EOR Services: A Compliant Solution for Remote Hiring in India

Hiring employees remotely gives firms the access to a wider talent pool. However, this process can be quite complex if done independently. From assessing skills of various talent pools in different regions to running background checks, hiring from different regions can be challenging. Moreover, companies struggle to strike a balance between local salary benchmarks and global pay scales.

If planning to hire employees from India, it is essential to comply with laws related to employment and payroll. Mentioned below are the ways in which EOR services in India ensure that a foreign firm stays compliant while hiring Indian talent.

Worker classification through EOR services:

In India, an employee working for any firm will be classified as a contractor if they work independently and temporarily with multiple clients. Partnering with an Employer of Record in India will help evaluate the nature of employees’ work to classify them correctly. Moreover, it protects the firm from penalties by aligning worker classification with Indian regulatory frameworks.

Payroll Processing and Tax Compliance:

Firms hiring from India must comply with laws related to tax and payroll in to avoid fines and potential bans on operating in India. A partnership with an EOR services in India will help to manage income tax withholding and social security contributions asper local laws. It computes salaries, bonuses, tax deductions (TDS under Sec192), and other withholdings, issues payslips and provides tax documentation for employees.

Avoiding Permanent Establishment (PE) Risks with EOR:

Hiring remote talent can trigger firm’s status to be a permanent establishment (PE). An Employer of Record in India hires legally on its own behalf, to prevent remote employees from being classified as business representatives under local laws. This helps to reduce the corporate income tax on the firm which depends on the earnings or profits of the firm.

Compliance Pertaining to Security and Benefits in India:

Apart from offering mandatory benefits such as healthcare, provident fund (EPF), sick leave, maternity leave and gratuity, EOR partners support companies providing additional perks such as private health insurance, wellness programs, stock options (ESOPs) and more.

Employment Contracts and Termination Compliance:

Employer of Record in India legally drafts compliant employment contracts on firm’s behalf when hiring talent from India. Moreover, they handle termination procedures by adhering to Shops and Establishment Act and state-wise rules for notice periods and layoffs. This includes management of severance pay & final settlements comprising of gratuity, leave encashment for unused paid leaves, salary dues, bonuses and reimbursements.

Immigration and Work Authorization:

EOR assists in providing work visas and helps secure legal work authorization if a remote employee requires to travel for work. It submits documents such as employment contract, salary details, proof of employment, and other documents required to process the visas minimizing the risk of visa rejection, deportation or legal penalties.

Data Protection:

In India, employee data protection laws are governed by the Digital Personal Data Protection (DPDP) Act,2023. EOR aligns with data protection laws of India to secure IT infrastructure, prevent data breaches and avoid non-penalties for non-compliance. It enforces the use of multi-factor authentication (MFA) for employees to access sensitive company data and conducts regular audits to comply with India’s data protection regulations.

Human Resource Support:

EOR acts as an extended HR team for company’s remote employees by offering solutions tailored to remote teams. Some EOR providers in India assist foreign businesses with employee engagement, training, and performance management. Without an Employer of Record, organizations may find it challenging to address disputes that could lead to legal actions and constantly changing labor laws.

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It is always advisable to opt for an Employer of Record in India when planning to hire Indian talent due to the varying laws state-wise and ever evolving tax regulations. Hiring remotely without a legal presence in India may lead to violations of laws and unwanted heavy penalties.