Authors: Dr. Christoph Senft & Jana Köhler, https://meetra.de/
Indian employees are enthusiastic and hard-working. India has one of the biggest IT sectors in the world, with highly qualified professionals. However, cultural differences between German and Indian employees can be fundamental. Therefore, it is critical for startups coming to India to find employees who match their culture. This article provides and overview of the Indian labour market and relevant regulation as well as helpful advice on how to find the best candidates.
The Indian labour market
The Indian labour market is generally quite different to Germany or other European countries. India has one of the largest and youngest workforces world-wide and for any company setting up shop in India the challenge will not be finding employees but selecting the right people and keeping them in your company as the retention rate is quite high. For a foreign company recruiting in India, it is highly advisable to focus on personnel that has enjoyed formal education at a university or other higher education institution with a good reputation. Similarly, previous exposure to foreign clients, employers or even study/work experience abroad is recommended in order to minimise (intercultural) misunderstandings and to guarantee swift adjustment to the new work environment.
Hiring at universities
In 2018, there were almost 900 universities, 40.000 colleges and 12.000 diploma granting institutions in India and more than 35 million students were enrolled in their programmes. Since 2008 the number of students has doubled and the government plans to reach 40 million students by 2020. Especially the private sector is booming because of this run at universities and the majority of middle-class students are educated at private institutions already. The sheer number of jobseekers graduating from these institutions makes it difficult for companies to select potential employees – they would be flooded with applications that are difficult to evaluate. Instead, many employers make use of the campus recruitment days and other services offered by placement cells at universities, especially at those institutions which are among the best in the country. Company representatives come on campus on specific days of the year organised by the universities and use standardised tests, assessment centres and pre-scheduled interviews to select the best candidates. These candidates are offered contracts before they even finish their studies. When companies are not looking for graduates but for candidates with work experience other recruitment channels have to be used, of course.
One major difference between recruitment processes in India and Germany is the frequency of communication. Indian candidates can be quite impatient when it comes to waiting for replies from companies they have been in touch with. It might be that a candidate asks immediately and regularly whether there is any update regarding the application process from the moment of handing in the application – on all available channels. The reason is, among other things, that Indian candidates always have many competitors and they have to be heard and seen to distinguish themselves from others. Patience is the key here, not only for the applicant. On the other hand, it might happen that the recruiting company waits in vain for any reply after sending a single email asking for additional documents. It might be helpful for international companies to change their communication style and use channels simultaneously to get in touch with candidates quickly. When it comes to selection processes it is even more recommendable in the Indian context than elsewhere to have face-to-face interactions and interview situations to understand the person you are dealing with. Paper doesn’t blush and CVs and motivations letters tend to be more flowery than in other contexts. Again, this has to do with the understandable need to stand out in this mass of potential employees.
Salary expectations and long-term planning
Salaries in India are not a secret normally, on the contrary, people might ask you immediately what you earn, even if you meet for the first time. Generally, it is considered to be an achievement to have a good salary, not something to be secretive about or to be ashamed of. Accordingly, salary negotiations are mostly not a taboo topic, but will be approached directly. Local recruiters even tend to ask potential candidates at the beginning of the first conversation what they earn and what they expect to earn in the new position. It is not uncommon to confirm the candidate’s current salary by asking for the latest payslip. At the same time, candidates automatically expect a substantially higher salary when they apply for or are offered a new job. A raise of at least 10 to 15 percent has to be added to the current salary. Annual salary hikes of at least 5 to 10 percent are also very common in India. As an employer you have to calculate with these costs, otherwise you might lose your employees quickly. Indians tend to be more mobile when it comes to their work situation which means that apart from regular salary hikes you have to offer other incentives to make your employees stay. Popular incentives are job titles, bonuses, reward or merit programs and offers for spouses or children.
Outsourcing & service providers
The most important recruiting channels are internationally known job portals like Monster or Indeed and, of course, social media platforms like LinkedIn and Facebook. One of the biggest Indian job platforms is Naukri.com. Due to the huge number of applications one has to deal with when advertising jobs openly, service providers that offer active sourcing and headhunting play a more important role in India than in other countries. Professional head-hunters usually charge fees when the work contract is signed and base their provision calculation on the annual cost-to-company (CTC) salary. This means that the fee percentage tends to be lower than in Europe, but the amount considered for the calculation is higher (European head-hunters mostly use the employee’s annual gross salary to calculate their charges). Apart from service providers for headhunting who take over the communication with the candidates there are also agents who source profiles and hand them over to the employer without supporting otherwise in the recruitment process. The charges for these services are mostly according to the number of profiles provided. It is possible to recruit without the help of service providers, but employers definitely need local knowledge about the Indian higher education system and labour market in order to evaluate profiles correctly. Moreover, a large personal network with references and recommendations by trusted partners is of great advantage.
Hiring regulations & labour laws
The labour laws in India provide extensive protection to industrial workers. However, the management sector is largely governed by individual contracts. Some of the central labour legislations which may be of relevance to a foreign investor are mentioned below. Apart from these, a particular state may have its own laws / rules with which an establishment would need to comply.
Social security contributions
- Employers are liable to contribute 10% of basic wages, dearness allowance and retaining allowance towards the Employees Provident fund, if their establishment employs more than 20 individuals.
- Employers are liable to pay gratuity at the rate of 15 days wage per year of employment for an employee who resigns or retires after 5 years of continuous service.
- Proprietors of factories or shops employing more than 10 individuals are mandated to contribute 4.75% of wages payable to an employee towards the Employees’ State Insurance Corporation.
Laws against sexual harassment at workplace
The Government of India enacted the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act (“POSH”) in 2013 for protection, prevention, and redressal of sexual harassment against women at workplace. POSH mandates that no woman employee is meted with workplace sexual harassment, and the primary obligation to curb such conduct is on the employer. Every employer, irrespective of the headcount, must constitute an Internal Complaints Committee (“ICC”). If an employer fails to constitute an ICC or repeatedly contravenes any other provision under POSH, the employer’s relevant business license may be cancelled.
The Maternity Benefit Act, 1961 mandates every employer of any establishment to provide every woman a total of 26 weeks of paid leaves, of which not more than 8 weeks shall precede the date of her expected delivery. Further, an employer has to provide crèche facility if his establishment employs more than 50 individuals.