India is an attractive option for business expansion with its growing economic power and its educated workforce. However, India has a number of complex labor laws that may serve as a barrier for new businesses to enter the market in the country. Many busy business owners do not have the time or patience to learn about a variety of laws and a different legal system. They may also be opposed to confronting various foreign bureaucracies.
Fortunately, there is a way for you to take advantage of the opportunities available in India while bypassing the complications: using a Professional Employer Organization (PEO).
Basics of Professional Employer Organizations
A PEO is a company that hires staff on your behalf. It manages your human resources, payroll and administrative needs required by hiring local staff while you maintain control over the daily interactions of your staff.
Using a PEO is an effective strategy for small and mid-sized businesses that want to test the market in India without making a full commitment to setting up a separate entity in India. It is an option that many startup companies, small businesses and growing enterprises use to expand into India.
Entering the Market in India
Without the assistance of a PEO, a business would have to set up a separate legal entity in the country. This requires contacting multiple government agencies to register and incorporate the business. These companies must comply with the complex regulatory framework to establish and maintain the business in a legal fashion. If the company violates the law, it can face significant liabilities.
A PEO in India offers an easy and fast way to start to operate on the Indian market compliantly and without establishing a local entity.
Areas Covered by PEOs in India
The specific services that PEOs provide depend on the contract that they have with the business. Common service areas that are provided by PEOs in India include:
- Employment contract drafting
- Tax deductions and administration
- Human resources
- Employee benefit administration
Some PEOs like New Horizons also offer additional services to growing businesses, including assistance with immigration matters and visa consulting.
Benefits of Using a PEO in India
There are many benefits of using a PEO in India, including the following:
Affordable Option with Predictable Expenses
Using a PEO in India is an affordable alternative to hiring staff directly. Because the PEO is the Employer of Record (EOR), it takes on the liability and legal responsibility for employees.
Many employees in India work under the terms of a written employment agreement that limits the reasons for early termination. Because you are not the direct employer, you need not worry about these concerns and can instead delegate legal responsibilities and severance processes to a PEO.
Additionally, you do not have to pay for staff that you do not need. You can adjust your employment numbers up or down as you need.
Using a PEO is also often cheaper than having jobs outsourced by other companies. You can often keep staff longer than you would through an outsourced arrangement, which is helpful if you choose to transition them from a PEO service to your direct employees once your company is incorporated in India.
You receive a streamlined plan that allows you to accurately predict your costs to operate your business in India.
Administrative Matters Handled by an Expert
By delegating administrative matters to an experienced PEO, you are placing these matters in the hands of a local expert who is familiar with the local statutory framework and best practices in India for a variety of subject areas, including human resources, payroll, taxation, benefits and other aspects of employee administration.
Better Benefits for Your Staff
Successful PEOs manage thousands of employees. This allows them to access benefits comparable to those available to larger companies so employees benefit by having better health insurance, retirement plans and other benefit plans that make you a competitive option for employees.
Best of all, you can offer these attractive plans at a lower price for you.
Compliance Matters Are Handled
The PEO can provide human resources guidelines and pertinent information about policies and procedures that are compliant with Indian labor laws and regulations. You do not have to learn the entire labor system in India in order to conduct business here.
By having a PEO on your side, you gain a competitive advantage of having an expert on your side, as well as the peace of mind of knowing that these matters are handled on your behalf.
Greater Focus on Your Business
Because you can delegate time-consuming administrative tasks to a trusted expert, you can stay focused on your business operations and expansion.
How to Identify a Good PEO
Not all PEOs have an equal amount of experience of guiding businesses through their expansion in India. It is important to perform due diligence and learn about the history and success of any PEO that you are considering working with.
Here are some steps you can take to identify a good PEO:
- Ask about the experience of the PEO and if their representatives have experience in your particular industry
- Ask to see the company’s credentials
- Inquire about the PEO’s compliance record
- Ask for references from other clients
Working with a transparent and ethical company like New Horizons can help you expand your business with confidence. Contact us to learn more about our history and the services we offer.