Employer of Record in India | EOR India
What is an Employer of Record (EOR) in India?
An Employer of Record (EOR) in India is a third-party organization that acts as the legal employer for a company's employees in the country. The EOR takes on the responsibilities of hiring, onboarding, payroll management, and ensuring compliance with local labor laws and regulations. This allows companies to quickly and compliantly hire talent in India without establishing a legal entity.
What are the benefits of using Employer of Record services in India?
- Rapid market entry without establishing a legal entity
- Full compliance with Indian labor laws and regulations
- Cost-effective solution for hiring and managing employees
- Access to local expertise in employment practices and market conditions
- Simplified HR administration and payroll management
By partnering with an EOR, companies can focus on their core business operations while the EOR service takes care of all employment-related tasks, making it a convenient and cost-effective solution for expanding into the Indian market.
Hiring in India
How to Hire Employees in India?
Step 1: Determine Your Hiring Options
When expanding your workforce in India, the first crucial decision is choosing between contractors and full-time employees. This choice significantly impacts your approach to using an Employer of Record (EOR) in India or setting up your own entity.
Decide Between Contractors and Full-time Employees:
Full-time employees, hired through an employer of record service, offer stability, long-term commitment, and are easier to manage and train. However, they require benefits, have higher overhead costs, and are harder to terminate.
Contractors, on the other hand, offer specialized skills, flexibility, and lower costs as they don't receive benefits. But they have less company loyalty, require more time to manage, and pose a greater risk of misclassification penalties.
Employees are better for core, long-term roles. Contractors excel in short-term projects needing niche expertise.
The right choice depends on the role, length of engagement, desire for control, and budget. Carefully weigh the tradeoffs for your situation.
Click here to learn more: Remote Hiring in India: Independent Contractor vs EOR Employee Explained
Choose Between Setting Up a Legal Entity or Using an Employer of Record (EOR):
When a company decides to offer employment in India, they must choose between setting up a legal entity or working with an Employer of Record (EOR) provider.
Setting up an legal entity involves establishing a legal presence, registering the business, setting up offices, and complying with local labor laws. This approach provides full control but can be time-consuming, costly, and complex, especially for businesses unfamiliar with Indian regulations.
In contrast, partnering with an Employer of Record (EOR) provider like Wisemonk simplifies the process. The EOR acts as the legal employer, handling payroll, compliance, and employee benefits administration. For companies with an established presence in India, considering a PEO India service can further streamline HR operations and reduce administrative burdens. This allows businesses to focus on core activities while ensuring adherence to Indian labor laws.
EOR services offer benefits such as compliance assurance, cost-effectiveness, quick market entry, and risk mitigation. The EOR assumes legal responsibility for compliance and employment-related risks, protecting the hiring company from potential liabilities. Ultimately, the choice depends on the company's resources, timeline, and risk tolerance.
Click here to learn more: Detailed Comparison of Entity Establishment vs. Employer of Record (EOR)
| Criteria | Legal Entity | Employer of Record (EOR) | ||
|---|---|---|---|---|
| Time to go live |  |
2-3 Months |  |
1-2 Days |
| Costs up to 20 employees | |
Significant upfront costs for incorporation, legal fees, office space, and ongoing maintenance expenses | |
Fixed monthly amount per employee; more cost-effective for a smaller number of employees |
| Costs above 20 employees | |
Costs of maintaining a local entity can be more cost-effective in the long run compared to EOR fees | |
EOR costs can become higher as the headcount increases, as fees are charged per employee |
| Compliances | |
The company is responsible for ensuring compliance with all Indian laws, including labor laws, tax regulations, and statutory requirements, which can be complex and time-consuming | |
The EOR handles all aspects of compliance, including payroll taxes, benefits administration, and adherence to employment laws, reducing legal risks for the company |
| Foreign compliances | |
-Investor / Board approval required for setting up the legal entity -Annual reporting of subsidiary activities and financials to the parent company -Permanent establishment (PE) risks and tax implications in India -Compliance with regulations in the company's home country |
|
The EOR assumes responsibility for local compliance, allowing the company to focus on its core business activities |
| Capabilities needed | |
Setting up and managing a legal entity requires significant time, resources, and expertise in Indian laws, tax regulations, and HR practices | |
Partnering with an EOR allows companies to leverage their local expertise, networks, and capabilities in HR, payroll, and compliance, without the need to develop these in-house. |
Step 2: How to Choose the Best EOR?
When choosing an Employer of Record (EOR) in India, consider your hiring needs and long-term goals. If you're looking to establish a dedicated team in India, partnering with an India-exclusive EOR like Wisemonk is often the best choice, as they offer local expertise, on-the-ground presence, cost-effective solutions, and comprehensive services tailored to the Indian market.
If you have employees in multiple countries and want to streamline payroll and employee management, consider partnering with country-specific EOR providers like Wisemonk for India. While global EOR providers offer a single platform for managing international teams, they may lack the deep local expertise and networks that specialized EOR partners bring to the table.
To make an informed decision, evaluate your company's specific requirements and compare the offerings of different EOR providers.
We have written a comprehensive article comparing the top EOR players in India, which you can find at: Best Employer of Record (EOR) companies in India.
Step 3: How to hire and onboard your Indian Employees?
Welcoming new hires is a critical moment that shapes their first impressions and sets the tone for their employee experience. In India, a well-structured onboarding checklist ensures a smooth transition, compliance with local laws, and integration into the company culture.
Key steps include sending a detailed offer letter, completing necessary paperwork like tax forms and employment agreements, setting up payroll, providing equipment and access, and assigning a buddy.
The onboarding process should familiarize new hires with policies, organizational structure, and their role. By investing time in a comprehensive onboarding checklist, companies in India can boost employee engagement, productivity, and retention right from day one.
Click here to learn more: Detailed Onboarding Checklist for Remote Employees in India
Offer Letter & Employment letter for Employees in India
When hiring employees in India through an Employer of Record (EOR), who should send the offer letter - the client company or the EOR partner?
Both the client company and the EOR partner typically send offer letters. The client company sends an initial offer letter to secure the candidate, outlining key terms like position, compensation, and start date. The EOR then sends a second, more detailed offer letter that reiterates the job details and serves as a precursor to the formal employment contract.
Click here to learn more: Creating and Sending Job Offer Letters for Remote Employees in India
Onboarding Responsibilities: Your Company & EOR
What are the specific responsibilities of the client company and the EOR partner during the employee onboarding process in India?
The client company is responsible for conducting interviews, selecting candidates, determining salary and benefits, preparing necessary equipment and access, and providing a comprehensive onboarding plan.
The EOR partner handles background verification, drafts compliant employment contracts, collects necessary documents (ID proofs, tax forms), sets up payroll accounts, and ensures compliance with local labor laws and regulations.
Click here to learn more: Detailed Onboarding Checklist for Remote Employees in India
By leveraging the expertise of an EOR India service like Wisemonk, you can navigate the complexities of hiring in India while ensuring a smooth onboarding experience for your new employees. This approach combines your company's vision with the EOR's knowledge, creating an efficient and compliant hiring process.
Want to hire talent in India: Let's Talk
Step 4: Running Payroll
Running payroll in India involves several essential components to ensure employees are compensated accurately and on time. Key tasks include calculating gross salaries based on employment agreements, applying statutory deductions such as income tax (TDS), Provident Fund, and managing additional deductions like professional tax. The process also requires generating detailed pay slips that outline earnings and deductions, followed by the timely disbursement of salaries to employees' bank accounts.
Partnering with an Employer of Record (EOR) like Wisemonk simplifies the payroll process significantly. The EOR takes responsibility for all payroll calculations, ensuring compliance with Indian labor laws and tax regulations. They handle the complexities of statutory deductions and filings, generate comprehensive payslips, and ensure that salaries are paid promptly.
Payroll in India
Key components of payroll management in India include:
- Salary Structure: A typical salary structure consists of basic pay, allowances (such as HRA, LTA, and medical allowance), and statutory contributions like Provident Fund (PF) and Employee State Insurance (ESI). Companies must ensure that their salary structures comply with minimum wage laws and industry standards.
- Statutory Deductions: Employers are required to deduct and remit various statutory contributions from employee salaries, such as Provident Fund (PF), Employee State Insurance (ESI), Professional Tax, and Tax Deducted at Source (TDS). These deductions must be calculated accurately and deposited with the relevant authorities within the prescribed timelines to avoid penalties.
- Payroll Compliance: Companies must adhere to a plethora of labor laws and regulations, including the Payment of Wages Act, 1936, Minimum Wages Act, 1948, Payment of Bonus Act, 1965, and Payment of Gratuity Act, 1972. Non-compliance can result in legal consequences and financial penalties.
- Leave and Attendance Management: Tracking employee leaves and attendance is crucial for accurate payroll processing. Companies must maintain proper records and ensure that leave balances are correctly calculated and reflected in the payroll.
- Payroll Processing: The payroll process involves gathering inputs from various departments, validating data, calculating net pay after deductions, and disbursing salaries to employees. This process must be completed within the stipulated timelines and in compliance with all statutory requirements.
Click here to learn more: Statutory Compliance and Payroll for your EOR Employees in India
The payroll process in India typically involves three stages:
- Pre-payroll: Defining payroll policies, gathering employee data, and validating inputs.
- Actual payroll processing: Calculating gross salary, making deductions, and arriving at net pay.
- Post-payroll: Ensuring statutory compliance, maintaining payroll accounting, and disbursing salaries.
Many companies in India are partnering with specialized payroll service providers like Wisemonk to streamline payroll management and ensure compliance. Wisemonk offers comprehensive payroll solutions tailored to the unique needs of businesses operating in India. With their deep expertise in Indian labor laws and regulations, Wisemonk helps companies streamline payroll processes, ensure statutory compliance, and focus on core business activities, making it a preferred choice for navigating the complexities of payroll management in India.
Taxes in India
Taxes are a critical aspect of the Indian financial system, and employees in India are subject to various types of taxes. The primary taxes that employees need to be aware of are income tax, Tax Deducted at Source (TDS), and professional tax. Understanding these taxes and their respective brackets is essential for financial planning and compliance.
Income Tax
Income tax is a direct tax levied by the government on an individual's income. In India, the income tax rates for the financial year 2023-24 are based on a progressive tax system, where the tax rate increases as the taxable income increases.
India has two income tax thresholds commonly known as “Old” and “New” tax regimes.
The new tax regime has six different levels of tax rates. If you earn up to INR 300,000, you don’t have to pay any tax. For every additional INR 300,000 you earn, the tax rate goes up by 5%.
Surcharge for New Tax Regime:
- 10% if income exceeds INR 50 lakhs but not INR 1 crore
- 15% if income exceeds INR 1 crore but not INR 2 crore
- 25% if income exceeds INR 2 crore
In comparison, the old tax regime offers 4 levels of tax rates with a 0% tax rate for income of up to INR 250,000. It allows various deductions and exemptions. The common deductions include Section 80C (investments), HRA, LTA, and health insurance premiums. This is suitable for those with significant eligible investments and expenses.
Surcharge for Old Tax Regime:
- 10% if income exceeds INR 50 lakhs but not INR 1 crore
- 15% if income exceeds INR 1 crore but not INR 2 crore
- 25% if income exceeds INR 2 crore but not INR 5 crore
- 37% if income exceeds INR 5 crore
Additionally, a 4% Health and Education Cess is applied to the tax amount after adding surcharge in both regimes.
Moreover, employees have the flexibility to choose whether they want to go with the old or the new.
As an employer, you are responsible for calculating the income taxes based on every employee’s preferred tax regime and remit them accordingly.
By partnering with an Employer of Record (EOR) service like Wisemonk, companies can efficiently manage tax compliance and other employment-related responsibilities in India.
Tax Deducted at Source (TDS)
TDS is a mechanism where the tax is deducted at the source of income by the payer and deposited with the government. Employers are required to deduct TDS from their employees' salaries based on the applicable tax slab rates. The deducted amount is then remitted to the government on behalf of the employee.For example, if an employee's monthly taxable salary is ₹1,00,000, and their annual taxable income falls in the 30% tax bracket, the employer will deduct ₹30,000 (30% of ₹1,00,000) as TDS every month and remit it to the government.
Professional Tax
Professional tax is a tax levied by state governments on salaried individuals, professionals, and businesses. The tax rates and slabs vary from state to state. In most states, employers are responsible for deducting professional tax from their employees' salaries and remitting it to the state government.
For instance, in Maharashtra, the professional tax slabs for salaried individuals are:
- Up to ₹7,500 per month: Nil
- ₹7,501 to ₹10,000 per month: ₹175 per month
- Above ₹10,000 per month: ₹200 per month (maximum limit)
Deductions and Exemptions
The Indian tax system offers various deductions and exemptions that can help employees reduce their taxable income and, consequently, their tax liability. Some of the common deductions and exemptions include:
- Section 80C: Deductions up to ₹1,50,000 for investments in Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), life insurance premiums, and more.
- Section 80D: Deductions for health insurance premiums paid for self, spouse, children, and parents.
- House Rent Allowance (HRA): Exemption on a portion of the HRA received from the employer, subject to certain conditions.
- Leave Travel Allowance (LTA): Exemption on travel expenses incurred for self and family within India, subject to certain conditions.
- Standard Deduction: A flat deduction of ₹50,000 from the taxable salary income.
For example, if an employee invests ₹1,00,000 in PPF and pays ₹25,000 towards health insurance premiums, they can claim deductions of ₹1,25,000 under Sections 80C and 80D, respectively, thereby reducing their taxable income.
Provident Fund (PF):
PF is a retirement savings scheme mandated by the Employees' Provident Fund and Miscellaneous Provisions Act, 1952. It applies to establishments with 20 or more employees. Both the employer and employee contribute 12% of the employee's basic salary and dearness allowance towards the PF account. The employee's contribution is deducted from their salary, while the employer's contribution is in addition to the salary. PF contributions are eligible for tax deductions under Section 80C of the Income Tax Act. Employers must register with the EPFO and make monthly contributions.
Goods and Services Tax (GST):
GST is an indirect tax levied on the supply of goods and services in India. Companies providing services may be required to register for and pay GST if their annual turnover exceeds the prescribed threshold (₹20 lakhs in most states, ₹10 lakhs in special category states). GST rates vary based on the type of goods or services, with most services falling under the 18% tax bracket. Employers must ensure proper GST registration, invoicing, and filing of returns.
Employee State Insurance (ESI):
ESI is a self-financing social security and health insurance scheme for Indian workers. It is mandatory for establishments with 10 or more employees and applies to employees earning up to ₹21,000 per month. The employer contributes 3.25% of the employee's wages, while the employee contributes 0.75%. ESI provides various benefits such as medical care, sickness benefits, maternity benefits, and disability benefits. Employers must register with the ESIC and make timely contributions.
In conclusion, understanding the various taxes applicable to employees in India, along with the available deductions and exemptions, is crucial for effective tax planning and compliance. Employees should consult with tax professionals or use reliable tax calculation tools to determine their tax liability accurately and take advantage of the tax-saving opportunities provided by the Indian tax system.
Wisemonk's Support For Employee Tax Optimization
In the post-pandemic world of remote work, skilled professionals in India have exciting opportunities to work for foreign firms. However, a significant portion of their income is lost to taxes. Did you know that salary earned for services rendered in India is taxable, regardless of residential status or where payment is received? With the new tax regime, individuals earning above ₹15 lakhs per annum fall into the 30% bracket, meaning ₹30 of every ₹100 earned goes to income tax.
Wisemonk, as your Employer of Record (EOR) in India, acts as the legal employer, optimizing employee taxes and enhancing take-home pay. Our expert team handles complex tax regulations, statutory contributions, and compliance on your behalf. We provide personalized tax planning services, leveraging deductions, exemptions, and benefits under Indian laws. Partner with Wisemonk to ensure your employees receive maximum tax benefits while reducing liabilities and simplifying compliance.
We ensure your employees receive the maximum tax benefits available under Indian regulations.
Click here to learn more: Employee Tax Optimization in India
CTC Calculator for Hiring Employees in India
Looking to hire employees in India but unsure about the total cost?
Our fully loaded cost calculator makes it easy for you to estimate your expenses. Simply enter the gross salary of your potential employee, and our calculator will provide you with a comprehensive breakdown of the total cost, including our Employer of Record (EOR) fees. With this tool, you can make informed hiring decisions and budget effectively for your expansion into the Indian market. Try our fully loaded cost calculator now and take the first step towards building your world-class team in India.
*The gross annual salary of employee mentioned above doesn’t include the Employer Provident fund contribution of INR 1800 per month. The employer will pay this amount in addition to the salary mentioned above. Indian employment law mandates a monthly contribution of INR 1800 from both the employee and the employer.
**For the first 4 years of employment, Wisemonk manages the Gratuity fund on its own, without any additional cost to the client. As per Law, after the completion of 4.6 years of service, the employee can request the Gratuity bonus (equal to ~12.02% of employee's fourth year salary) from Wisemonk. The employee gets a tax rebate from Government of India for this amount. At the completion of 4 years, Wisemonk will invoice the aforementioned amount to the client, to pay it to the employee as Gratuity Bonus.
***Maximum allowable Flexible benefit deductions
- Under old tax regime: Rs 14,116 per month
- Under new tax regime: Rs 4816 per month
Leaves in India
In India, employee leave policies are governed by various labor laws, including the Shops and Establishments Act, the Factories Act, and state-specific regulations. These laws ensure that employees receive adequate time off for rest, relaxation, and personal needs, while also considering the operational requirements of businesses. Employers are required to maintain proper records of leave taken by employees and ensure that leave balances are correctly calculated and reflected in the payroll. Non-compliance with leave regulations can result in legal penalties and damage to the employer's reputation.
Standard Leave Policy in India
Types of Leaves in Indian employment laws:
Earned Leave (EL) or Privilege Leave
Employees are entitled to a minimum of 15 days of earned leave per year, accrued at 1.25 days per month. This leave can be carried forward and is often used for planned vacations or personal time off.
Casual Leave (CL)
Usually ranging from 7-10 days per year, casual leave is meant for unforeseen circumstances or short-term personal needs. It cannot be carried forward and is often used for emergencies or unexpected situations.
Sick Leave (SL)
Typically, employees are entitled to 12 days of sick leave annually, used for short-term illnesses. The Indian Shops and Establishment Act mandates up to 7 days of paid sick leave. Some organizations allow accumulation of unused sick leave.
Maternity Leave
As per the Maternity Benefit (Amendment) Act, 2017, female employees are entitled to 26 weeks of paid maternity leave. This includes 8 weeks of pre-natal and 18 weeks of post-natal leave, ensuring adequate time for new mothers.
Paternity Leave
While not statutorily required in the private sector, many progressive companies like Zomato offer paternity leave as a benefit. The duration varies, with some companies offering up to 26 weeks, matching maternity leave provisions.
Bereavement Leave
Offered on compassionate grounds for the death of a family member, bereavement leave is not mandated by law but is common practice. The duration varies across organizations, typically ranging from 3-5 days.
Marriage Leave
Some companies provide marriage leave for employees getting married or attending a family member's wedding. The duration and eligibility criteria for this leave type vary across organizations.
Sabbatical Leave
Granted at the employer's discretion, sabbatical leave allows employees to pursue higher education, take career breaks, or deal with family/health crises. There are no legal provisions for this leave, and policies vary widely among companies.
Employee Benefits in India
Employee benefits are a crucial aspect of the compensation package offered by companies in India. These benefits not only help attract and retain top talent but also contribute to employee well-being and job satisfaction. In India, employee benefits can be broadly categorized into statutory and supplementary benefits.
Statutory Benefits in India
Statutory benefits are mandated by various labor laws and are compulsory for employers to provide. Some key statutory benefits include:
- Employees' Provident Fund (EPF): Both employers and employees contribute 12% of the basic salary to this retirement savings scheme.
- Gratuity: Employees who have completed at least five years of service are entitled to gratuity, calculated as 15 days' salary for each completed year of service.
- Employees' State Insurance (ESI): This provides medical benefits to employees earning below a certain threshold. Employers contribute 3.25% of the salary, while employees contribute 0.75%.
- Maternity Leave: Female employees are entitled to 26 weeks of paid maternity leave under the Maternity Benefit Act.
Supplementary Benefits in India
In addition to statutory benefits, many companies offer supplementary benefits to enhance their employee value proposition. Common supplementary benefits include:
- Health Insurance: Group health insurance policies cover employees and their dependents for hospitalization and medical expenses.
- Life and Accident Insurance: Companies often provide term life insurance and accidental death and disability coverage.
- Retirement Benefits: Voluntary retirement savings schemes like the National Pension System (NPS) are gaining popularity.
- Flexible Work Arrangements: Many companies now offer remote work options and flexible schedules to promote work-life balance.
- Meal and Transportation Allowances: Employers may provide meal vouchers, subsidized cafeteria facilities, or transportation allowances.
- Wellness Programs: Some companies offer gym memberships, health check-ups, or wellness workshops to promote employee well-being.
Wisemonk's Flexible Benefits Plan for EOR Employees
Wisemonk offers a comprehensive Flexible Benefits Plan (FBP) that allows employees to customize their salary components according to their personal needs, resulting in significant tax savings. The plan includes a range of benefits such as meal cards, fuel allowances, gift cards, and reimbursements for telecom, attire, and books. Wisemonk's integrated payroll system simplifies the management of these benefits, making it easy for employees to avail tax savings of up to ₹40,000 annually.
For employers, the FBP helps increase employee satisfaction and retention without raising CTC. With a 100% compliant platform, Wisemonk's Flexible Benefits Plan offers a win-win solution for both employees and employers.
| Flexible Benefits Components | IT Section | Old Tax Regime | New Tax Regime | Annual Maximum Amount |
|---|---|---|---|---|
| Meal or Food Allowance | Section 10 | |
|
39,600 |
| Fuel Allowance | Section 17 | |
|
28,800 |
| Mobile and Internet | Section 17 | |
|
24,000 |
| Gift Wallet | Section 17 | |
|
5,000 |
| Attire/Apparel | Section 10 | |
|
36,000 |
| Books and Periodicals | Section 10 | |
|
36,000 |
| Total | 1,69,400 | |||
Terminations in India
Terminating employment in India involves different processes for contractors and full-time employees. While contractors typically have more flexible termination terms, employees are protected by various labor laws that govern notice periods and severance pay. This is to protect employee rights while allowing employers to manage their workforce effectively.
Notice Periods in India
According to the Industrial Disputes Act 1947 of India, employers are obligated to provide a notice period ranging from 30 to 90 days to employees who do not hold supervisory, administrative, or managerial positions as their primary roles. The notice period can be mutually agreed upon in the employment contract.
Severance Pay in India
Severance pay, also known as retrenchment compensation, is governed by the Industrial Disputes Act 1947 and the Payment of Gratuity Act 1972. It's mandatory for employees who have completed at least one year of continuous service. The minimum severance pay is calculated as 15 days' average pay for every completed year of continuous service (or any part thereof exceeding six months).
Key points:
- Eligibility: Employees with at least one year of continuous service
- Calculation: 15 days' average pay per year of service
- Gratuity: Additional payment for employees with 5+ years of service
- Variations: Actual package may vary based on company type and negotiations
- Taxation: Severance pay is taxable as per the Income Tax Act
While the law sets minimum requirements, many companies, especially in the private sector and MNCs, offer more generous severance packages to maintain goodwill and avoid potential disputes.
Types of Termination
Termination for Cause
This type of termination occurs when an employee is dismissed due to misconduct, poor performance, or violation of company policies. Employers must follow due process and provide sufficient evidence to support the termination.
Termination Without Cause
Also known as retrenchment, this occurs when an employee is let go due to reasons unrelated to their performance, such as economic downturns or organizational restructuring.
Collective Termination
This involves the termination of a group of employees, often due to closure of a business unit or significant downsizing. Special rules and regulations apply to collective terminations.
Voluntary Termination (Resignation)
When an employee chooses to leave the organization voluntarily, it is considered resignation rather than termination initiated by the employer.
What are the key steps involved in terminating employees in India?
1. Serve Notice Period:
In India, employees who have worked for at least one year are typically entitled to a one-month notice period before termination. However, this notice period can be mutually agreed upon in the employment contract. During the notice period, the employee continues to work and receive their regular salary and benefits. Alternatively, the employer may choose to pay the employee one month's salary in lieu of the notice period.
2. Termination for Cause:
In cases of serious misconduct, such as insubordination, fraud, or theft, an employer may choose to terminate an employee immediately without serving a notice period. However, the employer must follow proper disciplinary procedures and have strong evidence to justify the termination for cause. This may include conducting an investigation, issuing warnings, and providing the employee with an opportunity to respond to the allegations.
3. Full and Final Settlement:
Upon termination, the employer must provide the employee with a full and final settlement, which includes any outstanding salary, unused leave encashment, reimbursements, and other statutory dues. If the employee has completed at least five years of continuous service, they are also eligible for gratuity, which is calculated based on their length of service and last drawn salary. The full and final settlement should be paid out along with the employee's last drawn salary.
4. Documentation:
The employer must issue a termination letter to the employee, stating the reason for termination and the last working day. Other essential documents include a relieving letter, which confirms that the employee has been released from their duties, and an experience certificate, which outlines the employee's job title, duration of employment, and key responsibilities. The employer should also provide the employee with a full and final settlement statement, detailing all the payments made.
5. Employer of Record (EOR) Responsibilities:
If the employee was hired through an Employer of Record (EOR), the EOR plays a crucial role in ensuring compliance with Indian labor laws throughout the termination process. The EOR will manage the notice period, calculate the full and final settlement, issue necessary documentation, and ensure that the employee receives all statutory payments. This helps to mitigate legal risks for the client company and ensures a smooth offboarding process.
Key Considerations:
- Companies must have a valid reason and follow due process when terminating an employee in India to avoid legal disputes.
- Employers should maintain proper documentation and records related to employee performance, disciplinary issues, and the termination process.
- Seeking legal counsel is advisable to ensure compliance with Indian labor laws and to handle any potential disputes or litigation.
- Larger Companies using EOR services should be aware that terminating a significant number of employees (usually 100 or more) may require additional scrutiny or government notification. This is in accordance with the Industrial Disputes Act, 1947, which mandates government approval for layoffs, retrenchment, or closure in industrial establishments with 100 or more workmen. Pregnant women and those on maternity leave have special protections.
- Employers should consult their internal HR policies and employee handbooks to ensure compliance with any company-specific procedures for termination. These policies should be in line with Indian labor laws and best practices.
In summary, terminating an employee in India involves serving proper notice, providing a clear reason, paying out the full and final settlement, and complying with applicable labor laws. Employers, or their EOR partners, must follow due process to mitigate legal risks and ensure a smooth offboarding.
Visa and Work Permits in India
Wisemonk simplifies this process by providing comprehensive support for obtaining the necessary visas and work permits for your employees. Our experienced team guides you through the entire process, ensuring compliance with Indian immigration laws and regulations. We handle the paperwork, document verification, and liaising with relevant authorities, allowing you to focus on your core business objectives.
If you prefer to handle the visa and work permit process independently, here's a step-by-step guide:
Visa Application Process:
- Determine the appropriate visa category (e.g., Employment Visa, Business Visa) based on the purpose of your visit.
- Apply online through the official Indian Visa Online website (https://indianvisaonline.gov.in/visa/). Fill out the application form, upload required documents, and pay the visa fee.
- Schedule an appointment at the nearest Indian Visa Application Center (IVAC) or Indian Mission/Post to submit your physical application, passport, and supporting documents.
- Attend the visa interview, if required, and provide biometric information.
- Track your application status online using the visa enquiry feature on the Indian Visa Online website.
- Collect your passport with the visa stamp from the IVAC or Indian Mission/Post, or receive it by post.
Work Permit (Employment Visa) Requirements:
- Applicant must be a highly skilled professional, employed by a company registered in India.
- Annual salary should be at least US$25,000, with some exceptions for certain professions.
- Visa must be issued from the applicant's country of origin or domicile.
- Applicant must comply with all legal requirements, such as payment of taxes.
- Supporting documents include passport, photos, proof of employment, registration documents of the Indian company, and proof of professional expertise.
Foreigner Registration:
- Foreigners staying in India for more than 180 days must register with the Foreigners Regional Registration Office (FRRO) or Foreigners Registration Officer (FRO) within 14 days of arrival.
- Registration can be done through the e-FRRO portal (https://indianfrro.gov.in/eservices/home.jsp).
- Required documents include passport, visa, proof of residence, employment contract, and photographs.
- A Residential Permit and Registration Certificate will be issued upon successful registration.
Useful Websites:
- Indian Visa Online: https://indianvisaonline.gov.in/visa/
- e-FRRO Portal: https://indianfrro.gov.in/eservices/home.jsp
- Ministry of Home Affairs (Visa Division): https://www.mha.gov.in/division_of_mha/visa-division
It is essential to check the latest requirements and guidelines on the official websites, as regulations may change over time. Consulting with the nearest Indian Embassy, High Commission, or Consulate is also recommended for the most up-to-date information and assistance with the visa and work permit application process.
Choose Wisely, Choose Wisemonk!
Wisemonk is a leading Employer of Record (EOR) service provider, enabling global companies to hire, pay, and manage talent in India effortlessly, without local entities or bank accounts. We offer best-in-class EOR services with features like local payments, equipment integration, lowest FX rates, and employee tax-saving options.
Wisemonk provides EOR services, payroll management, equipment procurement, and expert support, all powered by advanced technology. Wisemonk stands out with its transparency, value, and local expertise. With pricing starting at just $100 per employee per month, we are affordable for businesses of all sizes. Enjoy the industry's lowest FX markup (<0.6%), expense reimbursements, employee gifting, and bonus payouts at no extra cost.
Ready to elevate your business with top Indian talent? Contact Wisemonk today to see how our Employer of Record EOR services can help you achieve your goals while minimizing costs and compliance risks.
Click here to speak to an expert and start building your world-class team in India!
FAQs
How does an Employer of Record ensure compliance with local labor laws in India?
An Employer of Record (EOR) in India stays up-to-date with the complex and ever-changing local labor laws and regulations. They handle all legal aspects of employment, including contracts, payroll, taxes, and benefits, ensuring full compliance with Indian labor laws on behalf of the client company.
What are some key Indian labor laws that an EOR helps navigate?
Some important Indian labor laws an EOR assists with include the Minimum Wages Act, Payment of Wages Act, Employees' Provident Funds and Miscellaneous Provisions Act, Employees' State Insurance Act, Maternity Benefit Act, and various state-specific Shops and Establishments Acts governing work hours, leave, and employee welfare.
How does an EOR act as the legal employer for a company's workforce in India?
An Employer of Record (EOR) in India becomes the legal employer of record for a company's employees. The EOR assumes all legal responsibilities and liabilities associated with employment, while the client company maintains day-to-day control over the employees' work and performance.
What are the benefits of using an employer of record in India?
Using an employer of record (EOR) in India allows companies to hire and manage employees without setting up a legal entity. The EOR ensures compliance with Indian employment laws, handles payroll, taxes, and benefits administration, and reduces the company's legal and financial risks.
How does an EOR help companies comply with Indian employment laws when hiring international employees?
An Employer of Record (EOR) in India assists companies in hiring international employees by ensuring compliance with Indian employment laws, including obtaining necessary work visas and permits, drafting locally compliant employment contracts, and managing payroll and taxes as per Indian regulations.
Is EOR legal in India?
Yes, Employer of Record (EOR) services are legal and commonly used in India. EORs act as the legal employer of workers, handling payroll, HR administration, benefits, and compliance matters on behalf of client companies.
Can an EOR help manage employment contracts for a company's remote workers in India?
Yes, an Employer of Record (EOR) in India can draft and manage employment contracts for a company's remote workers in compliance with Indian labor laws. The EOR ensures that the contracts include all necessary clauses and provisions, protecting both the company and the employees.
What are the benefits and challenges of hiring in India?
Benefits of hiring in India include access to a large, skilled talent pool at lower costs compared to developed countries. However, challenges involve intense competition for top talent, skill gaps, cultural differences, and navigating complex labor laws. Companies often leverage specialized hiring services or employer of record (EOR) providers to overcome these challenges and build successful teams in India.
How does an EOR support companies in providing employee benefits to their Indian workers?
An Employer of Record (EOR) in India helps companies provide statutory and supplementary employee benefits to their Indian workers. The EOR ensures compliance with mandatory benefits such as Provident Fund and Employee State Insurance, and can also assist in offering additional benefits like health insurance and leave policies.
Does EOR have a platform and what features does it include?
Yes, many Employer of Record (EOR) providers offer a platform to streamline HR processes. These platforms typically include features such as employee onboarding, contract management, payroll processing, benefits administration, leave management and compliance management. Wisemonk, a leading EOR provider in India, offers a feature-rich platform to help companies manage their remote teams efficiently while ensuring compliance with local laws and regulations.
How much does an EOR cost in India?
The cost of EOR services in India varies depending on factors such as the number of employees, their salary levels, the complexity of services required, and the location within India. When choosing an EOR in India, it's important to compare pricing models and consider both the base fees and any potential hidden costs. A good EOR like Wisemonk offers transparent, flat-rate pricing while maintaining a high level of quality and strict compliance standards.
Which is the best employer of record service in India?
When choosing the best Employer of Record (EOR) service in India, it's important to consider factors such as compliance expertise, cost-effectiveness, range of services, and customer support. While there are several reputable EOR providers in India, Wisemonk stands out for its comprehensive offerings, transparent pricing, and deep understanding of the Indian market.
For a detailed comparison of the top EOR services in India, please refer to our separate article on the Best Employer of Record (EOR) providers in India [2024].
What is the difference between EOR and PEO?
An Employer of Record (EOR) acts as the legal employer, handling all employment tasks and compliance. It's ideal for companies hiring internationally without a local entity. A Professional Employer Organization (PEO) acts as a co-emoloyer and shares employer responsibilities with the client company, requiring an existing local entity. EORs provide a more comprehensive solution for global hiring, while PEOs offer HR support to businesses with an established presence.
What are the advantages of partnering with an EOR for legal compliance when managing a global workforce?
Partnering with an Employer of Record (EOR) for legal compliance when managing a global workforce offers several advantages. The EOR ensures adherence to local labor laws, reduces the company's legal and financial exposure, and allows the company to focus on its core business activities while the EOR handles the complexities of international employment compliance.
Is there a minimum or maximum number of employees I can onboard using Wisemonk?
Wisemonk is designed to cater to businesses of all sizes. Whether you're looking to onboard a single employee in India or set up a team across multiple countries, we've got you covered.
