In India, a company’s ability to swiftly create an entity, complete paperwork, or lease office space does not necessarily indicate its ability to expand. The speed at which it can start functioning defines it. There are several opportunities for international businesses looking to hire people from India. India offers access to one of the most skilled talent pools in the world, a developed service ecosystem, and a market that will progressively impact decisions about global product and delivery. However, hesitancy stems from a lack of knowledge about legislation and the perceived difficulty of establishing a local business.
Companies are hiring through an employer of record in India, which enables them to add workers to their team without physically incorporating them, helping overcome this reluctance.
What is an Employer of Record in India?
An Employer of Record in India will assume full legal employer status for the Indian team members. The EOR will sign employment contracts on behalf of the company, handle the HR functions, and assume full responsibility for compliance with the Indian labour laws. This means that with an EOR, you can hire employees in India without an entity.
An EOR will take complete responsibility for employing your staff in India. You only decide who to hire, what are the tasks they would have to perform, and how much to pay them. The EOR will then handle everything else, which includes employment contracts, payroll, taxes, benefits, and legal compliance.Because the EOR would be the legal employer, they would be responsible for complying with Indian labor laws and would provide the highest level of protection against compliance risks.
Why use an EOR for hiring in India?
An EOR will officially hire your employees via its own company in India. This means they will take full responsibility regarding the legal issues. Your company will not be the official employer; hence, the EOR will handle all compliance-related matters.
Since the EOR will already have a presence in India, they can get new employees onboarded quickly, sometimes even within days. They will take care of everything, ranging from taxes, payroll, benefits, provident fund, and all of the filings you will have to carry out.
EOR experts will stay on top of the challenges in the law, so you would not have to. You won’t be required to set up an office or hire local HR staff. This will save you time and money. When you have questions, you would just have to speak to your EOR. This makes everything simpler and helps you to focus on your business.
How does the EOR model simplify the onboarding and payroll process?
Working with a trusted EOR partner will significantly remove all the usual administrative and compliance-related hurdles that delay international hiring. An EOR simplifies hiring in the following ways:
- Compliance with labor law:
The labor laws in India are governed by a combination of acts, such as the Employees Provident Funds and Miscellaneous Provisions Act, 1952, and the Payment of Gratuity Act, 1972, as well as state-specific laws, such as the Shops and Establishments Acts. The EOR will ensure that every employee is hired under a contract that adheres to both local and national laws. This covers:
- Statutory minimum wages: Minimum wages vary from state to state, industry to industry, and skill level to skill level.
- Leave entitlement: EOR will handle all leave entitlements, including statutory requirements for annual and sick leaves.
- Working hours: The usual working hours in India are 9 hours per day or 48 hours per week, with mandatory rest periods.
- Termination process: Ensure compliance with the required notice period. Usually, it takes 30-90 days for most companies.
- Mandatory benefits and social security:
If you are hiring someone from India, managing the statutory contributions can be a heavy administrative burden. The EOR will handle registration and ensure the regular remittance of employees’ mandatory social security contributions.
- Tax withholding and payroll:
The EOR will be responsible for running compliant payroll in Indian rupees and for handling all income tax withholding.
- TDS (tax deducted at source): The EOR is responsible for correctly calculating and deducting income tax from the employee’s salary and remitting it to the Indian tax authorities. They also provide the employee with Form 16 for their annual tax filing.
- Employee tax filing: Indian employees will usually file their own tax returns by July 31 of each financial year if their income exceeds the basic exemption limit.
Conclusion:
With the correct hiring strategy, growing teams in India without creating a local organization is now simpler and more effective. Managing employment, payroll, and compliance domestically can be difficult and time-consuming, even though India offers access to a sizable, competent, and affordable workforce. Companies can hire and enroll workers more quickly, ensure complete compliance with local labor laws, and avoid the costs and administrative complexity of entity setup by collaborating with an Employer of Record.
