How To Hire And Pay Employees 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.

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). 

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.

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.

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.

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.

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.

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 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. 

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

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.

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.

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

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%.