With a population of more than 1.2 billion people, India claims the world’s largest democracy. Over the past two decades, the world’s fast-growing country has strategically focused on integrating itself into the world economy. Owing to explosive growth, India has now emerged as a global player and foreign companies are flocking there for expansion opportunities and talent needs. The country is seeing strong developments in IT, AI, automation, digital healthcare, pharmaceuticals, and manufacturing.
Why are companies doing business in India?
- India’s economy is projected to boast the world’s fastest growth at 6.7% in 2022, according to the United Nations Conference on Trade and Development (UNCTAD) Trade and Development Report 2021.
- In a survey conducted by the IBM Institute for Business Value, more than three-fourths of Indian executives (76%) pointed to India’s economic openness as a major advantage of doing business in India, while 60% identified India’s skilled workforce. Moreover, 57% said India’s large domestic market provides significant advantages for doing business in India.
- With an average age of 29, India has one of the youngest populations globally. As this vast pool of young citizens enters the workforce, India will likely enjoy a ‘demographic dividend’ and see its digital ecosystem explode.
- Tech hiring continues to surge: hiring demand in India’s IT software and services sector was 55% higher in June of 2021 than it was in January 2021 and 51% higher than it was in June 2019, according to Naukri JobSpeak.
Q&A with Pushkar Bagmar, Director, GoGlobal
What are some provisions that companies need to keep in mind when hiring employees in India for the first time?
Labor laws in India are determined by both the Central and State governments, often with overlap between the two in implementation. To streamline the labor laws in India, India’s labor ministry has consolidated 29 central labor laws into four labor codes: the Code on Wages, the Code on Social Security, the Industrial Relations Code and the Occupational, Safety, Health and Working Condition Code.
In addition to drafting a templated contract, it is also common for companies to issue a letter of appointment that serves as an employment contract. The letter should include details about the position, responsibilities, salary, starting date, benefits, and regulations for termination. Once an employee signs an employment contract with an Indian company, he or she is effectively protected under the labor laws in India. The contract must be made in writing and signed by both parties. It includes the same information as a letter of appointment. The length of the employment, as well as the probation period, should be clearly stated.
Probation periods are not mandatory in India, but it is common practice for multinationals to assert a period of three to six months, depending on the seniority of the employee. During the probation period, an employer can release its employee without giving prior notice and with no legal penalty. Outside of probation periods, employers must give a 30-day notice (or payment in lieu), as per the Industrial Disputes Act. Senior employees may be required to give a 60-day or 90-day notice.
Annual leave eligibility in India is dependent on the company’s location, with terms varying in each state. Employment contracts generally detail the terms of leave; however, most businesses have a range of 12-24 days of sick leave and casual leave.
Statutory bonus is payable as per the Payment of Bonus Act, 1965 and is applicable to establishments employing 20 or more persons. Performance bonuses are paid at the discretion of the company. Also, there is no mandatory 13th or 14th month bonus.
What’s led to the explosive growth of business in India?
With some of the top ranked global universities, India has a robust education system that molds top candidates with high-level skills. In particular, Indians are a reliable source of talent for companies when it comes to software development, IT and customer service. Another reason why foreign companies often prefer talent from India is their fluency in English, the language for business across India.
However, the vast size of India and the diversity of its workforce – combined with cultural nuances and business customs – can make it difficult to connect with the right talent when hiring employees in India. With the growing number of global companies competing for talent across India, it can be challenging to keep qualified senior executives engaged. At GoGlobal, our proven international PEO/EOR model ensures that HR processes are fulfilled seamlessly and compliantly.
What makes GoGlobal’s Employer of Record services in India so unique?
India is a diverse country with a distinct blend of cultures, religions, languages, and business customs. Therefore, doing business in India requires a multidimensional perspective. With a local team that has a lot of experience in hiring and managing workforces across the country, we’re able to strike the right chord with employees and ensure that the onboarding process is seamless and positive from the start.
Find additional details on benefits and hiring employees in India, or talk with an international HR expert.