What you'll learn
India is a country in south Asia with the 2nd-largest population in the world. It is bordered by Pakistan, China, Nepal, Bhutan, Bangladesh, and Myanmar. India is a multilingual and multi-ethnic country with a fast-growing major economy, and has a growing hub for IT services, with many companies choosing to find great talent in India.
Employment Terms
Types of Contracts
- Fixed term (3 months minimum)
- Indefinite
- Part time Contracts (in India, there are very few laws governing part-time employment, leaving the terms of engagement and working hours to be negotiated between the employee and the client. Typically, part-time employees in India work between 20-30 hours per week).
Working Hours
The standard working hours in India is 48 hours per week. There are no statutory rules governing overtime, this should be agreed upon in the employment contract.
Employees should be given time off instead if they work more than the agreed number of hours per week in their contract.
Minimum Wage
The minimum wage varies with between each state, but can be no lower than INR 178 per day.
Probation Period
The typical probation period in India is between 3 and 6 months. Probation periods can be extended based on employee performance and there is no maximum time for probation specifically written into statutory employment rules.
Taxes & Local Employment Costs
Employee Taxes & Contributions
Employees pay the following contributions from their salary:
- Income Tax
- Employee Provident Fund
Income Tax
Employees can be taxed according to the “old” and “new” tax regimes, which the employee can choose between. Below are the income tax slabs (bands) for India that were updated in 2024:
- INR 0 - 3,00,000 = 0%
- INR 3,00,000 to 6,00,000 = 5%
- INR 6,00,000 to 9,00,000 = 10%
- INR 9,00,000 to 12,00,000 = 15%
- INR 12,00,000 to 15,00,000 = 20%
- Above INR 15,00,000 = 30%
Employee Provident Fund
Employees can choose to have their contributions based on one of the following:
- Basic monthly salary (40% of gross salary)
- A fixed amount of INR 15,000
Employees pay 12% of their chosen amount into the Employee Provident Fund. Employees with a salary above INR 15,000 can opt out of the Provident Fund by writing to their employer.
Employer Taxes & Contributions
Employers match the contribution paid by employees into the Employee Provident Fund, which is 12% of either their basic salary, or INR 15,000.
Additionally, employers must pay an administration fee of 1% (which is paid to the government department administering the fund), resulting in a total of 13%.
Types of Leave
Annual Leave
Up to a statutory maximum of 45 days, annual leave accrues at a rate of 1 day for every 21 days worked, while agreements between employer and employee sometimes set a lower threshold.
Sick Leave
Sick leave is accrued at the rate of 1 day per completed month of service.
Employees are entitled to 100% of their average basic salary when taking sick leave, which the employer pays.
Maternity Leave
Employees who have completed at least 80 days of services in the previous year are entitled to a minimum of 26 weeks of paid maternity leave, 8 of which must be taken before the birth of the child. For any children born after the first 2, maternity leave decreases to 12 weeks.
The employer is responsible for paying the employee 100% of their average basic salary. The employee is entitled to take additional unpaid leave beyond 26 weeks.
Paternity Leave
Government workers are entitled to 15 days of paid paternity leave, but there is no statutory paternity leave for other sectors.
Public Holidays
Public holidays in India vary by region, between 10-15 public holidays each year. Most employers offer some extra days of paid time off in their contracts. Additional holidays vary by state, however, it is up to the employer whether to give them this time off (employee or employer state).
Benefits
Summary
Employers in India can typically offer the following benefits as part of the benefits structure in India. (This applies to full-time employees, not contractors).
- Private Pension
- Dental & Vision Plan
Termination Process
Notice Period
During probation, no statutory minimum notice period applies. After 1 year of service, employees are entitled to 1 month of notice. Payment can be made in lieu of notice.
Statutory Payments
If an employee has completed 5 years of service with the same employer, they are entitled to a payment at termination called “gratuity”. Gratuity is calculated as 15 days’ wages per completed year of service.
Any rules governing the payout of leave at the end of employment must be defined in the employment contract as there are no statutory rules governing this.
Additional Information
The 13th month salary bonus is usually mandatory in India, paid as a portion of the annual salary before the end of the year. India introduced a new tax regime in recent years that eliminated many tax exemptions, but also offered lower tax rates. Employees can decide which system they want to follow.
