Payroll Compliance in India
What are the regular working hours in India?
In India, adults over the age of 18 cannot work for more than 48 hours a week over a period of 4 weeks. Overtime is allowed in some instances depending on employment agreements; however, overtime cannot be forced and must be taken voluntarily.
Business hours vary in India, however in office environments, business hours are generally between 9am/11am and close around 6pm/8pm.
Through Section 51 of the Factories Act, employees under contract are not supposed to work over the threshold of 48 hours per week. Furthermore, section 59 states that employees are not supposed to work over 9 hours a day. Any time worked that goes beyond 48 hours weekly, or 9 hours daily, then this is considered overtime. Employees can expect to receive twice the standard wage.
Vacation and illness
According to India’s ‘Factories Act’, employees that work at least 240 days a year get 1 day’s annual leave for every 20 days worked a year. Mine workers below the ground get 1 day for every 15 days work, whilst employees above ground get 1 day for every 20 days work. Those working in sales and news, get one month for every 11 months worked.
When it comes to sick leave sales and news-based employees are entitled to one-month sick leave for every 18 months’ work and apprentices are entitled to 15 days’ sick leave.
India’s Maternity Benefit
Amended in 2017, the Maternity (Amendment) Bill 2017 – which updates the Maternity Benefit Act, 1961 – extends maternity benefit to working women for up to 26 weeks paid leave, which protects their employment during this maternity leave. The eligibility for this benefit is available to those who work in establishments with 10 or more employees.
State laws typically provide employees with 15 days of earned leave (EL) annually. Additional paid leave, employees can expect to benefit from 10 days of sick leave or medical leave (SL/ ML) and the possibility of a further 10 of casual leave (CL).
Unlike other countries, India does not have a standard process for terminating an employee. They may be terminated depending on the individual contract signed between employee and employer. However, there are still powerful labor laws in place, which must be adhered to as they supersede the contracts put in place by employers.
What tax considerations are there?
Employees in India are taxed on their income at a rate dependent on the ‘Income Tax Slab’ they fall into. Tax is deducted up to a rate of 30% for the highest earners. Non-residents must pay taxes on their Indian income only, whereas residents must pay tax on both their Indian and Foreign income.
At the time of publish, corporate income tax has been cut from 30% to 22% for existing companies in India, and 15% from 25% for new manufacturing companies.
Employees and employers must contribute towards social security in India – this is taxed at a rate of 12% of an employee’s income.