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How to Hire a Software Engineer in India: A Guide for Global Companies

If your company is interested in accessing the vast pool of global talent to fill remote positions, then you will want to understand how to best recruit, hire and pay employees abroad.  Once you have that information, you can target your recruitment to hire specific roles with skilled workers from countries that have certain types of specialists.

A good example of this is software engineers from India, where IT education and training are prioritized, and workers are known to be diligent in their approach to work.  Before recruiting, you will want to understand all of your options for hiring Indian software engineers, and any compliance risks that your company might face.

Benefits of hiring software engineers in India

If your company needs software engineers, here are some of the benefits of hiring in India:

Large talent pool 

There will be numerous candidates to select from within India’s large population possessing technical expertise.

Limits on US H1B Visa program

A related advantage is that recently the US (which has been a primary destination for Indian IT specialists) has limited the H1B work visa program, forcing some Indians to find remote work from home.  Software engineers are the number one category of affected H1B applicants.

Lower wages  

When you hire a foreign worker in their own country, you will often pay a wage that is ‘localized’ and in line with that economy, which for India means lower wages than you would pay in your home country. 

Desire to work for foreign companies

Indian software engineers will be motivated to work for foreign companies to gain experience and perhaps be hired abroad eventually.

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Market salary for software engineers in India

Expanding on the point about lower wages, it is helpful to see what workers are actually earning inside India for the position.  The average salary for software engineers in India is about INR 30,000 per month (US$500), with the highest salary at INR 48,000 (US$650).

Contrast that with the average software engineer salary in the US, which is over US$100,000 annually.

How to legally hire a software engineer in India

While the benefits are clear, there are some choices to be made about how to hire, pay and manage an Indian software engineer.

Hire freelancers

Some companies may prefer to just hire the worker as a freelancer, as apparently the simplest approach.  This can be a useful method for short term projects or to try out a new worker.

While that does avoid the complexity of foreign employment, there could be some downsides.  For example, freelancers may work for more than one client, could be less loyal, and setting up a suitable cross-border payment and performance system is a challenge.

Use an employer of record to hire your remote worker

If you want the stability and commitment of an employee, then you can use an employer of record (EOR) in India as one way to hire them.  The EOR handles all employment administration, taxes, withholding, and issuance of a local payslip to the employee.

Set up an entity in India

Companies with business plans in India aside from hiring remote workers might decide to set up their own corporate entity.  The branch or subsidiary would then hire and payroll the employees, as well as oversee and manage their work activity.  This is more costly and time-consuming than other options, and not really best for just hiring a few remote workers.

Misclassification risk in India: Employee vs contractor

In general, the hiring of contractors is discouraged in India, as it prevents a worker from receiving necessary employee benefits.  India uses a multi-faceted test including to classify employees vs contractors:

  • Control and supervision of the worker
  • Degree of integration with the company vs. independence
  • Type of company hiring
  • Whether the position is skilled/professional

These criteria might be applied less rigorously to a foreign company hiring an Indian contractor, but keep in mind your contractor at any time could file a claim to pursue employment benefits and rights.  At that point, your only choice would be to employ them or end the relationship.

How to stay compliant when paying an Indian worker

To avoid the compliance risks of hiring a contractor or the expense of setting up an entity, the most efficient way to hire an Indian worker is with an employer of record.  The EOR becomes the local employer on your behalf and will take care of the employment contract, set up payroll, withhold taxes and issue a payslip.

Some of the benefits of using an EOR are:

  • A fully verified and compliant entity in place for hiring
  • Relieves your HR department of the task of learning Indian employment rules
  • Experienced with all local labor laws and processes
  • Gives the employee assurance that everything is handled locally

Client Case: Hiring multiple employees in India for a US company

Context:

We had a client who initially contacted us with their plans to hire multiple workers in India, and wanted to know how they could go about that in a way that allowed them to scale up their hiring.

They were setting up a specialized IT support project, and had located two potential recruits in India, and were planning on adding to the team in the future, both in India and in Europe.  They had already determined that the roles would be best filled by employees so they could provide benefits, but the client had no plans to set up an entity in other countries.

Shield GEO Solution:

We gave them guidance on how the EOR solution was ideally suited for their situation, as it could be used for their two recruits in India and in different countries in the future as they continue to expand.  Once they had signed on as a Shield GEO client, we became their international employment partner and helped them scale with remote employees in various countries.

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