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Introduction to employment in India 

Finding top talent is challenging, but with India’s astounding population of over 1.4 billion people, there is no shortage of top-tier talent in the Asian nation. As the second-largest country in the world by population and the second-largest English-speaking country only after the United States, India is home to many tech talent and a hub for remote teams. 

While the South Asian country boasts of a vast pool of highly skilled tech talent, professional managers, and an unskilled workforce, India’s employment law is heavily bureaucratic with several complex requirements. As a result, employment in India can be a challenging and highly complex endeavor. However, with the right information and partnering with a Global Employment and Payroll Platform, organizations can hire talent and build remote teams in India with no hassles.

To know more about building a remote team in India, click here.

Types of employment in India

As the employment market continues to expand, there are different kinds of workers in a typical organization. Many organizations have employees with different legal responsibilities guiding their operations. In India, workers are broadly classified into two major employment categories - employees and contractors.

Type of employees

Full-time employees

More than 59% of Indians are full-time employees. As India's most common type of employment, full-time employees are entitled to several benefits like statutory leaves, pensions, health insurance, and attractive company packages. A full-time employee in India is obligated to work for 40 hours per week. Employers are obligated to provide a rest period of at least 10 hours before returning to work. 

Part-time employees

Unlike the full-time employees, part-time employees work less than 40 hours and are paid by the hour. They are also not entitled to benefits. However, employers are obligated to pay the same taxes as they would for full-time employees.

Independent contractors

Independent contractors are self-employed workers in India and provide professional services for organizations for a fee. They are usually consultants and skilled workers that are not legally bound to any organization to work solely for them. Independent contractors are responsible for their taxes and are in charge of their work schedule. They are also referred to as freelancers.

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Employment components in India

The Employment components in India vary across industries and organizations. However, No matter how complex employment in India, some components are universal in all organizations and are mostly applicable to full-time employees only. Some of these employment components are:

Statutory work hours in India

According to the Factories Act of 1948, every working adult (a person above the age of 18) cannot work for an organization for more than 48 hours in a week and not more than 9 hours in a day.

Public holidays in India

The public holidays in India are as follows:

  • Republic day - 26th January
  • Rama Navami - 10th April
  • Ambedkar Jayanti - 14th April
  • Good Friday - 15th April
  • Eid al-Fitr - 3rd May*
  • Eid al-Adha - 10th July*
  • Indian Independence Day - 15th August
  • Gandhi Jayanti - 2nd October
  • Dussehra - 5th October
  • Prophet’s birthday - 8th to 9th October*
  • Diwali - 24th October
  • Christmas day - 25th December

*public holidays start or end in the evening

Minimum wage in India

India offers the most competitive labor cost in Asia, with the national minimum wage pegged at INR 176 (US$2.80) per day and INR 4,756 (US$62) monthly.

Employment laws in India

The Indian constitution is the main and supreme law that governs the rights and conduct of Indian citizens. The constitution ultimately protects the rights of the people of India. It serves as the bedrock of all regulations in India, including the laws and regulations that govern employment in India.

The employment laws in India govern the ways businesses are run in India, protect employees’ rights, and provide regulations for the remuneration of statutory deductions.

Major employment laws in India

The following are laws that govern employment in India:

  • The Payment of Wages Act, 1936
  • The Payment of Bonus Act, 1935
  • The Trade Unions Act, 1926
  • The Employees Compensation (Amendment) Act, 2017
  • The Minimum Wages Act, 1948
  • The Industrial Disputes Act, 1947
  • The Industrial Employment (Standing Orders) Act, 1946
  • The Employees’ State Insurance Act, 1948
  • The Employees’ Provident Funds and Miscellaneous Provisions Act, 1956
  • The Maternity Benefit (Amendment) Act, 2017
  • The Beedi and Cigar Workers (Conditions of Employment) Act, 1966
  • The Payment of Gratuity Act, 1972
  • The Contract Labour (Regulation and Abolition) Act, 1970
  • The Equal Remuneration Act, 196
  • The Sales Promotion Employees Act, 1976
  • The Child and Adolescent Labour (Prohibition and Regulation) Act, 1986
  • The Inter-State Migrant Workmen (Regulations of Employment and Conditions of Service) Act, 1976
  • The Unorganized Workers’ Social Security Act, 2008.

Employment contracts in India

There are four main types of employment contracts in India.

Permanent Employment Contracts

A permanent employment contract is the most common employment document in India. It is given to employees working regular hours, either full-time or part-time. When an organization provides a permanent contract, it usually has no stipulated end date. It is valid until either the organization or the employee terminates the contract. 

Fixed-Term/Open-Ended Contracts

Fixed-term contracts are usually drafted for independent contractors. It has a stipulated end date, and the document outlines the start and end date, salary details, and the rights the independent contractors will be entitled to while working for the employer. 

Casual Employment Contracts

A casual employment contract is a mix of a permanent contract and a fixed-term employment contract. It looks like a permanent contract in that the working hours are fixed. It is also similar to the fixed-term contract in that there is an agreed duration (or end date) for work. 

For instance, the contract could state that the employee works for 48 hours, but the employee is primarily in charge of determining the work hours. 

Zero-Hour Worker Contracts

A zero-hour work contract describes the employment contract where the organization is not required to provide a fixed number of working hours to the employee. This type of contract means the employee is not required to work solely for a particular employer.

Employment law compliance in India

Employment law compliances are specific terms that govern employment in India. As the workforce is a crucial arm of every organization, it is required that employees’ fundamental rights are protected from exploitation from the employers that benefit from the employees’ services. 

The employment law compliance in India includes the minimum wages act, contract labor act, etc. These laws and regulations are crafted to protect employees and ensure employment in India are without discrepancies.

To ensure compliance with the employment laws in India, partnering with a Global Employment and Payroll Platform like Skuad is the best way to go. To know more about Skuad, book a demo today.

Employment benefits in India

Employment in India guarantees some statutory benefits to all employees working in the country. These benefits may vary across companies, but there exist a few mandatory benefits that every organization must provide to its employees according to India’s employment laws.

Employment benefits in India include

Social security

India’s social security is not as substantial as other developed countries. However, employers in India are required to contribute certain percentages of each employee’s salary towards the Employee’s State Insurance Act, Provident fund, Payment of Gratuity Act, etc.

Required leaves

Annual and holiday leave

The Shop and Establishment Act governs holiday and annual leave in India. In some Indian states, employees are entitled to annual leave after working for the organization for a specific period, usually three months to one year. 

Regarding the holiday leave, employers are required to close their business at least once a week, usually Sundays and on days that are public holidays.

Maternity and paternity leave

According to the Maternity Benefit Act, female employees who have worked in an organization for more than 80 days are entitled to maternity leave preceding the delivery date of their child. The leave spans three months or 12 weeks. During this leave period, the organization is obliged to pay the employee their full salary.

While the Indian law makes no provision for paternity leaves, organizations regularly provide leaves for male employees.

Sickness and disability leave

Organizations in India make provision for leave for their sick employees. However, it does not come with any compensation. The Indian employment law makes no provision for disability leave.

Pensions

Employees that are within the scope of the Employees’ Provident Fund are entitled to monthly pension payments according to the rules of the pension scheme.

For employment in India, it is essential to provide competitive benefits for employees. With Skuad’s Global Employment and Payroll Platform, you can provide Indian-specific benefit packages for your team. To know more, contact Skuad today.

Termination of employment

There are several grounds for termination of employment in India. These grounds include breach of employment contract, misconduct, resignation by an employee, layoffs, etc.

Collective dismissals

Collective dismissals of employees in India are permitted only in certain circumstances and upon fulfilling specific conditions. The two forms of collective dismissal are retrenchment and layoffs. 

Individual dismissals

Individual dismissals follow the conventional termination of employment in India. Organizations are entitled to dismiss employees based on a breach of the employment contract. If otherwise, the employer is required to provide a notice period of 1 to 3 months with the corresponding compensation.

Cost of hiring employees in India

According to PA2Recruit, the cost of hiring an employee in India is INR 15,000 (US$193). This cost covers Ad placements on job boards, onboarding and training, the employee’s gross salary and statutory benefits, and background verifications and checks.

While calculating the cost of employment in India can be challenging, Skuad offers an innovative solution to calculate the cost per hire easily. With Skuad’s salary calculator, you can instantly calculate the estimated total cost of employment in India and over 120 countries, including taxes and employer contributions.

To calculate the cost of hiring employees in India, click here.

Conclusion

Expanding into India, hiring talent, building a team, and the entire process of employment in India is an exciting and lucrative opportunity for any organization if done properly and in compliance with the Indian employment laws. Skuad’s Global Employment and Payroll Platform let you hire full-time employees and contractors in India without setting up a subsidiary. Skuad also helps with onboarding talent, paying employees, managing payroll, and ensuring compliance with Indian employment law.

Skuad handles your entire employment lifecycle so you can scale business operations in India compliantly, with less effort, and with an efficient HR administration.

To know more about Skuad, book a demo today.

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