Recruitment Guide for the India
Purpose
This guide aims to ensure that the company goes through the correct recruitment process, ensuring that the company will understand all the things to consider when hiring in India. This guide will serve as a how-to guide for the recruitment procedure in India.Key Takeaways
- A complete explanation of the things to know before hiring in India
- The Cost of Hiring an Employee in India
- Working Hours in India
- Company requirements needed to hire employees in India
What to Know Before Hiring in India
India is the world’s second-most populous country, and as a developing market economy, it is an attractive location for many multinational enterprises wishing to expand or hire remote workers. If you’re considering employing a team or even just one individual, our guide to engaging employees in India will help you get started.
Before you begin hiring in a new country, you should learn the overall topography of the workforce as well as the employment regulations you must follow. Before recruiting in India, let’s look at some essential things you should be aware of.
1. India’s Workforce Skills
On a national scale, India’s workforce has been hampered by a lack of education and skills. This may be a hurdle for multinational companies seeking to hire Indian workers. However, due to India’s population of nearly 1.33 billion people, statistics cannot be approached like they would in a less populous country. This is also true of India’s educational levels.
Despite a fourfold rise in enrollment in higher education institutions (HEIs) since 2001, India’s gross enrollment ratio (GER) — the percentage of people aged 16 to 23 who are enrolled in tertiary education — remains only 26.3 percent. This proportion may appear depressing, as it falls short of the Ministry of Human Resource Development’s 2020 goal of 30%. However, when this percentage is multiplied by the Indian population in this age range, we find that around 48.8 million young adults in India are attending an HEI. To put this in context, this is more than the whole population of Spain.
In reality, you may locate many highly educated candidates to join your organization in India. Industrial production, technology, information technology (IT) and business services outsourcing, retail, financial services, healthcare, and tourism are some of India’s most prominent and rising industries. The agricultural sector was the largest employer in 2018, employing more than 42 percent of the Indian workforce. The services and manufacturing sectors were the second and third largest employers.
2. Changing Jobs
Another exciting aspect of India’s workforce is that many Indian employees, particularly younger ones, are highly comfortable moving jobs. According to one survey, 56 % of Indian workers have chosen to change employment after a short period. The most prevalent reasons for job-hopping given by employees were that they were offered a better position elsewhere or because their present job was unsatisfying or featured a hostile work environment.
According to the survey, many people regard job-hopping as a chance to diversify their skill set and better their resumé or prospects. Employers may benefit from this mentality because your candidate pool isn’t restricted to unemployed job searchers. However, it also implies that you must exert effort to retain excellent talent. You may need to raise their salaries and even change their titles annually to keep your employees.
3. Packages of Salary
Because of all the allowances many employees receive on top of their basic pay, negotiating compensation packages in India is a complicated procedure. These allowances amount to so much that an employee’s base income accounts for only 40% of their overall compensation. These benefits may include:
- Bonuses based on performance
- Education allowance for children
- Hostel allowance for children
- Funding for house rent (HRA)
- Allowance for a vehicle
- Funding for telephone or mobile phone
- Allowance or concession for leave travel (LTA/LTC)
- Allowance for exceptional circumstances
Some of these allowances are taxable, while others are exempt from taxation up to a specific amount. Choosing the appropriate quantities to include in an employee’s remuneration package is complex, so overseas firms may wish to consider outsourcing HR for their Indian staff. Employees will seek a specific wage and a compensation plan arranged in the most tax-efficient manner possible.
4. Social Security and Tax Contributions
Navigating India’s tax regulations can also be difficult for multinational employers. India just implemented a new tax code that eliminates 70 tax breaks while offering lower tax rates. This new regime coexists with the old one, and employees can choose which system to follow. Because both systems are progressive, employees will fall into a specific slab based on their income. Employees earning less than a particular amount are exempt from paying income tax.
India also has a social security system run by the Employees’ Provident Fund Organization (EPFO). Employees and employers contribute to the Employees Provident Fund (EPF), a retirement savings program. Employees make the majority of this contribution. On the other hand, employers must fund grants to different types of social insurance.
5. Benefits That Are Guaranteed
There is no precise list of statutory benefits that apply to all workers in India. Instead, you must determine whether any legislation specifically relates to your industry. Commercial activities, for example, are governed by the local shops and establishments statutes, whereas the Factories Act governs factories.
Look for relevant rules that limit working hours or mandate rest periods. Paid time off requirements might range from 12 to 21 days per year. Sick leave, maternity leave, and other types of withdrawal may be available to employees. Employees may also be entitled to public holidays off. However, these vary by location. Find out which holidays are observed in the area where you are employed.
Though health insurance is not a required benefit, many businesses in India provide their employees with a private health insurance policy to supplement the public benefits to which they are eligible. Another arduous process you may avoid when you outsource your overseas HR is determining appropriate benefits packages.
6. Indian Languages
India is home to several ethnic groupings, each of which speaks hundreds of languages. Twenty-two of these languages are mentioned in the Indian constitution. Hindi is by far the most commonly spoken language in India. Hindi is the first language of around 41% of Indians. Bengali is the second most widespread, accounting for about 8% of the population.
This language diversity may be scary to international enterprises, but English-speaking organizations should remember that English is frequently used as a lingua franca in India. According to a 2019 survey, approximately 88 percent of Indians in metropolitan areas spoke English. In stark contrast, only 3% of rural respondents stated that they speak English. As long as you locate your business in a central metropolitan area, you should have no issue finding English-speaking personnel.
The Cost of Hiring an Employee in India
Hiring new personnel is an expensive proposition. The most significant factor is labor cost, which can be challenging to evaluate in India due to how compensation packages are organized. You must consider the charges of the recruiting process and assess how much each new employee will cost your organization. These expenses could include the following:
- Registration fees for establishing your Indian entity
- Lawyers and accountants can assist you in complying with Indian employment and tax laws.
- Time spent on hiring tasks by HR recruiters and managers
- Fees for a staffing agency if you decide to outsource.
- The cost of hosting or attending hiring events
- The cost of job advertising
- Travel expenses for any recruiters visiting India
- If relevant, relocation charges for new hires
- The cost of performing background checks through a third-party supplier
Given the propensity of many Indian employees for job-hopping, you want to make sure you hire the right people and then do everything you can to keep them. Otherwise, many of these costs will be repeated to replace this personnel.
Working Hours in India
According to the Factories Act of 1948, no adult (someone over the age of 18) can work more than 48 hours per week and no more than 9 hours per day. The spread over shall not exceed 10-1/2 hours, according to Section 51 of the Act.
The Minimum Wage Act of 1948 also states about working hours under rules 20 to 25 that the number of work hours in a day for an adult should not exceed 9 hours.
What Are Provisions under the Labor Law for Overtime in India?
| Act | Provisions under the Act |
|---|---|
| The Factories Act of 1948 Sections 51, 54 to 56, and 59 of the Act go into detail about working hours, spread out and overtime: |
Section 59 states that if a worker works in a factory for more than 9 hours in any given day or for more than 48 hours in any given week, he or she is entitled to overtime pay at twice his or her regular rate of pay. |
| Mines Act, 1952 | According to Sections 28 to 30 of the Act, no individual employed in a mine must be compelled or allowed to work in the mine for more than 10 hours in any day, including overtime. |
| Minimum Wages Act, 1948 | Under Sec. 33 it is mentioned that for overtime wages are to be paid at the rate of twice the ordinary rates of wages of the worker. It mentions that the employer can take actual work on any day upto 9 hours in a 12 hours shift. But he must pay double the rates for any hour or part of an hour of actual work in excess of nine hours or for more than 48 hours in any week. According to Section 14 of the Act, any worker whose minimum rate of pay is established with wage period of time, such as by hour, by day, or by any such period, and if a worker works more than that number of hours, it is deemed overtime. If the number of hours forming a typical working day exceeds the specified limit, the employer must pay him at the overtime rate for each hour or part of an hour worked in excess. |
| Bidi and Cigar Workers (Conditions of Employment) Act, 1966 | Working hours are governed by Sections 17 and 18 of the Act, which state that the period of labor, including overtime, should not exceed 10 hours per day and 54 hours per week. |
| Contract Labour (Regulation & Abolition) Act, 1970 | According to Rule 79 of the Act, every contractor is required to keep a Register of Overtime in Form XXIII that contains all facts relevant to overtime computation, hours of extra labor, employee name, and so on. |
| Building and Other Construction Workers (Regulation of Employment Service) Act, 1996 | Sections 28 and 29 of the Act state that employees who work overtime will be compensated at twice the regular rate of pay. |
| Working Journalist (Conditions of Service) and Miscellaneous Provisions Act, 1955 | According to Rule 10 of the Act, a working journalist who works for more than 6 hours in a day shift or more than 512 hours in a night shift shall be compensated with rest hours equal to the hours worked overtime. |
| Plantation Labour Act, 1951 | According to Section 19 of the Act, if an adult worker works in any plantation for more than the number of hours forming a typical working day or for more than 48 hours in any week, he or she is entitled to double the rates of usual earnings. Provided, however, that no such worker shall be permitted to work more than 9 hours on any given day or more than 54 hours in any given week. |
Company Requirements to Hire Employees in India
You can either establish your company as an employer or engage through an Employer of Record (EOR), a professional employment organization, to hire new employees in India (PEO).
If you pick this option, an EOR will already have everything in place for you to begin employing new staff in India. Furthermore, EORs are well-versed in Indian labor regulations and how to establish competitive compensation and benefits packages. Working with an EOR allows you to avoid the costs of creating your organization in India and managing onerous HR procedures for your Indian staff.
By delegating these HR tasks, you also reduce the risk of noncompliance. Globalization Partners has local, in-country consultants in India who understand how to stay legally compliant in all aspects of hiring Indian personnel.
An alternative to working with an EOR is to open your own firm office or subsidiary in India and handle hiring and other HR tasks yourself. To establish a subsidiary in India, you must first understand the legislation that applies to your industry. Incorporating a business in India can be complex, expensive, and time-consuming.
Most multinational corporations that set up a subsidiary in India choose private or public limited liability company form. To create your subsidiary and begin hiring in India, you must have the following:
- Identification Number for Directors (DIN)
- DSC (Digital Signature Certificate)
- The Registrar of Companies has approved the business name
- Articles of Association and Memorandum
- Application for incorporation
- Certificate of authorization to begin operations
- Company logo
- Account Number for Life (PAN)
- Filing for Employees' Provident Fund Organization
- Registration for Value-added Tax (VAT)
- Application for Medical Insurance
Depending on your sector or area, you may also need to seek additional permits or other licenses. Allow plenty of time to ensure that all requirements are in place before you begin recruiting.