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In an increasingly globalized world, hiring talent from around the world has become the norm for many companies. India, with its vast pool of skilled professionals, is a popular destination for businesses looking to expand their workforce. However, navigating the Indian job market and understanding its unique dynamics can be a challenge. In this article, we will explore the key aspects as to how you can use EOR to hire employees in India, starting from understanding the job market and work culture to the legal aspects and recruitment process. Whether you are a small startup, a multinational corporation, or an international company, this guide will provide you with the knowledge and insights you need to hiring employees in India successfully.

Contents

• Understanding the Indian Job Market to Hire Employees in India
• Employability Talent in India
• What are the Legal Aspects of Hiring Employees in India?
• What is the Cost to Hire Employees in India?
• Currency in India
• What Does a Company Need to Hire Employees in India?
• Why Should You Use EOR Services to Hire Employees in India?
• What is the Recruitment Process to Hire Employees in India?
• Work Permits Available for Indian Employees
• Compliance Risks While Hiring Employees in India
• Differences Between US and India Payroll
• Tax Filing and Compliance in India
• Most Common Benefits Offered to Employees in India
• Mandatory Social Security Contributions in India
• Penalties for not Making Contributions
• What are the Top Sectors From Which You can Hire Employees in India?
• Challenges to Hire Employees in India
• How to Protect Company Intellectual Property (IP) in India?
• Case Study: Successful Strategies to Hire Employees in India
• Process of Terminating an Employee in India
• Conclusion: Hire Employees in India

Understanding the Indian Job Market to Hire Employees in India

The first step when you are moving ahead to hire employees in India is to understand the job market. India is a rapidly growing economy with a diverse range of industries. Some of the key industries in India include information technology, manufacturing, healthcare, finance, and retail. Each industry has its own characteristics and hiring requirements, so it is essential to familiarize yourself with the specific industry you are targeting.

India’s information technology industry is one of the largest and fastest-growing sectors in the country. It is home to numerous multinational companies and has a high demand for skilled professionals in areas such as software development, data analysis, and cybersecurity. The industry has seen significant growth in recent years, with India becoming a global hub for IT services and outsourcing.

The manufacturing industry is another major player in the Indian job market, encompassing sectors such as automobile manufacturing, consumer goods production, and textile manufacturing. With the government’s emphasis on Make in India initiatives, this sector is expected to further grow in the coming years. The manufacturing industry provides employment opportunities for both skilled and unskilled workers, contributing to the country’s economic development.

The service industry, which includes sectors like healthcare, hospitality, and professional services, also offers ample opportunities for hiring in India. The service industry is known for its vast talent pool and is a major contributor to India’s GDP. It provides a wide range of job roles, from doctors and nurses in healthcare to hotel staff and customer service representatives in the hospitality sector.

Suggested Read: Salary Benchmarking in India- What are the Average Salaries in India for Top Roles?

Current Employment Trends To Know Before You Move Ahead to Hire Employees in India

Understanding the current employment trends in India is crucial when hiring in the country. India has witnessed a shift from traditional employment models to more flexible and remote work arrangements. With the rise of technology and the COVID-19 pandemic, remote work has become the new normal. Many companies have adopted work-from-home policies, allowing employees to work from the comfort of their own homes.

Additionally, there has been a growing trend of gig economy and freelance work, where individuals offer their services on a project basis. This trend has opened up new possibilities for hiring and allows businesses to tap into specialized skills on a short-term basis. Freelancers and gig workers provide flexibility and cost-effectiveness for companies, especially for projects that require specific expertise or short-term assignments.

Understanding Indian Work Culture to Hire Employees in India

Indian work culture is influenced by a mix of traditional values and modern practices. Hierarchical structures and respect for authority are important in the Indian workplace. It is common for companies to have a clear chain of command, with decision-making power concentrated at the top levels. Employees are expected to follow instructions and show deference to their superiors.

Additionally, building strong relationships and maintaining harmony within the team are highly valued in Indian work culture. Teamwork and collaboration are emphasized, and employees are encouraged to work together towards common goals. Building personal connections and fostering a sense of camaraderie among colleagues is considered essential for a productive and positive work environment.

It is also important to note that the concept of time may be perceived differently in India. While punctuality is still valued, it is not uncommon for meetings and events to start slightly later than the scheduled time. This cultural aspect should be taken into consideration when setting expectations and planning meetings or events.

Recommended Read: EOR India- A Detailed Guide on Employer of Record 

Employability Talent in India

As per reports, India witnessed an increase in its employability figure as it spiked from 46.2% in the previous year to 50.3% in 2023. Investing your time and resources in hiring employees in India involves possessing apt information about the employability trends in India.

Points at a Glance

• The percentage of employable women workforce stands at 52.8%, while it is 47.2% for men.
• Candidates hailing from Uttar Pradesh, Delhi, and Maharashtra had the highest employability.
• The most employable talent in India came from these three domains among several others: B.Tech, MBA, and B.Com

While all these came up in the survey findings, feel free to hire from other diverse domains because it is all about the candidates’ skills and knowledge that will prove to be fruitful for your company.

Suggested Read: Types of Leaves in India 

What are the Legal Aspects of Hiring Employees in India?

When hiring in India, it is essential to understand the legal aspects and comply with employment laws and regulations. However, it is important to note that this article does not provide legal advice, and consulting with legal professionals is recommended to ensure compliance with the latest laws and regulations.

Employment Laws and Regulations

India has a comprehensive set of employment laws and regulations that govern various aspects of employment, such as minimum wages, working hours, leave provisions, and termination procedures. These laws are designed to protect the rights and interests of both employers and employees.

For instance, the Minimum Wages Act of 1948 sets the minimum wage rates across different industries and regions in India. This ensures that workers receive fair compensation for their labor and helps prevent exploitation.

Similarly, the Factories Act of 1948 establishes safety standards and working conditions for employees working in factories. It mandates provisions such as the availability of clean drinking water, proper ventilation, and adequate lighting to ensure a safe working environment.

Understanding and complying with these employment laws is crucial to avoid legal complications, penalties, and potential lawsuits. Employers must stay updated with any changes or amendments to these laws as non-compliance can lead to severe consequences.

India is projected to have a surplus of 1 million highly-skilled tech workers by 2030, reveals reports.

Contractual Obligations

When you move ahead to hire employees in India, it is common to have employment contracts in place. Employment contracts outline the terms and conditions of employment, including job responsibilities, compensation, benefits, and termination clauses. These contracts provide clarity and protect the rights of both the employer and the employee.

Employment contracts also play a vital role in establishing a mutually beneficial relationship between employers and employees. They help set clear expectations, define the scope of work, and prevent misunderstandings or disputes in the future.

In addition to the terms and conditions, employment contracts may also include non-disclosure agreements (NDAs) or non-compete clauses to protect the employer’s proprietary information and prevent employees from joining competitors or starting their own businesses in the same industry.

It is advisable for employers to seek legal assistance when drafting employment contracts to ensure that they comply with the relevant laws and cover all necessary aspects of the employment relationship.

Understanding Tax Implications

India has a complex tax system, and employers are responsible for deducting taxes from employee salaries and remitting them to the government. It is important to be aware of the applicable tax rates, deductions, and exemptions to ensure compliance with tax laws.

Under the Income Tax Act of 1961, employers are required to deduct income tax at source (TDS) from employee salaries based on the applicable tax slab rates. They are also responsible for filing regular tax returns and providing employees with Form 16, which details their income and tax deductions for the financial year.

Additionally, employers must also comply with other tax-related obligations, such as Goods and Services Tax (GST) for certain goods and services provided to employees, and Professional Tax (PT) in some states.

Seeking assistance from tax professionals will help navigate through the intricacies of the tax system in India. They can provide guidance on tax planning, compliance, and help optimize tax liabilities for both employers and employees.

Overall, understanding the legal aspects of hiring in India is crucial for employers to ensure compliance with employment laws, protect the rights of both parties, and maintain a harmonious working relationship. Consulting legal and tax professionals will provide valuable insights and guidance in navigating through the complexities of the Indian legal and tax landscape.

Also Read: Latest Tax Slabs 

What is the Cost to Hire Employees in India?

Since you are about to embark on the journey of employing local talent in India, having a clear idea of the hiring cost is essential. After all, your business expansion plans will be dependent on this factor. Say, you are going to hire an employee who is based out of Bangalore or Mumbai. In such a case, taking into account the real hiring cost is a must.

Usually, the hiring cost for employers in India can vary widely depending on factors such as the industry, the level of the position, and the recruitment methods used. Let’s see what are the key components that contribute to the overall hiring cost:

1. Recruitment Channels

Costs associated with using recruitment channels, including job portals, social media platforms, and hiring agencies ought to add to the final hiring cost.

2. Advertising Expenses

If you choose to advertise job openings through various channels, there will be costs related to creating and placing these advertisements. This will then have a direct influence on the hiring cost.

3. Background Checks

Costs might be incurred for conducting background checks on potential hires to verify their professional and personal history.

4. Onboarding Costs

Expenses associated with the onboarding process, including training materials, orientation programs, and any technology or equipment required for the new hire fall under this category of hiring expenditure.

5. Technology and Software

Expenses related to the use of applicant tracking systems (ATS), candidate assessment tools, and other technology that you decide to use will contribute towards increasing your Indian employee hiring cost.

It can’t be emphasized enough that how vital it is for you to track and analyze these costs to optimize their recruitment processes and make informed decisions. Additionally, considering the long-term benefits of hiring, such as employee retention and productivity, is crucial for a comprehensive understanding of the return on investment in the hiring process.

Suggested Read: Top 10 Tax-saving Tips

Currency in India

In India, the currency used is the Indian rupee. The code of which is INR. You can write payment amounts either using the currency code (INR) or the rupee symbol (₹). Recruitment from India entails paying your Indian employees in INR solely. Workers may open a foreign currency account if they wish to receive payments in some other currency other than Indian rupee. Anyway, using local currency as the mode of payment is much recommended.

India is the home to the world’s third-largest web 3.0 workforce, reveals studies. 

What Does a Company Need to Hire Employees in India?

To hire workers from India, you either need to establish your company as an employer or use Employer of Record (EOR) services to carry out all the mandatory processes and stay compliant. Relying on EOR services will help you avoid the complexities of setting up a legal entity. Before we share with you the crucial things you need to hire employees in India, let’s see how you can eradicate troubles for yourself by going for an EOR.

• Instant option to kick-start the act of hiring in India.
• Guidance of experts, included in the EOR services, to help you navigate through the Indian legal landscape- especially, in the areas of employment laws and India payroll taxes.
• Relief from handling mind-boggling HR tasks for your employees.

Asanify offers the best-in-class EOR services for companies based out of India. With its great suite of features and expert knowledge in the areas of diverse Indian employment laws, Asanify can turn out to be your perfect buddy while you venture out to expand your business.

If you want to know the complicated process of establishing a legal entity or subsidiary branch in India, here it is. To start hiring in India without availing of EOR services, you need to have access to the following:

• Director Identification Number (DIN);
• Name of the business as approved by the Registrar of Companies;
• Digital Signature Certificate;
• Application for incorporation;
• Company seal;
• Permanent Account Number (PAN);
• Certificate to begin operations

Depending upon the company industry or location, procuring certain other permits may become a necessity. To ease things while adding Indian employees to your business, using EOR services may prove to be a prudent thing to do.

Why Should You Use EOR Services to Hire Employees in India?

Engaging in EOR (Employer of Record) services in India can be advantageous for foreign companies compared to setting up a legal entity. EOR services provide a streamlined approach to hiring without the complexities of establishing a full-fledged entity. After all, EOR enables foreign companies to enter the Indian market swiftly, initiate business operations, and establish a presence without the delays associated with legal entity setup. Further, a great deal of administrative workload gets reduced, thereby giving you the time to concentrate on strategic business activities.

Let’s have a look at this comparative analysis to understand how EOR can make things easier for you to achieve your mission of hiring employees from India.

Parameters	EOR	Legal Entity
Set Up	Consumes less time to set up. Can be used instantaneously.	Might take anywhere between 6 to 9 months to set up and requires the payment of registration fees
Cost	Very cost-effective	Requires heavy investment
Local Expertise Support	Offers local compliance specialists, so there is no need to get into decoding the legal complexities of the land	Need to gain knowledge of the local business and legal landscape
Payroll and Taxation	Automation of payroll processing with instantaneous payouts to employees and contractors. IT return filing is also made hassle-free with EOR services	Need to take care of employee payroll manually and check for statutory deductions
Compliance	No need to stress about compliance risks because the EOR service provider will take care of this aspect	Strong need for regular compliance check

74% of  Indian workers are keen on flexible work options. (Source: Microsoft Work Trend Index)

What is the Recruitment Process to Hire Employees in India?

Now that we have covered the foundational aspects of hiring in India, let’s delve into the recruitment process. Finding the right candidates, conducting effective interviews, and providing comprehensive onboarding and training are crucial for hiring success.

1. Adopt a Strategic Approach to Hire Employees in India

Recruiting talented professionals in India requires a strategic approach. Utilizing online job portals, social media platforms, and professional networking websites can help reach a wider pool of candidates. It is also beneficial to collaborate with local recruitment agencies and tap into their expertise and networks.

2. Incorporate Personal Touch to the Hiring Process

Add a personal touch to your recruitment efforts by highlighting your company’s culture, values, and growth opportunities. Clearly outline the desired qualifications, skills, and experience required for the position to attract the right talent.

3. Consideration for Diversity While Hiring Employees from India

When it comes to finding the right candidates, it’s important to consider the diverse backgrounds and cultural differences of Indian candidates. These differences can bring unique perspectives to your team and contribute to a more inclusive work environment.

4. Interviewing the Right Way to Hire Employees in India

During the interview process, focus not only on assessing technical skills but also on cultural fit and adaptability. Indian candidates may have diverse backgrounds and cultural differences, which can bring unique perspectives to your team. By considering these factors, you can ensure that you are not only hiring skilled individuals but also individuals who will thrive in your company’s work culture.

Conducting panel interviews with key decision-makers and involving team members in the selection process can help evaluate candidates from different angles. Additionally, providing prompt feedback to candidates can enhance their experience and ensure a positive employer brand. This feedback can also help candidates understand their areas of improvement and grow professionally.

5. Initiate a Smooth Onboarding Experience

Once you have selected the right candidate, make sure to roll out the job offer while including all the crucial particulars, including:

• Job title
• Working hours
• Salary and payment frequency
• Start date
• Benefits

Use our absolutely free Offer Letter Generator Tool to get your hands on the job offer document you want! Create, download, and send the job offer immediately to your chosen candidate.

Do note that a comprehensive onboarding and training program is vital to set the new employee up for success. Provide an overview of the company’s values, goals, and expectations. Assign a mentor or buddy to support the new employee during the initial days.

6. Focus on Employee Upskilling Sessions

Investing in continuous employee development and training programs is key to retaining top talent. Provide opportunities for upskilling and career growth, which will not only benefit the employees but also contribute to the overall success of your organization. By offering these opportunities, you can create a culture of learning and development, where employees feel valued and motivated to contribute their best.

In conclusion, the recruitment process in India involves finding the right candidates through various channels, conducting interviews that assess both technical skills and cultural fit, and providing comprehensive onboarding and training programs. By following these steps, you can attract and retain top talent, contributing to the growth and success of your organization.

Also Read: What is Professional Tax? The Ultimate Guide 

Work Permits for Indian Employees

Before you begin with the process of hiring employees from India, make sure to check if they are eligible to work  in India by law. Work permit or visa is a must for foreign nationals who are not Indian citizens and lack permanent residency. Let’s see what are the types of work visas available for workers in India.

1. Employment Visa or E Visa

This is generally granted to skilled professionals or highly qualified individuals working with registered companies in India. It’s essential for foreigners seeking employment in India. NGO workers can also obtain an E Visa if their monthly salary is a minimum of INR 10,000. If applicants don’t intend to travel, they can apply for a single entry visa. Multiple entry visa would suit applicants who plan to leave the country at certain intervals.

2. Business Visa

While not a work permit per se, a Business Visa allows foreign nationals to explore business opportunities, attend conferences, and make business-related visits to India.

Companies all over the world save 60-80% when hiring remote workers from India, reveals Microsoft Work Trend Index.

Compliance Risks While Hiring Employees in India

Employment laws and regulations in India are diverse and may vary from one state to another. Therefore, it is crucial to obtain an unhazed idea of the various aspects of employment and labor laws as applicable in India.

When a foreign company hires employees in India, you need to be aware of some of the most common compliance risks:

1. Labor Laws and Regulations

India has complex labor laws that cover aspects like working hours, minimum wages, leave policies, and termination procedures. Non-compliance with these laws can lead to legal actions, fines, and damage to the company’s reputation.

• Minimum Wage: The minimum wage rate in India has been set taking into account 2000+ job types available here. The standard minimum wage rate is 176 rupees per day (that is, $2.15). However, this figure is not absolute and keeps varying depending upon the local regulatory framework across diverse regions and industries.
• Overtime Pay: If employees in India work more than 48 hours in a week, they ought to receive twice their base pay as compensation.
• 13th Month Pay: Although a few exceptions are applicable, this compulsory bonus is offered as a percentage of the employee’s salary at the end of the year.

2. Employment Contracts

Ensuring that employment contracts comply with Indian labor laws is crucial. Any deviation may result in legal consequences.

3. Taxation

Understanding and adhering to India’s tax regulations is vital. You may land in the whirlwind of financial penalties in case of non-compliance with tax obligations, such as withholding taxes on salaries.

4. Social Security and Provident Fund

Complying with social security contributions and provident fund requirements is essential. Failure to do so can lead to legal actions and impact employee benefits.

5. Anti-Discrimination Laws

India has strict laws against discrimination based on gender, religion, caste, or disability. In case of non-adherence to the laws, legal actions and damage to the company’s reputation may follow.

6. Visa and Work Permits

Ensuring that employees have the necessary visas and work permits is crucial. Violating immigration laws can lead to legal consequences and affect the company’s ability to operate in India.

7. Health and Safety Regulations

Adhering to the health and safety regulations is important to provide a safe working environment. Legal actions and harm to employees are obvious consequences in case of not paying heed to these regulations.

8. Data Protection and Privacy

India has specific data protection laws. Companies must ensure compliance with these regulations to protect employee data and avoid legal issues while working with employees in India.

9. Local Customs and Cultural Sensitivity

Understanding and respecting local customs and cultural nuances is essential to maintaining positive employee relations and avoiding potential conflicts.

10. Trade Union Relations

Awareness of trade union laws and regulations is important, as engaging with or resisting unions improperly can lead to legal challenges.

11. Termination Procedures

Following proper termination procedures is crucial to avoid legal complications. Unlawful terminations can lead to disputes and legal actions.

To mitigate these risks, foreign companies should conduct thorough due diligence, seek legal advice, and establish robust compliance processes tailored to the Indian legal and cultural context.

Differences Between US and India Payroll

Before you start with building your remote team in India, staying aware of the fact that payroll execution in a country is different from the other is important. There are various components in the compensation package with varying employer contributions in both the US and India payroll. Incorrect specification of these elements would directly affect the take-home salary of employees. Committing payroll compliance errors may not only attract penalties but also affect employee morale. In India, there is a great risk of getting heaped with fines and back wages in case of non-adherence to payroll compliances. Let’s find out how the payroll of US differs so much from India, the country in which your contractors reside.

Parameters	US Payroll	India Payroll
Taxation	Federal and State Taxes: In the U.S., employees are subject to both federal and state income taxes. Tax rates vary by income level and state of residence. Social Security and Medicare: Employees contribute to Social Security and Medicare, and employers also contribute matching amounts.	Income Tax: India follows a progressive income tax system. The rates vary based on income levels. Provident Fund (PF) and Employee State Insurance (ESI): Employees and employers contribute to the Provident Fund, and ESI contributions are mandatory for certain categories of employees.
Salary Components	Basic Salary and Bonuses: Basic salary and bonuses are common components. Benefits such as health insurance and retirement plans are often provided. Overtime Pay: Overtime pay is common for non-exempt employees.	Basic and Allowances: Basic salary, house rent allowance (HRA), and other allowances are standard components. Provident Fund (PF): A portion of the basic salary is contributed to the Provident Fund.
Frequency of Payroll Processing	Payroll is typically processed bi-weekly or monthly.	Monthly payroll processing is the norm.
Statutory Compliance	Fair Labor Standards Act (FLSA): Governs minimum wage, overtime pay eligibility, record-keeping, and child labor standards. Family and Medical Leave Act (FMLA): Provides eligible employees with unpaid, job-protected leave.	Labor Laws: The Payment of Wages Act, Minimum Wages Act, and other labor laws govern payment and working conditions. Gratuity and Bonus: Employers are required to provide gratuity and bonuses under certain conditions.
Employee Benefits	Health Insurance: Employers often provide health insurance benefits. Retirement Plans: 401(k) plans are common, with employer contributions.	Provident Fund (PF): A mandatory retirement savings scheme. Gratuity: Employers provide gratuity as a lump sum payment to employees who complete a specified period of continuous service.
Leave Policies	Vacation and Sick Leave: Policies vary by employer, and there is no statutory requirement for paid leave.	Annual Leave: Employees are entitled to a certain number of paid annual leave days. Public Holidays: Employees are entitled to leave on public holidays.
Employee Stock Options (ESOPs)	Common Practice: ESOPs are a common component of compensation packages.	Increasing Trend: ESOPs are becoming more common in India, especially in the tech sector.
Payment Modes	Direct Deposit: Commonly used for salary disbursement.	Bank Transfers: Salary is typically transferred directly to employees’ bank accounts.

Tax Filing and Compliance in India

In India, employers are required to adhere to several tax filing and compliance rules when hiring employees. The tax year here commences from 1st April and concluded on 31st March. Workers in India need to compulsorily file their taxes by 31st July. Here’s a brief overview of the tax compliance norms in India:

1. Professional Tax (PT)

Professional tax is levied by state governments on income earned by employees. Employers are responsible for deducting and remitting this tax.

2. Tax Deducted at Source (TDS)

Employers are required to deduct TDS from employees’ salaries based on their income tax slabs. This amount needs to be deposited with the government on a monthly basis.

3. Goods and Services Tax (GST)

If the employer’s annual turnover exceeds the prescribed limit, they must register for GST. This tax is applicable on the supply of goods and services.

6. Employee Tax Declarations

Employers must collect and verify tax declarations from employees, which help in determining the TDS to be deducted.

7. Income Tax Returns (ITR)

Employers should issue Form 16 to employees, summarizing the salary details and TDS deducted. Employees then use this information to file their income tax returns.

Don’t want to load your head with chunks of tax norms? Use Asanify EOR to streamline the hiring process and abide by tax regulations. You can now complete hiring employees from India with great swiftness and ease while staying 100% compliant with Indian labor laws and tax regulations.

Note: Make sure to stay updated on any changes in tax laws and compliance requirements to ensure smooth operations and avoid penalties. Consulting with a professional tax advisor in India is advisable for accurate guidance tailored to specific business situations.

Most Common Benefits Offered to Employees in India

Before you work towards forming your remote team in India, it is a must to familiarize yourself with the mandatory employee benefits you need to offer your employees.

1. Maternity Leave Policy

Maternity leave policies are governed by the Maternity Benefit Act, 1961. Crucial aspects concerning this leave policy include:

a) Duration of Leave

Women are entitled to a maximum of 26 weeks of maternity leave. This includes eight weeks of leave before the expected delivery date (antepartum) and 18 weeks after delivery (postpartum).

b) Applicability

The Act is applicable to every establishment with 10 or more employees. It covers all women employees, including those working on a temporary basis or as contractual employees.

c) Payment during Maternity Leave

For the period of maternity leave, the employee is entitled to receive a salary at the rate of the average daily wage for the period of her actual absence.

d) Medical Bonus

Employers are also required to provide a medical bonus to women employees, which is a lump-sum amount to cover any medical expenses related to the pregnancy.

e) Miscarriage or Medical Termination

In case of a miscarriage or medical termination, a woman is entitled to six weeks of leave with full pay from the date of miscarriage or medical termination.

f) Notice Period

A woman employee is required to give notice to her employer in writing if she wants to avail maternity leave. This notice should state the date from which she will be absent and should be given as early as possible.

2. Paternity Leave Policy

Most companies in India don’t offer paternity leave to its employees. This is because it is not a statutory benefit in India. However, some organizations incorporate 15 days of paternity leave in their leave policy for the sake of benefitting their employees.

3. Other Types of Employee Leaves in India

Employees in India receive a minimum of 12 days of leave for every 240 days worked. Further, a minimum of 12 leave days each is offered as sick and casual leave. Further, providing employees in India with at least 10 paid public holidays yearly is much-anticipated.

4. Safeguards for Women at the Workplace

In India, there are several special protections for women in the workplace aimed at ensuring their safety and promoting equal opportunities. Some key provisions include:

a) Sexual Harassment Prevention

The Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013 mandates the establishment of Internal Complaints Committees (ICCs) at workplaces with 10 or more employees. These committees are responsible for addressing complaints of sexual harassment and ensuring a safe working environment.

b) Equal Remuneration

The Equal Remuneration Act, 1976, prohibits discrimination in remuneration on the basis of gender. Employers are required to provide equal pay for the same work or work of a similar nature.

c) Work Hours and Night Shifts

Some states have regulations limiting the working hours of women and restricting their employment during night shifts to ensure their safety. However, exemptions may be provided in certain sectors.

d) Crèche Facilities

The Maternity Benefit (Amendment) Act, 2017, mandates organizations with 50 or more employees to provide crèche facilities for working mothers, allowing them to care for their children while at work.

e) Non-Discrimination

The Constitution of India guarantees the right to equality (Article 14) and prohibits discrimination on the grounds of gender. This provides a broader framework for protecting women’s rights in all spheres, including the workplace.

Pay heed to the fact that, while these protections exist, challenges persist, and implementation varies across different workplaces and regions. Additionally, legal amendments and updates may occur, so it’s advisable to refer to the latest legal provisions for the most accurate information.

5. LGBTQ+ Rights at Workplace in India

LGBTQ+ rights in the workplace in India have been gradually evolving. In September 2018, the Supreme Court of India decriminalized Section 377 of the Indian Penal Code, which criminalized consensual same-sex relations. This was a significant step toward recognizing LGBTQ+ rights. However, specific workplace rights for the LGBTQ+ community in India can vary.

Some companies have adopted inclusive policies and provide a supportive environment, including non-discrimination policies, equal opportunity initiatives, and employee resource groups for LGBTQ+ individuals. These efforts aim to create a workplace free from discrimination based on sexual orientation or gender identity.

Recommended Read: Leave Policy for Employees- Download Expert-guided Templates 

Mandatory Social Security Contributions in India

Moving ahead to hire employees in India without contributing to the social security benefits? Well, that is a big no-no. Making mandatory social contributions to employees in India is crucial for several reasons. One primary aspect is the social security it provides. These contributions often fund schemes such as the Employees’ Provident Fund (EPF), Employees’ State Insurance (ESI), and other welfare programs. Additionally, these contributions play a pivotal role in promoting a sense of financial security among employees. They serve as a safety net during unforeseen circumstances, such as illness or accidents, by offering financial assistance and medical care.

Most importantly, mandatory social contributions foster a sense of responsibility among employers, encouraging them to prioritize the welfare of their employees. By contributing to these funds, employers actively participate in the social and economic development of the country.

Let’s have a look at the compulsory social contributions that you need to make upon hiring workers in India.

1. Employees’ Provident Fund (EPF)

The Employees’ Provident Fund (EPF) in India is a social security initiative managed by the Employees’ Provident Fund Organization (EPFO). It aims to provide financial security and stability to employees by facilitating savings for retirement. To gain a better understanding of EPF, let’s get acquainted with its core aspects.

a) Eligibility

•  Applicable to establishments with 20 or more employees.
•  Voluntary for establishments with fewer than 20 employees.

b) Contributions

• Both the employer and the employee contribute 12% of the basic salary and dearness allowance to the fund.
• Out of the employer’s contribution, 8.33% is allocated to the Employee Pension Scheme (EPS).

c) Eligibility for Membership

• Any salaried individual, earning up to Rs. 15,000 per month, is eligible for EPF membership.
• Further, salaried individuals earning more than Rs 15,000 per month, may choose to continue to be a part of the EPF programme upon seeking special permission.

d) EPF Interest Rate

The interest rate is decided by the EPFO and is subject to change. It is declared annually.

e) Withdrawal Rules

• Full withdrawal allowed after retirement (attaining 58 years) or on cessation of employment for two consecutive months.
• Partial withdrawal allowed under specified conditions like marriage, education, home purchase, medical treatment, etc.

f) Transfer of EPF

If an employee changes jobs, the EPF balance can be transferred to the new employer’s EPF account.

g) Nomination

Members are required to nominate family members to receive the EPF accumulations in case of the member’s demise.

h) Online Services

EPFO provides online services for account access, withdrawals, and transfers.

i) UAN (Universal Account Number)

UAN is a unique 12-digit number assigned to each EPF member, aiding in portability and easy tracking.

j) Employer’s Role

• Employers are responsible for deducting and depositing both employee and employer contributions to the EPF.
• Make sure to check the latest updates from the EPFO website or contact the local EPFO office, as rules and rates may be subject to change.

Also Read: 12 Provident Fund Lessons I Learnt- #12 Will Surprise You 

2. Employees’ Pension Scheme (EPS)

As mentioned above, 8.33% of the employer’s contribution is directed towards the Employee Pension Scheme or EPS. For employees obtaining more than Rs 15,000 per month, the EPS contributions reach the threshold of Rs 1250 per month. Since it is a fixed cost applicable solely to employers, employees don’t have the liberty to contribute their surplus income toward the EPS.

3. Employees’ Deposit Linked Insurance Scheme

The Employees’ Deposit Linked Insurance (EDLI) scheme is a social security program provided by the Employees’ Provident Fund Organization (EPFO) in India. It is designed to provide life insurance coverage to employees who are members of the Employees’ Provident Fund (EPF). Here are the key details:

a) Coverage

The scheme provides life insurance coverage to all EPF members. It covers both private and public sector employees who contribute to the EPF.

b) Insurance Amount

The insurance amount is linked to the member’s average monthly basic wages and dearness allowance (DA).

c) Premium Payment

Employers are responsible for paying the premium for the EDLI scheme. The premium is a fixed percentage of the total wages (basic wages + DA) payable to all employees covered under the EPF.

d) Nomination

Employees can nominate a family member to receive the insurance amount in case of their demise. This nomination can be updated by the employee as needed.

e) Claim Process

In the unfortunate event of the employee’s death, the nominee or legal heir can claim the insurance amount by submitting the necessary documents, including the death certificate and the claim form. The process is usually facilitated through the employer.

f) Additional Information

The EDLI scheme also covers cases where the employee has left service but still has an active EPF account.

4. Employees’ State Insurance (ESI)

Employees’ State Insurance (ESI) is a social security and health insurance scheme in India. It is administered by the Employees’ State Insurance Corporation (ESIC), an autonomous body created by the government. The primary objective of ESI is to provide financial and medical benefits to employees and their dependents in case of sickness, maternity, disablement, or death due to employment-related injuries.Here are key aspects of Employees’ State Insurance:

a) Coverage

• ESI applies to organizations with 10 or more employees (in some states, it’s 20 employees).
• Employees earning less than a specified wage threshold (as set by the government) are covered under the scheme.

b) Contributions

Both employers and employees contribute to the ESI fund. As of my last knowledge update in January 2022, the employee’s contribution rate is 0.75% of their wages, while the employer contributes 3.25% of the employee’s wages.

c) Benefits

• ESI provides a range of benefits, including medical benefits, sickness benefits, maternity benefits, disablement benefits, and dependent benefits.
•  Medical benefits cover outpatient and inpatient treatment, as well as various medical procedures and services.

d) Registration and Compliance

• Employers are required to register under the ESI Act within 15 days of becoming applicable.
•   Regular compliance, including timely submission of contribution payments and necessary records, is essential.

e) Administration

• The ESI Corporation manages the scheme and its funds.
• The organization is headed by a Director-General, and there are regional and local offices to facilitate the implementation of the scheme.

f) Hospitals and Dispensaries

ESI operates a network of hospitals and dispensaries where insured persons and their dependents can avail medical services.

g) Record Keeping

Employers need to maintain records of employees covered under ESI and submit these records periodically.

h) Legal Framework

The Employees’ State Insurance Act, 1948, governs the ESI scheme.

i) Inspections and Audits

The ESI Corporation conducts inspections and audits to ensure compliance with the provisions of the Act.

You may also like to check out: What is ESI? Everything You Need to Know!

Penalties for Not Making Mandatory Contributions

Hiring employees from India entails contributing to the mandatory social security funds. Failing to not contribute to EPF, EPS, and ESI may land you in an adverse situation of penalties, lawsuits, and complex legal conflicts. Penalties are usually calculated as a percentage of the contribution amount that remains unpaid after the due date with additional interest. The Government of India may exact hefty fines ranging from 5% to 25% of the due amount.

In addition to monetary penalties, employers may also face legal consequences, such as imprisonment, prosecution or other legal actions, for non-compliance with these mandatory social security contributions. Therefore, it’s crucial for employers to adhere to the prescribed timelines for depositing these contributions to avoid financial penalties and legal complications. Employers should stay informed about the specific regulations governing EPF, ESI, and EPS in their respective jurisdictions to ensure compliance.

If all these unnerved you, keep all your further worries at bay. By using Employer of Record (EOR) India services, you can easily hire Indian employees without having to worry about the legal norms and penalties. It’s time to automate payroll compliances with EOR services and stay worry-free with Asanify.

What are the Top Sectors From Which You can Hire Employees in India?

Foreign companies often hire employees from various sectors in India, tapping into the country’s huge talent pool. Let’s see what are the top sectors promising mammoth employment potential:

1. Information Technology (IT)

India is a global IT outsourcing hub. Companies often hire Indian professionals for software development, IT support, and other tech-related roles.

2. Business Process Outsourcing (BPO)

India is a leading destination for BPO services, with companies outsourcing customer support, back-office operations, and other non-core functions.

3. Engineering and Manufacturing

India has a robust engineering workforce. International companies based out of US, UK, Australia, etc. hire engineers for diverse roles, including product development, quality assurance, and process improvement.

4. Finance and Accounting

Indian professionals in finance and accounting are sought after for their expertise in financial analysis, auditing, and accounting services.

5. Pharmaceuticals and Biotechnology

India has a thriving pharmaceutical and biotech sector. Multinational companies often recruit Indian scientists, researchers, and professionals in drug development and clinical research.

6. Telecommunications

With a rapidly growing telecommunications industry, India provides skilled professionals for roles in network management, technology deployment, and customer support.

7. Healthcare and Life Sciences

The healthcare sector in India offers a pool of skilled doctors, nurses, and healthcare administrators. US companies or any other foreign enterprises may hire Indian talent for healthcare IT, research, and development.

8. Consulting

Indian professionals are valued in the consulting industry for their analytical skills and problem-solving abilities. Management and strategy consultants are often recruited by foreign firms.

9. E-commerce and Retail

The booming e-commerce market in India has led to an increase in demand for professionals in areas like logistics, marketing, and supply chain management.

10. Education and Research

India has a strong academic and research community. Foreign universities, research institutions, and educational organizations hire Indian talent for teaching, research, and administrative roles.

11. Renewable Energy

With a growing emphasis on sustainability, India’s expertise in renewable energy has become attractive to international companies. Engineers and experts in solar, wind, and other renewable technologies are in demand.

12. Media and Entertainment

India has a vibrant media and entertainment industry. Global companies may hire Indian talent for content creation, animation, journalism, and digital media roles.

Challenges to Hire Employees in India

While hiring in India offers numerous advantages, there are also certain challenges that employers need to be aware of and address proactively. Cultural differences, language barriers, and retention strategies are key areas to focus on.

Cultural Differences

India is a culturally diverse country with a multitude of languages, traditions, and customs. Understanding and respecting these differences is crucial for fostering a harmonious work environment. Embrace diversity and create inclusive policies and practices that celebrate different perspectives and backgrounds.

India’s cultural diversity is a result of its rich history and the coexistence of various religions, such as Hinduism, Islam, Sikhism, Christianity, and Buddhism. Each religion brings its own set of customs and traditions, which can influence the way people interact and work. For example, in Hinduism, hierarchy and respect for authority are important, while in Sikhism, equality and community spirit are emphasized.

Moreover, India is known for its regional diversity, with each state having its own language, cuisine, and cultural practices. This regional diversity can sometimes lead to misunderstandings or miscommunication if not properly addressed. Employers should make an effort to familiarize themselves with the cultural nuances of the specific region they are hiring from.

Language Barriers

Language diversity can pose challenges in communication and collaboration. English is widely spoken and serves as the common language for business in India. However, it is important to be mindful of potential language barriers and provide additional resources or language training to facilitate effective communication.

India is a multilingual country with over 1,600 languages spoken across its various regions. While English is commonly used in professional settings, it may not be the first language for many employees. This can sometimes lead to misunderstandings or difficulties in conveying complex ideas. Employers can overcome this challenge by providing language training programs or hiring interpreters to ensure effective communication between team members.

Additionally, employers should be aware of the different dialects and accents that exist within the English language in India. Accents can vary significantly from region to region, and it is important to have an open mindset and be patient when communicating with individuals whose accents may be different from your own.

Retention Strategies

Retention of top talent is a common concern for employers in India. Developing a robust employee engagement strategy and offering competitive compensation and benefits packages can help attract and retain skilled professionals. Implementing performance-based incentives, providing growth opportunities, and fostering a positive work culture can also contribute to employee satisfaction and loyalty.

India’s rapidly growing economy has created a highly competitive job market, making it essential for employers to go the extra mile to retain their top talent. Offering attractive compensation packages that align with industry standards and providing benefits such as health insurance, retirement plans, and flexible work arrangements can make a significant difference in attracting and retaining skilled professionals.

Employee engagement is another crucial aspect of retention. Creating a work environment that encourages open communication, collaboration, and innovation can help employees feel valued and motivated. Providing growth opportunities through training and development programs, mentorship initiatives, and clear career progression paths can also contribute to employee satisfaction and loyalty.

Furthermore, fostering a positive work culture that promotes work-life balance, recognizes and rewards achievements, and encourages a sense of belonging can go a long way in retaining employees. Regular team-building activities, employee recognition programs, and a supportive management style can create a work environment where employees feel motivated and invested in the success of the organization.

Recommended Read: How to Design an Hiring Policy for Small Businesses? 

How to Protect Company Intellectual Property (IP) in India?

If you are wondering as to how you can protect the ingenuity of ideas concerning the operation of core functions of your company, here’s your answer. Since you will be hiring employees from India, you can’t help but permit your employees access sensitive company information. No wonder that you are actually putting your company in a vulnerable position that way!

The best thing is that, in India, there is a set of laws offering protection to Intellectual Property. The seven kinds of IP rights that India recognizes, include:

• Patents;
• Copyrights for literary, artistic and creative works;
• Geographical Indication or GI tags of goods;
• Trademarks;
• Industrial designs;
• Plant diversities;
• Semiconductor integrated circuits

If you want to protect company intellectual property (IP) while hiring employees in India, you can take the following measures:

1. Non-Disclosure Agreements (NDAs)

Require employees to sign NDAs to ensure they understand the confidential nature of the company’s information and agree not to disclose it.

2. Employment Contracts

Clearly define intellectual property ownership in employment contracts. Specify that any work-related inventions, designs, or developments belong to the company.

3. Non-Compete and Non-Solicitation Clauses

Include clauses that restrict employees from working for competitors or soliciting clients or colleagues for a certain period after leaving the company.

4. Training Programs

Conduct regular training sessions to educate employees on the importance of IP protection and the specific measures in place within the company.

5. Access Controls

Limit access to sensitive information only to employees who need it for their job responsibilities. Implement strong access controls and monitor data access.

6. Security Policies

Establish comprehensive security policies, including password protection, data encryption, and secure communication practices, to prevent unauthorized access.

7. Regular Audits

Conduct periodic audits to ensure compliance with IP protection measures and identify any potential vulnerabilities or breaches.

8. Remote Work Policies

If employees work remotely, establish secure protocols for accessing company data and devices, including the use of virtual private networks (VPNs) and secure communication tools.

9. Exit Interviews

Conduct thorough exit interviews to remind departing employees of their ongoing obligations regarding confidentiality and IP protection.

10. Local Legal Advice

Seek advice from local legal experts to ensure that the company’s IP protection measures align with Indian laws and regulations.

By combining legal safeguards with technological and procedural measures, you can create a robust framework for protecting company intellectual property when hiring employees in India.

Case Study: Successful Strategies to Hire Employees in India

Let’s take a look at a few case studies that highlight successful hiring strategies in India. These examples provide valuable insights into hiring practices across different industries.

Tech Industry

In the tech industry, companies often leverage India’s strong engineering talent pool to build cutting-edge software solutions. Tech giants like Google and Microsoft have set up research and development centers in India, tapping into local expertise and nurturing talent through training programs and internships.

These companies understand the importance of investing in the future workforce. They not only hire experienced professionals but also provide opportunities for fresh graduates to learn and grow. By offering internships and training programs, they bridge the gap between academic knowledge and practical skills, ensuring a steady supply of skilled professionals in the industry.

Manufacturing Industry

The manufacturing industry in India has witnessed significant growth in recent years, attracting several multinational companies. One successful hiring strategy in this sector is partnering with local vocational training institutions and providing apprenticeship programs. This approach combines classroom learning with on-the-job training, equipping individuals with industry-specific skills.

Moreover, these companies also focus on fostering a culture of innovation and continuous improvement. They encourage employees to participate in skill development programs and provide them with opportunities to enhance their technical expertise. This not only ensures a skilled workforce but also boosts employee morale and engagement.

Service Industry

The service industry relies heavily on customer-centric skills and competencies. Many companies in this sector focus on hiring candidates with strong communication and interpersonal skills. Call centers and customer service centers in India often provide extensive training to their employees to ensure they meet the specific needs of their clients.

These companies understand the importance of delivering exceptional customer experiences. They invest in training programs that focus on enhancing communication skills, problem-solving abilities, and product knowledge. By equipping their employees with the necessary skills, they ensure that their customers receive the highest level of service.

Furthermore, companies in the service industry also prioritize employee well-being and work-life balance. They understand that a happy and satisfied workforce leads to better customer experiences. Therefore, they offer employee benefits and create a supportive work environment that fosters growth and development.

Also Read: Salary Structure in India- The Ultimate Expert Guide 

Process of Terminating an Employee in India

Since you are contemplating upon hiring employees in India, it is crucial for you to stay aware of the termination process as well. Terminating an employee in India involves several steps to ensure legal compliance and fair treatment. The process typically includes:

1. Review Employment Contract

The first step to employee termination process involves examining the employment contract to understand notice period, termination clauses, and any specific conditions.

2. Provide Notice or Pay in Lieu

Serve the required notice period as per the contract, or provide payment in lieu of notice if applicable.

3. Grounds for Termination

Clearly establish valid reasons for termination, such as poor performance, misconduct, redundancy, or a breach of company policies.

4. Hold a Disciplinary Meeting

Conduct a meeting to discuss the reasons for termination with the employee, allowing them an opportunity to respond.

5. Document Everything

Maintain detailed records of the entire termination process, including performance evaluations, warnings, and the termination meeting.

6. Termination Letter

Issue a formal termination letter specifying the reasons, effective date, and any post-termination benefits or obligations.

7. Clear Dues and Benefits

Settle any outstanding dues, such as salary, unused leave, and other entitlements. Provide details about benefits like gratuity and provident fund.

8. Exit Interview

Conduct an exit interview to gather feedback and insights that may help improve the workplace or identify areas of concern.

9. Offer Support Services

If feasible, provide outplacement support or counseling services to help the employee transition to a new job.

Recommended Read: Full and Final Settlement- See How to Run Termination Payroll

Conclusion: Hire Employees in India

The world of hiring is constantly evolving, and successfully hiring employees in India requires a deep understanding of the job market, legal aspects, and recruitment process. As the world becomes more interconnected, employers need to adapt to changing trends, embrace simplicity, and remain agile in their hiring strategies.

The easiest way to hire employees in India is by using Asanify EOR services.  Keep all your worries at bay and save your time while Asanify EOR will take care of all your tasks related to hiring workers in India. Click here to take the first step towards streamlining all the HR processes involved in recruiting your remote team in India.

To hire employees in India is to tap into a diverse range of talents and explore a rapidly growing market. By understanding the unique dynamics of the Indian job market, respecting cultural differences, and implementing effective recruitment strategies, you can build successful teams in India and contribute to their overall growth and success.

Frequently Asked Questions: Hire Employees in India

Q1: What is EOR (Employer of Record) and how does it work for hiring employees in India as a foreign company?

A: Employer of Record (EOR) is a service that allows foreign companies to hire employees in India without establishing a legal entity. The EOR takes on the role of the official employer, handling payroll, benefits, and compliance.

Q2: What are the key benefits of using EOR for hiring in India?

A: EOR streamlines the hiring process, ensures compliance with local laws, and minimizes administrative burdens. It also provides flexibility, allowing companies to scale their workforce without the complexities of establishing a legal presence.

Q3: What legal and compliance aspects should foreign companies be aware of when hiring through EOR in India?

A: Compliance with Indian labor laws is crucial. EOR providers navigate legal requirements, covering everything from tax withholding to employment contracts, ensuring companies meet local obligations.

Q4: How does payroll and taxation work when hiring employees through EOR in India?

A: The EOR manages payroll, withholding taxes, and statutory contributions on behalf of the foreign company. This includes income tax, provident fund, and other applicable taxes, ensuring adherence to Indian tax regulations.

Q5: Can EOR be used to hire employees on a temporary basis in India?

A: Yes, EOR is particularly beneficial for short-term or project-based hires. It offers the flexibility to engage employees for specific durations without the long-term commitment or legal complexities.

Q6: Are there limitations on the types of employees that can be hired through EOR in India?

A: EOR is versatile and can be used for various roles, including full-time, part-time, and contract positions. However, certain specialized roles or industries may have specific regulatory considerations.

Q7: How does employee benefits administration work with EOR in India?

A: EOR providers typically handle employee benefits, ensuring compliance with local regulations. This may include health insurance, provident fund contributions, and other statutory benefits required by Indian law.

Q8: What steps should a foreign company take to initiate the EOR process for hiring in India?

A: Begin by selecting a reputable EOR provider with experience in India like Asanify. Provide necessary information about the hiring needs, and the EOR will guide through the onboarding process, handling legalities and paperwork.

Q9: Is it cost-effective to use EOR to hire employees in India compared to establishing a legal entity?

A: While costs vary, EOR is often more cost-effective than setting up a legal entity. It eliminates upfront investment, ongoing compliance costs, and allows companies to focus on their core business activities.

Q10: Can EOR be used to hire remote workers in India?

A10: Yes, EOR is well-suited for hiring remote employees in India. It provides a compliant and efficient solution for engaging remote talent without the need for a physical presence in the country.

Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant  or Labour Law  expert for specific guidance.