Hindi, English, Bengali
Indian Rupee (INR)
📢 Introducing Lano 2.0!Global Employment just got a whole lot easier
📢 Introducing Lano 2.0!
Global Employment just got a whole lot easier
When it comes to skilled workers, it is hard to find any other country with such a large talent pool as India. Every year, around 3.1 million graduates join the ranks of India’s national workforce. Especially in IT, the country holds an international reputation for providing well-trained, high-quality experts.
In addition to the sheer number of qualified workers, hiring employees in India also holds financial benefits for international companies as employment costs are a lot lower than in Europe. Therefore, it’s no surprise that India ranks among the world’s top outsourcing countries.
Furthermore, the Indian Government has made the IT industry one of its top priorities by easing the legal processes for foreign companies wishing to outsource their IT workload and by creating very attractive IT policies and regulations.
There are only a few states in India where written employment agreements are mandatory. However, given the complexity of statutory and regional labour laws, it is strongly recommended to put in place a detailed employment contract when hiring an employee in India.
Fixed-term employment contracts are permitted by Indian law under the condition that the employee is only hired in order to fulfill a short-term requirement. It is therefore not possible to hire an employee via several short-term contracts in a row. Unless stated otherwise, employment agreements in India are considered to be permanent.
The employment contract needs to provide detailed information on payment. It is mandatory to indicate salaries in Indian Rupees.
There is no regulation on probation periods that applies to every state in India. As a general rule, a probation period should last three months. In practice, probation periods in India range between three and six months.
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In contrast to most countries where the common standard is set at 40 working hours per week, a normal working week in India comprises 48 hours with a regular nine-hour day.
A 30 minutes’ rest break is mandatory after five hours of consecutive work. There is a maximum of ten days employees are allowed to work in a row before having to take a day off. Daily working time is capped at 10.5 hours.
Any work delivered after a nine-hour day or exceeding 48 hours within one week is considered overtime. Overtime work is generally paid at a double rate. The same applies to work on public holidays.
Employees in India get paid monthly. Indian Rupees is the standard currency for salaries and wages. It is not allowed to pay employees in foreign currencies. Payments are to be made by the last day of the month – at the very latest – but usually employers start payments on the 28th of each month.
There is no national minimum wage in India. Depending on the employee’s skills, position, sector and governing state laws, different minimum wages apply. However, the national minimum pay level lies at around INR 176 (EUR 2.10) per day.
Employees who cannot work because of a medical condition are entitled to 70% of their usual daily wages. However, the number of paid sick leave days varies from state to state. While some states in India allow up to twelve days of sick leave, others limit their number to seven.
Indian legislation does provide for a 13th salary. With the Payment of Bonus Act, it has become mandatory for employers to pay their workers a minimum annual bonus equal to 8.33% of the full year’s wages. The maximum rate for bonus payments is 20% of the employee’s annual wages.
Learn about tax reporting, compensation laws, registration requirements and more in our free Payroll Guide for India.
Employees and employers in India are subject to the following tax and social security contribution rates (valid as of 2022):
up to 30%
25% – 30% corporate tax for domestic companies (40% for foreign companies)
up to 30%
Standard income tax rates (old system) *
Up to INR 250,000: 0%
up to INR 500,000: 5%
up to INR 1,000,000: 20%
over INR 1,000,000: 30%
Plus 10% to 37% surcharge on income exceeding INR 5,000,000
Plus 4% health and education cess on income tax
12% Employee Provident Fund (EPF)
4.75% Employee State Insurance (ESI)
12% Employee Provident Fund (EPF)
1.75% Employee State Insurance (ESI)
* In addition to the old standard tax system, India has introduced a new alternative tax system which comprises more tax brackets.
Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).
Indian employees are entitled to a minimum of 15 days of paid annual leave. Factory workers generally receive 19 paid vacation days each year, according to the national Factories Act. Employees who do not use all of it within the ongoing year are allowed to carry over up to 30 days of unused leave into the next year.
In addition, there are three national holidays which are observed in the entire country, plus a large number of regional festival holidays. As public holidays differ from state to state, Indian law rules that employers have to allocate no less than ten paid public holidays to their employees.
Female employees who have completed a minimum of 80 days of service with an employer are entitled to paid maternity leave. However, the leave length depends on the number of children: It’s 26 weeks of paid maternity leave for the first two children, for every additional child, maternity leave is shortened to 12 weeks. Granting paternity leave is not mandatory as there is no legislation for it.
There are no legal regulations that provide for further parental leave.
It is common practice for Indian employers to provide up to six days of casual leave per year for their employees – restricted to three days in one month – which can be used in case of any unexpected incident.
Employment may be terminated due to one of the following reasons:
by default as specified in the contract
voluntary termination of employment
by mutual agreement
in case of liquidation
theft, bribery or other disorderly behaviour
refusal to obey orders
An employee cannot be dismissed because of misconduct without a proper enquiry or without having had the chance to explain his or her behaviour.
In general, employers need to respect a 30 days’ notice period when dismissing an employee – except during probation when the notice period is shortened to 15 days. It is possible for employers to replace the notice period with an equivalent payment.
Only retrenched employees who have worked for an employer continuously for at least one year are entitled to severance pay equal to 15 days’ wages for every year of service.
After five consecutive years of service, employees who are dismissed also receive gratuity payment which is calculated as follows:
Last salary × 15 / 26 × number of years of service
However, the maximum gratuity payment ist INR 1,000,000.
This country guide is for informational purposes only and should not be construed as legal advice. The content of this guide contains general information, and although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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