As per the Indian Constitution, the federal as well as state governments are empowered to enact suitable legislations to regulate and protect the interests of employees, as well as to create and increase employment opportunities.
Depending on the type of industry, nature of work undertaken, number of employees, location, remuneration of the employees, etc., different legislation, such as the Industrial Disputes Act 1947, Factories Act 1948, and the respective Shops and Establishment Acts of relevant states have been enacted.
Foreign companies looking to establish in India should understand the country’s multiple federal labor laws as well as locally enacted laws that are specific to the state, industry, and the size of the firm.
While the federal government has spearheaded major reforms to consolidate the numerous existing laws into four major labor codes, these Codes are yet to be implemented. They are the Code on Wages, the Code on Social Security, the Industrial Relations Code and the Occupational, Safety, Health and Working Condition Code.
Labor regulations are derived from multiple sources in India. This concurrent nature of labor and employment laws can be confusing for companies that are newly established or looking to expand in India.
In India, Labor law is a concurrent subject in the Indian Constitution, which implies that labor and employment regulations in the country are governed at both the federal and state levels.
[tips title="Did You Know"]The main federal statutes that regulate the termination of employment include the Industrial Employment (Standing Orders) Act (IESA), 1946 and the Industrial Disputes Act (IDA), 1947, as amended.[/tips]
Employers need to consider multiple factors when assessing their statutory requirements, such as their industry, location, and number of employees. While the government is often ineffective in enforcing its labor laws, the legal and reputational risks of non-compliance merit attention. Further, failure to observe best practices in labor matters by foreign entities can be politicized.
To gain more insights about Indian labor laws, read this section
Hiring employees in India
India is the youngest country in the world, and as a developing market economy, it appeals to many multinational businesses seeking to expand or hire remote workers. If India is also on your radar, our guide to hiring employees in India will help you assess the process of forming a team in the country.
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Before you start recruiting in a new country, you should have a good understanding of the country's workforce and the employment laws that may apply to you.
India has consolidated 29 labor laws under the umbrella of four labor codes. These include the Code on Wages, the Code on Social Security, the Industrial Relations Code and the Occupational, Safety, Health and Working Condition Code. However, the rules for these codes are yet to be notified as of September 2021 and HR policies in India continue to be governed by the old laws for the time being.
Read our guide to hiring employees in India for comprehensive insights.
There are a variety of visas foreign investors can apply for depending on their purpose of visit. With the introduction of the e-visa, which is open to 166 countries, it has become easier for applicants to apply for an Indian visa. Applicants can apply online without the hassle of visiting an Indian embassy or consulate.
Read more about business visas in this section.
Terminating employees in India
Given the structure of Indian labor laws, there is no standard process to terminate an employee in India. An employee may be terminated according to terms laid out in the individual labor contract signed between the employee and the employer. Equally, the terms may be subject to the country’s labor laws. Here, employers should note that India’s labor laws supersede the provisions of labor contracts—any termination policy or clause outlined within a contract should be checked against the law by a professional.
Employers are exposed to a number of legal and reputational risks resulting from wrongful termination, or not following due process
Employers should, therefore, plan to construct contracts and human resource (HR) materials to ensure that senior management, HR personnel, and employees are fully apprised of their rights and responsibilities.
Click here to learn more about how to terminate employees in India.
Payroll processing in India is a daunting task because it involves a slew of financial aspects such as gross compensation, net income, bonuses, daily salaries, leave, compliances, and other items that are part of every employee's hire-to-retirement journey.
Employees are regarded as an organization's most valuable asset. As a result, businesses devote a significant amount of time and effort on recruiting, training, and establishing an appropriate workflow for each employee. Payroll processing is one of the most important tasks in the payroll process. Employees, in a sense, rely on the company's processes to ensure that they are paid on time.
According to the Minimum Wages Act of 1948, both the central and state governments have control over fixing the minimum wages of employment. Wage rates of employment differ across occupations, skills, sectors, and regions. Given the extent of difference between various kinds of employable work, there is no set wage rate for specific work across the country. Businesses are advised to track the periodically updated minimum wage amount across various categories of employment, such as unskilled, semi-skilled, skilled, and highly skilled workers, in their respective state/city/zone of operation.
To gain more insights about minimum wages in India, read this section
Social security system
India’s social security system is composed of a number of schemes and programs spread across a variety of laws and regulations. Generally, India’s social security schemes cover the following types of social insurances:
- Employee provident fund
- Health insurance and medical benefit
- Disability benefit
- Maternity benefit
The applicability of mandatory contributions to social insurances is varied. Some of social insurances require employer contributions from all companies, some from companies with a minimum of ten or more employees, and some from companies with twenty or more employees.
To gain more insights about the social security system in India, read this section.
A guide to public holidays
India's public holidays include gazetted and restricted days, as is the norm. The country’s holiday schedule is divided across three classifications: gazetted, restricted, as well as state and union territory. Commercial establishments should note the schedule for the respective states where they are located.
Many foreign human resource managers struggle with India’s holiday schedule. That is no surprise – the federal and state governments have acknowledged a numberof holidays every month to accommodate over 1.3 billion people spread over 36 diverse states and union territories, subscribing to different religious faiths, ethnic, and cultural traditions.
Although there are various ways to manage this schedule, most companies in India offer 10 to 14 public holidays, depending on the company’s past practices and industry norms, as well as the discretion of the concerned states.
Read our guide to public holidays to know more.
[faq title="FAQ:HR Automation & Technology Trends in India"]
What is Human Resource (HR) automation?
HR Automation is a process of using software to digitize and automate repetitive and time-consuming tasks including employee onboarding, payroll, timekeeping, and benefits administration to simplify HR processes. Cloud based HR SAAS platforms have transformed the HR function and played a pivotal role in bypassing the time and effort involved in maintaining physical paperwork in every-day HR processes earlier.
It would be fair to state that business is bound to take a hit If HR professionals in an organization spend more time on administrative work than utilizing their valuable skills in other consequential areas such as employee engagement, employee grievance redressal, workforce forecasting, talent acquisition, and updating HR policy as per ongoing regulatory changes, amongst others.
However, transitioning from manual HR systems to HR automation requires a certain level of expertise with the technology that is being integrated into organizational processes. The benefits of HR automation far outweigh the time, energy, and capital the organization will invest in the process.
Why should businesses invest in HR automation?
HR Automation directly results in enhancing the productivity of an organization’s HR Department. This is attained by maximizing efficiencies across several HR Related processes to reduce the administrative burden and minimize compliance costs. We have listed down some key benefits of HR Automation below:
- Enhanced efficiency and productivity
HR largely depends on document-driven processes, which when done manually, can be time-consuming, repetitive, and extremely inefficient. Automation of human resource functions can improve efficiency and productivity of an organization by automating such tedious tasks.
- Boosts cost savings
Automating the manual HR operations can help an organization save a substantial amount of capital in the long run. As information is stored online, the money that would previously be spent on paperwork and storage space would be eliminated.
- Simplifies HR processes
HR tech can greatly improve the employee experience in an organization. By automating all essential HR functions, the employees will be able to get their work done much faster. Since everything is automated from a single system, employees can find any information they need online.
- Reduced data errors
As an HR professional, one must deal with tons of employee data on a daily basis. Errors are sometimes inevitable when the data is managed manually. These errors can affect an organization on different levels, reducing the overall efficiency of its operations.
- Actionable insights
HR automation enables organizations to track, collect and analyse data of all kinds. This allows them to spot patterns and create reports on their findings. They can then use these insights to improve processes, correct any failures, and do more of what’s working across the business.
- Improved communication and collaboration
HR automation gives a clear overview of all the processes and stages involved. This helps everyone understand each other’s responsibilities, thereby improving overall communication and teamwork.
What manual processes can be automated in HR?
There is a broad spectrum of HR processes that can be automated to save time and boost productivity in an organization. Some of them are:
- Talent Acquisition
Recruiting is integral to the success of any organization, as it ensures one brings in the right talent and leadership for each available position. Many recruitment processes, like posting job ads and screening CVs — can be automated easily to save the organization considerable time and energy throughout the hiring process.
- Employee Onboarding
While employee onboarding is a crucial process of the HR function, it’s traditionally a time-consuming and paper-reliant process. Automation, however, allows HR teams to offer a more standardized experience for every hire, since it streamlines communication, improves efficiency, and eliminates mistakes that are characteristic of manual data entry.
- Learning & Development
Besides onboarding, training employees is critical to their success in achieving their individual goals, and the best way to approach employee training these days is through conversational technology based training sessions. Not only does it allow HR departments to digitize their training delivery, it also enables them to track the progress of individuals through data driven dashboards.
- Employee Exit Management
Automation can also simplify the process of managing employee exits from the organization through digitized files that will dissolve the employee’s payroll, benefits package, and follow retention schedules required to stay compliant.
- Leave Requests Management
Automation helps in syncing the employee information with payroll and human resources which helps in managing the workflow for any leave requests.
- Expense Claims Management
With HR automation, all mandatory fields and attachments for expense claims are easily created, leading to simplified expense claiming processes and functions, and easier approvals from various departments for expenses.
- Payroll Management
The advantages of automated payroll are manifold since automation can complete all types of payment functions — salaried and hourly wages, overtime, double-time, commissions, bonuses, raises, and more. Automating payroll simplifies tax filing as well, as this method maintains compliance with all relevant tax laws.
Is there a sustainable market for HR Technology in India?
The Indian HR Tech market is primarily being driven by the widespread adoption of contactless hiring solutions in organizations. The overall market size of HR technology in India was around 1.1 billion dollars in 2021.
Various technological advancements, such as the integration of artificial intelligence (AI), big data, cloud computing, and augmented reality (AR) solutions for remote hiring and the management of employees, provide the thrust to market growth.
Other factors, including rapid digitization and the adoption of work from home, and hybrid working models, are projected to have a positive impact on the HR Technology market growth.
What are the top HR tech trends in India in 2022?
- Permanent switch to hybrid and remote working teams
Hybrid work schedules, meaning a mix of work from home/anywhere and work from office, are likely becoming the norm. Applications, such as employee self-service (ESS) portals are becoming more important than ever. This evolution of working models will also have greater reliance on cloud-based systems for day-to-day administration work. Remote candidate screening and onboarding will also become a routine part of the job.
- HR to play a vital role in cybersecurity
With increased digitization and remote work, the threat of cybersecurity is ubiquitous. Around 55 percent of people working remotely have experienced a cybersecurity issue over the past year, with phishing and malware being the most common areas of concern. HR professionals working remotely, who are handling confidential employee data, are at a greater risk of hacking.
It is imperative that HR teams follow strict security protocols when working from home.
- AI’s role in recruitment
For HR professionals, one of the main applications of AI is in candidate screening. Application tracking system (ATS) platforms use AI to screen resumes, and automated chatbots can handle routine questions from applicants.
- Augmented analytics in HR
HR professionals are increasingly resorting to augmented analytics trends to deal with HR data. HR analytics provides data-driven insights on workforce analytics and talent analytics to enhance business performance and make strategic business decisions based on these metrics.
- Inclusive and accessible work culture
Technology enables the organization to provide a more inclusive workplace. Accessibility driven tools provide opportunities for businesses to focus on larger markets and help enhance the employee work experience. These hands-free features provide users with mobility challenges, an easier option to access technology. By eliminating barriers in technology, organizations could render an all-inclusive employee experience across all their products and solutions.
- Freelance economy
Associated with the ongoing shift to the gig economy, freelance staff work for an organization but with relative mobility, independence, and away from the nine-to-five work hour systems. This requires technology aided solutions like round-the-clock accessibility where performance is assessed typically on outcomes and linked to project management deadlines.
- Employee wellness
Employee wellness is as essential as employee performance for high productivity. HR leaders are increasingly focusing on employee wellness, health, and education to facilitate high engagement, quality, and productivity. This is particularly relevant in the post-Covid era where employees have had to contend with multiple uncertainties and challenges, such as communication gaps, lack of motivation, training, and more.