Legal HR: Recruitment strategies for MNCs entering India
India has become an attractive business destination for multi-national companies over the past few decades. The Indian market throws several opportunities for talented individuals, and it is essential that the MNCs are well prepared to grab the best talent at the beginning of their operations. In this article, we delve into the important recruitment considerations that an MNC entering India must keep in mind while devising its recruitment strategy.
Building the Set-up
For a multinational, while it is not only essential to understand the various statutory benefits for employees in India and their applicability to the concerned organization, it is also equally important to understand and strategize for the various industry practices. Employees in India are eligible for several benefits like provident fund, gratuity, compensation in case of injury, statutory bonus, etc. Further, employers are obligated to comply with laws that mandate the development of a safe, and employee-friendly workplace, viz, prevention of sexual harassment, factories act, shops & commercial establishments act, etc. Registrations and ongoing compliance with applicable laws are not just legal requirements, these are also essential for retaining the talent pool.
Tailoring Employment Documentation
Most MNCs coming to India would already have in place their global employment agreements and employment policies, and we often hear from them if they can replicate these in India to maintain uniformity of standards applicable to their workforce globally. While the short answer to their requests would be a ‘yes’, the MNCs will also be required to undertake necessary revisions to ensure that the policies are not only aligned with the applicable laws in India but also reflect the industry practice.
One such aspect which requires closer review and consideration to suit Indian needs is ‘non-compete’ covenants. Considering the edict under Section 27 of the Indian Contract Act, 1872, post-employment restrictions like ‘non-compete’ are not enforceable under the laws of India. However, most employers may still retain such covenants in the employment agreements to act as a moral deterrent for the employees. Typically, a ‘non-compete’ restriction is applied on an employee during the tenure of his employee and between 6 (six) months - 24 (twenty-four) months after cessation of employment. Coupled with attrition in some of the sectors (IT/ ITeS being one such), without careful consideration, this may not fare well for organizations. ‘Garden leave’ is also an offshoot of ‘non-compete’, and is a common addition to employment agreements of mid to senior-level employees of MNCs.
Jurisprudence in these matters reflects a nuanced approach taken by courts in instances of ‘non-compete’ - while ‘non-compete’ continues to remain unenforceable on individual employees, courts have successfully carved out instances wherein such negative covenants may still hold ground.
The other area of concern which requires a sensitive approach is a manner of handling confidential information. Necessary attention must be given to fine-tuning confidentiality clauses.
Bringing foreign talent to India
MNCs planning to parachute foreign employees to India for undertaking specialized projects must understand the legal implications of such import of talent in India. The applicable law requires foreign citizens employed in India (referred to as ‘international workers’) to get themselves registered with the provident fund regulator, and a percentage of their entire salary shall be deducted towards provident fund contribution. It is advisable that this contribution be factored in upfront while computing the remuneration package of the ‘international worker’.
Marrying global best practices with Indian employment trends
MNCs may consider few facets of employment practices as routine in their home jurisdiction. However, implementation of such practices locally may give them an edge over their Indian competitors. For instance, the Indian law on prevention of sexual harassment at workplace gives protection to only female employees in case of a claim of sexual harassment. MNCs with gender-neutral anti-sexual harassment policies may come forth as progressive and welcoming to potential recruits. Similarly, the addition of ‘paternity leave’ and ‘bereavement leave’ in the employment policy of the MNC may be a good addition to their package, since such leaves are otherwise not statutorily mandated under Indian laws.
MNCs must make the most of their global expertise in attracting the brightest talent for their Indian desk. They must leverage their international reputation to the fullest potential to maintain the competitive edge in talent market. We firmly believe that compliance of employment laws in letter and in spirit, coupled with the universal best practices, will keep MNCs in good stead.