India is the one of the favourite destinations for expatriates keen to work in emerging markets. Over the last few years, the country’s rapidly growing infrastructure, industry and services sectors have opened up its economy to more multinational corporations and foreign investment.
This development has led to the creation of numerous employment opportunities for foreign nationals working in skilled and specialised roles. Areas that attract the largest number of foreign professionals consist of administrative roles in construction and engineering, followed by telecommunications and IT as well as financial services.
Just as more foreign funding has resulted in the hiring of more foreign expertise, India’s living and working environments have also adapted to fit in with global, cultural standards. This situation is particularly true in its tier-one, metropolitan cities, where Special Economic Zones, industrial and software parks, and corporate centres have created conditions conducive to the creation of new jobs with an international profile.
Here we explore India’s working environment and touch on how its HR and payroll laws relate to foreign nationals working in the country:
Registering an Indian employment visa
An expatriate’s first in-country encounter with Indian bureaucracy often occurs at the Foreign Regional Registration Office (FRRO). The following documents are typically required for FRRO registration for foreigners visiting India on a long-term visa (more than 180 days):
- Application form in quadruplicate (Form A);
- Original version of passport and visa;
- Four passport-size photographs;
- Proof of residence in India;
- Copy of employment contract and employer undertakings.
Visa holders must also usually provide:
- Completed visa registration application form;
- Six passport-size photos of the applicant;
- Copy of their passport’s photo page;
- Copy of their passport’s visa page;
- Proof of address, such as a driver’s license or utility bill, from the visa holder’s home country;
- Notarised copy of a lease deed/agreement or a C-Form from a hotel where they will be resident;
- Visa registration fees.
Employers must ordinarily provide:
- Two copies of a permission letter requesting approval for an applicant’s visa registration;
- Two copies of a sponsorship letter pledging to take responsibility for the applicant’s conduct in India and promising to repatriate them at the company’s cost if any adverse activity comes to light;
- Two copies of a letter confirming the visa holder’s residential address in India;
- Two copies of an employment contract that specifically states their monthly salary, job title, length of employment etc;
- The company’s Incorporation Certificate.
All documents, apart from the Incorporation Certificate, must be originals. Letters must also be written on paper that includes the company’s letterhead, be signed by a senior manager and marked with the company’s official stamp. Once the FRRO is satisfied with the above documents, the foreign national is issued with a “residential permit” to stay in India.
Work culture
In India, workplaces are often hierarchical, with clear boundaries between different management tiers. The country’s business etiquette consists of a mixture of Western and Eastern practices, but local customs do influence relationships and need to be acknowledged if business interactions are to be successful.
For example, when beginning a discussion or conducting business, it is important to appeal to an Indian colleague or associate’s honour and be respectful of their role and expertise.
Size of foreign national population group
It is unclear how many foreign nationals are currently working in India, excluding people from neighbouring countries who are refugees or economic migrants. But the high minimum salary threshold of US$25,000 (salary and allowances) that the Indian government sets for foreigners seeking an employment visa effectively ensures the population is small and limited to high-ranking and specialised positions.
It is also worth noting that the minimum wage does not apply to foreigners employed as language teachers and translators, ethnic cooks, embassy staff or academics in higher education institutions.
Safety issues
General levels of safety vary across India. As a rule, expats will not be exposed to violent crime but they should keep guard against instances of petty crime, such as pickpocketing. Women should also be cautious when traveling alone, especially at night.
India does face the threat of terrorism and foreigners will find that security checks are robust in the country’s major cities, particularly at government buildings, hotels, sports venues, malls and shopping centres, transport centres, and places of worship.
Education
Most expatriate families send their children to private or international schools. The curricula, learning environments, teaching philosophies and fees in these institutions vary widely, and parents should choose a school that fits their budget and expectations. International school fees are among the most expensive and will require a sizeable allowance to cover them.
Healthcare
Public hospitals in India often employ well-trained English-speaking doctors and nurses. But a lack of equipment, funds and staff as well as overcrowding means locals and expats opt for private care whenever possible. All expats moving to the country should ensure they have adequate health insurance coverage.
Hiring household help
Most locals hire household help, such as cooks, cleaners, and drivers, who can be taken on in a part-time, full-time, or live-in capacity. But expats need to consider a number of factors when doing so, which include finding the right source of labour. For instance, local agencies may operate illegally and provide only native-speaking staff, but there are international and expat-focused domestic staff agencies such as Domesteq too.
Due to India’s large labour supply, local references will be abundant so it is here that language skills and identity verification services become important considerations. When hiring domestic staff, expats should verify their background and identity, either via the recruiting agency or intermediary, or by registering with the local police station.
Expat social security obligations
India’s social security system is governed by the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (PF Act) and provides pension and retirement benefits to workers in factories and ‘covered establishments’. These are defined as employing 20 or more employees.
In 2008, the PF Act was amended to include a new category of employee called international workers (‘IWs’), who are defined as follows:
- An Indian employee who has worked, or is going to work, in a foreign country with which India has entered into a social security agreement (SSA) and is eligible to use the available benefits under the social security scheme of that country;
- A foreign employee, who does not hold an Indian passport, but works for an Indian ‘covered establishment’.
International Workers
The Employees Provident Fund Scheme, 1952, and Employees Pension Scheme, 1995, were both amended in 2008 to include ‘international workers’ (IW), unless the individual concerned qualifies as an “excluded employee”. An excluded employee is a “detached worker” who is employed in India, but contributes to the social security scheme of their source country, according to the provisions of a SSA between their home country and India.
Detached workers are IWs. They are not Indian employees who contribute to the social security scheme of their source country via the provisions of a SSA signed between the home country and India. Such a person is exempt from contributing to the Indian system for the period that they work in the country.
Contributions and benefits
An IW working in India prior to 1 September, 2014, is required to contribute 12% of their salary towards the Provident Fund Scheme (PFS). Employers also contribute 12%, with 3.67% of this sum allocated towards the PFS and 8.33% towards their employee’s pension scheme.
An IW who joined the company on or after 1 September 1 2014 with a monthly salary in excess of US$250 (Rs 15,000) is not required to join the pension scheme. The joint 24% employee and employer contribution will in this instance all go to the Provident Fund.
IWs can claim their Provident Fund contributions back once their employment in India has terminated. To determine eligibility, countries with which India has an SSA will be subject to different conditions than countries that do not. An SSA’s “totalisation of period” clause means the coverage period for the social security scheme in India and a third party country can be aggregated in order to determine what pension benefits an individual is entitled to receive.
Employment contracts
Indian employment law does not generally specify that an employment contract must be in writing, apart from in a few specific states. But it is highly recommended that employers discuss employment terms and enter into a contract with each individual in order to avoid ambiguity. Indian employment contracts usually include the following details:
- Details of all parties involved;
- Job description;
- Probation period, if any;
- Salary details;
- Work location;
- Date of commencement of employment;
- Contract type: permanent or fixed-term;
- Miscellaneous benefits;
- Leave entitlement;
- Notice period;
- Conditions of termination;
- Restrictive clauses such as non-compete, non-solicitation, confidentiality of information and trade secrets.
This article was first published on India Briefing.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.
MORE ARTICLES THAT MAY INTEREST YOU
Indian taxpayers warned about scam emails from fraudsters
Key payroll considerations in India
Minding your manners in India - part one
India is the one of the favourite destinations for expatriates keen to work in emerging markets. Over the last few years, the country’s rapidly growing infrastructure, industry and services sectors have opened up its economy to more multinational corporations and foreign investment.
This development has led to the creation of numerous employment opportunities for foreign nationals working in skilled and specialised roles. Areas that attract the largest number of foreign professionals consist of administrative roles in construction and engineering, followed by telecommunications and IT as well as financial services.
Just as more foreign funding has resulted in the hiring of more foreign expertise, India’s living and working environments have also adapted to fit in with global, cultural standards. This situation is particularly true in its tier-one, metropolitan cities, where Special Economic Zones, industrial and software parks, and corporate centres have created conditions conducive to the creation of new jobs with an international profile.
Here we explore India’s working environment and touch on how its HR and payroll laws relate to foreign nationals working in the country:
Registering an Indian employment visa
An expatriate’s first in-country encounter with Indian bureaucracy often occurs at the Foreign Regional Registration Office (FRRO). The following documents are typically required for FRRO registration for foreigners visiting India on a long-term visa (more than 180 days):
- Application form in quadruplicate (Form A);
- Original version of passport and visa;
- Four passport-size photographs;
- Proof of residence in India;
- Copy of employment contract and employer undertakings.
Visa holders must also usually provide:
- Completed visa registration application form;
- Six passport-size photos of the applicant;
- Copy of their passport’s photo page;
- Copy of their passport’s visa page;
- Proof of address, such as a driver’s license or utility bill, from the visa holder’s home country;
- Notarised copy of a lease deed/agreement or a C-Form from a hotel where they will be resident;
- Visa registration fees.
Employers must ordinarily provide:
- Two copies of a permission letter requesting approval for an applicant’s visa registration;
- Two copies of a sponsorship letter pledging to take responsibility for the applicant’s conduct in India and promising to repatriate them at the company’s cost if any adverse activity comes to light;
- Two copies of a letter confirming the visa holder’s residential address in India;
- Two copies of an employment contract that specifically states their monthly salary, job title, length of employment etc;
- The company’s Incorporation Certificate.
All documents, apart from the Incorporation Certificate, must be originals. Letters must also be written on paper that includes the company’s letterhead, be signed by a senior manager and marked with the company’s official stamp. Once the FRRO is satisfied with the above documents, the foreign national is issued with a “residential permit” to stay in India.
Work culture
In India, workplaces are often hierarchical, with clear boundaries between different management tiers. The country’s business etiquette consists of a mixture of Western and Eastern practices, but local customs do influence relationships and need to be acknowledged if business interactions are to be successful.
For example, when beginning a discussion or conducting business, it is important to appeal to an Indian colleague or associate’s honour and be respectful of their role and expertise.
Size of foreign national population group
It is unclear how many foreign nationals are currently working in India, excluding people from neighbouring countries who are refugees or economic migrants. But the high minimum salary threshold of US$25,000 (salary and allowances) that the Indian government sets for foreigners seeking an employment visa effectively ensures the population is small and limited to high-ranking and specialised positions.
It is also worth noting that the minimum wage does not apply to foreigners employed as language teachers and translators, ethnic cooks, embassy staff or academics in higher education institutions.
Safety issues
General levels of safety vary across India. As a rule, expats will not be exposed to violent crime but they should keep guard against instances of petty crime, such as pickpocketing. Women should also be cautious when traveling alone, especially at night.
India does face the threat of terrorism and foreigners will find that security checks are robust in the country’s major cities, particularly at government buildings, hotels, sports venues, malls and shopping centres, transport centres, and places of worship.
Education
Most expatriate families send their children to private or international schools. The curricula, learning environments, teaching philosophies and fees in these institutions vary widely, and parents should choose a school that fits their budget and expectations. International school fees are among the most expensive and will require a sizeable allowance to cover them.
Healthcare
Public hospitals in India often employ well-trained English-speaking doctors and nurses. But a lack of equipment, funds and staff as well as overcrowding means locals and expats opt for private care whenever possible. All expats moving to the country should ensure they have adequate health insurance coverage.
Hiring household help
Most locals hire household help, such as cooks, cleaners, and drivers, who can be taken on in a part-time, full-time, or live-in capacity. But expats need to consider a number of factors when doing so, which include finding the right source of labour. For instance, local agencies may operate illegally and provide only native-speaking staff, but there are international and expat-focused domestic staff agencies such as Domesteq too.
Due to India’s large labour supply, local references will be abundant so it is here that language skills and identity verification services become important considerations. When hiring domestic staff, expats should verify their background and identity, either via the recruiting agency or intermediary, or by registering with the local police station.
Expat social security obligations
India’s social security system is governed by the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (PF Act) and provides pension and retirement benefits to workers in factories and ‘covered establishments’. These are defined as employing 20 or more employees.
In 2008, the PF Act was amended to include a new category of employee called international workers (‘IWs’), who are defined as follows:
- An Indian employee who has worked, or is going to work, in a foreign country with which India has entered into a social security agreement (SSA) and is eligible to use the available benefits under the social security scheme of that country;
- A foreign employee, who does not hold an Indian passport, but works for an Indian ‘covered establishment’.
International Workers
The Employees Provident Fund Scheme, 1952, and Employees Pension Scheme, 1995, were both amended in 2008 to include ‘international workers’ (IW), unless the individual concerned qualifies as an “excluded employee”. An excluded employee is a “detached worker” who is employed in India, but contributes to the social security scheme of their source country, according to the provisions of a SSA between their home country and India.
Detached workers are IWs. They are not Indian employees who contribute to the social security scheme of their source country via the provisions of a SSA signed between the home country and India. Such a person is exempt from contributing to the Indian system for the period that they work in the country.
Contributions and benefits
An IW working in India prior to 1 September, 2014, is required to contribute 12% of their salary towards the Provident Fund Scheme (PFS). Employers also contribute 12%, with 3.67% of this sum allocated towards the PFS and 8.33% towards their employee’s pension scheme.
An IW who joined the company on or after 1 September 1 2014 with a monthly salary in excess of US$250 (Rs 15,000) is not required to join the pension scheme. The joint 24% employee and employer contribution will in this instance all go to the Provident Fund.
IWs can claim their Provident Fund contributions back once their employment in India has terminated. To determine eligibility, countries with which India has an SSA will be subject to different conditions than countries that do not. An SSA’s “totalisation of period” clause means the coverage period for the social security scheme in India and a third party country can be aggregated in order to determine what pension benefits an individual is entitled to receive.
Employment contracts
Indian employment law does not generally specify that an employment contract must be in writing, apart from in a few specific states. But it is highly recommended that employers discuss employment terms and enter into a contract with each individual in order to avoid ambiguity. Indian employment contracts usually include the following details:
- Details of all parties involved;
- Job description;
- Probation period, if any;
- Salary details;
- Work location;
- Date of commencement of employment;
- Contract type: permanent or fixed-term;
- Miscellaneous benefits;
- Leave entitlement;
- Notice period;
- Conditions of termination;
- Restrictive clauses such as non-compete, non-solicitation, confidentiality of information and trade secrets.
This article was first published on India Briefing.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.
MORE ARTICLES THAT MAY INTEREST YOU
Indian taxpayers warned about scam emails from fraudsters
Key payroll considerations in India
Minding your manners in India - part one
