Sometimes the most challenging part of an expansion is determining how to pay your employees. Will you add them to an internal payroll, or do you want to outsource? What taxation rules do you need to follow? How can you learn each of these rules while you run your company? Globalization Partners can help. We handle payroll for all your employees and also take on the liability, so you can focus on growing your business.
Payroll Taxation Rules
Employers in India contribute to three different tax areas:
- Employee Provident Fund (EPF)
- Employee Pension Scheme (EPS) for government employees
- Employees’ Deposit Linked Insurance Scheme (EDL)
Both employees and employers must contribute to the EPF, which goes toward retirement benefits and pension. Employers contribute 3.67% to this fund and another 9.94% to other social insurances. India operates under a progressive tax scheme with higher tax rates based on an employee’s increased income. As an employer, it’s critical to know where your employees fall in the tax bracket.
India Payroll Options
Not only will you need to set up payroll in India, but you’ll also have to decide which payroll option is the best for your company. The three main India payroll options include:
- Internal: If you want to set up two separate payrolls in India, you can hire more people to run payroll right out of your subsidiary. An internal payroll is an excellent option for larger companies with more time, money, and commitment to India.
- India payroll processing company: India payroll outsourcing can benefit companies lacking the time or money to run their own payroll. You can work with a company in India to pay your employees. However, you’ll still be held liable for any oversights.
- Global PEO: Globalization Partners offers the best of both worlds. Through our India payroll outsourcing services, we can both pay your employees and take the compliance off your shoulders and onto ours.
What Do You Need to Set up India Payroll?
First, you’ll need information from every employee such as a permanent account number, proof of investments, details of dependents, certification from their previous employer, a written employment contract, and more. To register for social security, you’ll also need a provident fund number and the employee state insurance number.
Required Entitlement and Termination Terms
India typically uses probationary periods of three months, and an employer can extend it for another three. The best way to establish entitlement and termination terms is in a written employment contract. Typically, these contracts outline a 15 day notice period during probation and 30 days during regular employment. Employees who have worked for five or more years receive some kind of severance payment.
India Payroll Processing Company
Expanding to India is an exciting time, but it can also be challenging if you don’t already know the ins and outs of India payroll. Instead, choose an industry leader who will guide you toward success. Globalization Partners will help you set up your payroll in India and stay with you every step of the way. Contact us today for more information.