Not sure about statutory benefits for remote workers in India? Interested in providing a more competitive benefits package for your employees in the country? This short guide has you covered.

Remote’s complete guide on hiring remote workers in India provides a detailed overview of India’s labor laws, payroll processes, and more. This guide covers the details of common benefits, allowances, and reimbursements, statutory and otherwise.

Statutory benefits requirements in India vary substantially by employment contract, industry, and state. The rights guaranteed to a part-time factory worker in a rural region may be wildly different than those guaranteed to a remote engineer living in New Delhi.

That said, India does guarantee some benefits to all employees around the country. Contractors in India are not entitled to benefits, while full-time and many part-time employees generally are. Remote can help you create a compliant benefits package for your specific situation.

Statutory and common employee benefits in India

Though not mandatory, employers in India commonly provide employees with extra monetary benefits beyond their basic pay. These allowances can include transportation stipends for employees to travel to work, medical allowances for employees to take sick leave or care for sick family members, and house rent allowances to help pay for accommodations.

Some benefits are fully taxable, while others are exempt from taxes up to a certain amount. Contact Remote for more information on what kind of allowances your employees in India would expect in the area where they work.

Unlike most countries, leaves policies in India are governed by the laws of the state where the company's legal entity is established, not the state where the employee works.

Employees in India are entitled to a specific type of leave called earned leave. Earned leave minimum is typically 15 days per year for private sector employees but varies by state. If an employee does not use the earned leave, they are entitled to carry forward the unused earned leave to subsequent year.

Employers in India may offer unlimited PTO to their employees. If an employer offers unlimited PTO, the employer should track all leave taken to ensure compliance with Indian laws.

In the private sector in India, leave policies are often standardized. Senior-level employees usually receive the same amount of leave as entry-level employees.

Public holidays in India tend to be regional, not national. The country only recognizes three national holidays: Republic Day on January 26th, Independence Day on August 15th, and Mahatma Gandhi's Birthday (Gandhi Jayanti) on October 2nd.

Because every state observes its own set of holidays, employers in India traditionally give employees 10 days of paid holiday leave to use however they desire.

India now requires all companies in the country to provide employees with maternity leave. Employees become eligible for maternity leave after working for the employer for at least 80 days in the preceding 12 months.

Maternity leave minimums differ by state, but India’s national government sets the minimum at 26 weeks of paid leave for employees with fewer than two children (not including the one being born) and 12 weeks for employees with two or more children. The law also provides 12 weeks of maternity leave for adoption and children born via surrogacy.

Employees may take maternity leave as soon as eight weeks before their due dates. New mothers are guaranteed a minimum of two additional breaks during the day to nurse until the child is 15 months old.

India does not require companies to provide paternity or flexible parental leave to employees. Private employers have begun to offer paternity leave as an optional perk, however.

Employees returning from maternity leave at companies with 50 or more workers are entitled to receive daycare services paid for by their employers. Employers may choose to host daycare services on site, contract the service to a provider, or provide employees with a reasonable stipend. This benefit does not extend to new mothers working from home.

Although India does provide public healthcare, quality and availability vary substantially from one area to another. Because public healthcare quality tends to be well below private healthcare, employers use private health coverage to attract the best talent.

Private healthcare plans in India are not expensive compared to plans in other parts of the world. Employers can choose to provide a stipend for employees to purchase their own coverage or provide a plan directly.

India’s national government guarantees employees with at least 12 days of paid sick leave (or casual leave) per year. This leave covers employee illnesses, but it also covers bereavement leave and leave to care for sick family members. When employees use more than three days in a row for sick leave, their employers are allowed to ask for a doctor’s note.

Employees in India tend to care deeply about their job titles. Titles hold significance in both professional and social circles. Employees who do well are accustomed to receiving promotions and substantial raises year over year. When employing workers in India, understand the importance of titles and expectations of career growth to avoid miscommunications.

Employers in India are required to contribute a percentage of each employee’s salary to the Employees’ Provident Fund, Employees’ Pension Scheme, and the Employees’ Deposit Linked Insurance Scheme. Not all companies are required to contribute in all circumstances. See our guide on paying remote employees in India for more information.

Offer employees in India great benefits with Remote

With so many states and different rules to consider, staying compliant with the local rules for benefits in India can feel overwhelming. Remote takes care of everything to provide a single solution for all your India employment needs. Our global employment solution handles payroll, benefits, taxes, and compliance for all your employees in India. Contact us today at sales@remote.com to learn more about our India global employment and employer of record solutions.

Employee Benefits in India: All You Need To Know

Benefits to offer employees in India

Our guide on hiring remote workers in India breaks down the basics of Indian labor laws, but paying international workers is always a challenge. Here are the basics on how to pay remote workers in India:

Determine whether your Indian workers are contractors or employees.

Collect the necessary worker information, including location and personal details. 

Open a legal entity or partner with an employer of record in India.

Familiarize yourself with India's laws related to payroll and taxation.

Learn the difference between "fully taxable" and "partially taxable" employee benefits.

Set up the appropriate payroll deductions, including the EPF.

Build a competitive Indian benefits package.

Write and sign a compliant employment agreement with your chosen candidate.

In India, special laws regarding taxable components of salary, social contribution requirements for employees and employers, and other payroll factors can make it difficult for foreign employers to stay compliant. That’s why we put together this helpful guide to help companies pay remote workers in India.

How do foreign businesses pay remote employees in India?

To pay your employees in India, you have a few options. We'll outline the options that are legally possible below.

The first option is to open your own local legal entity in India. Doing so allows you to employ workers legally in the country under the name of your own entity. This option is usually reserved for enterprise businesses looking to hire large, permanent teams in a country. Not only is it time consuming and expensive to open an entity, but you must also find and set up your own payroll providers and vendors for all your employee benefits. You are also responsible for staying compliant with the labor laws of India’s national government and the laws of the state in which you operate.

Most foreign businesses hiring in India choose to work with an employer of record or another global employment solution, such as Remote. A global employment provider can hire and pay your workers in India on your behalf, so you do not have to open your own legal entity. Because Remote owns our own legal entity in India, we can offer the most comprehensive and secure global employment solution for employers hiring workers in India. Remote’s global employment solution in India includes payroll processing, benefits administration, tax filing, and all matters of legal compliance.

You may be able to pay workers in India as contractors in certain scenarios. Do not default to contractor payments to avoid hiring full-time employees, however. Laws in India do not favor employers attempting to skirt the rules by treating employees as contractors while not providing benefits. Choose this option for short-term projects or scenarios in which the contractor runs a legitimate self-employment business. Remote offers contractor payment services in India.

In what currency do companies pay remote workers in India?

Businesses must pay their employees in India in Indian rupees, or INR. Contractors may receive other types of currency if they open foreign currency accounts. In most cases, businesses should pay in the local currency to avoid complications.

Currency amounts in India are written differently than currency amounts in many other countries. Rather than a comma after every three digits, INR amounts place a comma every two digits after the first three. So, one million rupees would be represented as 10,00,000.00 instead of 1,000,000.00.

India recently introduced a new tax regime with reduced income tax rates. However, this new system removes tax exemptions, so it's not the best option for everyone. Employees who wish to retain exemptions in their salaries may choose to continue to use the old tax regime.

5% for income from INR 2,50,000 to 5,00,000

20% for income from INR 5,00,000 to 7,50,000

20% for income from INR 7,50,000 to 10,00,000

30% for income from INR 10,00,000 to 12,50,000

30% for income from INR 12,50,000 to 15,00,000

10% for income from INR 5,00,000 to 7,50,000

15% for income from INR 7,50,000 to 10,00,000

20% for income from INR 10,00,000 to 12,50,000

25% for income from INR 12,50,000 to 15,00,000

Tax rates are more lenient for employees over 60 years of age and employees over 80 years of age.

Which parts of salary in India are taxable?

Not everything included in employee compensation in India is taxable. Some allowances are fully taxable, others partially taxable, and others are completely tax-exempt.

Components of India salary that incur full taxes:

Basic salary, which can include commissions for salespeople

Benefits converted to pay, such as unused leave time

Components of India salary that incur partial taxes:

Transport allowance or conveyance allowance, a benefit paid to employees who must commute from their homes to the office, is tax exempt below INR 19,200 per year.

Medical allowance, paid to employees who need to take time for extended illness or to care for sick family members, is tax exempt below INR 15,000.

House rent allowance, provided to employees to assist with living expenses, is partially tax exempt only for renters. Limitations on taxable amounts for house rent allowance vary by city and income level.

Some other uncommon allowances are also partially exempt. Please contact Remote if you have questions about the taxability of a specific employee benefit in India.

India also recognizes a few completely tax-exempt allowances. However, these allowances are limited to specific government employees, judicial employees, and employees of certain international organizations, so businesses do not need to worry about non-taxable allowances in India.

Reasonable per diem allowances are not considered taxable income in India. Employees are not required to spend the full amount of the per diem allowance and may keep any extra as tax-free income. Companies cannot, however, attempt to pay employees “under the table” by providing unreasonably large per diem allowances.

Is there a difference between an allowance and a reimbursement in India?

Yes. Reimbursements give employees money back for expenses they initially covered on their own. Allowances are predetermined amounts given to employees for specific uses. Reimbursements and allowances are taxed differently depending on how the employee is expected to spend the money.

What payroll deductions are employers required to make in India?

Employers must make a minimum of three payroll deductions in India: Employees’ Provident Fund, Employees’ Pension Scheme, and Employees’ Deposit Linked Insurance Scheme.

What is the Employees’ Provident Fund (EPF) in India?

The EPF is a retirement investment scheme run by the Indian government. Employees at companies with more than 20 employees contribute 12% of their eligible salary to the EPF. Employers match the 12%, but employer contributions and employee contributions are distributed differently

Employees who receive less than INR 15,000 per month in salary must contribute to the EPF. Employees who make more may participate by request. For employees employed in multiple countries with split payroll, the total income in both countries is used to calculate eligibility.

Income for purposes of calculating EPF contributions includes basic income, dearness allowance, and retaining allowance.

Employers with more than 20 employees must participate in EPF contributions. Some employers in certain industries, especially industrial and manufacturing industries, may be required to participate as well.

What is the Employees’ Pension Scheme (EPS) in India?

Employees do not contribute to the EPS, but employers do. Employers must contribute 8.33% of the employee’s salary to the EPS (only 3.67% of the employer match goes toward the EPF). This brings the total of employee contributions and employer contributions to a matching 12% (when eligible) toward both EPF and EPS. Employees, however, cannot contribute to the EPS.

Contributions to the ESP are capped at INR 1,250 per month for workers making up to INR 15,000 per month.

What is the Employees’ Deposit Linked Insurance Scheme (EDLI) in India?

The EDLI provides life insurance for private sector employees in India. Employers must contribute 0.5% of the employee’s basic salary to the EDLI. Employees are not required to contribute.

Payouts for EDLI claims are capped for employees earning above INR 15,000 per month. 

Employers may opt out of the EDLI in favor of a different life insurance plan, but the benefits of the alternative plan cannot be less than the benefits of the EDLI.

The minimum wage in India varies by state and industry. Individual states may set lower or higher wages at their discretion. There is a national minimum wage of INR 176 per day for certain industries (about $3), but this minimum does not apply in most circumstances.

Salaries for remote workers in India are generally competitive with salaries in other areas of the world.

Employees who work more hours than are stipulated in their employment contracts may be entitled to overtime pay. Overtime rates are not clearly defined and can vary depending on the type of work the employee does, how many hours the employee usually works, and where the employee lives. Remote can help you determine whether your remote employees in India are eligible for overtime pay.

Employers in certain industries in India are required to pay their employees a percentage of their annual salary as an annual bonus. 13th month payments are due within eight months of the end of the financial year. Not all industries observe the 13th month bonus.

Businesses can pay contractors directly in India. Payments must be made in INR, unless the contractor opens a foreign currency account. However, in most cases, companies choose to pay in INR.

Companies can generally treat contractors in India the same way they would treat contractors anywhere else. However, India does enforce limitations on how companies work with contractors. Breaking these rules can lead to fines and penalties. Workers in India who have been paid as contractors but believe they should be employees may file a complaint through formal channels, forcing the company to defend itself in India’s courts.

If you plan to work with someone in India for a long period of time, it is safer to hire that person as a full-time employee, provided the worker wants to be an employee. Remote can help you convert contractors to employees in India.

If maintaining the contractor relationship makes sense, Remote can manage contractor payments as well. Just be sure to avoid the usual stumbling blocks: don’t tell the contractor when or how to work, and don’t provide resources or equipment that could indicate an employment relationship.

India’s thriving and diverse talent pool can be a treasure trove for businesses looking to hire some of the best workers in the world. Navigating Indian labor laws and paying employees in India while remaining compliant can be challenging, though, even for companies with workers in multiple countries.

Remote’s global employment and global contractor solutions make it easy. With Remote’s simple solutions, you can hire, onboard, and pay your remote workers in India easily and quickly, whether they’re employees, contractors, or a mix of the two. Contact us today at sales@remote.com to learn more about our global employment and global contractor payment solutions for India.

To pay your employees in India, there are a few options. These options include opening a legal entity, working with a global employment partner or pay workers as contractors.

How do foreign businesses pay remote workers in India?

Businesses must pay their employees in India in Indian rupees, or INR.

How to Pay Remote Workers in India

How to pay remote workers in India

With more than 1.3 billion people, India is filled with top talent for international employers. If you are looking to hire a remote employee in India, work with Indian contractors, or help one of your existing employees move to India, this guide can help you get started.

At Remote, we help companies of all sizes hire top talent around the world. India’s labor laws, payroll regulations, and benefits requirements vary among different states and union territories. India’s federal government does enforce certain requirements all around the country, however. This guide on hiring employees in India covers all the basics.

Employees in India often start later than employees in the US. A common workday might extend from 10 a.m. to 6 p.m. Some workers choose to work earlier or later, especially to accommodate remote colleagues. Asynchronous working can help alleviate this issue.

When making an employment offer to a person in India, companies often include non-salary components, such as private health insurance costs or other perks. This total is called “cost to company.” Many items in the cost to company that are not included as part of the employee’s basic salary are taken pre-tax, so these perks are highly desired. Employees may negotiate the cost to company as they would negotiate basic salary.

Indian businesses typically reward employees well for loyalty. It is not uncommon for employees to expect large raises of 10% or more after annual reviews, in addition to regular promotions. Job titles are especially important in Indian business and social culture, often even more important than salary.

Employees in India typically receive their pay on a monthly basis.

Like many countries, India has recently revisited the definitions of “employee” and “contractor” to account for changes brought on by the gig economy. In general, however, the usual standards continue to apply.

Contractors in India must be able to work for multiple companies and must not be subject to the control of any company for which they work. Contractors must be free to choose their own hours. Employers should be careful not to cross the line of misclassification in India by providing work equipment or office space to contractors, as such actions could indicate an employee relationship. Any contractor agreement in India should clarify that the arrangement is not one between employer and employee and that the worker is an independent party.

Although not required by law, most employers in India choose to use written contracts to formalize agreements with employees. Remote can help you ensure your employment contracts in India are fully compliant with national and state laws.

Related: How to pay remote employees in India

India uses the Indian Rupee, which has a currency code of INR. Payment amounts may be written using the currency code or with the rupee symbol, ₹. Amounts may also be represented by Rs, as in Rs 1,000.

Businesses with employees in India are required by law to pay their employees in INR. Contractors wishing to receive payments in a currency other than INR must open a foreign currency account, but companies should still aim to pay in local currency when possible.

The tax year in India begins on April 1st and ends on March 21st. Workers in India have until July 31st to file their tax returns unless they receive an extension. In 2020, the government issued a blanket extension to November 30th, but this special deadline will not apply moving forward.

Employers must provide tax documentation (Form 16) by employees no later than June 15th, although employees can also download this form online. Remote can help you ensure your company never misses a tax deadline for employees in India.

Until 2020, most companies in India strictly prohibited work-from-home arrangements for their employees. That changed out of necessity during the COVID-19 pandemic. Today, employers in India have relaxed their stance toward remote work, allowing employees to work from home more frequently.

Employees do not always wish to work from home. Many professionals live in guest accommodations or with multiple family members, which can make it difficult to work remotely. Employers who are accustomed to offering remote work to employees in other parts of the world should help ensure their workers in India have the tools and opportunities necessary to create advantageous working environments.

Related: Benefits to offer employees in India

In 2017, India’s federal government granted more maternity leave to employees who give birth while working. Employers in India today must offer at least 26 weeks of paid maternity leave to employees giving birth who have fewer than two children already. Employees giving birth who already have two or more children are only entitled to 12 weeks of maternity leave.

Indian law allows for 12 weeks of maternity leave for women who adopt children under three months old and women who have children in surrogacy arrangements.

To be eligible for maternity leave, the employee must have worked for the employer for at least 80 days in the last 12 months. Employees may begin taking maternity leave up to eight weeks prior to the due date.

After returning to work, employees must be allowed at least two nursing breaks per day in addition to regular breaks until the child reaches 15 months of age. 

In addition to maternity leave, employers with 50 or more employees must provide daycare services or access to free childcare for employees returning from maternity leave. This policy does not apply to employees working from home.

India does not require private companies to offer paternity leave to their employees. Government employees, however, receive 15 days of paternity leave. Private employers are free to offer paternity leave as an additional perk.

Public healthcare availability and quality varies greatly from one state to the next. Because public healthcare in India tends to be underfunded, employers often choose to offer their employees in India either a stipend to purchase a private insurance plan or a direct option to access health insurance through the employer.

Health insurance plans in India tend to be significantly cheaper than plans in the US.

Employees in India are entitled to a minimum of 12 days off for every 240 days worked, but 15 days per year is common. Laws on PTO requirements vary from one state to another, and requirements are based on the local of the company's legal entity, not the location of the employee. Employers should clarify PTO earning rates and rollover policies in all employee contracts in India.

Employers in India may offer unlimited PTO to their employees. If an employer offers unlimited PTO, the employer should track all time taken to ensure compliance with Indian laws.

Employees in India must receive a minimum of 12 leave days per year for sick leave and personal reasons. Employees may use this leave to care for sick family members or as bereavement leave. If an employee needs to take more than three consecutive sick days, the employer may require a written confirmation of the illness from a medical professional.

India only has a few national public holidays, with most states observing several of their own. States have different rules requiring overtime pay and paid time off for public holidays. Generally, employers should expect to provide employees with at least 10 paid public holidays per year to allocate as they see fit.

Employers may choose to cover certain expenses for employees in India, such as internet access or transportation. These stipends tend to be either fully or partially taxable but are sometimes not considered part of the employee’s base salary for purposes of calculating social contributions. Employees may be partially exempt from taxes for stipends paid to offset transportation costs, rent, and medical costs.

Employers often provide employees in India with setup money to purchase work equipment. Sometimes, it may be easier to purchase equipment and ship it to the employee directly, depending on individual circumstances.

Some states and regions in India enforce special protections for women in the workplace. Employers with remote workers may still be required to provide special protections depending on local laws.

Maharashtra, for example, has several unique protections in place for female employees. These protections include enhanced protections against sexual harassment, guidelines for workplace lighting, requirements for female security staff, extra security for women working night shifts, and others.

In 2018, the Supreme Court of India removed the parts of the country’s constitution that outlawed same-sex relationships. These decisions also granted protections to employees based on their sexual orientation. Today, employees who experience discrimination based on their orientation may file suit against their employers. These protections extend to gender identity as well.

Employers benefit from these decisions as well. With same-sex relationships now decriminalized in India, employers who hire LGBTQ+ workers and employers who actively seek to promote LGBTQ+ rights are no longer subject to penalties.

While India has made important strides in LGBTQ+ rights, legal issues persist. Many employees find it difficult to extend their health coverage granted by their employers to their same-sex partners, for example. At work, employees could be subject to social pressures and bullying for their gender identity and sexual orientation, despite new legal protections. Employers should be prepared to take swift action to protect all employees.

For employees who receive less than Rs 15,000 per month in salary, employers are required to set up an Employees Provident Fund account, or EPF. Employees who make above Rs 15,000 may apply to participate in the EPF with special permission.

International employees may be required to participate regardless of income in some circumstances. In cases of split salary or split payroll, companies must consider all employee income (inside the country and otherwise) in calculating percentages for contributions.

All employers with more than 20 employees must offer an EPF. Some businesses below the 20-person threshold may be required to offer an EPF if they meet certain criteria. Businesses not required by law to offer an EPF may do so voluntarily, if they desire.

In an EPF, the employee and employer contribute an equal amount of money into the fund, which the employee receives as a lump sum payment upon reaching retirement. The contribution rate for employees at companies with more than 20 employees is 12% of income. For employees at workplaces with fewer than 20 employees, contributions are limited to 10%.

Calculations for EPF contributions consider three factors to determine income: salary, dearness allowance, and retaining allowance. Salary refers to the employee’s regular salary. Dearness allowance is a cost of living adjustment given to public sector employees and people collecting pensions. Retaining allowance is an allowance paid to certain types of workers who are unable to work when their places of employment are not open.

Part of the employer contributions to the EPF actually go toward funding the Employees’ Pension Scheme, or EPS. While the entire 12% share from the employee goes toward the EPF, only 3.67% of the employer’s contribution does the same. The remaining 8.33% of the employer’s contribution goes toward the EPS. EPS contributions max out at Rs 1,250 per month for employees earning Rs 15,000 or more monthly.

Employees cannot contribute additional income of their own toward the EPS: it is a fixed cost applied only to employers.

Employees’ Deposit Linked Insurance Scheme

In addition to the EPF and EPS, employers contribute 0.5% of employee salary to the Employees’ Deposit Linked Insurance Scheme, or EDLI. The employee does not contribute to this scheme.

Penalties for failing to make required contributions

Employers who fail to make sufficient contributions toward the EPF and EPS are subject to fines and penalties. Companies found in violation of the law may be subject to penalties including all past due amounts plus interest. The Indian government may levy additional fines ranging from 5-25% of the total amount unpaid. In certain cases, employers may be subject to prosecution and even imprisonment if the avoidance of contributions is deemed to be deliberate fraud.

India does not have at-will employment like the US. In India, employees being terminated are entitled to a minimum of 30 days’ notice or 30 days’ pay in lieu of notice, if terminated without cause.

Employees may fire employees for cause, which can include low performance, workplace misconduct, or other non-protected reasons. Employees fired for cause may not be entitled to notice or pay if the misconduct falls into a category recognized by the Indian government. 

Employees in India are not always entitled to severance pay when let go, especially for workers with higher salaries. Some workers making lower wages may qualify for guaranteed severance pay.

Employees are entitled to payouts of unused PTO if they quit or are terminated. Employers offering unlimited PTO plans must pay employees for unused leave as if the employee were earning leave at the minimum required rate. Employers are not required to pay out sick or personal leave (often called “casual leave”), but many choose to do so as a courtesy.

Employees with more than five years of service are entitled to an additional severance payment called a gratuity. The gratuity is equal to 15/26 of the employee’s salary (about 57.7%) for every year the employee has worked for the company. Gratuity is capped at Rs 1,000,000.

The national government in India does not regulate probationary periods at the beginning of employment. Employers commonly set probationary periods of around three months at the beginning of new contracts. During the probationary period, the employer may terminate the employee without severance pay or notice.

Hire employees in India with Remote and stay compliant

With laws that vary from region to region and a host of unfamiliar payroll practices, hiring in India can pose a steep challenge for employers. Remote helps businesses of all sizes hire employees in India easily and quickly with our global employment solutions. One relationship to Remote takes care of payroll, benefits, taxes, and local compliance for all your employees in India. Contact us today at sales@remote.com to learn more about our global employment, employer of record, and contractor payments solutions in India.

India’s labor laws, payroll regulations, and benefits requirements vary among different states and union territories. India’s federal government does enforce certain requirements all around the country, however. This guide on hiring employees in India covers all the basics.

India

Benefits to offer employees in India

How to pay remote workers in India

Guide on hiring in India