Employ Candidates Compliantly in India

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  1. Overview: India
  2. Global HR Compliance
  3. Global PEO and payroll
  4. Visa, work permit & immigration support
  5. Expand without a company set up
  6. Contractor vs. employee: which is better?
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Global HR Compliance in India

If you hire an international workforce, or plan to hire, then Hiring and Firing Workforce in India Guide below will help you understand the nuances of labor legislation in the country.

When the company is planning to enter a new foreign market of India and has a need to employ a local national there, the first question to answer is how it is going to make local hires.

We have designed a Global Employer of Record service to help you outsource global employment of your foreign workforce to companies like ours.

This solution helps you employ your global sales force in India as well as in other 180+ countries of the world, and provide pay and benefits to your employees, as well as administer any business expenses with our help.

Our solution is different from other hiring modes in that it helps you engage your foreign workforce in full compliance with the local labor legislation. This means you are protected from any non-compliance and employee misclassification risks while we bear all employment risks, not you.

So, it looks very much like hiring your in-house sales force in your home country. However, you focus on only on your global business development while we admin your global HR. In addition, you don’t need to open your own entities in the foreign countries and can leverage our infrastructure in India instead. With our service, you can become a global company with reduced costs and minimized time and effort on your end.

Your employed foreign sales force will devote 100% of their time to your company product and may stay with you longer than foreign independent sales reps.

Global Employer of Record solution is 100% compliant solution that guarantees you and your employees fully compliance with local legislation in India .

We are experts in global workforce employment in India, and our goal is to become your single provider. Instead of working with numerous local staffing agencies and legal advisors, Acumen International can solve your global business challenges and save you time, costs, and resources.

Our team of English-speaking professionals frees you from working through language nuances. Acumen International works 24/7 and can assist you whenever you need, regardless of time zones. Our goal is to create tailored labor solutions for you that are managed legally and in full compliance with the local employment laws.

With our knowledge and deep understanding of local nuances, you easily satisfy your need for skilled professionals in your global industry. With our qualified local partners, you can trust that your global workforce satisfies all local tax, social security, and immigration requirements in India.

Hiring and Firing Workforce in India Guide

With the European economy sliding into recession and China making it harder for foreigners to penetrate its market, many entrepreneurs have started to give Indian market serious consideration. No doubt India was ranked low among the easy-to-do-business countries. However, over the years, India has shown a steady improvement in its economy, especially with regard to its GDP and economic policies. Moreover, it is projected to be one of the fastest growing economy with the largest consumer market in the world.

Below are other vital facts you should know about doing business in India.

Hiring and Firing in India

#Employment Agreements

One of the main principles of Indian labour and employment laws is that they distinguish between employees who are defined as ‘workmen’ and those who are in management/supervisory/ administrative roles (‘non-workmen’).

Permanent employment contracts

Employment contracts in India are generally considered to be ‘unlimited term’ contracts, (i.e. contracts that are valid until termination or superannuation, unless specifically identified as a ‘fixed term’ contract). Some of the common provisions included in an employment contract are:

  • location, description and title of the job;
  • date of commencement, duration (whether fixed term or unlimited term) and type (whether part-time or full-time) of the job;
  • details of any probationary period;
  • leave entitlement;
  • salary details and other benefits;
  • terms governing termination of employment;
  • restrictive covenants; and
  • governing law and dispute resolution.

Casual employment contracts

In India, the terms ‘casual’ labour, ‘temporary’ labour and ‘daily wage’ labour appear to be used interchangeably, with the term badlis used to denote a temporary replacement for an absent permanent employee. There are very few explicit exclusions from statutory rights and protections of workers based on the type of contract and there is a significant body of case law confirming that casual employees are not precluded from eligibility to specific statutory entitlements simply because their employment is temporary in nature.

Fixed-term contracts

There are also instances in which employment contracts are either project-specific or for a fixed term, depending on the requirements of the assignment.

#Employment Termination and Severance Pay (Dismissal)

Indian labor law does not recognize “at will” employment. Termination of an employee’s employment may only be for reasonable cause or on account of misconduct.

Voluntary resignation

If the employee voluntarily resigns, the employer must accept the same and communicate whether the employee has to serve the notice period / the notice period has been waived. Courts in India have held that entering into employment does not result in an infinite bondage of employment and an employee is entitled to exercise his right to resign from the employment. In limited circumstances, however, an employer would be justified in refusing to accept the employee’s resignation, for instance, when an employee wants to leave in the middle of work which is urgent or important and for the completion of which his presence and participation are necessary. An employer can also refuse to accept the resignation when there is a disciplinary inquiry pending against the employee.

The IDA defines retrenchment to mean the termination by the employer of the service of a workman for any reason whatsoever other than as a result of “a punishment inflicted by way of disciplinary action.” The definition of retrenchment however excludes:

  • voluntary retirement of the workman;
  • retirement of the workman on reaching the age of superannuation (as per the terms of contract);
  • termination as a result of nonrenewal of the contract; or
  • termination on the grounds of continued ill-health.

#It is prohibited to dismiss

Where an employee has been wrongfully dismissed, the employee can approach the appropriate authorities to refer the matter to the Board, Labor Court or the Tribunal depending on the jurisdiction. There is no limitation period prescribed under law for making claims against the employer under the IDA. However, claims relating to contracts, which include individual disputes such as termination of service, must be made within three years.

Depending on the facts of each case, generally, on wrongful dismissal, an employee may be entitled to:

  • Damages for loss of earnings and other benefits that the employee would have been entitled to in the course of employment.
  • Reinstatement of service and
  • Interest on the wages payable to him/her in the event he/she is not paid due salary.

#Notice period

In terms of Indian labour law legislation, ‘workmen’ who have undertaken at least 1 year of continuous service are entitled to a notice period of 1 month, or equivalent wages in lieu thereof. In addition, the employer would be required to pay ‘retrenchment compensation’ to the workman, which is calculated at the rate of 15 days’ wages for every completed year of service. However, no notice period (or payment in lieu thereof) or payment of retrenchment compensation is required in the case of workmen dismissed for misconduct, provided the employer conducts an internal inquiry prior to such dismissal.

#Severance payment

Severance payment would have to be made by the employer. However, the quantum of the amount and the processes followed would be different, depending on specific circumstances. Severance under the IDA is calculated at the rate of 15 days’ wages for every completed year of continuous service or any part thereof in excess of six months. In addition to severance under the IDA, there may be other payments required under applicable labor laws and contractual arrangements and the state-specific SEAs.

#Employee Benefits and Contributions

The Employees’ State Insurance Act (ESIA) seeks to guarantee medical care to workers. The Employees’ State Insurance Scheme (“ESI Scheme”) provides full medical care in the form of medical attendance, treatment, drugs and injections, specialist consultation and hospitalization to insured persons and also to members of their families where the facility for specialist consultation and hospitalization has been extended to the families. The ESIA applies to all factories and establishments (as may be specified) where at least 10 employees are employed.

Apart from the ESIA, under the Employees’ Compensation Act (ECA), the employer is required to compensate certain employees or their family members (as the case may be) in case of accidental death or disablement for injuries arising out of and in the course of employment, or on account of contracting an occupational disease.

The Employees’ Provident Funds and Miscellaneous Provisions Act (EPFA) is probably the most important social security legislation in India for employees. The EPFA is applicable in cases where a minimum of 20 employees are employed (this threshold is proposed to be revised to 10 employees). As per the EPFA, both the employer and employees are required to contribute a certain percentage of the wages to the Employees’ Provident Fund Commissioner for deposit to the respective accounts of the employees.

#Probationary period

Probationary periods are allowed and commonly used in India. However, there are no specific laws that contain provisions in relation to probationary periods, although most employers generally provide for a probationary period for junior and mid-level employees.

#Overtime

Pursuant to the MWA (The Minimum Wages Act), if an employee whose minimum rate of wages is fixed by the hour, by the day or by a longer wage-period, works on any day in excess of the number of hours constituting a normal working day, the employer is required to pay the employee for every hour or for part of an hour so worked in excess at the overtime rate calculated at double the ordinary rate of wages. The Code on Wages also states that the overtime wages shall be at least twice the rate of normal wages. Similarly, the FA (Factories Act) requires the employer to pay extra wages for overtime work where a worker works in a factory for more than nine hours a day or for more than 48 hours in a week. In such case, the worker shall be entitled to overtime wages calculated at the rate of twice the worker’s ordinary rate of pay.

#Work hours

Under the FA, an adult worker shall not be required or allowed to work in a factory for more than nine hours in a day and 48 hours in any week. There are also certain provisions under the FA(Factories Act) with respect to payment for overtime work. Additionally, the FA (Factories Act) also states that no child shall be employed or permitted to work in any factory for more than four and one-half hours in any day or during the night. In addition to the FA, the state-specific SEAs (shops and establishments acts) also prescribe the opening and closing hours, maximum hours of work in a day and a week, rest hours, spread over (inclusive of rest intervals and meal breaks) in a day, overtime, wages for overtime, leave and holiday requirements, etc.

#Annual leave

The total number of days of leave that may be carried forward to a succeeding year cannot exceed 30 in the case of an adult or 40 in the case of a child.

#Sick leave

Some of the state-specific SEAs contain provisions with respect to paid sick leaves. In some states, there is no requirement to provide sick leaves. In some states, sick leaves and casual leaves are grouped together.

#Parental leave

Maternity leave

The Maternity Benefit Act (MBA), inter alia, applies to every factory, mine, or plantation including any such establishment belonging to the government and to every shop or establishment in which at least 10 employees are employed, or were employed, on any day of the preceding 12 months. A female employee, who has worked for at least 80 days in the 12 months immediately preceding the date of her expected delivery, is entitled to paid maternity leave of:

  • 26 weeks, of which not more than eight weeks shall precede the date of her expected delivery for the first two children and
  • 12 weeks, of which not more than six weeks shall precede the date of expected delivery for the third and every subsequent child.

Paternity leave

Indian labor laws do not provide for paternity leave. There is no separate category of paternity leave recognized under Indian law, though a bill has been introduced in this regard seeking paternity leave of 15 days across all sectors. Currently however, some corporates and public sector departments do provide paternity leave to their employees, as prescribed in the concerned leave policy/rules.

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