Customer Stories — 14 min
The benefits of distributed teams have been proven. Cost savings, employee engagement and retention, and access to global talent — are some advantages enjoyed by companies who have embraced remote working.
If you’re ready to expand your team beyond your local area, India presents a diverse range of talent at reasonable rates. The Indian government has recently placed a lot of focus on the tech sector, improving infrastructure to support remote and tech-based Indian workers. This makes India an attractive location to find highly skilled talent.
Unfortunately, hiring in India can come with a large amount of red tape and costly processes, making it challenging for small businesses to take advantage of the Indian labor market.
Thankfully, businesses can turn to an employer of record (EOR) in India to hire and manage Indian workers with zero stress. An EOR can assist with taxes, payroll, employee benefits, and other tedious tasks related to global employment.
This guide has useful resources that can help you hire and pay workers in India using employer of record services. Let’s dive in.
Step 1: Weigh up the pros and cons of each potential partner. There are many types of EOR service providers available in India. After identifying your business requirements, shortlist potential EOR providers to compare and see which provider offers the best service and value for money.
Step 2: Select the most appropriate EOR. Each service provider operates differently. For instance, some EORs own their own entities in the country, while others depend on third-party vendors for certain services. While weighing up the pros and cons of each provider, make sure that you consider how the EOR will work with your business, and if the company is a good fit for how you operate. During this step, you should be certain that the service provider will offer a first-class experience to your employee, as well as a high level of security to ensure your intellectual property is protected.
Step 3: Check the reviews, testimonials, and coverage of your shortlisted providers. Some providers will try to dazzle you with 5-star reviews on their website. What they won’t share are negative reviews or feedback for improvement. In addition to the company website, also check out independent third-party review sites, online forums, or press coverage, to learn more about their services. You could even reach out to previous clients to glean insights into their operations and to find out more about the way they treat their clients.
Step 4: Ensure that the EOR solution provides the best-in-class employee experience. It’s important to remember that the EOR you choose will represent your company to your Indian workers. This means that if they offer a poor experience to your employees, it can negatively affect the reputation of your business, even if you are not aware of what is happening.
Step 5: Work with your partner. Using an EOR partner requires two-way communication. You should work with your EOR to ensure that your employee receives a fair and equitable compensation package that factors in local labor laws, as well as the employee’s experience, role, and level.
Hiring an employee in India while your business is based elsewhere can be a challenge. To legally employ an individual from another country, you need to open a local entity within that country. This is a sensible option for those looking to expand into India on a more permanent basis, but it’s a costly process that may not be suitable for small businesses.
Using an employer of record in India enables a business to hire Indian workers without opening a legal entity. The EOR will handle the entire onboarding process while ensuring your business stays within the regulations of local labor laws. An EOR can also perform a range of HR and legal services, such as:
Visa and work permits
Taxes and social security
Distribute employee stock options
This means you can focus on building a relationship with your new Indian employee instead of taking on the hassle of hiring, onboarding, and paying your workers yourself.
Unsure if you need an employer of record? This guide has additional information about when a business may need help from an EOR.
How much you pay for an EOR depends on many factors, including location, billing period, and the services you require. There may also be surcharges and a minimum number of employees or contractors required to enter an agreement.
It’s important to keep in mind that the amount paid to the EOR is only a part of the total cost of employment (TCE). The TCE will also include social security contributions or additional contributions as required by local labor, payroll, and tax laws.
Established providers will often have high enterprise rates, while some newer providers offer low rates. While it may be tempting to go for a lower-cost provider, you have to verify that they’re not compromising on compliance and security measures. They may also add hidden fees, especially if they rely on third parties to perform their services. You might face surprise costs and fluctuating fees with partner-dependent providers, as their partners can adjust their costs at any time.
A good EOR like Remote will offer transparent, flat rate pricing while maintaining a high level of quality and strict compliance standards.
Hiring in India requires strong knowledge of the local culture and regulations. Unfortunately, this is a tough task as India uses multiple pieces of legislation to govern labor practices, rather than a centralized law.
Indian employment law is handled by both the central and the respective state governments, with residual law-making powers vesting with the central government. This has left a complex web of regulations that employers need to keep in mind when hiring.
The penalties for non-compliance can be steep. Businesses should be certain that they can handle employee benefits and salaries in a way that complies with local labor laws.
Current labor laws in India do not require a written employment contract, but it's common for businesses to provide one. There are a few states, such as Delhi and Karnataka, where employers are required to issue written employment contracts to employees in non-manufacturing sectors.
Fixed-term employment contracts are permitted in India, as long as the employer is employing the worker for a short time. Previously, fixed-term contracts were only permissible for the apparel manufacturing sector. However, the government has recently stated that fixed-term contracts will be permitted across other sectors.
Employee compensation should be clearly laid out in any employment agreement. This includes salary, pension, and benefits, including vacation and sick days.
An employee's role should be listed in detail, ideally with a job description attached as an appendix. The language used should be clear and specific, as ambiguity can allow the employer to change roles and responsibilities with little to no notice. 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.
Employers are required to treat their employees in a way that complies with various central and state labor laws. These laws ensure the welfare of all parties involved in the employment agreement.
Small, medium, and start-up businesses in India can self-certify their compliance via an online portal. This is designed to simplify and ease the compliance burden during their early years. Otherwise, businesses will be subject to a random, risk-based inspection system.
India has recently overhauled its labor code in an attempt to offer security, respect, health, and other welfare measures to Indian workers. This means that foreign businesses with employees in India need to seek legal counsel to ensure they stay compliant with the new legislation.
The payment of wages to employees is regulated by the Payment of Wages Act, of 1936. The Act was introduced to combat employers' unauthorized deductions to protect employees against unjustified delays in payment.
Payment of wages must be made in Indian rupees. Contractors may be paid in other types of currency, providing they open foreign currency accounts. To avoid complications, businesses should pay in the local currency.
Alongside changes to employment law, the Indian government has also introduced a new tax regime with reduced rates of income tax. Despite lower rates, not everyone will see benefits from the new tax brackets, seeing as the previous exemptions have been removed.
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. This means businesses do not need to worry about non-taxable allowances in India.
India recently passed The Code on Wages 2019, which allowed the government to fix the minimum statutory wage for millions of workers. It removed a wide range of wage definitions that were spread across 12 different labor laws, making it easier for businesses to stay compliant.
Statutory benefits requirements in India can vary substantially, depending on employment contract, industry, and state. For example, a part-time factory worker in a rural region may have a different set of rights compared to those guaranteed to a remote software engineer living in New Delhi.
At Remote, we believe that you should pay workers what they deserve. As such, we make it easy to provide fair compensation and an attractive benefits package to help you attract the best talent India has to offer. Our network of global partners and local employment law experts allows us to offer above and beyond the norm, even to contractors.
For more on benefits and compensation for Indian workers, and how Remote can help, read our helpful article on Indian employee benefits on the Remote blog.
India does not have at-will employment. Indian employees who are subject to early termination without cause are entitled to a minimum of 30 days’ notice. Businesses can offer employees 30 days’ pay in lieu of notice.
While the employer is fully in charge of hiring and firing people in their organization, they cannot dismiss an employee without suitable cause. Employees terminated with cause may not be entitled to notice or pay if their actions fall into a category that is recognized by the Indian government. This could include poor performance, workplace misconduct, or other non-protected reasons.
There are various pieces of legislation protecting employees from being terminated due to discrimination or having reported wrongdoings in the business. Any attempts to terminate an employee based on protected characteristics are illegal, and those found guilty of unjust dismissal could face financial penalties.
Employees with more than five years of service could be entitled to additional severance pay, which is referred to as a gratuity. Gratuity is equal to 15/26 of the employee’s salary, roughly 57.7%, for every year the employee has worked for the company and is capped at INR 1,000,000
For detailed information and advice on hiring in India, read our India hiring guide.
As with most countries, India treats contractors differently from full-time employees. Contractors are not protected by labor laws unlike full-time employees, so it’s crucial to correctly classify your employees and contractors to avoid misclassification.
Recent lawsuits around the world have placed a renewed emphasis on correct worker classification. This has been caused by well-established companies such as Uber blurring the distinction between employee and contractor in an attempt to avoid giving statutory benefits to its drivers. These lawsuits have amplified the importance of treating workers correctly. When you’re trying to manage international workers, it can be tricky to identify the right worker classification for your business.
Some potential consequences for misclassifying workers include:
Penalties and fines: You may be liable for back taxes and associated penalties for paying late.
Back wages and benefits: You may be required to compensate workers for lost wages or benefits that resulted from the misclassification.
Legal issues: You may be vulnerable to lawsuits from groups or individuals harmed by misclassification.
The best way to mitigate the risks associated with misclassification is to rely on EOR who can manage your contractors and employees while ensuring each worker is correctly classified. Remote has a team of local experts who have in-depth knowledge of Indian employment laws and can ensure compliance while helping you avoid the serious consequences of misclassification.
Hiring workers in India is an excellent option for companies who are looking to recruit highly educated and skilled professionals at reasonable rates. International hiring is not a straightforward process, and you’ll have to consider the costs, logistics, and resources it takes to hire workers in India.
But, thanks to advances in technology, and global employment solutions like Remote, global hiring is not only possible, it’s easy!
Remote already has a legal entity in India, which allows you to hire talent in India without the cost and stress of hiring abroad. We can handle your employees, their benefits, payroll, and taxes, while you can sit back and focus on what matters the most — business growth. With Remote, you get:
A simple, yet comprehensive onboarding process which takes up to 9 working days.
A user-friendly platform that allows you to view and manage your employees or contractors from one place
A high level of security for your company’s data security and intellectual property.
Quick payments and invoice management in compliance with local tax laws
Continued compliance with evolving Indian labor laws.
If you’re ready to get started, sign up with Remote and start onboarding your new employees in India right away! Or learn more about hiring international employees with our employer of record services.
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