNATION AND DISMISSAL IN INDIA

A 30-to- 90 day notice period applies to terminating 'workmen'- employees whose role is not primarily supervisory, administrative, or managerial- for convenience. During probation, the required notice period is reduced to 15 days. Employees are entitled to a gratuity payment upon termination of service after five years of continuous employment, which equates to 15 days' salary for each full year of service.

RESTRICTIVE COVENANTS

The Indian Contract Act 1872 provides that every agreements by which anyone is restrained from exercising a lawful profession, trade or business of any kind is void. Therefore, post-termination non-competition clauses are void and unenforceable. Customer non-solicits are possible enforceable, though it may be argued that a restriction on activities with customers is a restraint of trade. Non-solicitation provisions, even if they are upheld, generally only entitle the employer to damages, and it is highly uncommon for an Indian Court to grant an injunction preventing the customer from taking their business elsewhere. Non-solicitation provisions in relation to other employees may be enforced against a former employee, but the courts do not generally grant injunctive relief restraining the employees who are being solicited from leaving the company.

READY TO HIRE YOUR EMPLOYEES IN INDIA?

CONTRACT OF EMPLOYMENT IN INDIA

Currently, there is no requirement for a formal written contract of employment in India, although employers generally enter into written employment agreements. Some state-specific laws require employers to record certain terms of employment such as wages, designation and work hours. The OSH Code has a statutory requirement for the employer to issues appointment letters to every employee on their appointment in the establishment, with such information and in  such form as may be prescribed by the appropriate government. Recent amendments to the Employee's Compensation Act 1923 (ECA) and the Maternity Benefit Act, 1961 (MBA) require employers to inform employees (in writing) of the benefits available to them thereunder.

MATERNITY LEAVE IN INDIA

Pregnant employees are eligible for a total of twenty-six calendar weeks of maternity leave. A mother may start her leave up to eight weeks before the expected delivery. Employers cover the cost of maternity leave, unless the employee is a factory level employee, then the costs are covered by social funds from the Government. Additionally, pregnant employees may also be eligible for medical bonus of INR 3,500. There are no legal stipulations for paternity leave expect for government sector employees, who are entitled to 15 days' leave.

SICKNESS LEAVE IN INDIA

In India, employer must provide six days of sick leave per year. Some employers provide an unpaid leave for long term medical issues, but this is not mandatory. 

SOCIAL SECURITY

Social security in India is governed by the Employees' Provident Funds and Miscellaneous Provision Act 1952 (EPF Act.) The EPF Act contains the following three principal schemes:

  • Employees' Provident Funds Scheme, 1952
  • Employees' Pension Scheme, 1995
  • Employees' Deposit-Linked Insurance, 1976

The EPF Act is mandatory for companies with 20+ employees and can be entered voluntarily by smaller organisations. Every covered employer is required to contribute 24% (12% each for the employer's and the employee's share) of the employee's monthly salary toward the Employees' Provident Fund and Employees' Pension Fund. Local employees who draw a monthly salary of INR15,000 or more are excluded from the legislation unless they are already covered, but this exclusion does not apply to International Workers. The employer contributions are exempt from tax up to 12% of monthly pay. 

HEALTHCARE AND INSURANCE

Since April 2020, it has been mandatory for all employers to provide a Mediclaim policy to employees in Indi

Employment of

FOREIGN NATIONALS IN INDIA

Employment visas are not granted for jobs for which a large number of qualified Indians are available to fill the position or for routine, ordinary, secretarial or clerical jobs.

Indian work visas

Employment visas will usually be granted to foreign nationals whose annual salaries exceed INR 1,625.00, with some exceptions. A change of employer in India is generally not permitted during the duration of the employment visa, except for at a senior level or for a skilled profession. The intended legal entity and the location of work in India must be clearly specified when applying for an employment visa.

Salary Taxes

MINIMUM WAGE IN INDIA

While India has no national minimum wage, minimum wages may be set by state or sector of industry. Wages vary from INR 160 per day in Bihar to INR 423 per day in Delhi.

INCOME TAX

Taxable Income 

Tax Rate

First 250,000 0%
Next 250,000 5%
Next 500,000 20%
Above 1,000,000 30%

 

SALARY PAYMENTS IN INDIA

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

SOCIAL SECURITY CONTRIBUTIONS IN INDIA

Employees covered under the EPF Act contribute 12% of their monthly salary to the Employees' Provident Fund and Employees' Pension Fund, in addition to an employer contribution of 12%.

WORKER MISCLASSIFICATION IN INDIA

Similar to other countries, India has strict rules on classifying individual contractors and full-time employees differently. Misclassifying your workers can put your business at risk of fines.

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