India PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in India to companies willing to join the Indian market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in India.  However, our solution allows you to get started in India in a few days, allowing you to save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

India fast facts

Population, million: 1,380,004,385
Land area: 3.287 km²
Capital: New Delhi
Local currency: Indian rupee (₨)

GDP per capita:$ 1900.00
GDP in currency:$ 2610.00 billion

Laws applicable to foreign nationals

The extent Acts dealing with entry, stay and exit of foreign nationals in the country are:

• Passport (Entry into India) Act, 1920
• Foreigners Act, 1946
• Registration of Foreigners Act, 1939

Indicate the legislative acts and other regulations that govern the relations between employer and employee

• The (federal) Industrial Employment (Standing Orders) Act 1946 
• Contract Labour (Regulation and Abolition) Act 1970
• Minimum Wages Act 1948 
• Workmen’s Compensation Act 1923 
• Employees’ Provident Fund and Miscellaneous Provisions Act 1952 
• Maternity Benefit Act 1961
• Industrial Disputes Act 1947

Indian employment law is mainly federal in nature, most states have a Shops and Establishments Act. These statutes are similar, but not identical. Further, some states have been permitted to make amendments to central laws, with which are thus applicable in a different manner in such states.

Hiring, Negotiating and Doing Business in India

Necessity of written employment contract

Except in states which require an appointment order, Indian law does not explicitly require that an employment contract be in writing, although this is the typical practice followed by most employers.

Where an employment contract is written, it will usually include the following:

• The employee’s position and duties.
• Remuneration including other benefits such as bonus, provident fund contributions, and so on.
• Working hours, holidays and leave provisions.
• Term of employment (where applicable) and termination provisions.
• Provisions for dispute resolution in relation to key employees.

Different forms of engagement: employment, contracting, work with private entrepreneur

Collective agreements are allowed by the law. Under Indian law, a refusal to bargain collectively in good faith with a recognized trade union is an unfair labour practice by the employer.

India Employment Contract

Types of employment agreements

Fixed-term agreements, – any limitations, such as max duration or number of fixed-term agreements.

There are special rules that apply to employees falling within the definition of “workman” under the ID Act. Where an employer wishes to change the conditions of employment (for example, wages, working hours and so on) of an employee who falls within the definition of a workman, the employer must give either 21 or 42 days’ notice of the change in the prescribed form (the length of notice depends on which jurisdiction in India the employee is located in). The employee can then either agree to the change, or object to it and raise an industrial dispute. Where an objection is raised, the dispute must be resolved by the relevant tribunal and the change cannot be made until the dispute is resolved.

For employees not covered by the ID Act, the employment contract will determine whether or not unilateral changes can be made by the employer.

India working hours

The normal daily hour limits range from between eight to nine hours, and the usual weekly limit is 48 hours. There are laws that restrict women from working at night (between 8:00pm and 6:00am). Some states also have a maximum number of hours of overtime that can be worked. 

Most state laws provide for a break of 30 to 60 minutes after four to five hours of work. In practice, it is typical to provide a one-hour lunch break in an eight-hour day. 

Overtime

Overtime is usually calculated at twice the rate of normal wages. State law defines what the term ‘wages’ covers; this typically includes basic wages plus normal allowances, but excludes any bonus component. 

There are no exemptions from paying overtime. However, the overtime provisions are seldom observed 

– generally, companies do not pay overtime when employees stay late to complete their work. It is recommended that employers pay overtime at least when employees are required by the nature of the assignment to work overtime – for example, call center employees.

Vacation leave in India

This varies from state to state, but is generally from 12 to 21 days. Most states prescribe up to 10 days of sick leave and some states prescribe another entitlement of up to 10 days of casual leave. In addition, most states prescribe about 10 days of public holidays; four to five of these are mandatory national and state holidays, while the remainder are chosen by the employer from a larger list provided by the state.
Some companies follow a policy of no encashment for unused vacations. It means that an employee should use vacation days during the year, otherwise heshe will lose those paid vacation days and no additional payment will be made in case of contact termination.
Further, the Factories Act provides that every adult worker who has worked in a factory for at least 240 days in a calendar year is entitled to one day’s leave with wages for every 20 days of work.

India Maternity Leave

Most states prescribe sick leave of up to 12 days. Sick leave generally cannot be carried forward to the following year. In some states, sick leave for more than a few days entitles the employer to request a doctor’s certificate.

No specific legislation relates to family leave. Women are entitled to between 12 and 26 weeks of maternity leave, depending on the number of children a woman has, where the woman employee has worked for 80 days in the 12 months preceding her delivery date. Further, women are entitled to between two and six weeks of leave in specified cases, such as miscarriage, medical termination of pregnancy or tubectomy. An additional one month’s leave may be available in case of any illness relating to either the delivery of a child or any of the aforementioned circumstances.

There are no provisions for paternity leave in the private sector under Indian law as yet, though a Paternity Benefits Bill 2017 has recently been drafted. Employers can voluntarily grant paternity leave if they wish.

Key amendments to law in recent months include a substantial change to the Maternity Benefit Act 1961 through the Maternity Benefit (Amendment) Act 2016. Key features of this amendment include:

• an increase in paid time off for eligible female employees from 12 weeks to 26 weeks in case a female employee has fewer than two children. If she has two or more children, she is entitled to 12 weeks’ leave;
• the introduction of the concepts of a ‘commissioning mother’ and an ‘adopting mother’, which widens the scope of the law. Such mothers are entitled to 12 weeks’ leave;
• the option to work from home once the paid maternity leave period has ended, based on an agreement with the employer; and
• requiring an establishment with 50 or more employees to set up a crèche facility.

Overall, the amendments are progressive in nature. From an employer’s perspective, there will be greater financial implications due to the increased maternity leave payment and also the benefits to be paid to the new categories of eligible female employees.

Further, a woman suffering from an illness arising out of pregnancy, delivery, premature birth, miscarriage, medical termination of pregnancy or a tubectomy operation is entitled to leave with payment of maternity benefit for an additional one-month period. A medical bonus of INR3,500 will also be provided to these employees and they are entitled to certain prescribed nursing breaks.

Parental leaves

Indian employment laws do not provide for paternity leave.  However, as good HR practice, some organizations allow their employees paternity leave. 

India Severance Laws

In case of termination of employment for reasons other than misconduct, employees have to be provided prior notice of termination or wages in lieu thereof.  The minimum notice period is stipulated under the ID Act and applicable S&E Act and is ordinarily 1 month.  A longer period of notice can be prescribed under the employment contract.

Indian employment law does not recognise an “at-will” employment. Employment may be terminated only for a reasonable cause or on account of employee misconduct. Employee rights pertaining to termination of employment are contained under the ID Act, state specific S&E Acts, standing orders, and the employment contract.

The ID Act stipulates that a workman who has been in continuous service for at least one year (defined to mean 240 days) may be terminated only if the workman has been:

• given at least one month’s notice in writing indicating the reasons for retrenchment (terminology used in the ID Act for termination of employment) and the period of notice has expired, or the workman has been paid wages in lieu of such notice; 
• paid retrenchment compensation (severance) equivalent to 15 days’ average pay for every completed year of continuous service or any part thereof in excess of six months.

If the termination of employment is in an ‘industrial establishment’, defined under the ID Act to be a factory, mine or plantation employing at least 100 workmen, the employer has an obligation to provide a minimum notice of three months or wages in lieu thereof. The above requirements are in addition to notifying or obtaining prior government approval for termination, as the case may be.

The ID Act also prescribes the last-in-first-out process to be followed at the time of retrenching employees, i.e., where any workman belonging to a particular category of workmen in the establishment is to be terminated, except  in case of any agreement between the employer and the workman in that behalf; or  for reasons to be recorded by the employer in writing, the employer should ordinarily retrench the workman who was the last person to be employed in that category. Further, where workmen are retrenched and the employer proposes to recruit, the employer is required to provide an opportunity to the retrenched workmen to offer themselves for re-employment and such workmen are to be given a preference over others.
Employment can be terminated on grounds of misconduct, with immediate effect, without providing any notice or wages in lieu of notice. The act of misconduct is to be established in a disciplinary enquiry to be held by the employer in accordance with the principles of natural justice.

India Tax

The employer and employee are obligated to contribute the Employees Provident Fund (EPF), which is a mandatory savings scheme towards retirement benefits and pension. Employees contribute 12% of their salary to this fund, while employers contribute 3.67%. Employers contribute an additional 9.94% to other social insurances, equaling a total employer contribution of 13.61% of the employee’s base salary. This percentage is based on basic pay and does not include the allowances. This does not need to be negotiated with the candidate and is included in the estimated social security costs provided by GP.

Health Insurance Benefits in India

Health Insurance in India is a mixture of public and private insurance. Some candidates may request an allowance for coverage. We recommend paying a taxable allowance in the amount of US$200 to US$400 a year to cover the cost of a private medical plan if you would like to offer supplementary benefits.

Additional Benefits in India

Many employers in India also provide supplementary insurances. Globalization Partners can arrange supplementary insurances for your employees in India as part of our service offering.

India Holidays

Employees receive 10 paid public holidays. In India the holidays vary by state (there are 30 different states), religion, and local custom. Therefore, the government does not stipulate what days the employee have to use as a holiday, but rather allows them to allocate the 10 public holidays as they see fit. have different holidays. does not need to be negotiated.

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.