Expanding Your Business: Payroll in India

Payroll in India

India provides many opportunities for global companies looking to expand, with over 1.4 billion people, a highly skilled labor force, and a rapidly expanding middle class. India is a complex market with multiple legal and administrative systems, a government structure with central and state budgets, and rich regional diversity.

One of the major challenges to expanding and managing payroll in India is the frequent change to both central and state regulations and business procedures. Each region has its own unique challenges and languages, so payroll can be complex to navigate.

India Labor Laws

Fixed term contracts must be in writing.

What is the Minimum Wage in India?

States and territories establish their own minimum wage rates. Rates can vary considerably

Overtime Policy

Overtime is paid at double the standard working hours

Severance Policy

Employees who work for at least one year and are dismissed for retrenchment are entitled to severance pay equal to 15 days wages for each year worked.

India Payroll Taxes

Income tax for residents is a graduated tax and ranges from 0-30%. Health and education levy also applies at a flat rate of 4%.

A high-income surcharge is applied to income above INR 5,000,000.

India HR Statutory Requirements 

Leave Requirements

Employees are entitled to paid annual leave of 1 day per 20 days of work if they have worked at least 240 days in a year. Up to 30 days of leave can be carried over to the next year.

Sick leave is determined by company policy but ranges from 15-40 days.

Maternity and Paternity Leave

Female employees receive 26 paid weeks of maternity leave for the first two children, which can begin 8 weeks prior to childbirth.

Pregnant employees must give notice to their employer in writing stating when they wish to take maternity leave.

There is no statutory paternity leave for private sector workers. The law does allow for fathers in the government sector to take 15 days of leave if they have fewer than 2 surviving children.

Retirement Policies

There are 2 tiers in the pension system. It is a voluntary contribution-based retirement plan.

Holidays in India 

When planning to hire in India, it's crucial to be aware of the official holidays when employees may not be available for work. 

• January 13 – Lohri
• January 26 – Republic Day
• March 1 – Maha Shivaratri/Shivaratri
• March 18 – Holi / Dolyatra
• April 14 – Mahavir Jayanti
• April 15 – Good Friday
• May 3 – Ramzan Id/Eid-ul-Fitar
• May 16 – Buddha Purnima/Vesak
• July 10 – Bakr Id/Eid ul-Adha
• August 8 – Muharram/Ashura
• August 15 – Independence Day
• August 19 – Janmashtami
• October 2 – Mahatma Gandhi Jayanti
• October 5 – Dussehra
• October 9 – Milad un-Nabi/Id-e-Milad
• October 24 – Diwali/Deepavali
• November 8 – Guru Nanak Jayanti

Easily Hire and Pay Employees in India

Is India in your hiring or expansion plans? Paylocity can help. Our cloud-based platform helps you navigate the waters of international payroll.

And don’t sweat complicated compliance — our hybrid service model includes a U.S.-based team and in-country experts in India to help when you have questions.

Want to learn more? Request a demo today!