Payroll and Benefits Guide India

Employer

Employer Payroll Contributions

Employee

Employee Payroll Contributions

Employee

Employee Income Tax

General

The national minimum wage in India is fixed by the respective state governments. It uses a complex method of setting minimum wages that defines thousands of different jobs for unskilled workers and over 400 categories of employment, with a minimum daily wage for each type of job.  The New Labour Code has introduced An increase of 14.5 times on the existing minimum wage to Rs 15,000 per month

Payroll Cycle

The payroll cycle in India is generally monthly, with wages paid on or after the 28th of each month.

13th Salary

General

The standard working hours in India are 40 hours weekly at 8 hours a day. This can also be 48 hours including breaks, only as per client’s discretion.

The employees are allowed to work for 8-9 hours in a day. The standard practice followed by a majority of organizations in India is 8 hours a day of working.

Overtime

All work in excess of the standard 48 hours a week is to be paid as overtime and is regulated by employment contracts, generally calculated at 200% of the regular pay rate.

Working Week

Monday–Saturday

Paid Time Off

The regulations regarding paid leave in India are set in the employment contract as a minimum of 15 days paid holiday a year (following completion of 240 days of employment).  However, it is common practice for additional leave days to be included in the contract, together with rules on how many days can be carried over to the following year.

All paid time off requests must be applied for at least 15 days prior to the start of the leave and approved by the employer, works committee, and the manager to ensure continuity of work.

Sick Days

Employees who have been continuously employed for at least 3 months are entitled to 15 days paid sick leave per year and must provide a medical certificate within 48 hours of the first day of sickness.

The sick pay is calculated at 70% of the regular daily salary rate.  For employees of private sector employers, this paid leave is paid by the employer and cannot be reclaimed from the government. Factory employees do not have a separate category of sick leave and instead use their annual leave for sick/casual leave.

There are no provisions concerning paid sick leave for employees who need to take long-term sick leave, or for employees who are injured during the course of their employment.

Any unpaid time off provided to an employee is purely at the employer’s discretion.

Maternity Leave

Eligible expectant mothers are entitled to 100% of their regular salary rate for 26 weeks for their first two children, decreasing to 12 weeks for any subsequent children. No woman is allowed to work during the six weeks immediately following the day of the delivery or of her miscarriage.
To be eligible, the employee must have been employed for at least 80 days of the preceding 12 months before the expected due date.

Adoptive Mothers and Commissioning Mothers

A woman who legally adopts a child below the age of 3 months or a commissioning mother (a biological mother who uses her egg to create an embryo that is implanted in any other woman), shall be entitled to maternity benefits for a period of 12 weeks from the date the child is handed over.

Every company with 50 or more employees shall have the facility of creche within the prescribed distance either separately or along with other common facilities.

The employer shall allow 4 visits a day to the creche by the woman, which shall also include the interval of rest allowed to her.

Paternity Leave

While government employees are entitled to 15 days of paternity leave, there are no statutory paternity leave laws for the private sector.

Parental Leave

There are no statutory laws on parental leave.

Other Leave

Each state generally sets other leave entitlements and policies.

Termination Process

The termination process is standard in India, with notice periods required unless an employer can provide sufficient cause for dismissal without notice due to misconduct, disobedience, lack of skill, neglect of duties, or absence without permission.

Notice Period

The notice period required is at least 30 days.

Severance Pay

In case of a termination due to redundancy, employers are required to pay retrenchment compensation. Severance or retrenchment compensation equal to 15 days’ average pay for every completed year of continuous service or part thereof in excess of 6 months must be paid to a workman on termination of employment.

The provisions of the IR Code pertaining to retrenchment are aligned with the provisions under the ID Act. However, for the purposes of retrenchment compensation, the same will be calculated at the rate of 15 days’ average pay or average pay of such number of days as may be notified by the appropriate government, for every completed year of continuous service or any part thereof in excess of 6 months.

Additionally, as mentioned above, the IR Code also requires employers to contribute an amount equal to 15 days’ wages or such amount as may be notified by the government for every retrenched worker to a “worker re-skilling fund.”

In addition, the employer must pay certain termination benefits to employees who are dismissed, including leave encasement, gratuity payment (for employees, whether workmen or not, with 5 years or more of continuous service), payment in lieu of notice (if no notice is given), statutory bonus payment, and any other amounts due under the employment contract.

Employees who are being terminated on account of misconduct are not entitled to notice pay or retrenchment compensation.

Probation Period

Probation periods in India generally differ based on the employee’s role and their seniority, being between 3and 6 months.

General

• Wellness allowance
• Work from home allowance
• Meal allowance
• Private pension
• Additional 5-9 days of annual leave.

VISA

There are two main types of visas in India: a business visa (visits to India of up to 6 months to conduct business for a non-Indian company) and an employment visa.

An employment visa is required for foreigners going to India for employment. The maximum length for this type of visa is 5 years, however, if the employment contract is longer than five years, then an extension will need to be sought before the end of the visa.

This visa also offers the possibility to live and work in India on a more permanent basis.

Visa applications must be made in the applicant’s country of residence.

General

The standard rates of VAT in India are 18.00% and 12.00%, with other primary rates of 28%, 5%, 3%, 1% & 0.25%