With the shift to remote working, companies across the globe are increasingly seeking top-tier, remote talent beyond the corporate HQ. Outsourcing to India is popular. It offers a large pool of highly skilled professionals. Additionally, it is one of the fastest growing economies in the world.
If you plan to expand, India might be the ideal starting point for building your distributed team. IT infrastructure is well-established, English is widely spoken, and despite a rapidly growing economy, the cost of living is still lower than most countries.
In fact, salaries remain well below the US and Canadian averages at about $428.49USD per month.
But when it comes to hiring Indian talent, salaries aren’t the only monetary consideration to factor into your budget. It is important to consider the costs of setting up an employment package. This includes tax contributions, social security contributions, overtime and vacation pay, stipends and benefits. All of these factors must be taken into account before beginning the hiring process.
We analyzed the costs of hiring an employee in India, including mandatory and optional expenses. This will help you expand your global reach without increasing hiring costs.
Mandatory Costs of Hiring in India
Mandatory hiring costs are non-negotiable expenses when hiring remote, Indian talent. Proper accounting of salaries, taxes, overtime pay, and vacation pay is essential. Otherwise, you may break local labor laws and regulations. Mandatory costs include:
Salary
The average minimum wage in India is INR 32,840 (USD $422). That said, minimum wage in India is complex and there is no statutory minimum wage for organizations in the private sector outside of regulated “factory” sectors.
Employers do not have a legal obligation to pay a minimum salary. However, salaries vary widely across industries and job types, as is the case with most countries. To offer a competitive salary, employers must consider the type of job and the skills required for success.
Generally, salaries in India are much lower than in the U.S. and Canada. This means you will pay less for similarly qualified workers in countries with a stronger economy.
Taxes and Benefits
All employers are required to contribute 20.33% in payroll taxes. This money goes toward an Employees’ Provident Fund (12%) and Employees’ Pension Scheme (8.33%).
Overtime Pay
Standard working hours are 8 hours per day, 40 hours per week. The standard workweek is from Monday to Friday.
Most roles don't require overtime pay. However, all factory workers must receive additional overtime pay. Industry practice is to give extra pro-rated PTO or pay twice the regular rate for overtime work.
Severance Pay
Depending on the reason for their termination, employees in India may be entitled to severance pay:
- Termination due to redundancy: Employees are entitled to severance pay equivalent to 15 days' of pay at their average pay rate for every 1 year of continuous service or part thereof in excess of 6 months
- Employees who are dismissed: Employers must pay termination benefits including leave accrued, gratuity payment (for employees with over 5 years of continuous service), payment in lieu of notice (if no notice is given), statutory bonus payment, and any other amounts due under the employment contract.
- Employees who are terminated due to misconduct: Are not entitled to notice period or severance pay
Supplemental Costs of Hiring in India
When the world is your competition, it pays to incentivize new and existing hires with attractive supplementary benefits like medical, dental, vision, life insurance, retirement savings plans and other stipends and perks.
Offering attractive supplementary benefits boosts morale and increases retention. This lowers onboarding costs, helping to establish a strong, remote team you can rely on.
Benefits
In India, there are a variety of supplementary benefits certain companies offer. Typical supplementary benefits can include:
Health Benefits: In India, citizens are entitled to free care in public health facilities with no deductibles, co-payments, or coinsurance. However, government funding for health care is limited and often inaccessible and as a result, a significant portion of outpatient and inpatient care is delivered at private, high-priced facilities, with costs typically paid out-of-pocket.
To complement the government-funded health care in India, many companies will offer private health insurance to offset costs. One popular company with a variety of insurance options for employers to choose from is Pazcare.
Bonuses and Extras
Statutory Bonuses in India are mandatory per the Payment of Bonus act (1965). The bonus rate is between 8.33% and 20% based on the 'available surplus' as mentioned in the act.
Average Cost of Hiring
Below is an estimate based on a salary of $100,000 for an employee in India. This salary is designed to make it easier to calculate. It will vary depending on your hiring goals. These include the employment contract details, the candidate's experience and education, and the type of position.
Average Cost Of Hiring One Employee in India (Annual in $USD)
Mandatory Burdens
Salary: $100,000
Employer Taxes: $20,330
Statutory Bonus: $8,330 - $20,000
Total: $128,330 – 140,330
These totals do not include costs for additional benefits. Examples of popular soft benefits in India include gym memberships, health coaches, subsidized cafeterias and subsidized transportation.
Work with Borderless
Growing your remote, global team and hiring Indian talent can seem overwhelming, especially when you consider all the associated costs. Leave the headache to Borderless.
Working with an Employer of Record (EOR) handles all the administrative work, ensuring compliance and giving you cost-savings, so you can focus on growing your business.
To get started, book a demo today.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
