India
Know everything about hiring and compliance in India.
In India, minimum wage regulations are intricate and determined by individual state governments. Unskilled workers face a vast array of employment opportunities, with over 2000 job types and 400 job categories, each assigned a minimum daily wage. Adhering to these minimum wage guidelines is crucial for employers to comply with the relevant authority.
Overtime pay in India is typically calculated at a higher rate, often 1.5 to 2 times the regular hourly wage, and is usually mandatory for factory workers. The standard working hours differ by state but generally amount to around 40 hours per week, from Monday to Friday. The maximum permissible working hours, as per the Shops and Establishments Act, are 48 hours per week.
Mandatory benefits for employees in India encompass contributions towards the Employee Provident Fund (EPF), Employee State Insurance (ESI), and gratuity. Additionally, employers may offer various optional benefits such as health insurance coverage, retirement plans, transportation and meal allowances, and flexible work arrangements. The cost of mandatory benefits typically ranges from 5% to 6% of the employee's gross salary.
Although there is no legal requirement for employers to provide a bonus to employees in India, many companies opt to include annual or performance-based bonuses as part of their compensation packages.
Employers in India usually handle payroll on a monthly basis, following a preferred schedule as outlined below:
- Payroll cut-off date: 25th of each month.
- Payment date: Last day of every month.
Individual income tax in India is calculated using a progressive tax rate system, which varies depending on an individual's income slab. Moreover, specific deductions and exemptions may apply based on various factors. Here are the tax rates under the old regime:
For individuals below 60 years of age:
- Income up to Rs. 2.5 lakh: No tax
- Income between Rs. 2.5 lakh and Rs. 5 lakh: 5% tax
- Income between Rs. 5 lakh and Rs. 10 lakh: 20% tax
- Income above Rs. 10 lakh: 30% tax
For individuals between 60 and 80 years of age (senior citizens):
- Income up to Rs. 3 lakh: No tax
- Income between Rs. 3 lakh and Rs. 5 lakh: 5% tax
- Income between Rs. 5 lakh and Rs. 10 lakh: 20% tax
- Income above Rs. 10 lakh: 30% tax
For individuals above 80 years of age (very senior citizens):
- Income up to Rs. 5 lakh: No tax
- Income between Rs. 5 lakh and Rs. 10 lakh: 20% tax
- Income above Rs. 10 lakh: 30% tax
The monthly employer cost breakdown in India typically includes:
- Employer's contribution towards provident fund (EPF): 12% of basic salary up to Rs. 1800
- Employee deposit linked insurance (EDLI): 0.5% of basic salary up to Rs. 75
- Professional tax: Rs. 200
Furthermore, employers may need to cover additional benefits, such as health insurance, as per the employment contract.
An employment agreement in India should encompass various essential details, including job responsibilities, compensation, benefits, working hours, leave policies, confidentiality agreements, termination procedures, and any other specific terms relevant to the employment relationship.
During the onboarding process in India, employees are typically required to provide the following documents:
- Valid proof of identity, such as a passport or Aadhaar card.
- Proof of address to verify their current residential address.
- A recent photograph for identification purposes.
- Educational certificates to authenticate their academic qualifications.
- PAN (Permanent Account Number) card, necessary for taxation purposes.
- Bank account details for salary processing.
In certain cases, additional documents may be requested from the previous employer, such as:
- Salary payslips for the last three months, offering a record of recent earnings.
- A relieving letter, confirming the employee's departure from the previous employment.
Although having a probation period for new hires in India is not obligatory, employers may choose to implement it. The probation period's duration should be clearly specified in the employment contract, typically ranging from 3 to 6 months. During this period, employers assess the employee's suitability for the role.
In India, severance pay is not mandatory unless explicitly stated in the employment contract or terms of separation. The entitlement to severance pay depends on the type of termination:
- In cases of role redundancy: Severance pay may include gratuity (for employees with a continuous service of 5 years), accrued leaves, payment in lieu of notice (if no notice is given), applicable bonuses, and any other outstanding amounts as per the employee agreement.
- In cases of termination due to employee misconduct: There is no entitlement to notice or severance pay in such instances.
The notice period in India can vary depending on factors like the employee's position, duration of employment, and terms outlined in the employment contract. Typically, notice periods range from 30 to 90 days.
Frequently asked questions
What are the mandatory employee benefits in India?
The mandatory benefits for employees in India include contributions towards the Employee Provident Fund (EPF), Employee State Insurance (ESI), and gratuity.
What are some additional benefits that employers may offer in India?
Additional benefits that employers may offer in India can vary but commonly include health insurance coverage, retirement plans, transportation allowances, meal allowances, and flexible work arrangements.
What are the minimum wage requirements in India?
Minimum wage requirements in India are complex and are determined by the respective state governments. There are 2000 different types of jobs for unskilled workers and more than 400 categories of employment, with a minimum daily wage for each type of job. It is essential for employers to adhere to the minimum wage guidelines set by the relevant authority.
How is overtime pay calculated in India, and what are the maximum working hours?
Overtime pay is typically calculated at a higher rate, usually 1.5 or 2 times the regular hourly wage. This is usually mandatory for factory workers. The standard working hours vary by state and are typically around 40 hours per week, Monday to Friday.
Are employers required to provide a bonus to employees in India?
There is no legal requirement for employers to provide a bonus to employees in India. However, many companies offer annual or performance-based bonuses as part of their compensation package.
How often should employers process payroll in India?
Employers in India typically process payroll on a monthly basis. Most companies prefer the following schedule: - Payroll cut-off date: 25th of every month - Payment date: Last day of every month
What is the maternity leave policy in India?
In India, female employees are entitled to maternity leave of up to 26 weeks, as per the Maternity Benefit Act. This includes 8 weeks of leave before the expected delivery date and up to 18 weeks of leave post-delivery. To be eligible, an employee must have worked for an organization for at least 80 days in the 12 months before the date of the expected delivery or adoption.
How many sick leave days are employees entitled to in India?
The number of sick leave days can vary depending on the company's policy. It is common for companies to provide a certain number of paid sick leave days per year, usually ranging from 6 to 12 days.
What are the national holidays observed in India?
The national holidays observed in India include Independence Day, Republic Day, Gandhi Jayanti (Mahatma Gandhi's birthday), and various religious holidays like Diwali, Eid, Christmas, etc. The exact list of holidays may vary from state to state.
How long is the notice period typically in India?
The notice period in India can vary depending on factors such as the employee's position, duration of employment, and terms mentioned in the employment contract. Notice periods usually range from 30 to 90 days.
