An employer of record in India acts as a legal employer for your company in India, taking care of all the employment-related tasks without companies needing to set up a local subsidiary. This allows companies to hire Indian employees quickly and compliantly.

By partnering with an EOR, companies can access India’s vast talent pool while mitigating the complexities and risks associated with local compliance and employment laws. 

The EOR plays the role of an official employer, managing crucial tasks such as payroll management, tax compliance, benefits administration, and HR-related obligations. Employer of record (EOR) ensure adherence to local regulations, generate employment contracts, manage employee onboarding, and provide solid support for hassle-free operations. 

Additionally, employer of record in India offer expertise in navigating cultural nuances, managing payroll taxes, and providing localized support to companies and their workforce. This enables businesses to focus on their core operations and expansion-related activities while leaving administrative and legal responsibilities to the EOR.

India boasts a highly skilled workforce across various industries, offering a competitive advantage with its talent pool and costs. However, hiring directly in India can be complex, with legal hurdles and the need to establish a local entity.

An EOR (Employer of Record) simplifies this process. Here's how:

• Faster Hiring: Onboard Indian employees quickly without setting up a local company.
• Reduced Risk: Avoid challenges and potential penalties associated with employment contracts, tax compliance, and payroll.

Real-World Example: Even experienced companies like Byju's (an ed-tech leader) faced hefty fines for delayed employee benefit payments due to complex regulations.

Compliance Made Easy: EORs ensure adherence to India's intricate employment laws, minimizing risks and penalties. They handle everything from payroll and taxes to benefits administration.

Focus on Your Business: By partnering with an employer of record, you can concentrate on core business activities while leaving the complexities of Indian employment law to the experts.

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How to hire using an EOR in India

An Employer of Record (EOR) simplifies hiring in India by acting as the legal employer for your Indian employees. Here's a step-by-step guide to get you started.

1. Choose an EOR

Research: Identify EORs with strong reputations and services matching your needs. Evaluate: Ensure they have expertise in your target locations and offer robust support. Select: Choose an EOR based on their ability to meet your business requirements. 

2. Clarify Services and Negotiate Terms 

Discuss Services: Understand the full range of services offered by the EOR. Negotiate Terms: Agree on fees, contract details, and services included. 

Finalize Agreement: Confirm all parties understand their roles and responsibilities. 

3. Employee Onboarding and Documentation 

Onboarding Process: Coordinate with the employer of record for a smooth employee onboarding. 

Documentation Compliance: Ensure all contracts and documents comply with local laws. Provide Company Info: Share essential company policies and culture information with new hires. 

4. Maintain Communication and Evaluate Services 

Regular Check-ins: Set up ongoing meetings to discuss updates or issues. Feedback: Offer constructive feedback on the EOR's services. 

Evaluate and Adapt: Regularly assess the EOR's performance and the partnership's impact on your global strategy.

Hiring talent in India through an EOR offers a streamlined approach, but it's important to understand the associated costs. While EOR fees typically range from $200 to $500 USD per employee monthly, the actual cost can vary depending on your specific needs. Here's a breakdown of the key factors influencing employer of record costs in India:

1. EOR Setup Fees:

• EOR providers often charge a one-time setup fee to cover onboarding expenses for each new employee. This may include:some text
  • Contract costs
  • Initial onboarding time
  • Establishing your payroll profile

2. Refundable Security Deposit:

• To ensure compliance, EORs might require a refundable security deposit per employee. This deposit, typically equivalent to the employee's notice period pay, is held during employment and returned upon termination after all dues are settled.

3. Employee Salary and Employer Costs:

• You'll be responsible for the employee's salary and mandatory employer contributions in India. These contributions cover social security, unemployment insurance, and retirement funds. Gloroots, for example, offers a one-click payroll solution to ensure timely payments for your distributed Indian workforce. The EOR calculates your employer liability based on local regulations and sends invoices for the total amount, including salary and contributions. They then handle payments to employees and relevant authorities.

4. Supplementary Employee Benefits:

• While some employee benefits are mandatory in India, you might offer additional perks like meal vouchers or software subscriptions to attract and retain talent.

5. EOR Service Fee:

• EORs charge a service fee on top of the setup fee. This fee can be structured differently depending on the provider. Some EORs might charge a monthly per-employee fee, while others may have a flat fee or base it on the employee's salary. Discuss this with your chosen EOR and understand all factors that determine the final cost.

6. Currency Exchange Fees:

• EORs can help manage currency fluctuations and ensure your Indian employees receive their salaries in full. However, there might be associated currency exchange fees to consider.

Key Metrics For Foreign Employers 

India has one of the most largest skilled workforces. Since the 1990s, India has always been eyed by foreign employers as one of the most lucrative, affordable countries to hire tech and business talent.  According to Linkedin’s State of Hiring Report, India is the only country to have a talent surplus by 2030.

The table below depicts key indicators from the Global Talent Competitiveness Report for employers wishing to hire from India.

Source: The Global Talent Competitiveness Index 2023

Through the Gloroots’ Recrew platform, you can discover amazing talent in India.

The issue of "employee misclassification" occurs when employers inaccurately classify workers, often labeling them as independent contractors to avoid providing employment rights and benefits typically granted to permanent employees despite the workers performing duties similar to those of permanent employees.

By partnering with an Employer of Record (EOR) in India, you can ensure accurate worker classification and the preparation of proper employment agreements. These experienced professionals are well-versed in local labor laws and can provide guidance to ensure compliance. They handle precise payroll processing, accurate classification of employees, and comprehensive benefits administration, allowing you to focus on your core business activities while entrusting employment-related obligations to seasoned experts. With their support, you can mitigate the risks associated with employee misclassification and ensure a fair and compliant workforce.

Payroll in India

Payroll cycles in India

Monthly payroll cycles are the most commonly used in India, wherein employees are paid their salary once every month.

Minimum Wage in India

The minimum wage in India is determined by individual state governments and varies based on different job categories and types of employment. The process of setting minimum wages involves defining numerous job roles for unskilled workers and over 400 employment categories, each with its own minimum daily wage. 

Bonus Payments in India

The minimum bonus payable is 8.33%, and the maximum is 20%. Bonus is payable annually within 8 months from the close of the accounting year. Bonus is payable to all employees whose salary or wages do not exceed Rs. 21,000 per month

How an EOR helps you run payroll in India

An Employer of Record (EOR) in India acts as your legal employer for your Indian team, taking the burden of payroll compliance off your shoulders. Here's how an EOR simplifies your India payroll management:

Compliance Expertise:  Our EOR team has in-depth knowledge of Indian payroll regulations. We handle all tax calculations and deductions (TDS), ensuring your employees receive accurate paychecks. We also contribute to social security programs like EPF, EPS, and ESI (if applicable) to keep you compliant with local laws.

Reduced Administrative Burden:   Forget the complexities of managing payroll in-house. An EOR handles the entire process, from tax calculations to timely payments. This frees you and your team to focus on core business activities like growing your presence in India.

Faster Onboarding:  With an EOR, your Indian team members can be onboarded quickly. You can build your team in India sooner without establishing a separate legal entity.

Cost-Effectiveness:  While EOR services come with a fee, it can be more cost-efficient than setting up your own payroll infrastructure in India. You avoid upfront costs and the need for dedicated payroll staff.

Peace of Mind: By partnering with an EOR, you can rest assured that your India payroll is handled by experts. This minimizes the risk of penalties for non-compliance with Indian labor laws.

India’s employment laws are informed by its four new labour codes are the Code on Wages 2019, the Code on Social Security 2020, the Occupational Safety, Health and Working Conditions Code 2020 and the Industrial Relations Code 2020.  

Partner with an Indian EOR like Gloroots to help you compliantly hire employees amid these complex local labor laws.‍

Employment Contract

In India, written employment agreements are not mandatory in all states, but it is highly advisable to have a comprehensive employment contract in place due to the intricate nature of statutory and local labor laws. The employment contract should include detailed provisions regarding payment, and it is mandatory to specify salaries in Indian Rupees.

Indian law permits the use of fixed-term employment contracts when there is a specific short-term need for the employee's services. It is important to note that consecutive short-term contracts cannot be used in hiring employees. Unless explicitly specified, employment agreements in India are generally considered to be of a permanent nature.

The contract must include:

• Names of the parties involved
• Job description
• Non-competition agreement
• Non-disclosure agreement
• Period of employment
• Notice period
• Leaves
• Benefits
• Compensation
• Specific terms for termination of employment‍

This might sound overwhelming, but it doesn't have to be. Gloroots eliminates these barriers for you. With Gloroots' Employer of Record offering, hiring and managing employees globally is a piece of cake.

Working Hour 

Any work performed beyond the regular 48 hours per week in India is considered overtime and is subject to specific regulations outlined in employment contracts. Overtime pay is typically calculated at a rate of 200% of the regular pay rate. This ensures that employees are compensated fairly for the additional hours they work beyond the standard working hours.

Overtime

Overtime work in India, exceeding the standard 48 hours per week, is compensated as per employment contracts. Typically, the overtime pay rate is calculated at 200% of the regular pay rate. This ensures that employees are appropriately remunerated for the additional hours they work beyond the normal working hours.

Annual leave

Indian employees have a minimum entitlement of 15 days of paid annual leave, as mandated by labor laws. Factory workers, governed by the national Factories Act, typically receive 19 paid vacation days per year. If employees are unable to utilize their full leave entitlement within the current year, they are permitted to carry forward up to 30 days of unused leave to the following year.

In addition to annual leave, there are three national holidays observed across the entire country. Moreover, India celebrates a significant number of regional festival holidays. Since public holidays vary from state to state, Indian legislation stipulates that employers must provide their employees with a minimum of ten paid public holidays each year.

Sick Leave

Employees who have completed a continuous period of at least 3 months of employment are entitled to 15 days of paid sick leave per year. To avail this benefit, employees must furnish a medical certificate within 48 hours of the first day of sickness.

During sick leave, employees receive payment equivalent to 70% of their regular daily salary rate. It is important to note that for private sector employees, the responsibility of paying sick leave lies with the employer and cannot be reimbursed by the government. In the case of factory employees, they do not have a separate category of sick leave, and they utilize their annual leave for any sick or casual leave.

There are no specific provisions in place for paid sick leave in situations where employees require long-term sick leave or sustain injuries during the course of their employment.

Any unpaid time off provided to employees is entirely at the discretion of the employer and is not mandated by law.

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INCOME TAX

Below is a tabular version of the latest income tax slabs applicable for individuals and HUF:

Other Taxes and Social Security contribution

Employer contribution

Termination Process

In India, the termination process follows a standard procedure that includes providing notice periods, except in cases where an employer can justify immediate dismissal without notice due to reasons such as misconduct, disobedience, lack of skill, neglect of duties, or unauthorized absence.

It is important to note that pregnant employees or those on maternity leave are protected from termination.

Notice Period

Employers are generally required to give a one-month notice.

Severance Pay

In the event of redundancy, employers in India are required to provide retrenchment compensation to affected employees. This compensation is calculated at a rate of 15 days' average pay for each completed year of continuous service or part thereof exceeding 6 months.

The provisions related to retrenchment in the Industrial Relations Code align with those stated in the Industrial Disputes Act. However, the compensation calculation for retrenchment is based on 15 days' average pay or the average pay for a specified number of days as notified by the appropriate government, for each completed year of continuous service or any part thereof exceeding 6 months.

Furthermore, the Industrial Relations Code mandates that employers contribute an amount equivalent to 15 days' wages or the amount specified by the government, per retrenched worker, to a "worker re-skilling fund."

Additionally, employers must provide certain termination benefits to employees who are dismissed, including encashment of accrued leave, gratuity payment for employees with 5 years or more of continuous service (regardless of whether they are classified as workmen or not), payment in lieu of notice (if no notice is given), statutory bonus payment, and any other outstanding amounts as per the employment contract.

Employees terminated due to misconduct are not entitled to receive notice pay or retrenchment compensation.

Probation Periods

In India, probation periods vary depending on the employee's role and seniority, typically ranging from 3 to 6 months.

Expanding your business to India unlocks a massive talent pool, but navigating the complex legal and administrative landscape can be a nightmare. Gloroots cuts through the red tape and lets you focus on building a thriving Indian team.

Here's how Gloroots streamlines your India expansion:

• Effortless Onboarding: Skip the hassle of setting up a legal entity. Gloroots acts as your Employer of Record (EOR), handling all the paperwork and ensuring compliance with Indian employment laws.
• Seamless Payroll: No more worrying about taxes and social security contributions (EPF, EPS, ESI). Gloroots automates payroll processing and ensures your Indian employees are paid accurately and on time.
• Benefits Made Easy: Gloroots simplifies benefits administration, giving you the flexibility to offer competitive packages without the administrative burden.
• Focus on Your Team: With Gloroots handling the complexities, you can focus on building a strong company culture, attracting top talent, and driving business growth in India.

Gloroots goes beyond EOR. Our Recrew platform helps you find exceptional talent in India, matching you with highly skilled professionals who are a perfect fit for your company.

Stop letting compliance slow you down. Let Gloroots be your trusted partner in conquering the Indian market.

Ready to build your dream team in India? Get a free consultation with Gloroots today!