Requirements for Foreign Employees to Work
Once foreign companies set up an entity in India, they very often prefer to appoint employees from their home country or headquarters for the management and control of the Indian business. This is done mainly for the convenience of co-ordination with the parent company in terms of decision-making, financial management and other business matters. This movement of employees could be undertaken by way of secondment or transfer.
There are three broad considerations that must be kept in mind, in either of the approaches: (i) income tax issues; (ii) social security contributions; (iii) visa considerations. Business visas to India are given strictly only for ‘business purposes’, such as sales or establishing contact on behalf of the foreign company in India. Like most other jurisdictions, business visas in India cannot be used for any direct revenue generating work or employment. There is a separate employment visa category for employees coming to work at an Indian establishment, which is usually granted for 1 year, or the term of the contract. There are certain additional conditions prescribed in this regard, including that the foreign national must draw a salary in excess of USD 25,000 per annum.
Does a Foreign Employer need to Establish or Work through a Local Entity to Hire an Employee?
Foreign employers may often have requirements wherein they might need to engage a sales person, representative or agent in India, even though they may not have a place of business in India. Also, the foreign employer may not intend to immediately generate any revenue in India. In such a scenario, it may be noted that the foreign employer need not mandatorily set up a local entity in India.
Limitations on Background Checks
Employers are increasingly conducting background checks to guard against inaccurate resumés, overstated work experience and any employee behavioral issues. Typically, employers issue an offer letter, conduct background checks and expressly state that the person’s employment with the organization is contingent upon his/her clearing the background checks, and vetting of educational and job qualifications. However, the permission of the concerned employee would be required to conduct a background verification. Under the governing legislation on data protection in India, any company collecting, using or disclosing any personal information of an employee/prospective employee, will require such person’s consent.
Restrictions on Application/Interview Questions
Given Constitutional safeguards against discrimination on the grounds of religion, race, caste, sex and place of birth, it is imperative that employers bear these principles in mind while conducting background verifications and interviews. Excessively personal questions are generally not advisable. Indian labour and employment laws are largely silent as to the process of selection and hiring of employees in the private sector. In any case, as market practice, most employers in India conduct at least basic (education, job history) background verification of prospective employees in accordance with the IT Rules and/or ask prospective candidates to disclose specific information as a condition precedent to the employment relationship.