Your guide to outsourcing payroll operations in India from Canada

India’s abundant and affordable talent pool has consistently drawn global companies, including those in Canada, seeking to reduce costs and optimize processes.

With 73% of businesses outsourcing some aspect of payroll, whether it’s tax calculations, timesheet management, or running payroll altogether, there’s no question that accounting operations are likely one of the most outsourced services in India.¹

We’ll be covering what your payroll outsourcing options are in India and things you’ll need to consider before handing over that responsibility. We’ll also cover how the Wise Business Account is an efficient way to pay your international employees quickly and affordably. Its platform is designed to remove pesky cross-currency costs and integrates with popular accounting tools.

Types of Payroll Outsourcing Options in India

When you’re outsourcing payroll, there are two routes you can take. Your first option is to hire an independent contractor, who is a solo entity that works for themselves.

Contractors differ from employees in that they typically work on a project basis and aren’t tied to your business. What this means is that they assume full responsibility for paying their own taxes and managing their own benefits.

Under the Government of India, the Contract Labour Act exists to protect and outline the rights of contractors. There are also legal differences between a contractor and an employee in the realm of flexibility, pay, and the extent of control an employer has over them, among other areas.

There are also the considerations of Permanent Establishment and IP Protection that are native to India.²

Take note of how long you’re hiring a contractor – if you exceed a certain period or hire too frequently, you may have to pay corporate taxes and comply with their tax laws.

There are also necessary IP regulations you must follow to protect your business.

Independent contractors from India can be found in a variety of online locations. You might choose to look at marketplaces like Upwork, Fiverr, and Freelancer.in which often help employers bypass any compliance requirements. Alternatively, more traditional job boards such as Naukri.com, Shine, or Indeed can connect you to established freelancers as well.

The other option is to seek out payroll outsourcing companies in India. These companies vet and connect businesses to qualified professionals. This helps to simplify the process and ensure that you get matched with experts who meet your standards. They also usually handle all the administrative processes relating to hiring overseas, which can be a struggle for businesses that don’t have the experience required to do them.

Here are some reputable outsourcing companies to consider:

Mindspace Outsourcing Services

Mindspace provides bookkeeping, payroll, and year-end accounting preparation for Canadian-specific businesses. They’re certified and qualified to handle various payroll software, including Xero, QuickBooks, and more, with over 8 years of experience under their belt. As a bonus, Mindspace Outsourcing takes care of your sensitive data in numerous ways. Using Microsoft Server Architecture, antivirus solutions, and other security protocols, clients can stay confident that their data is safe.

Trustpilot Rating: 4.8/5³

Aplite Advisors

Aplite Advisors offers an end-to-end payroll service for companies around the globe, with specific expertise for Canadian businesses. They boast an international infrastructure that can handle everything from remuneration planning and payroll to tax compliances and international taxation. Their robust list of services ensures that all aspects of a business’s financials are covered.

Trustpilot Rating: 4.0/5⁴

FindErnest

FindErnest boasts a broad range of services, including contract, temporary, and permanent staffing, as well as executive search and payroll services. Their primary focus is on pairing employers with great global talent, covering sectors such as the healthcare, finance, media, manufacturing, and tech industries. With their AI-powered solutions and human expertise, businesses can accelerate growth while mitigating the risks of outsourcing.

Trustpilot Rating: 4.3/5⁵

Things to Note Before Outsourcing Work to India from Canada

Before you make a final decision to outsource to India, you’ll want to keep these factors top-of-mind.

Cultural Differences

International business partnerships, especially if you’ve navigated them before, can prove complicated when it comes to cultural differences. With varying values, etiquette, and norms to what you might be accustomed to in Canada, there can be a learning curve that both you and your outsourced counterpart need to get past.

Given their general cultural predisposition, Canadians may be more inclined to an open and direct approach to communication, while Indians might be more used to a more context-oriented style. Patience is key to a successful international partnership, as well as a little familiarity with work styles.

Time Zone Differences

Contractors often set their own hours, which means there aren’t traditional work hours to adhere to. This flexibility can be a big bonus to contractors and businesses alike, especially in cross-country partnerships where time zone differences can be stark.

Between Canada and India, there is between an 8.5 to 12.5 hour time difference, which essentially means you’ll be working with a professional who starts working while you wind down for the day.

In this case, you’ll need to set clear expectations about communication and turnaround times. Set timelines for when you want projects to be completed by, milestones to be achieved, and deadlines for tasks so you can coordinate your work schedules despite time zone differences.

Compliance with Legal Requirements

Abiding by the Contract Labour Act, we mentioned previously and keeping in touch with tax norms and employment laws of both Canada and India will help make sure you steer clear of any penalties or legal trouble. While there are many benefits to hiring overseas, it doesn’t come without its challenges. Going through reliable outsourcing companies or using freelancing platforms could help overcome those barriers and ensure you meet all necessary legal obligations, even potentially adding a useful dispute resolution aspect into the mix.

Payment Cycle for Indian Employees

Canada might be more lenient and flexible when it comes to pay cycles, offering weekly and bimonthly pay schedules along with monthly ones. In India, the most common payment cycle is monthly. More importantly, there might be compliance rules that require employers to pay before or after a certain day in a month, and potentially based on the size of the organization. However, these rules may not apply depending on whether the worker is classified as an employee or a contractor.

Labour Laws for Outsourcing Work to Indian Employees

Outsourcing work to India also means complying with India’s labour laws. The Contract Labour Act outlines a variety of rights and regulations that both protect contractors and provide guidelines for employees. As an employer, you’ll need to follow these rules to demonstrate fair treatment and provide proper compensation for your employers or contractors. The Minimum Wages Act is another important document you’ll want to review, as it details the lowest possible compensation that can be provided to a worker in India based on the standards of living and economic conditions of where they’re located.⁶

Currency Conversion When Paying Salaries from CAD to INR

Sending money locally is often a breeze, with methods in place to make that process free and easy. Making transfers overseas and in a different currency, however, and the devil’s in the details.

While most financial institutions might promise low or zero fees, businesses often fall victim to hidden fees and inflated exchange rates that serve to secretly boost the bank’s revenue. On top of that, intermediary banks in the SWIFT network might also charge additional fees along the way, making international transactions expensive.

With the Wise Business Account, you can dodge those high exchange rates and fees, all while paying your employees in INR at the mid-market exchange rate – with no markups. The benefits even extend beyond transparent fees with simplified payroll processes. Think easy digital invoicing and batch payments, letting you pay up to 1000 employees at a time. Getting started with this account only requires a one-time fee of 42 CAD, followed by minimal fees on subsequent transfers.

What’s more, you’ll enjoy a fortress of security, from two-factor authentication, 3D secure online payment, biometric recognition, and dedicated anti-fraud teams that protect you and your account and ensure your safety is never compromised.

Pay your employees and clients abroad with Wise

To sum it up

Outsourcing payroll operations to India holds a wealth of benefits for Canadian businesses. Although outsourcing overseas has its challenges, brushing up on your compliance requirements and partnering with professionals or outsourcing companies can allow you to tap into India’s talent pool and streamline your business operations in no time. With Wise on your side, you can easily manage cross-currency payroll without the burden of invisible fees and marked-up exchange rates.

Sources

Sources verified on 22 March 2024