Employment Law

India Regional Business

From our regional base in Uttar Pradesh, India's most populous state, we directly coordinate and manage all recruiting and recruiting in India.

We ensure that your team in India is managed in full compliance with national and state legal requirements.

Employment Contract in India

Although not a strict legal requirement, it is highly recommended to hire employees in India on the basis of a written employment contract. This clarifies the legal rights and responsibilities of employers and employees and reduces the likelihood of employment disputes.

If there is no written employment contract, there is also a risk that the courts will interpret the implied terms in the contract to favor the employee rather than the employer.

The employment contract should state the employee's base salary as well as any allowances, additional compensation and severance pay. The contract should also describe the responsibilities of all employees and how the contract can be terminated and renewed. All references to monetary values ​​shall be in Indian Rupees (INR).

Although not mandatory, it is common for Indian employees to expect salary increases of 10%-15% every year. Gradual salary increases should be clearly stipulated in the terms of the written employment contract.

Probationary periods are also common in India. Three months is the typical length, which is also the maximum initial trial period. However, employers can choose to extend this period by up to three months. During the probation period, the employee or employer is required to give 15 days' written notice of termination of employment.

When you adopt Remoly’s India PEO solutions, we ensure that all employment contracts comply with Indian labor laws.

Fixed Term

Indefinite

Working Hours in India

The standard working week in India is 40 hours and the average working time per day is 8 hours.

The maximum daily and weekly working hours stipulated in Indian labor laws depend on the relevant industry. For example, for employees working in factories, the Factories Act, 1948 provides that for hours worked in excess of 9 hours in a day or 48 hours in a week, double the ordinary wage is payable.

For workers working in mines, the Mining Act 1952 stipulates that workers should work more than 10 hours a day and 50 hours a week, including overtime.

India’s Tax and Contribution System

Employers in India are required to contribute to the Employees Provident Fund (EPF), a national pension fund that funds employee pension plans. Employers are also required to make contributions to the Employee Deposit Linked Insurance Scheme (life insurance scheme). Employers contribute 3.67% of employees' wages to the EPF. Employees contribute 12% of their salary to the fund. In addition, the employer also contributes 9.94% of other social insurance contributions. The rate is calculated from the employee's base salary, excluding all allowances. Income tax is applied to an employee's salary according to the following structure:

• Income up to INR 2,50,000 – excluding taxes
• Income above INR 2,50,000 to INR 5,00,000 – 5%
• Income above INR 5,00,000 to INR 7,50,000 – 10%
• Income above INR 7,50,000 to INR 10,00,000 – 15%
• Income above INR 10,00,000 to INR 12,50,000 – 20%
• Income above INR 12,50,000 to INR 15,00,000 – 25%
• Income above INR 15,00,000 – 30% Apart from employee income tax, other taxes that any business expanding into India needs to consider include:
• corporate income tax . Typically, the effectiveness is about 25%. Resident companies pay based on their worldwide income and non-resident companies pay based on their Indian income.
• Goods and Services Tax (GST) . This is a consumption tax levied on the supply of goods and services. Depending on the goods/services, the tax rates are 0%, 5%, 12%, 18% and 28% respectively.

Health Insurance

In India, health insurance is a mixture of public and private insurance. Some employees may require health insurance benefits as part of their compensation.

Holiday Policy

indian Holidays

Employees in India are entitled to a number of public holidays (also known as "statutory holidays", depending on the state). Three national public holidays apply across the country: These include Republic Day, Independence Day and Mahatma Gandhi Day. Others Pay holidays vary by state, local custom, industry/sector and religion, but generally range from 10-20 days per year. For example, central government employees are entitled to 17 public holidays in 2023 (14 specific statutory days, and Three can be selected from the list).

Take a Vacation

The minimum statutory paid leave in India is 18 days per year, plus 7 days of unpaid "personal leave" for a total of 25 days.

Sick Leave

Paid sick leave depends on the state, but there are usually around 10 days of paid sick leave per year. It is common for employers to provide unpaid leave for long-term medical issues, but this is not required by law.

There are also ten additional days of leave each year as "temporary" leave. This is an unpaid leave that employees can take at their discretion.

Maternity and Paternity Leave

Female employees in India are entitled to 26 weeks of maternity leave. Leave can be taken eight weeks before the due date and the remaining leave can be taken after delivery. Female employees are also entitled to a medical bonus of INR 3,500.

Please note that paid maternity leave is only available to women working in organizations with 10 or more employees. Please also note that for the second or subsequent employee, the mother is only entitled to 12 weeks of maternity leave.

If a woman is a factory-level employee, maternity leave is paid from government social funds. Otherwise, the employer is responsible for paying all maternity leave wages.

Although paternity leave is not mandatory in India, some employers may offer it as a benefit.

Employers of Record in India ensure that employees are entitled to all paid and unpaid leave provided by law.

India Labor Contract Negotiation

In India, many elements of the employment relationship are usually negotiated in advance between the potential employer and employee. As with all business negotiations, this means taking into account certain peculiarities of Indian business culture. First, Indian companies are often hierarchical. This may mean that negotiations may be more time-consuming than in other countries due to the need to obtain approval at multiple levels of the organization, particularly where no commercial relationship exists. Second, Indians themselves may be more inclined to communicate indirectly rather than directly as individuals from other countries. For example, they may be less willing to say "no." Instead, they may prefer to use terms like "maybe" or "maybe." In India, job titles are also very important to people. Culturally, higher job titles command greater respect: the importance placed on job titles should be taken into account when negotiating any domestic employment contract in India. In India, perks and benefits are crucial for potential employees looking to maximize their real income. These allowances and benefits are pre-tax and may account for 60% of the total compensation package. One way to think about it is that what might be considered "gross salary" in other countries is equivalent to "basic salary" in India. The total amount paid by a company for employee salaries, allowances and benefits is often referred to as "cost to company" (CTC) in India. In addition to these perks, some Indian employees may receive incentives and bonuses based on performance. These allowances are taxable. Many foreign companies prefer to provide a gross salary and let their PEO structure the compensation package in the most tax-effective way. This is because the various components of a compensation package are affected by whether they are subject to tax implications. In India, PEO and employer records ensure that all employees receive benefits that are compliant with regulations and competitive in the market.

Termination and Severance

In India, an employer is required to provide written notice before terminating an employment contract. 30 days is the typical notice period. However, the employer may choose to pay the employee wages in lieu of the notice period.

Employees are entitled to 15 days of pay for every year they work for the company. Unless they are terminated for:

• disciplinary action
• Persistent poor health
• Fixed-term employment contract expires or is not renewed
• retirement or pension

If an employee has worked continuously for five years or more, they may be entitled to a gratuity. This amount is equal to the employee's last salary received x 15/26 x number of years of service.

Working with our India PEO, Remoly's team of local experts can provide assistance in drafting strong employment contracts that comply with local regulations.

Salary and Benefits

Indian Compensation Law

In India, minimum wages vary from state to state and industry to industry. For example, agriculture has minimum wages set individually by state governments. Employers must provide pay stubs (sometimes called "pay stubs") to employees, and in most cases, payments are deposited into the employee's bank account. Employees in India usually receive their salary on the 1st of every month. The Wage Law stipulates that enterprises with less than 1,000 employees should manage wages before the 7th of each month. For enterprises with more than 1,000 employees, wages should be paid before the 10th of each month. Due to rising wages, many employees in India expect salary increases of 10% to 15% per year. Although India's emoluments laws do not mandate salary increases,

India's Welfare is Guaranteed

To maintain a successful benefits administration strategy, Indian employers should pay attention to benefits security. For example, health insurance in India is usually a combination of public and private insurance. While employees are entitled to public health benefits, they can also request private supplemental plans as part of their benefits.

Employees are entitled to paid leave, including 10 paid public holidays. Three of these days are mandated nationwide, while the remaining days vary by state, local customs and religion. The minimum statutory paid leave is 15 days.

Female employees in India are eligible for 26 weeks of maternity leave.

India PEO ensures that all employees in India receive the benefits provided by law.

Indian Welfare Administration

Businesses looking to expand into India need to budget for supplementary benefits. These benefits can influence an employee to accept a position and stay with the employer. Supplementary benefits in India include:

• special allowance
• medical allowance
• Telephone/cell phone allowance
• Concessional Leave Travel Allowance (LTA/LTC)
• House Rent Allowance (HRA)
• transportation allowance
• vehicle allowance

It is increasingly common for employees in certain industries in India, such as IT, to participate in employee stock option plans offered by their employers. An Indian PEO can also assist in the management of such plans.

Remoly's India PEO solutions include benefits management services that will provide your employees with the most competitive benefits.

Benefits and Compensation Limitations

For businesses expanding into India, highlighting variable perks and benefits when negotiating a total compensation package can be daunting. Employers are generally prohibited from hiring and paying employees without first establishing a subsidiary in India. Establishing such a subsidiary and ensuring recruitment complies with local perks and benefits rules can take months, causing significant business delays.

With Remoly's India PEO and Employer of Record solution, businesses can start operating in India in just 48 hours. Remoly is the legal employer of your workforce in India, which means you don’t need to set up a subsidiary in India to hire employees. As the only global PEO with an in-house recruiting team, we can help you find, hire and develop top local and international talent.