Worried about expanding or setting up your team in India? Asanify's EOR helps you get started within 1 Day with our fully automated HRMS and 100% compliant Payroll Solution.
Asanify's Employer of Record is the complete payroll outsourcing solution for your team in India. We take care of your Payroll and all Statutory Compliances so that you can focus purely on your business growth.
Consolidated payouts for all your employees. Transfer money in your local currency with the best-in-class FX Rates
Accurate, complete, and timely filing for all Statutory Compliances to ensure a zero-hassle experience for your employees
HRMS to track Attendance, Time-Offs, Expenses, Goals and Performance Management to maximise team productivity
Importance of Payroll Compliances in India
The labor laws in India are well established, and they clearly define the state and central statutes that companies must comply with. In order to conform with these statutory compliances, companies must stay updated and adhere to these labor regulations. This includes but is not limited to paying minimum wages, rendering maternity benefits, and provident funds to the employees.
Some of these Payroll Regulations are:
1. Payment of Wages Act, 1936
The legislation ensures that employees in various establishments receive their wages in a timely manner and in accordance with the law. According to this Act, it is the employer's responsibility to ensure the prompt payment of wages, with a minimum frequency of once a month. The employer has the flexibility to choose the payment frequency, whether it be daily, weekly, or monthly, based on their convenience. Payments can be made in cash or by check, and with the consent of the employees, bank transfers can also be utilized. Both the Central Government and the State Government determine and enforce minimum wage rates, which may vary depending on the employment sector and employee categories.
2. Minimum Wages Act, 1948
The central objective of this Act is to prevent labor exploitation by setting a minimum wage standard. However, it is worth noting that the minimum wage can vary across states and sectors, as the provincial government has the power to intervene in this matter. As defined by the Act, the minimum wage is the amount required to maintain a decent standard of living in a particular state. It considers factors such as employment types, schedules, and can be calculated on a daily or hourly basis.
3. Payment of Bonus Act, 1965
The practice of providing bonuses in India originated during the First World War when workers in specific textile mills received a war bonus equal to 10% of their wages. This tradition continued, and later, annual bonuses became customary in factories and organizations with more than 20 employees. The Payment of Bonus Act of 1965 governs the calculation of bonuses, which is based on the employee's remuneration and the company's profit. Employees who have worked for a minimum of 30 days are eligible to receive bonuses from their employers.
4. Maternity Benefits Act, 1961
The Act's main goal is to guarantee the welfare and security of female employees by granting them fully paid leave during pregnancy and child care. It requires organizations with more than ten employees to provide maternity benefits. To qualify for these benefits, an employee must have worked in the establishment for at least 80 days within the last 12 months. The Act applies to a wide range of sectors, including factories, mines, plantations, and other shops and establishments determined by the Central Government.
5. Employee State Insurance (ESI) Act, 1948
The Act aims to provide employees with a safety net to address unforeseen circumstances such as medical emergencies, maternity leave, or workplace accidents. Both employers and employees contribute to the employee's insurance account, with employers contributing 3.25% and employees contributing 0.75% of their wages. Non-seasonal factories employing more than ten individuals are obligated to implement the Employee State Insurance (ESI) scheme for employees earning less than ₹21,000 per paycheck. To comply with the ESI Registration Act, the employee's Cost to Company (CTC) should be revised to include the ESIC employer and employee contributions.
6. Employees Provident Fund (EPF) Act, 1952
The Act incorporates provisions for the social welfare of employees, particularly emphasizing financial security. It mandates that both employees and employers contribute 12% of the employee's basic pay and dearness allowance (DA) towards the Employee Provident Fund (EPF). These contributions to the EPF qualify for exemption under Section 80C of the Indian Income Tax Act. Compliance with the Act is compulsory for establishments with 20 or more employees, ensuring the well-being of the workforce.
7. Labour Welfare Act
The Act applies to employees in industries with specific operational conditions. It sets guidelines to improve working conditions and aims to provide social security and uplift the standard of living for workers. Individual state authorities govern the statutory conditions, leading to variations in contribution amounts and frequencies among different states.
8. Payment of Gratuity Act, 1972
Gratuity is mandatory in establishments employing ten or more individuals, such as NGOs, hospitals, and educational institutions. It is a predetermined component of an employee's salary and must be included in the Cost to Company (CTC).
9. Tax Deducted at Source (TDS)
As per the Income Tax Act, TDS deduction is an indirect tax collection. Employers deduct tax before paying the employee's salary. TDS applies to employees in the Income Tax Slab. Outsourcing compliance management to legal experts can help businesses stay compliant. Asanify offers legal support to ensure compliance with statutory provisions. A legal advisor can handle the extensive list of legislations, ensuring the business's safety.
What our Customers have to say about us...
Managing state and central compliances in India can be a nightmare. With Asanify, we literally got started in 1 Day with all our employees onboarded. Payroll execution for us is now a 5-minute job every month. Our employees are delighted to have the security of state compliances and payslips to show for their income.
United Healthcare Staffing, US
Asanify's hands-on support in the EOR service is commendable. Their teams are available round-the-clock and this ensures that my employees are never stuck with any aspect of their Payroll / Taxes. The HRMS platform offered by Asanify makes it very easy to for us manage employees remotely.
Frequently Asked Questions about hiring through EOR in India
1. How much does an EOR cost? EORs commonly have one of two pricing models:
- Fixed monthly fee per employee: Charged for each employee engaged through the EOR.
- Percentage of payroll inclusive of all applicable taxes
It is important to note that additional costs such as administrative fees, onboarding charges, and supplementary feature expenses may be associated with both pricing methods. Furthermore, it is not mandatory to use an EOR for your entire workforce. If you choose to segment its usage, you will only be billed for the employees you engage through the EOR.
2. What is the difference between an EOR and PEO?
A Professional Employer Organization (PEO) enters into a co-employment arrangement with a company, assuming administrative responsibilities such as employee payment, compliance management, and payroll tax filing. Both the company and the PEO share responsibility for the workforce. However, a PEO does not provide the capability to hire employees in countries where the company does not have a local entity established.
In contrast, an Employer of Record (EOR) acts as the exclusive employer for the specific portion of a company's workforce that is engaged through their services, assuming all associated liabilities. An EOR enables companies to work with employees in other countries without the need to establish a legal entity in each location.
3. Does an EOR protect your sensitive and confidential information?
By entrusting your payroll management to an Employer of Record (EOR), you can save time and reduce compliance risks. However, it is important to consider the potential data security risks associated with sharing your data with companies that utilize third-party vendors, as manual data uploads can increase the vulnerability to data breaches.
To mitigate risks, it is advisable to select EORs that prioritize data protection by implementing the following measures:
- Compliance with Privacy Regulations: Look for EORs that adhere to industry-standard privacy regulations in the countries where they operate. This ensures that your data is handled in accordance with legal requirements.
- Secure Infrastructure: Choose EORs that maintain a secure infrastructure with continuous maintenance and robust security measures in place. This helps safeguard your data from unauthorized access or breaches.
- Stringent Personnel Vetting: Opt for EORs that employ a thorough vetting process for their personnel. This ensures that individuals with access to your data are trustworthy and reliable.
Additionally, consider establishing a Data Processing Agreement (DPA) with the payroll service provider. A DPA outlines clear privacy practices and provides legal protection for your data, enhancing security and ensuring accountability.
By taking these precautions, you can enhance data protection and minimize the risks associated with outsourcing payroll management to an EOR.
4. Does an EOR help with Indian tax filings?
With an Employer of Record (EOR) handling your payroll management, tasks such as tax calculations and filing can be streamlined. In the context of India, authorized payroll providers like Asanify can assist in this process. They have the capability to automatically calculate and file taxes on behalf of your company.
As an authorized payroll provider recognized by the Income Tax Department, Asanify can efficiently distribute and submit forms that outline taxable income, TDS (Tax Deducted at Source) payments, and social security contributions. By leveraging their expertise and technology, Asanify simplifies the tax-related responsibilities of your company, ensuring compliance with relevant regulations and minimizing the administrative burden associated with tax filing in India.
5. What are the mandatory benefits for Indian employees?
The Ministry of Labour and Employment in India establishes the minimum working conditions that employers must provide to their employees. These mandatory employee benefits encompass various aspects, including:
- Retirement Payments through the EPF: Employers are required to contribute to the Employee Provident Fund (EPF) on behalf of their employees, ensuring financial security for retirement.
- Earned Leave: The policies regarding earned leave may vary among the 28 state governments in India. Employees are entitled to a certain number of days off for leave, which accumulate based on their length of service.
- Maternity Leave: Female employees are entitled to maternity leave, allowing them to take time off during and after pregnancy to ensure their well-being and that of their child.
- Disability Leave: Employees with disabilities may avail of disability leave, which allows them to take time off work to address their specific needs and health conditions.
- Public Holidays: Employees are entitled to designated public holidays, which may vary based on the specific state or region.
- Sick Leave: Employees are provided with sick leave, allowing them to take time off work to recover from illness or address medical conditions.
- Gratuity Payments: After completing five years of continuous service with an employer, employees are eligible to receive gratuity payments as a form of appreciation and financial support.
These mandated benefits aim to safeguard the welfare and rights of employees, promoting fair and equitable working conditions across various sectors in India.
6. What are the employer costs for full-time employees in India?
Typically, employers are responsible for deducting the following from the salaries of their full-time employees:
- Employees Pension Scheme
- Employee Provident Fund
- Employee State Insurance
India's social security system comprises the provident fund, pension scheme, and state insurance, which collectively provide coverage for retirement, health insurance, disability, and various other entitlements. Employees are required to contribute a portion of their salary towards these schemes, in addition to the costs borne by the employer.
It is important to note that if a company employs more than 10 individuals, it is mandatory to make contributions to the Employee State Insurance (ESI) scheme. This scheme ensures that employees have access to health insurance benefits. Both the employee and the employer contribute to the ESI scheme, with the contributions being a percentage of the employee's salary.
The social security system in India plays a vital role in safeguarding financial well-being and providing necessary support to employees in different stages of their lives. Compliance with the mandatory contributions ensures that employees can avail themselves of the benefits offered by these schemes.