Hiring remote employees has become quite a necessity given that there are new global talent pools that are yet to be tapped into. One of the most effective ways that could help manage this process is through an EOR. An EOR which also stands for Employer of Record is a third-party organization that handles everything you need from payroll to taxes and compliance with labor laws. To understand more about EOR and the benefits of EOR India partner here is a detailed description of the same.
Table of Contents
- Why You Need to Use an EOR in India for Hiring ?
- How to Choose an EOR in India?
- Hiring in India
- How to Hire EOR in India?
- Setting Up a Local Legal Entity vs. Working with an EOR Provider in India
- Employer Onboarding in India
- Taxes in India
- Choose Wisely, Choose Asanify!
- Conclusion
- FAQs
Why You Need to Use an EOR in India for Hiring ?
Partnering with the right EOR India could help you to quickly expand your operations while also managing it in a better way. If you are still wondering why you need to get an EOR partner then here are a few of the benefits you get that might give you the confidence and clarity to move with the global HR service partnership.
1. Cost-effective
One of the most important factors that involve setting up a legal entity in India is the amount of time and cost being involved. Using an EOR in India eliminates almost half the time required which allows businesses to save money while also starting their operations quickly.
2. Legal compliance
Navigating the complex labor market in India could be quite challenging for most of the foreign organizations. An EOR in India is established so that all the requirements needed by the local regulations can be complied with easily hence also minimizing the risk of legal penalties and issues.
3. Focusing on core activities
Companies could focus more on their core business activities by entrusting the administrative work to an EOR in India. This makes sure there is better productivity and helps the management team to concentrate more on the strategic growth initiatives.
4. Simplified payroll management
An EOR partner in India could mean that they could handle everything from payroll processing, which also includes tax deductions, salary disbursement, and benefits administration. This makes sure that employees are paid accurately and on time without having the administrative burden fall on the employer.
How to Choose an EOR in India?
When you tend to choose an employer of record in India you might want to consider your long-term goals and hiring needs. If you are mainly looking at establishing a dedicated team in India, then partnering with Indian-based EOR could be one of the best choices as they offer an on-the-ground presence, solutions that are cost-effective, and local expertise. Not to mention you get a comprehensive service that is tailored specifically to the Indian market.
However, if you have employees in various countries you might want to streamline the employee management and payroll services through a single platform such as a global EOR. To come to a final decision, you could also consider the following factors of the organization such as:
- Professional expertise
- Lower amount of administrative pressure
- Effortless budgeting and forecasting
- Liability protection and risk transfer
- Experience in multiple industries
- Localization and cultural awareness.
Suggested Read: What is an Employer of Record (EOR)?
Hiring in India
Hiring in India requires you to have a strong knowledge of the local regulations and culture involved. Unfortunately, this is quite a tough task since India uses multiple pieces of legislation to govern labor practices rather than a single labor law. India employment is handled by both respective state governments and the central boards with residual law-making powers being vested within the central government. This has left a complex web of regulations to be kept in mind while hiring. Furthermore, the penalties for not following the regulations could be quite high.
Employment agreements and contracts in India
Current laws of labor in Indi do not require a written contract of employment however it is common for businesses to write one. There are a few states including Karnataka and Delhi where employers are needed to issue written employment contracts for those in non-manufacturing sectors. Fixed-term employment contracts are also permitted in India as long as the employer is employing the worker only for a short time. Employee compensation should also be clearly mentioned in the employment agreement along with salary, pension, vacation, and sick days along with benefits.
Labor law compliance in India
Employers are needed to treat their employees in a way that complies with several state and central labor laws. These laws also ensure the welfare of all parties involved in the agreement. Small, medium, and start-up businesses in India could also self-certify their compliance through an online portal. This is designed in such a way that it simplifies the process and eases out the compliance burdens. Otherwise, businesses will be subject to a random risk-based inspection system.
Payroll in India
The payment of wages to employees in India is based on the Payment of Wages Act, of 1936. The act was introduced so as to combat the employers’ unauthorized deduction and to protect the employees against unjustified delays in payment. Payment of wages must strictly be done in Indian rupees. Contractors however may be paid in other types of currency provided they open foreign currency accounts. It is mostly recommended that to avoid complications to pay in local currency.
How to Hire EOR in India?
If you are looking to hire remote employees through an EOR in India there are certain steps that might be needed to be followed in order to comply with the laws.
Step 1 – Choosing a reliable EOR provider
The first step to ensure you have a smooth hiring process is to look for a reputable EOR in India. Look for those providers who have a strong track record, positive client testimonials, and a deep understanding of the Indian labor laws.
Step 2 – Defining job responsibilities and role
It is important to define the job roles and responsibilities along with the qualifications required for remote positions. This will also help the EOR in India to find suitable candidates who could match your business needs.
Step 3 – Recruitment and onboarding
The EOR in India will handle everything related to recruitment right from sourcing to interviewing candidates to even extending job offers. Once the candidates are selected the EOR will also manage the onboarding process while ensuring that all the necessary compliance requirements and documentation are met.
Step 4 – Payroll and benefits administration
The EOR in India also manages the payroll processing which includes benefits administration, salary payments, and tax deductions. This also ensures that the employees receive their compensation accurately and within the stipulated time.
Step 5 – Ongoing compliance and support
An employer of record in India also provides continuous support to make sure that there is compliance with local regulations and laws. It also handles legal issues that may arise in the future while keeping the employer in the loop about the changes in legislation that could possibly impact the remote workforce.
Also Read: EOR India- A Detailed Guide on Employer of Record
Setting Up a Local Legal Entity vs. Working with an EOR Provider in India
When a company decides to offer an employment opportunity in India, it needs to be able to choose between either setting up a local entity or working with an EOR provider in India. Setting up a local entity involves establishing a legal presence which also means you need to register the business, set up an office, and comply with the various local labor laws. This approach could provide full control but could also be time-consuming, complex, and costly, especially for people who are not that familiar with Indian regulations.
In contrast, partnering with an EOR provider could even simplify the process further. The EOR acts as a legal employer who could handle all the payroll, compliance, and employee benefits administration. This also allows businesses to focus more on the core activities while making sure they adhere to the Indian labor laws.
EOR services also offer benefits such as quick market entry, cost-effectiveness, compliance assurance, and risk mitigation. The EOR also acts as a legally responsible entity for compliance and employment-related risks, protecting the hiring company from potential liabilities. Ultimately the choice will depend majorly on the company’s risk tolerance, timeline, and resources.
| Features | Setting up your local entity | Employer of record |
| Cost | Huge investment with ongoing operation cost | Flexible payment options |
| Scalability | Difficult to establish new businesses abroad | Quick entry into the market |
| Employee satisfaction | Ensure employees will get complete legal benefits | Provides employees with location flexibility |
| Management of risk involved | Full responsibility lies with the employer and could possibly face penalties | Manages all employment-related risks and ensures complete compliance |
| Legal compliance | Full compliance responsibility could also be liable for fines | Ensure proper compliance will also handle global regulation updates |
Employer Onboarding in India
Welcoming new hires is quite important since they get their first impression about the organization based on the employee experience they get. The main steps involved in the onboarding process include the following:
- Sending a detailed offer letter
- Completing the necessary paperwork such as tax forms and employment agreements
- Setting up a payroll
- Providing necessary access and employment
- Assigning a buddy
The checklist required for each of the steps could be given as follows:
Step 1 – Before the offer letter
The company will collect the company details such as name, DOB, contact info, previous employment documents, address, etc.
Step 2 – After giving away the offer letter
| Action to be taken | Responsible entity | Details |
|---|---|---|
| Drafting employment contract | EOR | Creating localized employment agreements that are compliant with Indian labor laws |
| Verifying background | EOR | Conducting background checks with the consent of the new employee |
| Welcome email | EOR and company | The company sends welcome mail whereas EOR will conduct a local onboarding process |
Step 3 – On the day of joining
| Action to be taken | Responsible entity | Details |
| Employment documentation | EOR | Ensuring all paperwork, such as NDAs, contracts, tax forms, etc. are completed and filed |
| Payroll setup | EOR | Collecting requires documents setting up payroll systems and tax calculations |
| Policy briefing | Company | Explaining leave policies, company procedures to new hires, and code of conduct |
| Account setup | EOR | Assisting with bank account setup required for salary deposits |
| Introduction to systems | EOR | Providing a walkthrough of HRIS and payroll systems |
| IT setup | EOR/ Company | Providing with the necessary equipment, IT training, software, and communication channels |
| Mentor assignment | Company | Assigning a buddy to help new hires adjust to company culture |
Step 4 – Post-onboarding
| Action to be taken | Responsible entity | Details |
| Payroll explanation | EOR | Explaining payslip components such as contributions, deductions, net pay |
| Ongoing support | Company | Scheduling regular check-ins, and one-on-one meetings to provide ongoing support and feedback |
| HR operations | EOR | Payroll compliance and processing, benefits administration, etc. |
Taxes in India
Taxes are quite an important aspect of the Indian financial system and employees in India are subject to a number of different taxes. The primary tax that employees need to be aware about is the income tax, TDS, and professional tax. Understanding these tax types is quite important for financial compliance and planning.
Income tax
Income tax is nothing but the tax that is deducted by the government from an individual’s income. In India, the income tax rates for the financial year 2023-24 I based on the progressive tax system where the tax rate increases based on the increasing income range.
Professional tax
Professional tax is a tax that has been levied by the state government on salaried individuals, businesses, and professionals. The tax rate may also vary from state to state. In most states, employers are the ones responsible for deducting the professional tax from their employees’ salaries and depositing it with the state government.
TDS (tax deducted at source)
TDS is the tax deducted from the source of income by the payer and is sent to the government. Employers are supposed to deduct the TDS from employees’ salaries based on the tax slab rates that are applicable.
Well, when you hire an EOR, they act as your legal employer who optimizes the employee taxes and enhances take-home pay. The expert team also handles complex tax regulations, statutory contributions, and compliance on your behalf. We also provide tax planning services along with leveraging deductions, exemptions, and benefits based on Indian laws.
Choose Wisely, Choose Asanify!
Looking for an employer of record in India could be quite a tedious process but not when you have Asanify with you. We provide the best of service when it comes to hiring, paying, and even managing talent in India effortlessly. We also offer the best in class services for equipment integration, the lowest FX rates, and an easy local payment structure. As a comprehensive platform, Asanify aims to provide payroll management, equipment procurement, and expert support all with the help of advanced technology. We also make sure our core values lie in transparency, value, and best-in-town expertise. With pricing that is quite affordable, we are the perfect match for all your business needs.
Suggested Read: Employer of Record Services India: The Ultimate Guide
Conclusion
Venturing into the Indian market surely holds a lot of promise, especially for global companies however it comes with its own set of complexities. Collaborating with an EOR in India however could result in wonderful results along with being able to streamline the process while also getting a cost-effective, compliant, and efficient way to handle all the HR functions. Ready to elevate your business needs with the top Indian talent being present in your organization? Well, then it is time to contact Asanify to achieve all your goals while lowering risks and costs.
FAQs
What is an Employer of Record?
An EOR or called as the Employer of Record is a third party organization that takes on the legal responsibility of employing employees for another organization.
How does an EOR manage compliance in India?
EOR helps by calculating the medicare taxes, professional taxes, deductions, and paying dues to the government based on the Indian tax regulations. It also takes care of the monthly payroll processing.
Can an EOR handle payroll and taxes in India?
Yes an EOR is responsible for undertaking all the HR administrative and compliance needs which also includes labor laws, taxes, and payrolls with respect to the employees.
What are the benefits of using an EOR over setting up a legal entity?
When you choose to use an EOR over setting up a legal entity there are a few benefits that you get such as follows:
- Workforce flexibility
- Risk management
- Avoiding worker misclassification
- Reduced cost of set-up
How quickly can an EOR help hire employees in India?
Based on the provider you choose, an EOR could help you hire new employees within just 1 to 14 days and not more than that.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.
