10 Notable Points When Hiring in India

15/08/2023 05:12 AM

Image Source: http://surl.li/jqitq

India is a country known for its rich cultural heritage, diverse workforce, and thriving business opportunities. With its rapid economic growth, India presents abundant opportunities for employers and businesses. However, navigating the Indian hiring landscape and understanding its complex employment regulations can be difficult.

In this blog, we have carefully curated ten crucial points that will empower you to make informed decisions and embark on a successful hiring journey in India.

Here are the 10 key points that will help to ensure a successful hiring process in India:

1. Compliance with Employer Cost You Must Follow

When hiring remote employees in India, it is important to consider the employer's cost, which is typically estimated at 5% of the employee's salary or INR 1950. Employees in India have the flexibility to choose their Provident Fund contribution, which must be matched by the employer.

Employee's Provident Fund - 4.8% of the employee's monthly gross salary or a fixed amount of INR 1800.
Provident Fund Administrative Charges - 0.2% of the employee's monthly gross salary or a fixed amount of INR 75.
Employees Deposit Linked Insurance - INR 75.

2. Vital Inclusions for Contracts

Contracts in India should be in written form and can be either in English or bilingual. It is essential that both parties sign the contract. A valid contract must include the following elements:

Name
Job role and job description
Leaves
Employee obligation
Termination conditions

3. Essential Documents for Onboarding in India

Passport / ID
Identity and address proof
PAN Card
ID photograph
Social Security Contributions
Proof of educational qualifications
Indian Aadhar Card
Recently Salary Statement
Investment declaration

The onboarding process typically spans three business days, and it is necessary to complete all required documents one day prior to the employee's start date.

4. Mandatory Benefits for Employees in India

In India, both on-site and remote employees are entitled to receive mandatory benefits, which encompass:

Employees’ Provident Fund
Employees’ Pension Scheme

5. Compulsory Paid Time Off & Public Holidays

Paid Time Off (PTO) is determined and specified in the employment agreements, with the minimum PTO requirement set at 18 days.

In India, there are more than 25 national holidays celebrated. However, the specific holidays observed may vary based on the employee's location and their religious beliefs. The national holidays typically include:

New Year’s Day	Diwali
Makar Sankranti	Christmas
Maha Shivratri	Lohri
Ugadi	Republic Day
Mahavir Jayanti	Holi
Eid al-Fitr	Ram Navami
Bakri Eid	Good Friday
Rakshabandhan	Buddha Purnima
Janmashtami	Muharram
Onam	Ganesh Chaturthi
Dussehra	Gandhi Jayanti
Eid-e-Milad	Guru Nanak Jayanti

6. Minimum Wage Requirements

For organizations in the private sector outside of regulated "factory" sectors, there is no statutory minimum wage. However, within the factory sectors, India adopts a complex methodology to establish minimum wages, which are set at the state and sub-state levels and subject to regular updates. India classifies nearly 2,000 different types of jobs for unskilled workers and over 400 categories of employment, each assigned a minimum daily wage. The calculation of monthly minimum wages incorporates a variable dearness allowance (VDA) component, which takes into account inflationary trends.

7. Overtime Pay & Rules

Employees in the private sector outside of factory roles do not have specific statutory requirements to adhere to. However, for factory workers, it is mandatory to provide overtime payment. In the case of additional hours worked, the common industry practice is to compensate employees with prorated Paid Time Off (PTO) or additional pay equivalent to 100% of their regular salary.

Standard working hours are set at eight hours per day and 40 hours per week. The standard workweek typically spans from Monday to Friday.

8. Individual Income Tax

In India, individual income tax is subject to progressive rates ranging from 5% to 30%. There are two income tax regimes: the New Personal Tax Regime (NPTR) and the old regime. Taxpayers have the flexibility to select either one of the regimes based on their preference. The following table illustrates the income tax rates under the New Personal Tax Regime (NPTR) effective from 1st April 2020:

Up to 250,000 - Exempt
Between 250,000 to 500,000 - 5%
Between 500,001 to 750,000 - 10%
Between 750,001 to 1,000,000 - 15%
Between 1,000,000 to 1,250,000 - 20%
Between 1,250,001 to 1,500,000 - 25%
Above 1,500,000 - 30%

9. Leave Policies in India

Maternity Leave

In India, pregnant employees who have worked with the same employer for at least 160 days in the preceding year are entitled to 26 weeks of paid maternity leave. Out of this period, eight weeks must be taken before the childbirth. With the maternity leave policy in India, the employee will receive 100% of their average salary, and the employer will be responsible for providing the payment. Furthermore, the employee has the option to extend their leave without pay if needed.

Sick Leave

Employees in India have the entitlement to receive up to 12 days of paid sick leave. Sick leave accrues at a rate of one day per month. During sick leave, the employee receives 100% of their average salary, and the responsibility for this payment lies with the employer.

10. Procedures for Terminating Employees

Terminations in India can be carried out based on the "at-will" principle, meaning without cause, subject to adherence to the necessary notice period and severance requirements as specified in the employment agreement. Compliant terminations may include:

Voluntarily by the employee
By mutual agreement
Unilaterally by the employer based on:
- Probation period
- Breach of duties and responsibilities
- Gross default and misconduct contravening the terms and conditions of the agreement
By the expiration of the contract

Notice Period

In India, the minimum notice period for ordinary dismissal is typically one month, although this duration may vary depending on the specific state regulations.

Severance

In cases of termination due to redundancy, employees in India are entitled to receive severance pay equivalent to 15 days' average pay for each year of continuous service or part thereof exceeding 6 months.
When employees are dismissed, employers are required to provide termination benefits, which include payment for accrued leave, gratuity (applicable for employees with more than 5 years of continuous service), payment in lieu of notice (if no notice is given), statutory bonus payment, and any other outstanding amounts specified in the employment contract.