India is filled with world class employees and highly skilled professionals. But before tapping into the country’s talent pool, employers must first navigate their way through the employment laws and regulations. The succeeding sections should help you with the basics when onboarding workers from India.
Employee Contract
Public and Provincial Holidays
Leave Information
Basic
In India, employee contracts must be in a language understood by both contracting parties. Contracts are generally in English, provided that both parties understand it.
Probation Period
The Probation Period for Indian employees can last up to 6 months.
Employee Benefits
The Indian government has set statutory benefits for their employees to ensure that they get the best out of their employment. Below are some of the benefits:
- Employee Provident Fund (EPF)
- Employee Pension Scheme (EPS)
- Employee State Insurance (ESI)
- Maternity leave
The payroll cycle in India is monthly.
Minimum wage in India varies per state and with industry associated. However, the national floor level minimum wage across the country is 178 INR per day.
The standard working hours in India are 9 hours per day and 48 hours per week. Including overtime, the maximum working hours must not exceed 60. Furthermore, the overtime hours per quarter must not exceed 50. Employers must compensate for the overtime at 200% of the regular hourly rate.
Employer Payroll Cost:
| Type of contribution |
Contribution |
| EPF + EPS |
12% |
| ESI |
3.25% |
| Total cost on employer |
15.25% |
Employee Payroll Cost:
| Type of contribution |
Contribution |
| EPF + EPS |
12% |
| ESI |
0.75% |
| Total cost on employer |
12.75% |
Employee Income Tax
| Taxable Income (Indian Rupees, INR) |
Tax Rate |
| Income up to 300,000 |
No tax |
| Income between 300,001 – 600,000 |
5% |
| Income between 600,001 – 900,000 |
10% |
| Income between 900,001 – 1,200,000 |
15% |
| Income between 1,200,001 – 1,500,000 |
20% |
| Income above 1,500,000 |
30% |
Health and education cess is levied at 4% of the income tax and surcharge.
VAT
VAT in India is referred to as the Goods and Services Tax (GST). Rates range from 5% to 28%, depending on the goods and
services.
In India, the termination process may vary from one employer to another and mostly follows the terms indicated in the employment contract.
The notice period for employees under probation is up to 30 days. Employers must give a notice of at least 60 days to their employees before termination.
Severance pay
Severance Pay in India varies based on duration of employment, performance and salary. Below are the rates:
| Employee Classification |
Severance Pay |
| Workman |
15 days’ worth of average pay
for each year worked
|
|
Workman of a factory, mine or
plantation with 100+ workers
|
15 days’ worth of average
pay for each year worked
|
| Non-worker |
Determined by the employment contract |
|
Employee (workman or non-worker)
that is dismissed due to misconduct
|
No severance pay |
Foreign employees in India must secure a work visa to legally work in the country. The visa’s validity may vary from 6 months to 5 years. For investors looking into operating their business in the country, they must apply for a business visa.