HP, Facebook and Google recognised the booming IT sectors like Bangalore in India and started sourcing talent, but it was only lately they realised that catering this unmatchable talent to their countries is an issue, hence they became local. It’s not feasible for every foreign employer to own a legal entity in India or establish their own space but there are options like employer of record or EOR, which have been highly popular because of the flexibility they provide.
You keep operating your business anywhere and can still hire in India without undertaking the complexities of Indian legal compliance related to labour laws. EOR does that all as they operate locally and have established set-up offering tailored solutions for your needs, and then you can save huge cost and still expand your team and access the vast talent pool in India. There are other options too for hiring an employee in India, but there are complexities attached. In this guide we will understand all possibilities and how to access them to hire an employee in India.
How To Hire An Employee In India?
There are many options as I said earlier, but understanding the feasibility and your requirements is essential. Below I have mentioned some of the highly preferred options on how could you hire an employee in India;
Hiring Via Your Own Legal Entity
It’s tough though to establish your branch or subsidiary in India, but it could help you to fill requirements and other HR tasks internally. To set up an entity in India, there are some strict regulations set by the Indian law which you must fulfill, understand below;
Also Read: The Future of EOR Payroll in a Global Workforce
To build a subsidiary and hire in India, you must have to obtain;
- Director Identification Number (DIN);
- Digital Signature Certificate (DSC);
- Business name approved by the Registrar of Companies;
- Memorandum and Articles of Association;
- Incorporation application;
- Certificate to commence operations;
- Permanent Account Number (PAN);
- Employees’ Provident Fund Organization filing;
- Goods and Services Tax (GST) registration; and
- Medical insurance application
In case of some special industry types like medical, there are some extra or special permits which you need to obtain.
Important Indian Labor Laws Characteristics
If you have been planning to establish your own legal entity in India, then you must consider below mentioned factors to ensure compliance;
Indian Law or Practice | Description |
13th-month pay | Essentially equal to one-month’s pay. It applies to every employer. It is provided as a bonus, typically given at the end of the year |
Paid time off | This is typically 10-15 days in India |
Permanent establishment | As we’ve stated above, your company can do this itself or go through an EOR |
Sick leave | Maximum of 12 days annually |
Parental and maternity leave | Paternity leave is not mandatory. Maternity leave is maximum 26 weeks for the first two deliveries and 12 weeks for each delivery thereafter¹² |
Holidays | 17 public holidays occur annually in India and working on these holidays requires additional pay¹³ |
Taxes | Income tax, Provident Fund, Employee State Insurance, Goods and Services Tax, Professional Tax |
Minimum wage | Labor costs vary by state and job type. The national minimum wage is $2.15.¹⁴ |
Overtime | Overtime payments kick in when an individual works more the 9 hrs.¹⁵ |
65 – 70 | SGD 50 – SGD 500 |
SGD 500 – SGD 750 | |
SGD 750 & above | |
Above 70 | SGD 50 – SGD 500 |
SGD 500 – SGD 750 | |
SGD 750 & above |
Partnering With An Employer Of Record
The term became famous when some startups or small scale companies from foreign started to hire in India and came to know about the secret enterprises that have been following from the last many years to cut costs and acquire best talent. Employer of Record (EOR), also known as a professional employment organization (PEO) is simply a local entity based in India helping you acquire talent as per your needs but at 60-70% reduced cost. They have established networks and have complete compliance with legalities and other labor laws assuring you a complete set of services as required without any hassle you aren’t aware about.
Also Read: The Role of EOR in Managing Foreign Worker Quotas Under MOM Guidelines
Types of Employees
Depending on your needs, there are different categories of workers currently available under Indian labor law.
Full-time Employees
A full-time employee is like a regular employee who exclusively works for the employer and is restricted to being associated with any other employer or undertaking any off the record.
Part-time employees
Part-time employees get the complete entitlement of all the perks and benefits like a regular employee, but the difference is that they also get proportionate benefits and work for lesser hours as compared to the full-time employees.
Contract workers
A contractual worker, as the term itself signifies, is employed contractually with respect to a “contractor” or a “bond”, hence not directly from the employer. A contractor supplies the contractual talent to the actual employee for a specified period and cost and tasks as agreed and mentioned within the contract.
Conclusion
Hiring in India has been more easily accessible than earlier because of services like EOR. AS per the current Indian labor laws an adult, defined as 18 years or older, under the mutual agreement could work for more than 48 hours in a week and not more than 9 hours in a single working day. Which implies that full-time workers under this window work for 40 or 48 hours in a week as per the employer policy.