29 June 2018
Staff Recruitment in India
With a population of more than 1.3 billion, India is the world’s second most populous nation after China, but it contains proportionately more young people, which would potentially provide a large pool of workers, particularly in light of the country rolling out its Make In India initiative. The median age of India’s population is expected to stay below 30 by 2025, by which time India will have eclipsed China to become the world’s most populous country. In comparison, China’s median age is expected to surpass 40 by 2025. As a result, the gap between the two countries in the number of people aged between 18 and 35 in their populations is likely to widen in India’s favour.
The Ministry of Labour & Employment (MOLE) of the central government is responsible for protecting and safeguarding the interests of workers in general, and the poor, deprived and disadvantaged sections of the society in particular. MOLE also aims to create a healthy work environment for higher production and productivity and to develop and coordinate vocational skill training and employment. Aside from the central government, the state governments also enact labour market and welfare legislations, as labour is a subject in the concurrent list under the Constitution of India.
In India, employment laws apply to Indian employees as well as foreign employees working in the country. Specifically, they apply to employees of Indian companies and establishments regardless of their nationalities or place of work in the country, and regardless of the choice of law in the employment contract, subject to certain limited exceptions under the provident fund legislation.
Below are the main labour and industrial relations laws that Hong Kong companies are advised to acquire practical working knowledge when establishing a presence and hiring workers in India, depending on the sectors and business scopes they intend to be engaged in.
|Factories Act, 1948||To provide for the health, safety, welfare, working hours, and leave for workers in factories or manufacturing units|
|Shop and Establishment Acts||To regulate wage payments, work conditions, working hours, overtime and holidays for people working in shops and other establishments such as hotels and restaurants (promulgated by the states)|
|Contract Labour (Regulation and Abolition) Act, 1970||To regulate the engagement of contractor and contractor workers by the principal employer|
|Industrial Employment Standing Order Act, 1946||To codify service conditions and stipulate the required certification of any business establishment employing 100 or more employees|
|Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996||To regulate employment conditions including safety, health and welfare of people engaged in building and construction activities|
|Industrial Disputes Act, 1947||To provide for the investigation and settlement of industrial disputes, and conditions for strikes, layoffs and unfair labour practices|
|Trade Unions Act, 1926||To provide for the registration of trade unions and to define the law relating to registered trade unions|
|Payment of Wages Act, 1936||To regulate the payment of wages to certain classes of employees in respect of wage period, payment time and mode, and responsibility for payment|
|Minimum Wages Act, 1948||To set out the requirements for paying the minimum wages to skilled and unskilled workers, taking into account an industry’s capacity to pay, nature and location of work|
|Equal Remuneration Act, 1976||To provide for the payment of equal remuneration to men and women workers and for the prevention of discrimination, on the ground of sex, against women in the matter of employment|
|Employee’s State Insurance Act, 1948||To provide for a scheme for contributions by both the employer and employee and provisions of benefits to employees in case of sickness, maternity and employment injury|
|Employees Provident Fund and Miscellaneous Provisions Act, 1952||To provide for a scheme for equal contributions by both the employer and employee to a provident fund for employees in factories and other establishments where twenty or more workers are employed|
Streamlining and Simplification of Labour Law Requirements
India is known for its complex labour laws and therefore difficulty in labour law compliance given the multiplicity of labour laws enacted by the central and state governments, many of which are arcane. Meanwhile, there are more than 40 labour related legislations enacted by the central government alone, dealing with minimum wages, accidental and social security benefits, occupational safety and health, conditions of employment, disciplinary action, formation of trade unions, industrial relations. Attempts to consolidate them for lowering or removing the impediments to industrial development have been embarked upon, particularly by the reformist-minded Modi government.
In February 2017, MOLE notified the Ease of Compliance to Maintain Registers under Various Labour Laws Rules (2017) to expedite compliance of various labour laws and maintenance of combined registers. Compliance requirements under four codes have been rationalised and simplified, that is, (i) wages; (ii) industrial relations; (iii) social security and welfare; and (iv) safety and working conditions, covering the following labour laws.
- Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996
- Contract Labour (Regulation and Abolition) Act, 1970
- Equal Remuneration Act, 1976
- Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
- Mines Act, 1952
- Minimum Wages Act, 1948
- Payment of Wages Act, 1936
- Sales Promotion Employees (Conditions of Service) Act, 1976
- Working Journalists and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955
With the changes and amendments, employers will be required to maintain fewer registers under the above labour laws, either electronically or in hard copy, with the number of data fields also cut down substantially to some 140 from over 900 previously. Remarkably, the number of compliance registers is reduced from more than 50 previously to the five below:
- Employer Register (FORM A)
- Wage Register (FORM B)
- Register of Loans and Recoveries (FORM C)
- Attendance Register (FORM D)
- Register of rest/leave/leave wages under the Mines Act, 1952; the Sales Promotion Employees (Conditions of Service) Act, 1976 and the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1957 (FORM E)
In addition, MOLE has launched a unified online portal Shram Suvidha, which provides a single point of contact between employer, employee and enforcement agencies so as to bring about greater transparency in their day-to-day interactions. The portal consists of the following features:
- Centralised reporting is made possible despite requirements by various labour laws
- Information on labour inspection and enforcement is consolidated
- Labour Identification Number (LIN) is allotted to units to facilitate online registration and filing of returns
- Online registration with Employee State Insurance Corporation (ESIC) and Employee Provident Fund Organisation (EPFO) is allowed
As a further step to simplify the employment codes, the central government plans to introduce new LIN to replace all employer codes issued by separate labour enforcement agencies, such as ESIC, EPFO, Chief Labour Commissioner (Central) (CLC(C)) and Directorate General of Mines Safety (DGMS).
Employment of Expatriate Worker in India
Aside from employing local staff, Hong Kong companies should take note that expatriate employment is allowed in India, but there are guidelines stipulating the conditions for which a business or employment visa will be issued, requiring information including the financial standing of the applicant, as well as the expertise in the field of the concerned business. The visa applicant should be at least 18 years old, in good health, and about to fill a position not suitable for an Indian employee. In addition, his or her job scope should not be the kind of routine or clerical work (which otherwise can be filled by an Indian worker), and the annual salary should be in excess of US$25,000.
Generally, foreigners seeking to work and reside in India need to register their visa, request new visa or extend their existing visa, which they work on via the online portal of the Foreigners Regional Registration Office (FRRO), or visit the office in person. Registration of visa is mandatory for visa which exceeds 180 days.
Like the visa application, both the visa holder and the employer must provide the supporting documents in registering the visa of the employee. On the part of the employer, he or she needs to provide the documents below. A residential permit to stay in India will be issued once FRRO is satisfied with the application.
- Two copies of a permission letter that requests approval for the applicant’s visa registration
- Two copies of a sponsorship letter that pledges responsibility for the applicant’s activity in India and promises to repatriate the applicant at company cost if any adverse conduct comes to notice
- Two copies of a letter confirming the visa holder’s residential address in India
- Two copies of an employment contract that specifically states the monthly salary, designation, tenure of employment, etc.
- The company’s Certificate of Incorporation (see Section 2 on registration or incorporation of a company in India)
- Regulatory Environment
- Establishing a Presence
- Intellectual Property Protection
- Staff Recruitment
- Tax Considerations
- Import/Export Procedures
- Further Information