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 every Indian subsidiary should have a local HR manager

Is your subsidiary in India not achieving the results you expected in terms of turnover, profit or customer reach? Then it's time to take a hard look at your organisation's HR policies in India. "HR is the driving force behind a successful Indian entity," says our expert Deepmala Datta.

A survey we conducted among 100 companies with an entity in India revealed that 42% consider finding and retaining suitable staff the biggest challenge. 61% of these companies indicate that good, local HR policies are the solution to this problem, yet only 20% of them actually have an HR team in India. "A good HR policy is an under-appreciated issue among Indian subsidiaries of European companies," says Deepmala. "I have assisted hundreds of companies in finding suitable staff, but never has the HR team from the head office travelled to India to participate in such an interview process. Many companies see it as a by-product, when in fact it is the driving force behind a successful business in India."

Focus on talent retention

"I have a very controversial view on turnover," Deepmala says. "I like turnover because it gives a company a chance to bring in an employee with better skills than his predecessor. Of course, it depends on which positions have the highest turnover. If they are critical positions, high turnover is very problematic for the results that a company can achieve." It is therefore important, she says, for the local HR department to identify which skills, positions or people the company cannot do without. "Instead of wasting all your energy and a lot of money on keeping 90% of your employees on board, it is smarter to focus on the most important talents, about 20% of the organisation. Despite the fact that a good salary is essential to retain an employee, Indian employees, like their European counterparts, are no longer satisfied with just a pay rise, but want to develop professionally and personally. Therefore, make sure you have appropriate HR policies in place that offer growth opportunities to these talents."

Lack of structure

Is your Indian entity stagnating in growth, but you are not questioning your business strategies? Then, according to Deepmala, it is good to check whether everyone in the company is in the right place. "When a company comes to IndiaConnected with such a problem, we start with a corporate restructuring process. We take assessments of the employees in key positions within the company and conduct interviews with all employees. This is the only way we can find out what the underlying problem is that is causing the growth to stagnate. One problem I often encounter is a lack of structure. There is a big cultural difference between India and Europe that needs to be kept in mind: hierarchy. In India, we have a strong need for a clear leader. If there isn't one, employees tend to build their own power structure, which doesn't always work in favour of the company."

How an imbalance in the company structure resulted in a hostage director 

"I have been involved in an extreme example myself," Deepmala says. "I was sent to a factory in Mumbai where the staff had been on strike for three days. The head office in Europe had no idea why and could not get in touch with the managing director. Once I arrived, I found a man standing guard at the door of the managing director's office. I had to bargain with him to get access to the office and once inside I understood why. The workers of the factory had been holding the managing director hostage for three days. After many talks with the strikers, I came to the conclusion that the problem was actually very simple and that there was absolutely no need to go on strike to solve it. But it had gotten so out of hand, because the manager was not a good match for the position. He had been chosen for his impressive CV, but had no experience of managing such a large group of workers, let alone factory workers. If the HR team had checked for these skills when recruiting the manager, this misery could easily have been avoided."

HR as a sparring partner of management

HR should not be treated as an administrative department. "We have touched on it several times, but the success of a company depends on its people. My advice for any company with an Indian entity is to be smart about costs and hire only one senior HR manager. This HR manager should have a strong position in the company, where he or she can not only intervene and handle abuses in the right way, but also give guidance to the management. In addition, this HR manager must be a sparring partner of the executive. After all, future objectives can only be realised with the right people in the right places. The HR manager can not only ensure that the right people are retrained and moved on, but can also recruit new suitable staff with these future objectives in mind."

Common mistake

"Many companies choose to start with one agent or manager and then also make them responsible for building a team once the entity starts to grow," Deepmala explains. "That doesn't work well in many cases. What we often see is that European companies choose their first agent or manager based on his past success, but don't take into account how he was able to achieve those successes. Is that all to his credit or did he have a support team?" 

In almost all cases, it is the latter, according to Deepmala. "Such a manager or agent therefore embarks on a very tough trajectory in a start-up company, in which he is completely on his own and not performing at his full capacity. This is often already visible in the results, but is attributed to the fact that the entity is in the start-up phase. As soon as this manager can start hiring people, he will immediately choose former colleagues with whom he could work well in his previous work environment. They are the right choices for him, but not necessarily for the positions they will fill within the company. In addition, these employees are taken away from their current employer, which means a substantial increase in salary in their new job. I have seen situations where this practice led to the company selling more, but never making a profit." According to Deepmala, this situation can be avoided very simply. "Don't think lightly about HR, but dare to invest in it from the very beginning."

Hiring in India during COVID-19: 'This is the best time'

The supply of highly skilled personnel in India has never been greater. Samriti Parashar, HR specialist for Maier + Vidorno, IndiaConnected's partner in India, shares her experiences and tips on how to handle the recruitment and interview process in the smartest way possible in COVID-19 times.

Contrary to what you might think, Samriti sees almost no decrease in the number of international companies looking for staff during this corona crisis. "On the contrary, companies see it as a perfect time to prepare for the period that will follow this crisis. You want to have the right management at the helm of your company during and after this difficult time. In addition, I have noticed that companies now have more time to go through the long recruitment and application process, which takes about four to five months."

Increased supply of highly skilled personnel

According to Samriti, finding good staff in India is easier than usual at the moment. With current global travel restrictions limiting the country's brain drain, Indians cannot currently work for a multinational company abroad so easily. "They are therefore more interested if we approach them for an option with an international company in India itself. We are also seeing a greater willingness among potential candidates to talk to us because of the economic uncertainties caused by the outbreak of the coronavirus. We therefore have a larger pool of strong candidates to fish from." 

How do you find that good staff in India?

According to Samriti, you do not need to deviate from your normal methods to find the right people, although it is advisable to do more active outreach as the crisis may not expect companies to be looking for staff. "We go through the CVs in our database as usual and search actively on Linkedin, that process remains the same." What does change are the follow-up steps, for example job interviews are conducted via video calls. "In principle, that doesn't make much difference to the application process, but normally I would advise a company to schedule a face-to-face meeting with the remaining candidates in India or at the European headquarters in the last round, and that is less easy than usual at the moment." 

Samriti's advice is to find someone in India you trust, such as a business partner, a mentor or one of the IndiaConnected experts, to conduct the final interview for you in person. "Through a video call you learn a lot about a candidate, but in a face-to-face meeting you can read each other's body language better and get a better feel for each other. It is therefore important that you are represented by someone who understands India, knows what your company needs and who dares to put the choice in your hands." If you do not have someone on the ground right now who can make this choice for you, Samriti says it is smart to test the candidates psychometrically. "This is normally a popular tool, but since the outbreak of the coronavirus we have seen that 95% of companies choose to carry out this test. This is because there is less opportunity to get a feel for someone in a face-to-face interview. The test measures intelligence, skills and personality traits and gives you insight into someone's independence, social skills and leadership qualities, for example. Companies feel more comfortable making a choice with these test results in hand."

Contracts in India during COVID-19

Samriti has not yet seen special additions to employment contracts as a result of the corona crisis. "In India, everyone has a trial period of three to six months as standard, which gives the employer the peace of mind to find out whether a candidate is really a good fit for the company. One exception I have seen was a company that had already selected a candidate for an open vacancy, but had not yet drawn up a contract when the coronavirus suddenly appeared around the corner. They had it put on record that they could reconsider whether the candidate could actually start two months later." Samriti does see an increase in additional conditions being laid down to make working from home as smooth as possible. Laptops, telephones and other hardware are often standard in the contract, but increasingly broad agreements are now being made about compensation for a good wifi network at home or an extended data plan for the telephone."

Do you need to draw up a contract for new employees in India and do you want to be sure that you meet all the requirements? Our HR experts can guide you through this process in many ways, from our HR Health Check to total administrative relief for your organisation in India.