Emerald Technology Nov 2, 2022 1:39:38 PM < 1 min read

How to hire employees in India

India, in South Asia, is the second-most populous country and the most populous democracy in the world, as well as being the seventh-largest country by area. It's capital is New Delhi and it's largest city is Mumbai. The service sector makes up more than 50% of its GDP. In India there is no singular source of employment law covering labour and employment related matters. Both the Central and the State Governments have the power to legislate on the subject of employment and labour relations.

 

WORKING TIME AND OVERTIME IN INDIA

The work week in India is 40 hours, with a standard work day of 8 hours. Employees are entitled to 10.5 hours between work days. Work hours should not exceed more than 50 hours per week, or 9 hours per day. There is no legal requirement to pay overtime apart from to factory workers, who are entitled to receive 2x salary payments for any hours worked over 8 hours per day or 48 hours per week.

 

ANNUAL LEAVE 

The Factories Act provides 12 days of annual leave of all employees who have worked at least 240 days in a given year. Annual leave allowances differ between adult workers, who are entitled to one day of earned leave for every 20 days service (15 days per year), and you workers under the age of 15, who get one day of earned leave for every 15 days of service (20 days per year). 

 

TRIAL PERIOD IN INDIA

The typical probation period in India is six months and can be extended by a period of three months at a time. The maximum probation period must not exceed two years.

 

RESIGNATION AND DISMISSIAL IN INDIA

A 30-90 day notice period in India is six months and can be extended by a period of three months at a time. The maximum probation period must not exceed two years.

 

RESTRICTIVE COVENANTS

The Indian Contract Act 1872 provides that every agreements by which anyone is restrained from exercising a lawful profession, trade or business of any kind is void. Therefore, post-termination non-competition clauses are void and unenforceable. Customer non-solicits are possible enforceable, though it may be argued that a restriction on activities with customers is a restraint of trade. Non-solicitation provisions, even if they are upheld, generally only entitle the employer to damages, and it is highly uncommon for an Indian Court to grant an injunction preventing the customer from taking their business elsewhere. Non-solicitation provisions in relation to other employees may be enforced against a former employee, but the courts do not generally grant injunctive relief restraining the employees who are being solicited from leaving the company.

 

CONTRACT OF EMPLOYMENT WHEN HIRING IN INDIA

Currently, there is no requirement for a formal written contract of employment in India, although employers generally enter into written employment agreements. Some state-specific laws require employers to record certain terms of employment such as wages, designation and work hours. The OSH Code has a statutory requirement for the employer to issues appointment letters to every employee on their appointment in the establishment, with such information and in  such form as may be prescribed by the appropriate government. Recent amendments to the Employee's Compensation Act 1923 (ECA) and the Maternity Benefit Act, 1961 (MBA) require employers to inform employees (in writing) of the benefits available to them thereunder.

 

MATERNITY AND PATERNITY LEAVE IN INDIA

Pregnant employees are eligible for a total of twenty-six calendar weeks of maternity leave. This leave duration also applies to a female employee having two or more than two surviving children. A mother may start her leave up to eight weeks before the expected delivery. There are no legal stipulations for paternity leave except for government sector employees, who are entitled to 15 days' leave.

 

SICKNESS AND DISABILTY LEAVE

In India, employer must provide six days of sick leave per year. Some employers provide an unpaid leave for long term medical issues, but this is not mandatory. 

 

SOCIAL SECURITY IN INDIA

Social security in India is governed by the Employees' Provident Funds and Miscellaneous Provision Act 1952 (EPF Act.) The EPF Act contains the following three principal schemes:

  • Employees' Provident Funds Scheme, 1952
  • Employees' Pension Scheme, 1995
  • Employees' Deposit-Linked Insurance, 1976

The EPF Act is mandatory for companies with 20+ employees and can be entered voluntarily by smaller organisations. Every covered employer is required to contribute 24% (12% each for the employer's and the employee's share) of the employee's monthly salary toward the Employees' Provident Fund and Employees' Pension Fund. Local employees who draw a monthly salary of INR15,000 or more are excluded from the legislation unless they are already covered, but this exclusion does not apply to International Workers. The employer contributions are exempt from tax up to 12% of monthly pay. 

 

HEALTHCARE AND INSURANCE IN INDIA

Since April 2020, it has been mandatory for all employers to provide a mediclaim policy to employees in India.

 

EMPLOYMENT OF FOREIGN NATIONALS WITHIN INDIA

Employment visas are not granted for jobs for which a large number of qualified Indians are available to fill the position or for routine, ordinary, secretarial or clerical jobs. Employment visas will usually be granted to foreign nationals whose annual salaries exceed INR 1,625.00, with some exceptions. A change of employer in India is generally not permitted during the duration of the employment visa, except for at a senior level or for a skilled profession. The intended legal entity and the location of work in India must be clearly specified when applying for an employment visa.

 

SALARY AND SALARY TAXES INDIA

MINIMUM WAGE

While India has no national minimum wage, the minimum wages may be set by state or sector of industry. Wages vary from INR 160 per day in Bihar to INR 423 per day in Delhi.

 

INCOME TAX

Taxable Income (INR) Tax Rate (%)
First 250,000 0
Next 250,000

5

Next 500,000 20
Above 1,000,000 30

 

SALARY PAYMENTS

The payroll cycle in India is generally monthly, with wages paid on or after the 28th of each month.

 

SOCIAL SECURITY CONTRIBUTION

Employees covered under the EPF Act contribute 12% of their monthly salary to the Employees' Provident Fund and Employees' Pension Fund, in addition to an employer contribution of 12%.

 

SOCIAL CONTRIBUTION RATES

As above.

Feel free to contact the Emerald Technology team today.

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