When we decide to expand internationally and hire employees in other countries it’s important that we familiarise ourselves with the local culture, business practices and any differences in operation.
While international business relationships can clearly be beneficial to both parties and function harmoniously, it’s important to acknowledge the differing perspectives and not just assume you’ll be able to use your same business practices in the new location.
India and the United States vary significantly in working culture and employment regulations. This article encompasses the primary differences that a US employer should expect before and during the hiring process of Indian employees.
What to Consider When Hiring a Remote Worker in India
Many employees in India are used to a deferential, hierarchical top-down employment structure and expect to be given clear directions of what their function and role is as well as what is expected of them by their superiors. For example, managers would rarely be seen spending time eating with employees below their station. However, water-cooler conversations between employees of similar stations are frequent in the workplace.
In contrast, corporate culture in the US shows strict adherence to professional work relationships. Casual conversations between employees usually only take place during break times, or when the work day has finished. Although, interactions do occur between employees of all levels.
What are the typical working hours in India?
While typical working hours in India range between 10am to 6pm, Monday to Saturday, many employees arrive later and consequently stay longer to complete assigned tasks.
With heavy traffic in major hubs such as Delhi and Bangalore, the market for remote workers is strong, particularly where there is a good infrastructure (eg. stable broadband connectivity) for working from home. Many professionals working in India find themselves taking a number of longer breaks at work, which consequently lengthens their work day.
At Shield GEO, our Indian employees enjoy the benefits that come with a flexible work arrangement. By blending both the social Indian work style and the reduction of long hours in the workplace, employees working remotely enjoy a healthier work-life balance with more freedom, instead of worrying about heading into work on time or staying back for long hours on end.
What is the time difference to East Coast USA? West Coast USA?
How is this commonly dealt with?
While asynchronous communication, when done well, can account for the bulk of your conversations — in order to maintain healthy working relationships, promote connection within your team and provide timely support, you will need to prioritise at least some video or voice calls throughout the week.
Indian employees won’t be available for any group meetings, including all-hands calls, hosted during the regular US work day, unless they stay up very late. And any one-on-one calls will likely have to fall outside of regular working hours for both parties — either early morning or late at night.
This will require some extra coordination to find an appropriate time that works for both parties, but is by no means impossible.
The West coast has a slightly better window for someone who works late in the US and someone who starts early in India. However, with the trend in India preferring later start and finish times, this might make US Eastern time zones more accessible (early evening India is early morning on the East coast).
Do you have to pay overtime in India?
Overtime is the norm and must be paid under employment law. However, this amount is usually capped per month.
How do you recruit employees in India?
The largest recruitment platform in India is Naukri. Other job boards that US employers should consider include LinkedIn, Times Jobs, Monster India, Indeed, Shine, Freshersworld, Glassdoor, Job Sarkari, Upwork, and Placement India.
How do you interview remote workers in India?
As in the US, the Indian interview process is generally regarded as formal and structured. For corporate positions, there are often two rounds of interviews and in some cases some form of competency testing. There is usually a set list of questions an interviewer will be working from, centering on qualifications and education. Interviewees will aim to answer these questions politely and succinctly, which may differ from US candidates who are culturally more likely to promote themselves and their achievements.
Generally, men in India will wear suits and ties to interviews while women may wear corporate wear such as suiting, skirts and blouses or they may choose to wear saris.
It’s commonplace to send a thank you note after the interview. This is different from a follow up message, or one questioning what the next steps will be and is simply meant as a sign of polite gratitude.
Are Indian CVs different to American CVs?
Indian CVs tend to be longer and can span two, three or more pages compared to single-page American CV’s. These Indian CVs typically contain an entire career history and details on each position held. Although not mandatory, a professional photo of the candidate may also be included with the CV. Some Indian CVs also contain some personal information such as race or gender, which are not included on an American CV.
Is making an offer to an employee in India different to hiring in the USA?
It’s commonplace to negotiate the salary after extending a job offer in India. Salaries will often be quoted in terms of CTC or cost to company which will include pay as well as any other costs the company will incur due to employment. This could include benefits like health insurance, the cost of a driver, or company car, subsidies for food, clothing or equipment, contributions to provident fund and will also include your gratuity amount. Generally, the take home pay amounts to about 70% of the CTC.
Salaries are also offered using the Lakh unit, which is equal to 100 000. For example, 150 000 rupees is 1.5 lakh rupees.
How much annual leave do employees get in India?
Annual leave in India varies across their respective state government acts. Generally, 15 days of annual (vacation) leave is permitted alongside 12 casual paid leave days and public holidays. The 12 casual paid leave days also encompass sick leave, emergencies, family or personal reasons. If an employee is sick, they must provide a medical certificate from their doctor if they are absent for 3 or more consecutive days.
As there is a statutory minimum the employer will not be able to reduce the amount of annual leave to their remote employees in India. Annual leave does not expire but moves into the next year with a cap of thirty days.
Can we offer unlimited PTO in India?
You can offer unlimited leave provided that employees receive their minimum entitlement. This means that leave should still be tracked. Unused annual leave must be paid out at termination.
Do I have to track leave in India?
Yes because there are minimum statutory entitlements and unused leave needs to be paid out at terminations, you must track the leave of your Indian employees.
What are the National public holidays in India?
Officially, only three holidays are fully covered national public holidays. These are Republic Day (January 26), Independence Day (August 15) and Mahatama Gandhi’s Birthday (October 2). If the employee is required to work on that day, the relevant state may increase wages for that day or allow a claim for compensatory leave. It is, however, standard for companies to provide 10-12 days paid off for public holidays, depending on which state as different public holidays are celebrated across the country. Larger companies will have standardised public holiday schedules across all locations.
At Shield we offer our employees the choice of 3 different public holiday schedules. It’s a bit tricky to keep track of but it can be helpful for employees to match against their religious preferences.
We offer 20 days annual leave and classify the 12 casual leave days in India’s legislative framework as sick days.
How to Pay Remote Employees in India
Do Indian employees get paid differently to US employees?
Yes, Indian employees are paid differently to US employees. Salaried employees in the US are usually paid a fixed amount on a weekly, bi-weekly, or monthly basis, whereas salaries in India are structured with a number of components totalling a net salary figure. This includes a basic salary, allowances such as for housing, transport, health, and can include a number of perquisites as well.
How often do Indian employees get paid?
How often employees in India are paid depends on the type of work they are doing. If employed on a full-time basis, generally employees would be paid on a monthly basis.
Can employers pay Indian employees bi-monthly?
Employers are not able to pay employees bimonthly.
What are some common benefits that foreign employers offer remote employees in India?
Remote work inherently provides a number of benefits including: increased productivity, shorter (if any) commute times, flexible work scheduling, and more savings for the employer and employee. Many foreign employers provide additional allowances to their employees such as payment of business expenses, and the ability to work from a coworking space if so desired. Employers commonly pay a stipend for reasonable expenses such as travel where necessary.
Can employers pay a stipend for expenses?
At Shield GEO, we provide our remote employees in India with a health and wellbeing allowance and cover our employees under our Professional Indemnity and Public liability insurance as well as any other employment-related insurances required by the laws of the host country such as workers compensation or medical insurance. We also provide our employees with a stipend for their internet expenses and the ability to work from a coworking space, if so desired.
How is work equipment provided to remote employees in India?
Employers also commonly provide a stipend to remote employees for work equipment such as a laptop and other peripherals. Some employees in India are given free reign to choose their own equipment as well, provided their employer’s approval. In this case, employers can provide a stipend up to a certain amount or pay the full amount. Employers must remember to take note that some electronics are expensive to buy locally, and some items may be difficult to ship to new employees due to customs.
At Shield GEO, we ensure our Indian remote employees have the correct equipment to complete their day-to-day tasks efficiently. We provide our employees with a laptop, keyboard and mouse, and a headset for conferencing. At our employee’s primary place of work, we also provide a monitor, desk, ergonomic chair, and desk lamp.
Do Indian employees have to be paid in Indian Rupees (INR) ?
Yes, remote employees in India must be paid in Indian Rupees. India has strict controls on their currency and holding foreign currencies. Employees might ask for their salary to be set in USD, but they will receive it in INR unless they hold a foreign currency account in India. These accounts are strictly regulated and their financial activity is monitored. To pay employees in other currencies, employees must hold a foreign currency account in India. In most cases, remote employees in India for companies in the US must receive payment in Indian Rupees.
Can employers pay remote workers in India in USD?
No, employers cannot pay remote employees in India in USD. An Indian employee performing work in India for a US company should be paid in INR in India. If you send them USD, it will get converted into INR because there are strict controls on Indian nationals holding foreign currency accounts in India.
When the salary is fixed in INR, how do employers control the cost in USD?
When paying a remote employee in Indian Rupees, the cost of USD will fluctuate as the foreign exchange rate changes. This means employers cannot control the cost of USD.
If an employer wishes to safeguard against a large amount of movement in the exchange rate, they could fix the salary in INR and then benchmark it against USD. Effectively monitoring for any discrepancies that could be made up later in a “variable fx bonus.”
India Payslip Explained
All employers must issue their Indian employees with payslips. An Indian payslip will require personal information such as age, start date, bank account information and job title. It will also require leave information, such as a balance of leave available versus the leave taken to give the employee an overview of the leave still available to be taken.
The earnings and deduction portion of the payslip will find the breakdown of the compensation they are receiving, alongside the deductions taken from their pay to arrive at their net pay or what is deposited in their bank account each month. They can also see here what they contribute to their pension/retirement, which is titled under the Provident Fund.
Provident Fund: an amount of money that is collected from the employee’s salary. It is typically the 12% basic salary that they get after retirement. Read more on the Provident Fund Amendment.
Professional Tax: is a small deduction levied by state governments on all earning professionals. The amount is at the discretion of the state government and differs by state.
HRA: A salaried employee and the employees living in a rented house can take the benefit of the housing rent allowance. The housing rent allowance depends on the city. If the employee is a resident of the metro city than the HRA will equal to 50% basic salary. For the other areas, it will be 40% of the basic salary. More information can be found in this PDF.
The Basic Salary will only be around 40% of the total salary. It is a very important part of your salary slip as the rest function depends on it. This component is higher for junior-level employees. It is 100% taxable and matters because if the employee has a large amount of basic income, their tax will be higher. Furthermore, house rent allowance and employee provident funds are linked to the basic salary.
TDS: Tax-deductible at the source
Other perks include special allowance, driver salary, food allowance, internet expenses, professional development allowance, dress allowance, telephone and car reimbursements…
LTA: The Leave Travel Allowance covers the cost of the travel when the employee is on leave along with a family member.
Total: The employee’s earnings minus the deductions. This is what the employee receives in their bank account.
Social Security in India Explained
Does the employer have to pay SS?
Employers will have to pay social security. They are required to pay 12% of basic wages into the Provident Fund. There is a 1% Employer PF administration charge so at Shield GEO we reflect this as 13% ER PF on our quotes and LOAs.
PF is not mandatory for salaries above INR 25000. However, we still recommend our clients continue to pay their employees PF regardless of their salaries.
Does the employee have to pay SS?
Employees have to contribute 12% of their monthly base salary towards the Provident Fund Scheme and 1.75% to the national insurance scheme.
More information on India Social Security can be found here.
What is the 401K equivalent for remote employees in India?
The Employees’ Provident Fund Act encompasses the Provident Scheme, Pension Scheme and the Employee Deposit Linked Insurance Scheme. The Provident Fund is most similar to the US 401k, and in India the employee can claim from their PF settlement after attaining 55 years of age and retires from service.
Do Indian employees need health insurance? What does it normally cost?
In India, health insurance is a voluntary but common benefit, especially for foreign employers. It is comparatively, a much low expense than US insurance premiums, and when the employer provides the insurance directly there is no tax impact for the employee.
Terminating Remote Employees in India
Are there Probation Periods in India?
There are no direct laws around probation periods, but it is customary to allow up to three months at the start of the contract. Each state will vary with notice period requirements. Typically, the worker is not entitled to any dismissal notice or payment in lieu of notice during the period of probation.
Is there at will termination in India?
There is no at-will employment in India and a notice period must be given. The exemption to this will be if the termination is due to misconduct by the employee, and terminations in this circumstance can wave any payment in lieu of notice. Generally, the notice period is 30 days, however, in certain establishments with more than 100 employees, the employer must provide a notice period of at least three months. In the event of a mutually agreed separation, the notice period can be less, but both the employee and client must agree and sign a letter to confirm this.
Do you have to pay severance in India?
US employers are required to pay severance in employees in India. Employees who are dismissed are entitled to three different payments: severance, leave encashment and gratuity payments. Severance payments are equivalent to fifteen day’s average pay for every completed year of continuous employment.
Leave encashment is the entitlement to payment of wages for accrued and unavailed leave days up to the date of termination employment. The employee will be entitled to 12 days of paid casual leave and 10 days of public holiday leave. Casual leave payment is customary, not statutory, so the US employer can refuse to pay it out.
Gratuity payments are relevant to employees who have worked continuously for an employer for at least five years. This payment is calculated with this formula:
The 15/26 reflects the 15 out of 26 working days per month, the ‘last drawn salary’ pertains to the basic salary + the dearness allowance, and the years of service must be rounded to the nearest full year.
Gratuity is limited to INR 1,000,000.
Is it difficult to terminate an employee in India?
It is not a difficult termination process in India provided that the steps are followed and the employee is properly compensated. It is, however, not as easy as the US. This is primarily due to the notice period and severance pay requirements. The processes also vary because, in India, employees are paid on their last working day, which is why the notice period is important. In the US, the employee is terminated, and then there is a two week period of processing the payment before they are paid.