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Understanding the psyche of Indian employees, their expectations from new employers, mindset towards career and most importantly, their traditional values is an imperative before you commence your recruitment process. A ‘job’ for the working population in India is just not a source of ‘bread and butter’ but forms a base to social status, eligibility for mortgage and marriage prospects.
Culture
- Negotiations are slow in India especially if relationship has not already been established. While Indians appreciate data and statistics, they also use their intuition and faith, and they value patience.
- Indian employees have indirect communication style and wont say “no”. They may use words like “possibly”, “not sure” etc and you need to pay attention to that.
- Salary inflation in India is high. Employees expect a title increase and salary increase of 10-15% per year. Employees expect a hike of atleast 30% when switching a job.
- Job titles are very important in India and employees negotiate hard for it. In India the marriages are still arranged and better the title better the wife, so the employee may turn down the high paying job for a good title.
- Providing great workplace culture with benefits like work from home, a good insurance policy and the good workplace will go a long way in attracting and retaining the employees.
Apart from culture you also need to take into consideration the complex employment laws in India as detailed below.
Employment Contracts in India
Indian labor law is complex. Having a very strong and detailed employment contract is very important. The employment contract should consist of terms like compensation, benefits, leave policy, termination and resignation process etc. We have assist you with drafting a legally compliant and the detailed employment contract.
Employment Agreement format in India
Working Hours in India
The typical working hours in Indian are 9 hours per day excluding the lunch break. That is 40hours a week
Holidays in India
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 only 3 mandatory holidays that is on 15th August, 26th January and 1st may. Rest of the 7 holidays can be decided by the employer
Vacation Days in India (paid leaves)
21 days of paid leave in India is mandatory.
India Sick Leave
In India, the minimum entitlement of sick/casual leave is 12 days in total. Some employers provide unpaid leave for long-term medical issues, but this is not mandatory.
Maternity/Paternity Leave in India
Female employees are entitled to 26 weeks of paid maternity leave.
Health Insurance in India
Health Insurance in is not mandatory. But employees do ask for health insurance benefits and this may cost additional USD 200-400 per year per employee.
Termination/Severance in India
Probationary periods are commonly used in India with 3 months being a typical probation timeframe. The maximum initial probation is 3 months, and then the employer can extend the probation for up to an additional 3 months.
Termination by either the employer or employee must be given in writing as per the employment contract. There is a 15-day notice during probation. The minimum the notice period can be is 30 days. Payment in lieu of notice is permissible.
If the employee has served for 5 or more continuous years, they are generally entitled to a gratuity payment. Gratuity = Last Drawn Salary × 15/26 × No. of Years of Service
India Salary Structure
The salary structure in India is a bit complicated. The CTC that is cost to company usually consists of many components. Employers should negotiate on “CTC” and not inhand salary.
A typical salary structure for a employee having “CTC” of Rs 20 Lakhs /year i.e Rs 166666/month will be as follows:
Salary Break Up
Basic Salary | 50% | 83333 |
House Rent allowance | 25% | 41666 |
Special Allowance | 15% | 24999 |
Leave travel allowance | 10% | 16668 |
Total | 100% | 166666 |
Deductions | ||
Tax (estimated) | (29166) | |
Professional Tax (fixed) | (200) | |
PF contribution by employer (retirement benefit) – fixed | (1800) | |
PF contribution by employee (retirement benefit) – fixed | (1800) | |
Inhand Salary per month | 133700 | |
Income tax in India on employees salary in India
Income Tax Slab | Tax Rate |
Up to Rs.2.5 lakh | Nil |
Above Rs.2.50 – Rs.5 lakh | 5% of the total income that is more than Rs.2.5 lakh |
Above Rs.5 lakh – Rs.7.50 lakh | 10% of the total income that is more than Rs.5 lakh + Rs.12,500 |
Above Rs.7.50 lakh – Rs.10 lakh | 15% of the total income that is more than Rs.7.5 lakh + Rs.37,500 |
Above Rs.10 lakh – Rs.12.50 lakh | 20% of the total income that is more than Rs.10 lakh + Rs.75,000 |
Above Rs.12.50 – Rs.15 lakh | 25% of the total income that is more than Rs.12.5 lakh + Rs.1,25,000 |
Above Rs.15 lakh | 30% of the total income that is more than Rs.15 lakh + Rs.1,87,500 |
Process to hiring employees and our role
Hiring practices in India are, overall, likely similar to the practices you’re used to in your home country. However, there are some country-specific considerations you should factor into the process. Let’s look at the process of how to hire in India, along with some of our tips for finding your ideal candidates.
Steps to hire | Particulars | Tools and resources | Our role |
Posting the Job Ad | Post a job add or search resumes | You can also hire a local recruitment agency. They typically charge 1-2 month of employees salary as their fees. | – |
Schedule Interview | Short list employees and schedule interviews | – | |
Extend an offer | This is the most important part here. Few pointers: Salary – Generally 30% hike from the previous salary is a good offer. But after the covid companies also offered 100%-200% hike for junior and mid-level employees Good Job Title – A “good” job title can impact many parts of life in India, such as arranged marriages. Therefore, an employee could turn down a high-paying job to find one with a better-sounding title. Optimal Salary structure – The salary structure should be designed in such a way that the inland salary is optimal Insurance Benefits – A good insurance policy will help to retain employees | To check the current salary trends, you can use https://www.payscale.com/ | Our role is to:
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Onboarding of employee | Onboarding steps are as follows:
| Our role is to:
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Processing the payroll | Online payroll System which allows the following
| Our role is to:
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About Rohit Lohade
Rohit Lohade is a Chartered Accountant with 15+ years of experience. He has assisted more than 300 Gobal Companies with India Entry Strategy