Manage Employment in India Without the Hassle

The Indian payroll landscape is governed by a complex web of central and state-specific labour laws, including provisions for social security, gratuity, provident fund, professional tax, and statutory bonuses. Employers must stay abreast of frequent regulatory updates and reforms such as the upcoming Labour Codes, which aim to consolidate and simplify existing laws.

The Standard Parameters of Employment in India:

• Working Hours (Varies by company) – Typically, employees work 8 hours a day, Monday to Friday, with a 40-hour workweek. Specific hours may vary depending on the client’s company.
• Probation Period (Varies by company) – Commonly three months, with a notice period of two weeks during probation and one month after.
• Payroll Cycles – Salary is paid on a monthly cycle, from the start to the end of each calendar month.
• Official Deductions from Salary – Deductions may include unpaid leave, taxes, and Provident Fund (PF) contributions for retirement benefits.
• Typical Work Hours – Standard work hours are generally from 9 am to 5 pm, but companies may have alternative shifts such as 7 am to 4 pm, 10 am to 7 pm, 11 am to 8 pm, or 1:30 pm to 10:30 pm, depending on the business needs.
• Public Holidays – There are 12 government-declared public holidays, varying by state. However, every state observes three national holidays: Republic Day, Independence Day, and Gandhi Jayanti.
• Casual Leave/Sick Leave – Employees are entitled to twelve days of casual or sick leave annually, prorated based on their joining date. These leaves cannot be carried forward and automatically lapse at the end of each calendar year.
• Maternity and Paternity Leave – Female employees are entitled to 26 weeks of maternity leave. Paternity leave policies vary, and male employees are entitled to a specified number of days off after the birth of their child, which varies by company.
• Earned Leave – Employees typically earn between 15 to 20 days of leave per year. These leaves can be carried forward to the next year but cannot exceed three times the annual entitlement. Carry-forward policies may vary, and unused earned leave is typically forfeited if not utilized within a certain period.
• Professional Tax (PT) – PT is applicable based on state-specific laws and is deducted accordingly, depending on the location of employment.

(Gross Income includes all types of regular income, allowances, and any one-time payments or benefits; Gross Deductions comprise all regular deductions, statutory deductions, and any one-time deductions.)

Important Elements of Salary Structure in India:
The monthly salary and wage disbursement in India consist of several key components that make up a salary package. These elements are crucial for both employers and employees when calculating taxes, Provident Fund (PF), Employee State Insurance (ESI), Leave Travel Allowance (LTA), and other benefits.

• Payroll Cycle – In India, the payroll cycle is typically monthly, with wages paid on or after the 28th of each month.
• Overtime – Any work exceeding the standard 48 hours per week is considered overtime and is typically compensated as per the employment contract, generally calculated at 200% of the regular pay rate.

1. Checking the Company Name Availability
Before you can register a company, it’s essential to ensure that your desired name is available. Fortunately, the MCA 21 website provides an online service which enables applicants to check if their proposed company names are still up for grabs. When this process is completed successfully, the chosen business title will be visible on the same website.
2. Acquiring a Director Identification Number (DIN)
For anyone in the process of becoming or already serving as a director for an incorporated company, obtaining a Director Identification Number (DIN) is essential. The DIN-1 application form can be completed online to procure your provisional DIN quickly and easily. Afterwards, the printed and signed form must be sent to the ministry with the necessary evidence of identity and address. Once verified, your request will receive permanent approval granting you a DIN.

3. Acquiring a Digital Signature Certificate
Obtaining a digital signature certificate requires formal confirmation from an authorized agency, registered with the ministry. With your application form and relevant identity/address evidence in hand, company directors can apply for this electronic key which validates their identity. This Digital Signature Certificate is invaluable when it comes to displaying trustworthiness and reliability within business circles.

4. Obtaining an Incorporation Certificate
Obtaining an incorporation certificate from the Ministry of Corporate Affairs will authenticate your business’s constitution. All that is required are three digital forms, which can easily be filed on their official website: e-form 32, e-form 1 and e-form 18. With this simple step taken care of, your company will be established.
In addition to Form 1, the Registrar of Companies must be provided with one copy each of The Memorandum and Articles of Association (MoA and AoA), a consent letter from directors, as well as an authenticated stamped document that confirms the power granted through an attorney.
When you complete your company’s incorporation forms, the certificate of incorporation will be immediately sent to the email address supplied with the information.

5. Creating a Company Seal for official documentation
An official seal is essential when it comes to sharing certificates and other legal documents. The total cost of obtaining a company seal will vary based on the number of words that need engraving, how many seals are issued, and how soon you need them delivered. It’s important to note that private companies are not obligated to maintain their own seals.

6. Stamping of all Company Documents
To ensure proper incorporation of your business, the Registrar of Companies requires that you submit a copy of your Memorandum and Articles of Association (unsigned) and proof of payment for stamp duty. This payment must be made online prior to submitting any documentation. Upon completion of this application, the Superintendent will return the copies – one with a stamp, signature and official embossing. Company promoters must then sign both MoA and AoA forms in their own handwriting, making sure to include every required information.

7. Acquiring a Permanent Account Number (PAN)
For the acquisition of a PAN, filing Form 49A is necessary. Subsequently, an exclusive PAN card will be officially dispatched to your registered address via post. Although you may apply for a PAN online as well, it is essential that all required documents are sent physically in order to complete the verification process successfully.

8. Acquiring a Tax Account Number (TAN)
In accordance with the Government of India, a Tax Deduction Account Number (TAN) is an obligatory number issued by the Income-tax department to entities that must deduct or collect tax at source. To acquire your TAN, you must complete and submit form 49B to a TIN Facilitation Center. Following verification of the application, it will be forwarded to the Income Tax Department who’ll then issue the TAN. You can apply for this number either manually or digitally through NSDL’s website.

9. Obtaining a certificate from the State/Municipal Inspector under the Shops and Establishment Act
It is essential to provide the State Shop and Establishment Inspector with a statement that contains your employer’s/manager’s name, official business name, postal address, and category in order for trade license registration. Additionally, you must pay relevant fees within 30 days of launching your enterprise. Fulfilling these steps will ensure the speedy completion of the procedure.

10. Applying for GST Registration
Companies that seek to provide goods and services across states must register for GST if their annual turnover is more than INR 40 lakhs/20 Lakhs. Before starting any other new business processes, registering for GST should be prioritized.

11. Obtaining a Profession Tax Certificate from the State Profession Tax Office
Every private employer is obligated to pay taxes and must acquire a registration certificate from the appropriate authority. Any business that needs to apply for Profession Tax Certificate should submit Form 1 to their local State Profession Tax Office.

12. Completing a National Employees’ Provident Fund Registration
Employers are obligated to provide their employee details to the EPFO in order for them to receive an Establishment Code Number (ECN). There is no need for employees themselves to submit any applications. This step only applies if a company falls within the scope of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952. Thus, it’s vitally important that employers take charge of this process correctly and promptly.