Why payroll outsourcing is a game changer for European companies in India

Managing payroll abroad can be challenging and time-consuming, as each country has unique laws and regulations regarding social security and taxes. By outsourcing administrative matters, you won't lose valuable time and can focus on growing your Indian business. These are the benefits of payroll outsourcing for European companies in India.

Better compliance with local labor and tax laws

If you have staff abroad, you know better than anyone how important it is to stay up to date on the latest payroll regulations, such as annual salary increases, a 13th month paid holidays, etc. Keeping up to date in this area can take an immense amount of time, especially in India. In addition, being non-compliant with new regulations can negatively impact your business in the country. 

Therefore, to ensure compliance and reduce risk, it makes sense to outsource payroll to a local expert. That way, European companies can be sure that all processes comply with laws and regulations at the state, federal, local and industry levels, without having to invest significant resources. 

Streamline HR function through payroll outsourcing

Outsourcing payroll can reduce the workload on your HR department alleviate, allowing them to truly focus on human resources issues. By taking difficult administrative tasks off your HR staff's hands, they can focus on challenging cultural issues that need to be bridged, for example. 

Transferring payroll to a third party ensures that you do not have to hire and train additional staff, saving you money and time that you can invest in your core business.

Maintain confidentiality and transparency

With in-house payroll, there is a risk of losing sensitive personal data of employees. Therefore, it is advisable to consider payroll outsourcing. This approach helps maintain confidentiality while limiting access to payroll data to key decision makers and senior employees. 

To ensure data security compliance, it is essential to work with a trusted payroll administrator that offers secure solutions, including data encryption, storage and reporting.

Are you looking for a reliable administrative partner?

From our European offices in the Netherlands, Germany, Spain and Sweden, and our offices in Delhi, Bangalore, Pune and Chennai, IndiaConnected helps dozens of companies from across Europe do business in India every year.

For companies with a subsidiary in India, we take care of the entire administration: accounting, payroll, tax returns, legal support and necessary compliances. We also perform the Company Secretary and the Chartered Accountant function. Do you need business and tax registrations, such as GST, DIN, DSC or TAN? We apply for them for you.

Let us know what administrative matters you could use help with, and we will put together a customized package for you.

Salaries in India: what do you need to think about?

Wondering how much you can really save on your personnel costs if you out-source to India? Or have you started recruiting staff for your Indian branch and are you wondering what a realistic salary proposal is? These are the average salaries in India: From university graduates to telemarketers and skilled tradespeople. Please note that these are averages regardless of the experience, education, sector and location of the candidate.

Despite the fact that the average wages in India are still a lot lower than in Europe, the average monthly salary has risen rapidly in recent years. While the average salary was ₹19,492 (€221) in 2016, it has now almost doubled to ₹31,900 (€362). This sounds very advantageous, but this average also includes the very low salaries of the many Indian farm workers. As a foreign company, you cannot rely on this average. Depending on the region where you are located, the average salary will be higher or lower. Foreign companies are often looking for staff around the big cities and those salaries are a lot higher. For instance, in Mumbai, the average salary is ₹66,900 (€760), while in Chandigargh, a much smaller city, it is only ₹43,900 (€499).

Average salary in India based on experience, education and function

A candidate's level of education and experience obviously affect salary. In general, Indian workers with two to five years of experience earn on average 32% more than freshers and juniors across all sectors. Professionals with more than five years of experience earn on average 36% more than those with five years or less of work experience. When reaching ten years within a sector, salaries increase by 21% and by a further 14% when reaching 15 years or more of experience. Not only the years of experience count, but also changing jobs has an influence. Every time a person changes jobs, the salary increases by 30-35%. An important point to consider in the recruitment process. 

Of course, several aspects play a role in determining salary, such as education, position and location. In India, employees with a basic education earn on average 17% more than colleagues who have only completed secondary school. A Bachelor's degree increases the salary by an average of 24% and a Master's degree by another 29%. There is also a big difference between the different regions. In the big cities, the cost of living is much higher than in more rural areas. Salaries are, of course, adjusted accordingly. 

To get an idea of average salaries of different jobs and sectors, we have put together some examples. Please note that these are only examples and the experience, education, sector and location of the suitable candidate are not included in the examples below. Would you like more insight into the possible salary costs for your Indian entity? Please contact our experts, they can advise you on realistic salary proposals based on the sector you are active in, your location and your specific requirements.

Fight turnover with a competitive salary offer

In India, many companies suffer from high staff turnover. To attract and retain talented employees, it is very important that your salary is equal to or higher than the average salary for that position in India. In addition, you must comply with the rules of the Indian employment arena. Legal assistance in drafting employment contracts and conditions is therefore no luxury. It is also advisable to seek practical advice on best practices, so that the policy is not only legally compliant, but also HR-friendly. IndiaConnected is happy to support you in this process, including the recruitment and selection process and contract negotiations. 

Why manufacturing in India is a smart move

When outsourcing production, European companies are quick to think of China, because it can be done cheaply there. But is that idea still correct? Labor costs in China have risen significantly in recent years. average minimum wage for contract workers in China is now 197.67 euros and India only 125 euros. There are many other advantages to producing in India, such as there is no language barrier because Indians speak English well and there is a large pool of highly skilled personnel available. Three top European companies chose India years ago for these reasons.

In 2011, Roosen Industries noticed that in the Netherlands and surrounding countries it was finding it increasingly difficult to get good skilled workers to make high-quality precision metal parts. Labor costs were also skyrocketing as a result. "A serious threat," observed director Gandert Roosen, who took the initiative to build a factory in the northern Indian city of Kanpur. That turned out to be a golden opportunity. "The lower labor costs and an abundance of highly trained personnel mean that we can produce more than 20% cheaper on average and we can complete our orders faster because of the extra capacity. This has greatly strengthened our competitive position. 40% of semi-finished products are now made in India. It is the fastest growing division of our company."

"Made in India does not have the best image," states entrepreneur Paulien Wesselink, "but with O My Bag we are proving otherwise." The sustainable bag brand produces top quality in Calcutta. "We obviously didn't find the right producer at once, but over time we stumbled upon a cooperation partner who could meet our standards." The trendy bag label is now sold in more than 120 stores in 20 countries. 

"Anything we can make in Europe can just as well be produced in India," argues Jens Groot of Basic Water Needs. Why more companies don't have an Indian factory surprises him. "Producing in India is attractive. The industrial landscape is good: there are enough suppliers who can deliver quality, wages are low and the infrastructure is in order." In terms of logistics, India is also convenient. "Chennai, India's 5th largest city is a few hours' drive away. There is an international airport and a port from where we export our water filters to Africa and the rest of Asia. Ideal."

5 tips for finding and keeping good staff in India

1. Go to Bangalore

"While the labour market in Bangalore is highly competitive, it is bursting with excellent people. The outstanding graduates of India's top universities come to this city in droves."

• Jos van Haaren, Philips

2. Keep a close eye on salaries

"Most Indians are not very nice to their employees, so as a European you are easily a very good boss here. I think it's important to create a good atmosphere. I try to create clear expectations about how people can develop with us, including their salary. This is very important, because Indians are constantly comparing their salary with colleagues. You have to treat everyone equally, otherwise you get trouble and people leave. With us, the turnover so far has been zero. I'm proud of that." 

• Jesse van de Zand, Janta Meals

3. Opt for experience

"Prefer not to hire people who have just come out of university. People with work experience have already learned the basics about working in the industry from their first employer." 

• Jos van Haaren, Philips

 4. Encourage critical thinking, ask for feedback

"Whether you instruct them to run 10, 20 or 30 rounds, Indian field hockey players do it. In Europe, players are quick to ask 'Why really?' The lack of independence kills you in top sports, because on the field you really have to decide who to play the ball to. In business, of course, the same applies. Therefore, constantly ask for feedback and encourage critical thinking." 

• Paul van Ass, former national coach of the Indian hockey team

5. Provide a challenge

"As an employer, it is sometimes difficult to work with the best students in India. On the one hand, you want to show respect and give recognition to what people have achieved. On the other hand, a job with a foreign multinational is not the finish line. For the employer, that's when it starts. Therefore, you have to ensure that your people continue to learn and be challenged." 

• Jos van Haaren, Philips.

6. Accept cultural differences, but draw a line too   

"You have to immerse yourself in the Indian context and accept that things in India happen differently than what you are used to. Otherwise you go crazy. For example, I constantly had a driver at my disposal, even though I hardly needed one. As a European you find it sad that such a driver is waiting all day, but over there they are used to that. Besides, the driver does have a job. So don't send him away, but accept it. On the other hand, you have to watch over your core business: you must not compromise on quality." 

• Paul van Ass, former national coach of the Indian hockey team