Staffing in India: Key Highlights for Foreign Entities!
The consulting industry in India is a rapidly growing sector, with a CAGR of 30%. The industry is worth up to $1.4 billion and is expected to reach $2.1 billion by 2025. The key players in the consulting industry in India include some of the multinationals, however, Karma Global has upped its ante with loads of consulting work carried out in the IT, financial and regulatory services sectors.
Karma Global, a Leading Consulting Firm with Operations in U.K, U.S. Canada, Middle East and South East Asia, Specialises in Areas Like Staffing, On-boarding, payroll, facility management, curbing regulatory risk, auditing and abiding by all labour law related compliance on PAN basis.
Staffing in India: Key Highlights for Foreign Entities!
In over 95% of staff employed by abroad firms operating in India are hired locally. India has a huge talent pool with basic skills for highly skilled individuals to choose from.
However, the size of India and its workforce, combined with cultural differences and attitudes to employment, can make it difficult to find the right staff for your business. In particular, with the growing number of international companies competing for talent, it can be challenging to find experienced senior executives.
Applicability of Indian employment and labour laws
The applicability of Indian employment and labour laws is often one of the most significant concerns for foreign entities looking to hire India-based personnel. Such laws in India have territorial application limited to India, or part thereof, and are designed in such a manner that they can secure the interests of the workforce in the country. For this reason, several of these laws entail registration, return filing, and local facility inspection, where the employer’s presence in India is required.
Therefore, these labour laws do not apply to an entity based outside of India, such as a foreign company or other corporate body, if the entity does not have any establishment, office, subsidiary or joint venture in India.
To streamline labour laws and improve the business environment in India, the Government of India has introduced four labour codes, consolidating around 29 labour laws. While these codes have received parliamentary approval and presidential assent, they await implementation through an official notification from the central government. Until that notification is issued, the existing labour laws will remain in effect.
Eligibility to hire in India
There are two primary avenues: establishing the company as an employer or partnering with an Employer of Record (EOR), often referred to as a professional employment organization (PEO).
By choosing to work with an EOR, a company gains immediate access to all the necessary infrastructure for hiring employees in India. EORs are well-versed in Indian employment laws and can assist in structuring competitive salary and benefits packages. This approach also mitigates the risk of non-compliance.
The alternative option is for the company to set up its own branch or subsidiary in India, taking charge of hiring and other HR responsibilities internally. To establish a subsidiary in India, one must start by researching industry-specific regulations. Most international companies opting for a subsidiary structure in India typically choose between a private or public limited liability company.
To initiate the subsidiary setup and commence hiring in India, the following prerequisites are essential:
- Director Identification Number (DIN)
- Digital Signature Certificate (DSC)
- Business name approved by the Registrar of Companies
- Memorandum and Articles of Association
- Incorporation application
- Certificate to commence operations
- Company seal
- Permanent Account Number (PAN)
- Employees’ Provident Fund Organization filing
- Value-added tax (VAT) registration
- Medical insurance application
- Drafting Employment Contract
- Digital HR Administration
- Salary and Remuneration
- Taxes and Social Security Contributions
- Payment of Gratuity
- Annual Bonuses
- Maternity and Paternity Leave
- Prevention of Sexual Harassment in the Workplace
Proprietary blog of Karma Global
Collated and Compiled by the internal staff of Karma Global with the knowledge and expertise that they possess, besides adaptation, illustration, derivation, transformation, collection and auto generation for its monthly newsletter Issue 18 of December 2023 and in case of specific or general information or compliance updates for that matter, kindly reach out to the Marketing Team – kush@karmamgmt.com / yashika@karmamgmt.com