How to hire Employees in India - A Complete Guide

India’s well-educated, employable, English-speaking talent have positioned the country as a desirable hiring destination. India is touted to have the 3rd-largest web 3.0 workforce. Its six million software developers and plethora of professionals in data analytics, robotics, and cyber security have turned India into a hotspot of tech professionals.

In parallel, the U.S. Bureau of Labor Statistics reported in 2022 that the IT sector is anticipated to grow 15% from 2021 to 2031, creating 682,800 new jobs. Evidently, India’s talent surplus can fulfill the US’s need for tech skills.

How to Hire Employees in India: Employer of Record vs Entity

In India, there are three options for hiring and onboarding talent: establish a foreign corporation, collaborate with an employer of record, or work with contractors.

Your choice will rely on various factors, including time, cost, the number of people you want to hire, and the long-term objectives of your business.

Here is an overview of the choices before you make a decision:

Set up a local entity

You can start hiring in India by establishing a branch office or a subsidiary to build a long-term presence and set up a large team. By doing this, your business can manage internal hiring and employment processes, lowering overall staffing expenditures.

Remember that creating an entity requires expertise and knowledge of the Indian legal, business, and payroll rules. Non-compliance while managing HR procedures and global payroll will lead to legal hassles. If you only want to hire a few people, establishing an entity is a time-consuming and expensive process fraught with risk.

Partner with an EOR

You can swiftly hire workers in India without a legal entity by collaborating with an international Employer of Record (EOR). In simple terms, an EOR is a third-party that specializes in India's employment rules and regulations and assists global companies with talent onboarding.

An EOR will take care of all hiring, payroll services, benefits, compliance, and taxes on your behalf so that you can focus on hiring and operational responsibilities.

Features	Employer Of Record	Setting up your own entity
Cost	Flexible payment options	Huge investment; ongoing operation cost
Scalability	Enables quick market entry	Difficult to establish new businesses abroad
Risk Management	Mitigates employment-related risks; ensures compliance	Full responsibility for compliance, exposing the business to potential penalties
Employee satisfaction	Provides employees with location flexibility	Ensures employees receive full legal benefits
Cost consideration	Lower entry barriers; predictable monthly fees.	High initial investment; recurring onboarding costs.
Legal Compliance	Ensures compliance, handles global regulation updates	Full compliance responsibility, liable for fines.

Classification of Indian Workers: Employee vs Contractors

A common mistake employers make when hiring is misclassifying employees as independent contractors. This misclassification can damage employee relationships and lead to legal issues in the country of hiring.

Employee Background Checks in India

Why Background Checks Are Important:

‍Conducting background checks is crucial for validating a candidate's credentials, identifying potential risks to your company’s reputation and safety, and ensuring compliance with industry-specific regulatory standards. This is especially important given the rise in resume fraud due to recent job cuts.

Types of Information Collected:

Identity Verification: Confirming the candidate's identity through documents like PAN, Aadhaar, passport, or driver's license.
Educational Verification: Verifying degrees, diplomas, and certificates, especially due to the prevalence of fake universities.
Employment History: Checking past job roles, responsibilities, and reasons for leaving to ensure the candidate's experience aligns with their claims.
Criminal Record Check: Screening for any criminal records or pending cases to ensure workplace safety.
Address Verification: Confirming the accuracy of the candidate’s residential address.
Reference Checks: Gathering insights from previous employers or colleagues about the candidate’s work ethic and performance.
Credit History Check: Assessing financial responsibility, particularly for roles involving financial tasks.
Drug and Alcohol Screening: Testing for substances, crucial for safety-sensitive positions.
Professional License Verification: Verifying necessary professional licenses, such as medical or driving permits.
Social Media Screening: Reviewing the candidate’s online behavior to ensure it aligns with company values.

Employee Background Verification Process

‍The background check process typically begins with obtaining written consent from the candidate. After consent is secured, relevant information is collected, including personal details, employment and education history, credit history, and criminal records. This information is then verified using public records, private databases, and references. The entire process usually takes a few days to a few weeks, depending on the complexity of the checks and the information sources.

How Gloroots Can Help

‍When considering hiring employees in India, partnering with a reliable Employer of Record (EOR) like Gloroots can streamline the background check process. Gloroots offers expertise in local employment laws and regulations, ensuring that background checks are conducted ethically and compliantly. Our team of local experts can assist you in obtaining candidate consent, collecting and verifying information, and interpreting background check results accurately. By leveraging Gloroots’ comprehensive background check solutions, you can confidently hire qualified candidates while safeguarding your company’s interests.

Employment Laws You Must Know Before Hiring in India

1. Minimum wages in India

The Minimum Wages Act, 1948 sets minimum wages for various categories of workers in different industries. Employers must pay employees the specified minimum wage under this law within seven days from the end of the wage period. The wage period should not exceed one month. Also, employers must provide employees with a payslip containing the wages paid and the deductions made.

2. Payroll contributions and deductions

Like many countries, India’s labor laws mandate employers to make statutory contributions on behalf of the employee or in addition to the employee’s contributions. Below is the list of payroll contributions employees must make:

Provident fund: Employers with 20 or more employees must contribute 12% of the employee's basic salary and dearness allowance towards EPF (Provident Fund).
Professional Tax: Professional Tax is a state-level tax levied on salaried individuals and professionals. Employers must deduct professional tax from their employees' salaries and deposit it with the state government.
Income Tax: Employers must deduct income tax from their employees' salaries under the Income Tax Act, 1961. The tax deducted depends on the employee's salary and other factors such as exemptions, deductions, and investments.

3. Maternity leaves

The Maternity Benefit Act, 1961 provides maternity leave and other benefits for female employees. It specifies the duration of maternity leave, the conditions for eligibility, and the benefits that must be provided. During the 26 weeks of maternity leave, women employees are entitled to pay equal to the average daily wage earned by them in the 3 months preceding their maternity leave. This pay is subject to a maximum limit set by the central government.

The Cost of Hiring in India

Ensure to include the following expenditures to figure out/determine the true cost of each new employee.

These expenses could include the following:

Indian entity registration costs
Employment agency expenses - if you decide to outsource
The expense of organizing or going to hiring events
Job advertisem*nt costs
Hiring manager travel expenses for going to India
New employee relocation fees
Third-party background check fees

The Process of Hiring in India

Whether you start your own business or work with an EOR, you must be aware of the hiring procedure in India.

1. Publish Ads on LinkedIn

If you're seeking remote employees in India, it is preferable to post job openings on LinkedIn or online job portals like Indeed, WorkIndia, and others. When creating your ad, make sure to cover the following points:

2. Review Applications

Whether you are hiring full-time employees or independent contractors in India, judge candidates based on their skills, experience, and business knowledge. Before advancing candidates to the next level of the hiring process, consider sending them an assessment task. This task can test the skills required for the job and prove their abilities.

3. Draft Employment Contracts

Conduct interviews online if you don't have an office in India. Consider the different time zones and select an interview time convenient for all parties. Make job offers to qualified applicants after the interview. Given the complexity and ambiguity of India's employment rules, drafting a thorough employment contract is crucial. You must outline all the requirements and conditions pertaining to the job to ensure that your staff members understand their rights. Provide relevant details, such as pay, perks, and other allowances. Ensure the employee reviews the contract and include termination procedures as well.

4. Onboard the Employee

Once you have your new hires, you must complete the onboarding procedure. This is crucial since your new recruit needs to know all the specifics of your workplace culture and rules. The onboarding procedure typically includes an introduction to the workforce, the workflow cadence, and job-specific training (if required).

Business culture in India

The following points shed light on the business culture and India and what sets it apart:

Employers must communicate job expectations and responsibilities clearly to their employees.
Senior management makes most decisions. The leadership team takes accountability for decisions that impact the business long-term.
Salary inflation has been substantial. In 2023, employees' salaries are anticipated to increase by 10.3% compared to 10.6% in 2022. The increased employee attrition in the tech sector has prompted employers to attract and retain talent with salary increases and bonuses. Inflation has also impacted employee salaries greatly.
To attract and keep employees, offering a fantastic workplace culture that includes benefits like working from home, a robust insurance plan and a pleasant working environment is important.

Job Market in India

It is safe to say that the hiring outlook in India is promising. While companies in other regions are slowing recruitment, demand for Indian talent is growing – 46% of youth are considered employable, mostly in the technology and engineering sectors.

Besides, January 2023 saw a 2% year-on-year (YoY) increase in job opportunities in non-IT sectors. Experts reveal that sectors like Insurance, Oil & Gas, Banking, Hospitality, Real Estate, BPO, Automobile, and Healthcare showed financial resilience amid recession fears and inflationary headwinds.

Manpower Group found in its survey that almost 45% of Indian employers said they would hire more people in Q1FY24. White-collar jobs recorded a 5% month-on-month surge, with domestic employers focusing on their growth story.

India Remote Hiring Trends

749 million Indians have access to high-speed internet. This number is anticipated to increase to 900 million in the next five years. With lockdowns catalyzing the adoption of remote work, India’s broadband penetration has been higher than in many countries, and India’s workforce has quickly adapted to remote work.

Remote working is the preferred mode of employment for 82% of Indian employees, reports the Times of India. 64% feel they are more productive when working remotely. In light of the shift toward remote work, co-working spaces have doubled since 2019. Before the pandemic, India's flexible office spaces market spanned 30 million sq. ft with 471,782 seats. The market shrunk to 20 million sq. ft with 312,990 seats in 2020 but has now impressively grown to 43.4 million sq. ft with over 679,760 seats.

Here’s how Indian employees feel about working remotely:

Employers are increasingly embracing remote hiring, with 47% of tech companies in India using online assessment tools to screen talent.
44% of remote employees feel they are more laid-back, mentally relaxed, and have a better work-life balance. Employees credit this to the flexibility in choices of venue and timings, which have made integrating professional and personal work easier.
The Great Mid-size Workplaces 2022 report reveals that organizations witness reduced burnout among remote employees.

Top sectors to hire from in India

India's economy is growing swiftly because of its diverse range of industries. Here is a list of emerging industries with the most employment potential in 2023:

1. Information technology

The rapid expansion of the IT and technology sectors in India and abroad has opened up a wide range of job options for qualified professionals. Due to the growing demand for digital transformation and automation, a skilled workforce is needed in data analysis, cybersecurity, cloud computing, and software development.

2. Medical and health services

One of the sectors with the quickest growth rates in India and globally is healthcare. As the population ages and the demand for medical services rises, there is a rising demand for competent workers in professions like nursing, nursing, and medical assistants.

3. Sustainability and clean energy

Over the coming years, the renewable energy sector will expand significantly as sustainability and reducing carbon emissions gain importance. Its expansion will make it feasible to create jobs in generating renewable energy, energy storage, and energy efficiency.

4. Machine Learning and Artificial Intelligence

Businesses and consumers are paying attention to emerging industries like artificial intelligence and machine learning. Businesses like Google, Amazon, and Microsoft are investing in these technologies and creating job opportunities for experienced industry professionals. These technologies have the power to fundamentally alter several industries, including finance, logistics, healthcare, and transportation.

5. Data Science, Data Analytics, and Big Data

In 2023, emerging industries like data analytics, data science, and big data are expected to expand and present various job opportunities. Google, Amazon, Microsoft, IBM, Oracle, SAS, and Salesforce are some of the top firms in these fields.

They offer a range of careers, including data analysts, data scientists, and big data engineers. The demand for qualified expertise in these sectors will increase as IT firms depend heavily on data-driven insights to make strategic decisions. Other companies, such as Adobe, Tableau, and Splunk, also offer jobs in big data analytics.

Hire Indian employees compliantly with Gloroots

Hiring in India is complex due to compliance, HR processes, benefits administration, and taxes. In such cases, it is wiser to partner with an Employer of Record like Gloroots to onboard remote Indian talent quickly and compliantly.

Gloroots’ EOR platform helps onboard a candidate within a day so that you can kickstart your operations as soon as possible. Gloroots’ speed and expertise in local and global compliance ensure you comply with local employment laws.

The platform allows companies of all sizes to seamlessly manage payroll for their entire team in a single click. Employers can generate invoices, manage mandatory benefits, and pay taxes hassle-free. With Gloroots, you can avoid all the heavy lifting of setting up a local entity and skip straight to onboarding your candidates to develop a fully remote team.

For more information on our platform and assistance, connect with us.

FAQs

How much does it cost to hire an employee in India?

Payroll costs in India include basic salary, dearness allowances, PF contributions, state-level taxes, and cess. Besides payroll costs, other hiring expenses include but aren't limited to advertising costs, joining bonuses, and onboarding costs. Employers should also note that hiring costs depend on skill set, work experience, and location.

Where can I hire employees from India?

Cities such as Bangalore, Chennai, Hyderabad, Delhi Mumbai should fill your talent pipeline, especially if you are looking for tech talent. Employers use tactics such as campus recruitment, job fairs, and walk-in recruitment to hire candidates in these cities. Companies can look for candidates through online job portals. Indeed, Naukri and Linkedin are some popular sites.

How do companies recruit employees in India?

Companies identify talent using online ads and social media posts. Depending on the organization's goals, budget, and needs, onboarding can be done via a local entity or an EOR partner.

What is an employee’s minimum salary in India?

According to the Ministry of Labour,The Minimum Wages Act, 1948 and its subsequent amendments have set the minimum wage rate at INR 178 per day and INR 5340 per month. However, we advise employers to research the salary trends for the skills, experience, and job functions they seek.

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BASIS FOR COMPARISON	EMPLOYEE	INDEPENDENT CONTRACTOR
Nature of relationship	An employee is a worker hired by the employer to work on a regular basis in exchange for a fixed remuneration. There is an employer agreement in place.	A self-employed individual who performs services for another organization in exchange for fixed compensation is an independent contractor. There is a contract in place.
Work	Work is a key aspect of business operation	Work is temporary and not an integral part of business operation
Source of income	Salary	Proceeds from each project
Taxes	Employers have to pay and withhold relevant taxes, including income, social, and unemployment taxes for employees	No income taxes are withheld with the client company. Contractors will be responsible for all of the relevant taxes
Benefits	Most employers pay for and provide benefits like health care, disability, paid leave, and retirement for their employees.	Contractors have to pay for their own benefits like health care and retirement.
Training	Employees receive training for performing services in a particular manner.	Contractors do not receive any training from the client company.
Independence	Works under the control and direction of an employer.	Works independently.
Management Oversight	The employer manages day-to-day work	Only the result of work is managed, not what work is done or how it's done
Service Loyalty	Service is provided to one company during a particular period of time	Service is often provided to multiple clients simultaneously
Expenses	Employers are responsible for reimbursing work expenses incurred	Self-responsible for work expenses, like device purchase, software purchase, etc., and may not receive reimbursem*nt from the client company
Termination	In most cases, severance pay and a termination notice are required before terminating an employee; regulations vary by country.	A contractor can often be terminated at any time.

How to hire Employees in India - A Complete Guide | Gloroots (2024)