India is one of the top hubs for hiring remote IT workers in the world. It boasts more than 4.5 million IT workers among its 1.3 billion people. It is short change compared to the country’s total population. However, according to research, by 2025, there is a potential of redeploying 40 - 45 million workers with around 60 - 65 million retraining towards the Information Technology Sector. That’s a 1000% increase of labor in the digital sector in less than 5 years.
One of India’s strength is also it’s competent grasp of the English language. It is the world’s second-largest English-speaking country, with around 125 million people knowing the language. This one of the reasony why many global companies tend to hire employees from India.
While India is one of the fastest growing economies and population in the world, it lags behind in the available opportunities for their workforce. The unemployment rate for university graduates and higher in the IT field in India is 19.4%.
The country’s challenge to provide ample opportunities for their workforce. India needs to generate five to ten million jobs a year to keep up with the population’s growth rate. This has led to a surge of Indian professionals working as expatriates in the United States, United Kingdom, Singapore, Indonesia and also remotely.
There is a surplus of talent in India as international companies taking advantage of it’s relatively low employment costs paired with highly skilled IT workers with a strong grasp of the English language.
In this article, you will get to know the compliances, trends, and compensations in hiring employees from India.
For more information regarding India, check out India's TalentWiki page.
Due to the recession triggered by the Covid-19 virus in 2020, the rate of unemployment in an already job scarce market has naturally gone up in India. However, with the increased shift towards digitalisation, there has also been a rising demand for advanced skills in areas of artificial intelligence, machine learning, and data scientists.
In this push for remote work, even Indian companies are riding on the trend for hiring of gig and contract workers. Hybrid working, remote hiring and continual upskilling will continue to be a trend, especially in the technology sectors.
Hiring Indian workers do well for your company. They are well-educated with a strong command of English. Communication won’t be an issue with them.
In the last decade, India has become a stronghold of well-skilled workers such as full stack developers, UI/web developers, QA testers and Software Design Engineers in Test (SDETs). Indian talent is also strong in cybersecurity, data analytics, DevOps and cloud infrastructure.
Here are just some statistics about the wide range of IT workers in India:
The advantage of hiring remote workers from India is the relative value of their wages compared to the depth of their skill sets.
With the expansion of the technology industry in the past few decades, the demand for more highly trained IT developers and engineers will only continue to increase.
Before hiring from India, it’s important to take a look at your candidate’s educational background. The top universities are extremely competitive and students score the highest 1 to 2% to be eligible for admission.
Some of the best universities in the country are known for computer and technology sciences:
When it comes to hiring employees in India, sites such as Naukri, Fresherslive and Indeed list job positions for the Indian job market. Other sites like Flexjobs and Toptal are also great resources for additional job listings. Alternatively, LinkedIn is also a valuable database of around 65,090,000 people (as per 2019 data).
When it comes to compensation companies also include non-salary benefits which are highly sought after by most candidates. A prestigious job title is also one of the main attractions for hiring Indian workers. They value their role and responsibilities just as much as their prospective salary.
By law, according to the Payment of Bonus Act 1965, employers are also required to pay statutory bonuses. Companies with at least 20 employees with employees earning less than 10,000 rupees per month, they are entitled to bonsues.
The amount ranges from 8.33% to 20% of the salary earned or INR 100, whichever is higher. These statutory bonuses are in place to take care of the lower wage workers which are often included in the compensation package.
In addition, employees can also expect substantial pay raises and promotions after their annual reviews, with raises of 15–20% or more.
It is common to offer 15–24 days of annual paid leave in India. However, the laws for paid time off (PTO) vary from state to state. Employers should clearly define PTO earning rates and rollover benefits in their employee contracts.
Employees receive a minimum of 12 days of sick leave annually. Female employees are entitled to 26 weeks of paid maternity leave if they have one child. They are entitled to 12 weeks if they have 2 or more children.
Employers typically offer their employees a stipend to purchase a private insurance plan or directly access benefits through the company. This varies from state to state.
Employers also has the option to cover additional expenses for work, such as internet access, work equipment and transportation.
One of the hiring challenges in India is its payroll contribution and taxes. Employers are required to cover three payroll deductions in India — Employees’ Provident Fund, Employees’ Pension Scheme, and Employees’ Deposit Linked Insurance Scheme. Companies who fail to make sufficient contributions toward the EPF and EPS are subject to fines and penalties.
The Employee’s Provident Fund (EPF) is set up for employees who receive less than Rs 15,000 per month in salary. Both the employee and employer contribute an equal amount into the fund with a usual rate of 12% from their salary. This serves as a pension for the employee upon retirement.
On the employer’s side of contributions of 12%, only 3.67% of their contributions go to the EPF, the remaining 8.33% goes into funding the Employees’ Pension Scheme (EPS). Employers also contribute 0.5% of employee salary to the Employees’ Deposit Linked Insurance Scheme( EDLI) on behalf of the employee.
One of the challenges of hiring employees in India is the complicated costs of labor due to the compensation structures of the country’s labor code. It can take a significant financial toll on you without properly understanding these structures.
On top of this, recruiting costs must also be factored in which may require you to do the following:
Retaining employees must be your priority because replacing them will cause you to repeat many of these processes again. Make sure to find the best fit candidate and allow them to enjoy working for your company.
When it comes to hiring your first remote workers from India, it’s also important to understand the right job fit. Due to the nature of remote work, communication is one of the challenges of hiring employees remotely. They should have great communication skills with the ability to follow instructions well and work independently.
Their experience in working with various types of people across the world and familiarity with remote tools is also beneficial. Employing workers from India can be tricky to navigate, especially with the risk of non-compliance of employment and tax laws.
It important to understand the local labour laws and business culture. Err on the side of caution with corporate compliance to lessen the risks involved with hiring workers from other countries.
One way to get around that is to work with a third-party company, such as an Employer of Record (EOR) which hires employees in India on your behalf. Instead of setting up your own legal entity, you can start hiring internationally immediately.
Our platform provides this service and more. It is easily accessible and user-friendly for your EOR or PEO needs. We have streamlined your record keeping, payroll processing, and employee data management into one efficient system.
We take care all of your payroll, benefits, taxes, and local compliances for your employees, freelancers, or contractors in India. By using our platform, you have the option of directly paying your workforce through us. We provide single and multiple payment options saving you valuable time for growing your business.
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No, you can’t hire employees in India as a foreign company unless you have established a legal entity in the country, or you can employ an EOR to hire on your behalf.
Yes, the probationary period in India is up to 6 months.
You have three options.
To mitigate compliance risks, you’ll need a legal entity based in India to pay your employees.
You can hire employees in India if you have an entity based in the country. You also have to follow India’s labor code and tax compliances to avoid penalties and legal issues.
Yes, you can hire independent contractors in India as they are not classified as regular employees. They are subject to different compliances, which the contractor is liable to pay.