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The Beginner's Guide to Hiring Employees in India

March 28, 2023

India is one of the fastest-growing economies in the world and offers a large pool of skilled workers. Hiring employees in India is no easy task, though. You have to understand everything from local labor laws and regulations to best practices for onboarding new hires. You must also know how to navigate cultural differences and build relationships with potential candidates.

Fortunately, there is a way around the complex and often time-consuming process. With the right information, you can avoid some common challenges, including compliance mistakes, to make your talent search easier and ensure the success of your recruitment efforts.

Understanding Indian Labor Laws

The Constitution of India provides a framework within which all Indian legislation must operate. Within this framework, Indian employees have a number of provisions that protect them from workplace discrimination and ensure fair treatment.

For example, employees in India are protected from unjust discrimination based on gender, age, ethnicity, caste, or religion, according to Indian employment laws. They also have the right to privacy, equal pay, paid time off, and a safe and healthy working environment. Moreover, the labor laws cover a wide range of issues, including working hours, employment contracts, and employment benefits.

When hiring employees in India, employers must be aware of all the important workplace laws and regulations, of which the 10 listed below are some of the most important:

  1. The Payment of Wages Act of 1936  was created to prevent unnecessary delays in wage payments and prohibits employers from making deductions from wages without legal justification.
  2. The Minimum Wages Act of 1948 ensures fair remuneration for employees across various industries by setting a minimum wage that employers are required to pay their employees, based on factors such as the nature and duration of work.
  3. The Factories Act of 1948 aims to protect workers from exploitation by ensuring employers provide safe and reasonable working conditions, including a maximum 48-hour workweek and a weekly holiday.
  4. The Employees Provident Fund Act of 1952 provides social security benefits, such as medical care, retirement pension, and education and housing benefits for employees working in factories or other covered establishments.
  5. The Payment of Bonus Act of 1965 ensures that employees who have worked for at least 30 days in the previous year in factories or other covered establishments receive a minimum bonus of 8.33% of their wages.
  6. The Employees State Insurance Act of 1948 safeguards the benefits of workers who become sick or injured while working.
  7. The Payment of Gratuity Act of 1972 provides for payment of gratuity in certain circumstances such as retirement, death due to any cause, or disablement due to an accident or disease.
  8. The Maternity Benefit Act of 1961 gives benefits, such as maternity leave and healthcare, to pregnant working women who have worked with their employer for at least 80 days.
  9. The Workmen’s Compensation Act of 1923 requires that financial compensation be given to workers and their dependents in the case of accidental injury.
  10. The Industrial Disputes Act of 1947 provides legal means for resolving disputes between employees and employers and requires employers to give notice before terminating employees.

Understanding these and other laws will make the hiring process more efficient because you will be aware of the employee's rights as well as your responsibilities as an employer.

The Hiring Process in India

The recruitment process in India is quite similar to the hiring processes in other parts of the world and typically involves the following steps:

  • Creating a job ad: This should have a clear job description that gives candidates all the information they need, such as special qualifications, job requirements, and required experience. Salary and benefit information should also be included in the job description so that the candidate knows what they will be getting if they get the position.
  • Posting the ad: You will then need to put the ad on various platforms, such as job portals, social media, and even newspapers. Naukri, foundit (formerly Monster), TimesJobs, and LinkedIn are some of the popular job portals and social media platforms for posting jobs in India.
  • Screening and shortlisting candidates: This involves the standard process of reviewing resumes and conducting preliminary interviews to identify the most qualified candidates.
  • Undertaking pre-employment formalities, including verifying documents, conducting background checks, and signing the employment contract. An Employer of Record (EOR) can make the entire process more seamless when hiring talent in India. For example, Remofirst can help with the recruitment process, as well as background checks.

Once this is done, you’re ready to onboard the new hire and integrate them into your work systems. Again, Remofirst can help you take care of this process in a streamlined way.

Legal Compliance and Payroll Management

For employers operating remotely in India, compliance and payroll management are critical elements that must be carefully managed. This is particularly important because the country's labor laws and regulations are continually changing, and staying up to date with the latest requirements is not always easy.

When it comes to payroll, employers must comply with various payroll laws, such as the Payment of Wages Act, Minimum Wage Act, and Provident Fund Act. They must also keep accurate attendance and leave records and adhere to tax regulations such as the Income Tax Act and the Goods and Services Tax.

The law imposes a variety of penalties for noncompliance, including hefty fines and even jail time. Also, the reputational damage of failing to comply with labor laws is huge and something that could easily cost a business its revenue, growth, and even its existence.

Keeping up with all the various laws and regulations can be arduous, however, especially as they evolve. As such, it may serve your business well to outsource payroll processing and management to a third-party service provider that specializes in this area. Doing this will not only ensure compliance but will also free up your time and resources to focus on other aspects of your business.

Maternity and Paternity Leave

Maternity leave is an important benefit that employers in India are required to provide to female employees under the Maternity Benefit Act. The Act stipulates that female employees are entitled to 26 weeks of maternity leave for up to two children, with six weeks of leave allowed in case of miscarriage or the medical termination of a pregnancy.

On the other hand, a 15-day paternity leave is available to government employees. No law mandates paternity leave in the private sector, but some employers do provide it as part of their employee benefits package.

As an employer, it's crucial to understand the maternity and paternity leave laws in India and ensure that you comply with them. Offering these benefits will help your organization meet legal requirements, plus it will create a positive work culture and support your employees during major life events, such as the birth of a child.

Unlocking India's Talent Pool: Why Partnering with an EOR is the Key to Successful Hiring

India is home to a pool of talented candidates with unique skill sets that can bring tremendous value to international companies.

For one, the country has a large and highly skilled workforce, with a strong emphasis on science, technology, engineering, and mathematics (STEM) fields. This makes it an ideal location for sourcing talent with specialized knowledge, skills, and expertise. Indian employees are also known for their strong work ethic and dedication to their jobs, and they can bring cultural diversity to a global startup, resulting in new perspectives and innovative ideas.

However, establishing an entity in India can be a costly and time-consuming process, particularly for smaller startups. Furthermore, successful hiring necessitates a thorough understanding of the local hiring process, labor laws, and cultural climate. That's where partnering with an Employer of Record (EOR) like Remofirst can be a game-changer, allowing companies to navigate the complexities of hiring and onboarding in India with ease.

By partnering with Remofirst, startups can quickly and effectively hire and onboard talent without the burden of establishing a local entity or requiring extensive knowledge of the Indian hiring landscape. Check out our country guide to India to learn more about how we can help you tap into the county’s vibrant talent pool, or visit our partner Uplers if you're looking to source remote Indian talent.