With the growing trends of advancement of digital technologies and the proliferation of online recruitment platforms, the landscape of hiring international contractors has changed drastically. Independent contractors or freelancers in India play a major workforce for companies looking to leverage remote professionals for mainly short-term projects. Today, Indian freelancers present a key remote workforce in IT, finance, e-commerce, content creation & marketing, engineering, etc.
Yet, running contractors in India isn’t without challenges. Companies face various challenges ranging from work inconsistency to communication barriers. Most importantly, a company must be aware of compliance risks, payment & taxation issues, and Intellectual Property (IP) risks when working with Indian contractors.
In this blog, we’ll explain how Remunance helps you avoid risks and better manage independent contractors in India. With Remunance’s service support, you can address challenges ranging from cross-border payment, compliance risks, IP risks, etc. to ensure the smooth functioning of your Indian contractors. Before we dive into how Remunance helps foreign companies, let’s explore the market conditions of Indian independent contractors.
Is Hiring Indian Independent Contractors Still Relevant?
The answer is “yes”. India remains a key location for hiring contractors for foreign companies. Talent availability, cost efficiency, time zone advantage, technological infrastructure, and favorable government policies are key factors attracting foreign companies to hire contractors in the country. Here are the insights into these factors:
Availability of a Large Pool of Skilled Professionals
Till 2023, the country has nearly 15 million freelancers working as writers, designers, web developers, software engineers, data analysts, logistics operators, trainers/coaches, etc. According to the India Skills Report 2022, the freelancer market in India soared at a 22% growth rate from January 2019 to January 2021. Many analysts projected that the Indian contractors market looked bullish in the coming years due to the increasing online job opportunities in India.
Cost Advantage of Hiring Contractors
The cost of hiring Indian contractors is significantly lower compared to Western countries. As explained by Clockify, in 2024, the average hourly rate for Indian contractors (graphic designers) is nearly USD 4, which is quite less than the rates in France (USD 38), the US (USD 32), and Australia (USD 31). India is known for its lower labor costs and cost of living, providing cost advantages for foreign companies hiring Indian professionals. Also, the operation in India is quite affordable due to its lower expenses related to office space & infrastructure, utilities, and administrative functions.
Time Zone Advantage
India’s time zone (GMT+5:30) is another advantage for US and European companies. The US and India have a time difference of 9.30 to 13 hours. This can be a major advantage for US companies to operate for extended hours and ensure faster times for project completion. India and Europe have 3.5 to 4.5 hours of time difference. This time difference allows easy team collaboration and ensures real-time communication due to overlapping working hours. Yet, many Indian contractors often work flexible hours to ensure effective communication and timely project delivery of clients from different time zones.
Additionally, India has a world-class technological infrastructure, such as high-speed internet and various communication tools to make remote working efficient. Government policies like Make in India, Digital India, Startup India, etc., and programs like IT parks and SEZs offer a favorable environment for encouraging foreign companies to hire Indian professionals.
4 Things to Know When Engaging Contractors in India
When running contractors in India, you as a business owner must know four important things that often become hurdles to remote team operations and put you at various risks. Let’s explore each point:
Legal and Regulatory Compliance
You must comply with Indian and International taxation and GST laws when hiring independent contractors in India. The country has complex legal rules for contract work, taxation, and worker classification. For instance, you must avoid worker misclassification between independent contractors and employees under Indian laws. The country has over 40 central laws and several state laws related to labor and employment which might get attracted with incorrect contract drafting. The Indian Contract Act of 1872 governs the contract relationship toward work scope, payment terms, duration, confidentiality, and termination clauses. In the case of non-compliance, you’re liable to pay taxes in India for having a permanent establishment or fines for the contractor not complying with GST regulations.
Taxation
You must know that employing contractors is subject to different tax rules in India compared to full-time employees. If the annual income of the contractor crosses a certain amount then the contractor is liable to pay taxes. Also, according to the Indian Tax Act of 1961, contractors must register for Goods and Services Tax (GST) and file tax returns if they have foreign currency earnings. Similarly, foreign companies must verify the contractor’s GST compliance and ensure proper Tax Deducted at Source (WHT) on payment to Indian contractors. You may face compliance issues if your Indian team and company fail to execute such tax responsibilities.
Payment and Currency Exchange
You must understand that India’s central bank, the Reserve Bank of India (RBI) governs several laws related to cross-border payments to Indian professionals. The Foreign Exchange Management Act (FEMA), Double Taxation Avoidance Agreement (DTAA) provisions, and regulations around foreign remittances. For instance, per the 2023 Indian Union Budget, foreign remittances TCS increased to 20% from 5% except for education or medical treatment payments. Also, if any contractor works solely for your organization, it will attract PE risks. You need a local guide to help navigate the intricate Indian regulations for cross-border payments and currency exchange.
Intellectual Property Protection
You must have a legal safeguard to protect your intellectual property (IP) rights. The chance of misusing sensitive information and data of a company is relatively high when working with independent contractors. To protect sensitive data and information, you must have secured storage and use encrypted data when using electronic data interchange and communication.
The Information Technology Act of 2000 describes the same provision to provide legal recognition for electronic transactions related to Indian businesses and employees. Also, signing confidentiality agreements isn’t enough as you must be aware of dispute resolution mechanisms in case of non-disclosure agreements (NDAs) violation.
Remunance’s Service Supports to Manage Indian Contractors Better
No doubt, hiring Indian contractors is one of the easiest ways to complete your target projects at reduced cost when you need a remote workforce outside your country. Also, you must know the challenges you may face when engaging with contractors. With the assistance of local experts like Remunance, you can effectively handle various challenges associated with Indian contractors and manage them better.
So, let’s understand the range of service support of Remunance to help manage independent contractors in India better.
Compliance Assurance
Remunance has a dedicated team of legal experts, who are well-versed in local labor laws and employment regulations. The legal team keeps abreast of new updates in the laws and regulations that may affect the employment of independent contractors in India. It takes full responsibility to ensure that you and your Indian contractors are safe from legal and compliance risks related to employment, tax payment, and worker classifications. Remunance ensures compliance assurance for you and your team, relieving you from your worries about risk mitigations such as permanent establishment risks in India.
Cost-Effective and Ease of Payment
Remunance provides payroll services and follows a streamlined payment process for independent contractors in India. Cross-border payments attract remittance fees that become a bulk expense for foreign companies when paying various contractors in their bank accounts individually. On the contrary, you pay only one remittance fee when sending money to Remunance’s account. As per the invoice details, Remunance disburses the amount to each account of your Indian contractors, resulting in cost-saving and ease of payment. Also, it takes care of specific tax regulations, like GST, TDS, and other statutory deductions.
Better Knowledge for Dispute Resolution
Remunance can effectively handle legal disputes arising from confidentiality issues and IP infringement when working with Indian independent contractors. It becomes a big burden for foreign companies to proceed with legal fights in Indian jurisdictions. Compared to your home country, India’s enforcement mechanisms may differ significantly and can be more challenging to handle without local support. On your behalf, Remunance can easily initiate a legal case against those Indian professionals who fail to respect the NDAs signed with you.
Conclusion
Independent contractors in India still play crucial roles in the global economy by filling the workforce gap across industries. Foreign companies can efficiently complete their short-term projects by taking advantage of workforce flexibility offered by Indian contractors. Also, you get various benefits, such as access to a large pool of skilled workforce in India and the cost advantages of hiring them.
Also, you must know how to address challenges around running contractors in India, including employment regulations, taxation, payments, and IP risks to ensure the smooth running of your team. Remunance can be your hand-holding guide who helps navigate complex challenges in the Indian market. With Remunance support, you can easily take advantage of the opportunities that Indian contractors have to offer without worrying about compliance matters, taxation, or dispute resolution.
Disclaimer
This blog is created for informational purposes. Everybody is requested to seek advice from an expert before making a decision based on the information given in the blog. Remunance disclaims any liability/loss or damage caused by using the information, directly/indirectly, given in this blog.
