Employer of Record In India

Employer of Record Solutions has simplified payroll administration and recruiting processes for Indian business growth. Our automated and centralized worldwide HR platform simplifies the onboarding of remote workers and the management of employee benefits and payrolls in compliance with local laws. All of this is feasible without needing to go through the laborious process of forming a specific organization in India.

We assist companies in streamlining their global expansion through our informed global network so they can focus on the bigger picture instead of getting bogged down in the smaller issues.

Overview of India

• Estimated Population: 1.39 billion
• Currency: INR Indian Rupee
• Capital: Delhi (National Capital Territory)
• Number of officially recognized languages spoken: 22
• Languages frequently used: Hindi, English
• GDP: -10.29% (2020)

Employment Landscape in India

Indian labor laws encompass various aspects of employment, including bonuses and performance evaluations, maternity benefits, state insurance, and employee provident funds. These laws are designed to protect the rights and interests of the Indian workforce.

It’s important to note that foreign nationals working in India are also subject to these labor regulations. This includes the regulations related to provident funds, and whether they apply to foreign nationals depends on the specific terms of the social security agreement between India and the worker’s home country.

In the case of Indian employers contracted by Indian organizations for work abroad, Indian labor regulations still apply. However, this doesn’t extend to Indian employers working for foreign companies.

Understanding these intricacies can save organizations significant time and effort during their expansion process. This is why partnering with an Employer of Record (EOR) is often a wise and efficient choice. An EOR can help navigate the complexities of labor regulations and ensure compliance, making the expansion process smoother and more manageable.

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

Every year, more than 2.8 crore students enroll in over 51,000 higher education institutions in India, making it an enormous segment of the education system. A significant portion of these students comprises knowledge workers aspiring to pursue careers in creative and IT-related fields. Over 27 lakh students choose to specialize further by enrolling in post-graduate courses. Their apprenticeships are regulated by the Apprentices Act of 1961.

The number of remote employees has notably tripled in recent years, resulting in significant growth in the remote hiring landscape. Many highly skilled professionals are now working remotely, breaking down geographical barriers and expanding the talent pool. Remote work has gained tremendous popularity as businesses embrace digital work methods.

Indian labor laws encompass a variety of regulations that apply to different types of workers. These laws cover both employees and non-workers. Employees can be engaged in various roles, such as manual, unskilled, skilled, operational, technical, clerical, or supervisory positions. Non-workers, on the other hand, typically serve in management or administrative roles within an organization.

The employment of contract workers in India is also subject to specific regulations, governed by the Contract Labour (Regulation and Abolition) Act of 1970 rather than the Industrial Disputes Act. Contract employees are entitled to minimum wages, basic insurance coverage, and health and safety protections under this act. However, they do not have access to benefits like job security or union participation.

While it’s not mandatory, it’s highly recommended that businesses in India create detailed employment contracts for each category of employees, specifying the terms of their employment.

Negotiating employment terms in India can differ from other countries due to the socio-cultural context. India follows a hierarchical decision-making structure, both within families and businesses, which can sometimes prolong the negotiation process. It’s common to use phrases like “I will get back to you” since both employers and candidates prefer not to decline an offer outright.

In India, job titles hold significant value for employees due to the hierarchical structure, nearly on par with their cash compensation. Employers can use job titles as a crucial negotiation tool.

Different types of allowances are provided for various job positions in India, such as housing rent, leave and travel expenses, phone allowances, special allowances, and more, many of which are a percentage of the base salary. Employees can also negotiate certain wage splits, such as provident fund contributions.

Understanding these nuances is crucial when operating in the Indian job market, and seeking guidance from experts can greatly assist in navigating the complex labor landscape.

Recruiting in India

In India, the hiring process generally follows a straightforward procedure. Once hiring needs are identified and job descriptions are in place, employers have the option to either utilize an in-house team or partner with an agency to source qualified candidates.

Recruiters in India often rely on professional social networking platforms like LinkedIn and well-known websites such as Naukri, Shine, and Monster to connect companies with potential applicants across a range of job opportunities.

Candidates who meet the job description requirements undergo a crucial background check before being shortlisted. Shortlisted candidates then go through a series of panel interviews, including technical and HR rounds, to assess their suitability for the role and alignment with the organization’s culture.

Following a comprehensive screening, the most qualified candidates receive a letter of intent or a job offer, making them legally recognized employees of the company upon successful negotiation and acceptance.

Hiring through job boards, social media postings, or advertisements in India offers several advantages, including access to a large talent pool and a reduced risk of talent shortages. However, it also involves the challenge of sifting through numerous applications to identify the most suitable candidates, particularly during the initial screening phase, which is crucial for precise candidate selection.

While platforms like LinkedIn have gained popularity, they may have a limited audience in India, especially when seeking highly skilled professionals. Finding qualified individuals promptly can be challenging. In such situations, partnering with an Employer of Record (EOR) in India becomes a strategic choice. EORs like Marzuna offer the expertise needed to navigate domestic employment standards and leverage digital onboarding technology to expedite the recruitment process while handling compliance and legal matters. Leading EORs also provide e-signing options, facilitating faster onboarding through digital documentation.

Additionally, EORs like Marzuna assist with other essential human resources tasks, including payroll administration, time and expense management, security and compliance, and tax filing. These features streamline the process for both companies and applicants, resulting in a faster, more cost-effective, and smoother experience.

Probation & Termination

In India, there are no specific regulations that dictate the duration of an employee’s probationary period. Typically, this period ranges from three to six months, and in certain situations, it may be extended for up to a year if necessary. During this probationary period, if an employee’s performance is unsatisfactory, the employer has the authority to terminate their services and cite performance as the reason.

The process for terminating an employee’s job in India is not standardized. Employers must consider both the terms of the employment contract and any provisions within the relevant Act that pertain to the employee’s category of employment when dismissing an employee.

It’s crucial to be aware that an employer could face legal repercussions for wrongful termination under the state’s Shops and Commercial Establishments Act within the Indian legal system. Typically, an employee has the right to a written notice period of 30 days, or in some cases, compensation equivalent to 30 days’ pay.

Contracted workers and independent contractors who are protected under Section 73 of the Indian Contract Act have the option to file claims for damages and initiate legal action for contract violations.

Employers of Record (EoRs) play a valuable role in ensuring that companies’ actions comply with local regulations, reducing the risk of legal complications in the future. EoRs assist businesses in creating reliable employment contracts that align with legal standards, providing peace of mind in terms of compliance.

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

Establishing a subsidiary in India involves four crucial phases, each demanding meticulous attention and a comprehensive understanding of the country’s laws and procedures.

• Name Reservation: The first step entails filling out Form No. INC-1, the Application for Reservation of Name. Selecting an appropriate name for the subsidiary and ensuring that no other business has already registered the same name are vital aspects of this stage.
• Collaboration with Ministry of Corporate Affairs: The second phase involves collaboration between the organization and the Ministry of Corporate Affairs, which represents the Indian government. This process includes setting up a Distributed Control System (DCS) and obtaining a Director Identification Number (DIN).
• Documentation and Registration: The third phase encompasses the completion of the Memorandum of Association and Articles of Association. Additionally, it involves the payment of registration fees and stamp duty. These legal documents outline the company’s objectives, organizational structure, and internal governance framework.
• Tax and Director Appointment: The final stage entails filing Form INC-22 for tax purposes and Form DIR-12 with the Registrar of Companies for the appointment of directors and managerial employees.

Approaching these phases with a thorough understanding of the entire process and a working knowledge of how local agencies operate is essential. This approach reduces the likelihood of encountering issues or delays during the application procedure, ensuring a smoother setup for the subsidiary.