India has a burgeoning middle class and a growing list of millionaires who account for the steady growth (9.1%) in consumer spending. Besides possessing rich diversity in culture and lifestyle, the Indian market is rife with various products. Factors like these have made India what it is today – the 6th biggest economy globally with a GDP of over $2 trillion and a lucrative business destination.
20 years ago, India transitioned from a closet socialist state to a more liberal marketplace. With gobsmacking incentives and loosened up tax policies to start a business, India jumped 79 positions to the 63rd spot in 2021 in the ease of doing business index from a paltry 142 in 2015.
India continues to offer extraordinary talent at effectively cheap labor costs. In an assessment of 65,0000 students and graduates, the report found that over 40% of India’s youth is job-ready, equipped with digital skills. Talent pools are enormous in India. Despite an economic slowdown, tech hiring increased 55% in January 2021, with attractive salaries at 50% higher than earlier.
Thus, India leads an attractive business destination for global brands thanks to an optimistic spending behavior, business-friendly policies, and a rich talent pool that you can hire at affordable costs.
Marking your presence in India is a must and should be done fast. Partnering with a PEO service or an Employer of Record in India can help you tap into this cash cow of a consumer market. As you hire the talent and explore strategies to conquer the market, Multiplier’s PEO solution can help compliantly set up shop without a local entity or a subsidiary and onboard talent without employment risks.
Why use an India PEO?
Knowing that India is a business-friendly nation, one might wonder what could go wrong when expanding into the country? The challenge comes in navigating the local labor laws of India’s 30-odd states.
When treading into an overseas territory, it is essential to research and navigate local labor laws and compliance to steer clear of employment risks. India’s varied job markets can pose a challenge for new businesses.
Apart from state laws, companies must also adhere to the labor laws stipulated by the central government. Recently, the Centre also introduced new labor codes that have impacted compliance, finance, compensation requirements. These efforts revised the 80-year-old laws of the industrial era.
Keeping track of these changes requires you to incorporate finance, HR, and payroll specialists into your team. For the experts at Multiplier, managing HR and payrolling is one of their strong areas. Instead of building a specialist team, outsource the tasks to an expert PEO service in India like us.
Indian PEO Costs
Usually, PEOs charge based on two pricing models – fixed and variable. A PEO based on the fixed pricing model charges a transparent fee ranging between $200 – $1000 per employee per month.
Multiplier is one such PEO solution. The final cost depends on the complexity of employment laws of the employee’s jurisdiction.
Our prices ensure that you get the most out of your employee spending. Every employee hired through our PEO also receives HR support, benefits management, and a live dashboard to track workforce spending in real-time.
How to hire in India
If you are about to embark on hiring talent in India on your own, here are a few tips to keep in mind.
Employment Contracts
With abundant jobs in almost every sector, Indian employees are spoilt for choice. They usually possess multiple job offers in hand before choosing their desired employer. Thus, you must word the employment contract when onboarding employees in India carefully.
Typically, a compliant employment contract should elaborate details, benefits, compensation, termination, bonuses, incentives.
Indian employees expect their salaries to be stated as the cost to the company. You must define their salaries in Indian currency – Indian Rupee.
Legally, employers can stipulate a probation period anywhere between 1-3 months.
They are eligible for an annual bonus between 8.3% – 20% of the yearly salaries. They also expect a salary hike of over 10% each year.
With centralized labor laws and over 200 state laws, employers must carefully heed compliance and local regulations while drafting a compliant contract. It is always wise for the employer to onboard an employee along with an employment contract. If the employee sues over any defaults, the government tends to favor the employee over the employer.
Taxes in India
India has a progressive tax system – the higher the salary, the higher the taxes.
Income tax in India follows the tax slabs below:
Besides, employers are required to deduct 3.6% – 12% from their employee’s salaries to contribute to the Employee Provident Fund (EPF) – a state pension fund. Employers also contribute to social insurance, which is calculated based on the employee’s base salary.
Working hours
Indian labor laws stipulate that workers should work no more than 40 hours per week. The standard work hours span up to 8 hours and should not exceed 9 hours/day.
Health Insurance & benefits
Without engaging with a PEO service in India, businesses may violate laws related to benefits. Here are a few things to keep in mind while stipulating benefits for employees:
Insurance
To be specific, health insurance is now mandatory in India, post covid, – April 1, 2020.
Multiplier’s PEO services in India encompass offering locally relevant health benefits for employers.
Annual and Sick Leaves
A minimum of 21 days is the statutory minimum for employees in India. Most companies offer a month’s equivalent in paid leave.
Employers must provide six days of sick leaves. Employees can still avail of unpaid leaves spanning more than six days on account of medical complications.
Employees also receive ten days of paid leaves on account of public holidays. The holidays can vary from state to state.
Maternity Leaves
Although there are no stipulations regarding paternity leaves, female employees are entitled to 26 weeks of maternity leave. Female employees can avail of this benefit eight weeks before the expected date. If employees take leaves a few days closer to the scheduled date, then they can take the rest of the leaves after delivery.
Employees are also entitled to a medical bonus of INR 3,500.
Termination
Any defaults in termination are viewed seriously in India, with laws generally favoring employees.
A statutory minimum of 30 days notice must be given to the employee in cases of employer-motivated termination. Likewise, employees should provide 30 days of notice if they wish to stop working for an employer.
You can also pay a severance package in case of termination without any prior notice.
On termination, employees are entitled to 15 days’ wages for every year they have worked for a company.
Employees are also entitled to a gratuity payment if they have continuously worked for more than five years; gratuity = last drawn salary x 15/26 x No. of year’s service.
Why Multiplier?
With Multiplier’s PEO/EOR solution, treading into a new market is as seamless as confidently ice-skating.
Without the hassle of setting up a foreign branch or subsidiary, we can help you onboard your preferred candidate, handle HR issues and payroll, and ensure compliance with local laws.
Once you have chosen your desired talent, start generating and customizing employment contracts for them in a few clicks and manage the workforce from a single platform. You can also pay thousands of employees in Indian Rupees with a single click.
Hire and expand into India using #1 SaaS-based PEO service. Contact us to grow your business today.