Global labour mobility is no longer restricted to the physical migration of labour. With changing work structure and the evolving labour market coupled with technological advancements and digital transformation, companies are no longer constrained by physical boundaries of their country. In addition to this, the novel corona virus pandemic which led to the worldwide economic recession has ironically accelerated this work globalization like never before and has contributed to the rise of virtual migration.
And while this global labour mobility has provided greater flexibility and wider options to companies and employees alike, employment and labour laws in many countries do not recognise this growing trend of working across borders yet. Thereby leaving companies to figure out legal and regulatory challenges they may face when hiring someone in another country, especially when you do not have local operations there. Given that unconventional employer-employee relationships and non-traditional work modes are here to stay, governments across the globe need to recognise the importance of having a regulatory framework for working across countries. Some of the areas of challenges are taxation, social security contributions, health insurance, labour compliances and registrations.
Immigration and Right to Work in India
For a foreign national to work remotely from India, appropriate entry visas or work permit requiring an India based sponsor will be necessary. Additional immigration requirements may apply in form of a minimum salary threshold for employees, registrations with local authorities in India upon arrival, etc. A foreign national is prohibited from working from India while on a tourist visa.
Compliances and registrations
In case of multinational companies that already have a presence in India, hiring talent in India or having your employee work overseas in India is fairly easy. However, where companies do not have a business presence in the Indian jurisdiction, depending on the nature of the business activity undertaken and work to be performed by such local hire or foreign hire in India, it may trigger the requirement to establish a formal legal presence in India and cause the company to obtain appropriate registrations and licenses under Indian labour laws and to have a registered place of business in India.
- Taxability of employee: Like most countries, an individual's tax liability in India is triggered by his/her tax residency status. Where an employee is working from or relocating to India, it may be subject to the Indian income tax.
- Tax registration and compliances for companies: Companies need to evaluate whether the activities of the staff in India would amount to having an “permanent establishment” in India and whether it may trigger the requirement of tax registrations and compliances in India.
Social security contributions
Compliance with Indian social security laws and contribution to such benefits arise only if such laws are applicable to the foreign company. If local talent is hired for performing work of the foreign company or overseas employee is working remotely for the foreign company, such social security benefits may not apply and may not be provided for while working from India.
India does not have a national healthcare system in place. Hence separate benefits may need to be applied for and provided by the foreign company while working from India.
The following data privacy standards apply in India:
- Personal Information: Personally identifiable information (“PI”) of any person including medical and health information (“Sensitive PI”) being qualifications, professional experience, identification documents, contact details, health declarations, details of medical tests etc. is classified as “Personal Information”.
- Consent: Collecting, processing, transfer and storing of any personal information requires consent of such person and the foreign company should obtain such consent (in writing or electronically) prior to collection.
By taking steps to understand local legal compliances in a foreign jurisdiction and managing these challenges skilfully, companies can explore their options to access a wider talent pool and not be constrained by their regional or domestic marketplace.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.