MSP program implementation guidelines for india

1. January 2020
SAMEER SRIVASTAVA
VP, INTERNATIONAL STRATEGY & OPERATIONS
SSRIVASTAVA@WORKSPEND.COM
CONTINGENT
WORKFORCE
PROGRAM
IMPLEMENTATION
GUIDELINES
FOR INDIA

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1. Summary
2. Matrix of Taxes
3. Labor laws
4. Tenure Length
5. Treasury Function
6. Data Privacy
7. Time Sheets
8. Data Migration
9. Implementation Best Practices
INDEX

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SUMMARY
A large number of MSP clients in the US and EMEA are
now in their second stage of the MSP Implementation:
Global Expansions. It is very rare for program solutions,
copies of the original solution design in the US or
Europe, to be successful in other countries.
In a series of presentations, Workspend will share key
guidelines, best practices if you will, with key points to
focus on while implementing the MSP Solution outside of
the US and EMEA.
This presentation is focused on India and has details
about the Taxes, Data Privacy and Migration, Labor Laws,
Treasury Function, Time Sheet Process and
Implementation Best Practices. The information is up to
date as of January, 2020.

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MATRIX OF TAXES

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GOODS AND SERVICES TAX
▪ Goods and Services Tax (GST) is an indirect tax imposed in India on the
supply of goods and services.
▪ GST rate of 18% applicable for recruitment services and/or HR services
▪ With-holding tax for out of country entities usually applies
▪ Billing on behalf of suppliers is not recommended
▪ Payment services are not allowed without a local presence
▪ Reverse Charge Mechanism (RCM) is a system in GST where the receiver
pays the tax on behalf of unregistered, smaller material and service
suppliers.
• The receiver of the goods is eligible for Input Tax Credit, while the unregistered dealer is not.
• Applicable in cases of SMEs, e.g. Smaller Staffing firms focusing on Light Industrial requirements

6. TAX DEDUCTED AT SOURCE
▪ Tax Deducted at source (TDS)- The party making the payment for the bills raised by other
party, is obligated to deduct 10% of the total invoices amount less Service tax as Income Tax
Deduction and deposit with Government treasury in the account of the Vendor/Sub-vendor
for whom the deduction was made.
▪ When is it deducted? TDS will be deducted immediately upon recording of invoice in Books of
Account or at the time of making payment (in case of advance ) whichever is earlier. For
financial year ending the TDS would be required to deducted on the accrual amounts.
▪ How is it deducted? It is deducted only on the billed amount excluding GST. This is the
statutory responsibility of the party making the bill payment.

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TAXES - WHO HAS THE LIABILITY?
▪ TDS liability to pay to the Govt. Authority resides with the legal entity
who is making the payment.
▪ GST liability payment to the Govt. Authority resides with the Legal
entity who is raising the invoice.
▪ They are recovered only at the time of filing of return at the end of the
year, if there exists a refund.
▪ Capital Infusion will have to be factored in mainly due to deduction of
10% on full value of the Invoice against which an MSP fee of 2%,
therefore a net deficit of approximately 8% month over month (apart
from cost of running the business).
HOW IS TDS RECOVERED?

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LABOR LAWS

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Traditionally, due to the high level of uneducated and low skilled
population, the state and federal governments in India have tried
to ensure protection for the workers by enforcement of the labor
laws. As of today, there is no specific definition for a ‘Contingent
Worker’ in the labor laws and the same rules of engagement apply
to full-time and contingent workers. Along similar lines, there is no
differentiation between a ‘White Collar’ and ‘Blue Collar’
contingent worker and as of today, similar laws apply to both sets.
Here is a brief overview of the laws that are applicable to the
contingent workforce:
1. Contract Labor Regulation and Abolition Act (CLRA)
The CLRA Act is applicable towards the regulation of employment
of the contingent workforce in certain establishments and also
gives details for its abolition under certain circumstances. It applies
to every establishment in which 20 or more workmen are
employed or were employed on any day of the preceding twelve
months as contract laborers.
TOP 9 LABOR
LAWS APPLICABLE
TO CONTRACTORS
IN INDIA

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TOP 9 LABOUR
LAWS APPLICABLE
TO CONTRACTORS
IN INDIA
2. The Shop and Establishment Act (S & E)
The S & E Act applies to shops, commercial establishments, banks,
insurance companies, hotels, restaurants, software companies and
other service providers. It gives details on working hours, leave
with pay, overtime etc. Some key points of this Act are:
•It allows for 48 working hours per week, spread over 6 days.
•Overtime should be the double of normal hourly rate.
•An Employee who has worked for a minimum of 240 days, is
eligible for 21 days paid leave, and at the same time, an employee
cannot accumulate for than 42 days of leave.
3. Minimum Wages Act
The Minimum Wages Act prescribes the minimum wages that
need to be paid to the workforce, and this includes working from
home. According to this Act, workers are classified as: Unskilled,
Semi-Skilled, Skilled and Highly Skilled.

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TOP 9 LABOUR
LAWS APPLICABLE
TO CONTRACTORS
IN INDIA
4. Payment of Bonus Act
The Payment of Bonus Act provides for the payment of bonus
to persons employed in certain establishments on the basis
of profits or on the basis of production or productivity. The
Act is applicable to establishments employing 20 or more
persons. The minimum bonus, which an employer is required
to pay even if he suffers losses during the accounting year is
8.33% of the salary.
5. Payment of Gratuity Act
The Payment of Gratuity Act specifies the payment of gratuity
to all employees in all establishments employing 10 or more
employees to all types of workers. Gratuity is payable to an
employee on his retirement/resignation at the rate of 15 days
salary of the employee for each completed year of service
subject to a maximum of Rs 350,000.
6. Maternity Benefits Act
The Maternity Benefit Act regulates the employment of the
women in certain establishments for a prescribed period
before and after child birth and other related benefits.

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TOP 9 LABOUR
LAWS APPLICABLE
TO CONTRACTORS
IN INDIA
7. Employees Provident Funds and Miscellaneous
Provisions Act
The Act provides for establishments of a contributory provident
fund in which employees’ contribution has to be at least equal to
the contribution payable by the employer. Minimum contribution
by the employees is around 10-12% of his or her wage.
8. Industrial Disputes Act 1947
The Industrial Disputes act 1947 gives detailed steps for the
investigation and settlement of industrial disputes in an industrial
establishment relating to lockouts, layoffs, retrenchment etc. It
provides the rules and regulations for the reconciliation and
adjudication of disputes and/or differences between the
employees and the employers.
9. Employee State Insurance Act (ESI)
The Employees' State Insurance Act requires firms to provide an
integrated need based social insurance scheme that would
protect the interest of workers in contingencies such as sickness,
maternity, temporary or permanent physical disablement, death
due to employment injury resulting in loss of wages or earning
capacity. This Act also guarantees reasonably good medical care
to workers and their immediate dependents.

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TENURE LENGTH

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TENURE LENGTH FOR CONTRACTORS
In simple terms, the law lays down 240-days is the maximum number of days a firm can employ a
contractor. But at the same time a Supreme Court ruling stipulates that a tenure of 240-days does
not entitle a contractor to the right of regularization.
The applicable information is given in italics below:
Supreme Court Ruling: In Madhyamik Siksha Parishad, U.P. v. Anil Kumar Mishra and Others etc.
[AIR 1994 SC 1638 : (2005) 5 SCC 122], this Court has categorically held that “…. The completion of
240 days' work does not, under that law import the right to regularization. It merely imposes certain
obligations on the employer at the time of termination of the service. It is not appropriate to import
and apply that analogy, in an extended or enlarged form here."
It is not the law that on completion of 240-days of continuous service in a year, the concerned
employee becomes entitled to for regularization of his services and/ or permanent status. The
concept of 240-days in a year was introduced in the industrial law for a definite purpose. Under
the Industrial Disputes Act, the concept of 240-days was introduced so as to fasten statutory
liabilities upon the employer to pay compensation to be computed in the manner specified in
Section 25-F of the Industrial Disputes Act, 1947 before he or she is retrenched from services.

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TREASURY
FUNCTION

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INVOICING REQUIREMENTS (VMS)
Discounts (Training, Tenure, Volume etc.)
GST calculations
Conversion of rates from Monthly to
Weekly/Daily (hours to consider etc.)
Invoice data
▪ Supplier GST Number (Individual to each
supplier)
▪ Supplier Invoice Number (Individual to
each supplier)
▪ Supplier Address
▪ Place of Supply
▪ Round off of final amount
Credit Notes – Difficult to explain to
authorities in India as credit notes are not very
common and are not encouraged

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PAY WHEN PAID MODEL
▪ In India we do not have specific laws for contractors, hence all the
candidates taken on board will be on full time role of the pay-rolling
company, and it is the employer’s obligation to pay salary as per the
statutory requirement/due date each month.
▪ But if the Vendor is ok with this model, MSP can pay the vendor only
when the MSP gets paid by the customer, in this situation Vendor has
to ensure payout to the contingent work force is made as per law,
without pressuring the MSP to pay any advances to cover for the pay
check.
▪ Under Indian Law, both the Supplier and the End Client are equally
responsible for the contractor’s welfare and in case of delay in salary
disbursement, both can be held accountable.

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BEST PRACTICES – TREASURY FUNCTION
▪ Get details on all the various permutations and combinations of the
rates and discounts that are in place at the client site. Double check with
the suppliers, and the clients AP teams as well to make sure you have
covered all the bases.
▪ Work out what the VMS can and cannot do, and make sure that everyone
signs off on the agreed workarounds, if required. Keep manual
intervention to a minimum.
▪ Make sure that the client AP teams, along with the suppliers and the
MSP’s own finance function are all in sync as to how the new process is
going to work, who the key contacts are and be aware of the escalation
matrix.
▪ ‘Accrual Reporting’ has to be accurate and shared in a timely basis.
▪ Critical: All the stakeholders, including the hiring managers, need to
understand how the new process is going to work, with special emphasis
on how the suppliers’ monthly rate is calculated.
▪ Suppliers and the client alike need to agree on the invoice cycle, the
actual process of invoice submittal and the timelines that are involved.

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DATA PRIVACY

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DATA PRIVACY
▪ There is no specific legislation specifying data protection right now.
▪ The Information Technology Act (2000) which was amended in 2008, has
provisions for the protection of electronic data.
▪ A revised Data Protection and Privacy Law will be put forward for
discussion in the Parliament later this year (2019).
▪ Breach of confidentiality is sometimes used in lieu of privacy laws and is
accounted for in Indian Courts.
▪ Data Privacy regulations have been passed, interpretation and
enforcement are being determined.
▪ Legislation should be monitored, until then case studies indicate the
enforcement path.

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TIME SHEETS

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TIME SHEETS - CHANGE MANAGEMENT
▪ Contractors Entering Time – constant follow up is required right from
the first week as in most places, the suppliers submit a monthly
invoice without any time sheet process being followed.
▪ Managers approving/rejecting time sheets – Hiring managers need to
get habituated to this process, and to act in a timely manner. With
most clients in India, before the MSP steps in, managers are used to
approving monthly invoices only.
▪ Over communicate to the hiring manager community. Delays in time
sheet approval end up causing the maximum escalations.

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DATA MIGRATION

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▪ Particular attention has to be paid to:
▪ Assignment Start and End Dates
▪ Rates
▪ Rate Card
▪ Remaining PO amount
▪ With the wrong data being migrated, this impacts the
invoice(s) and push back from managers and suppliers
▪ This is a common issue in India as with most clients we have found that
there is no central repository with the correct data.
▪ Data has to be verified twice – client PBAR/Managers and
Supplier
▪ Data sign off process to be completed with the Suppliers and
the Client before the upload
DATA MIGRATION: ISSUES & IMPACTS

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IMPLEMENTATION
BEST PRACTISE

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IMPLEMENTATION BEST PRACTICES FOR INDIA
Training and Re-Training of supplier on
invoicing process (Over-communicate
and train)
Get suppliers engaged early to
understand the as-is process as
meeting only with stakeholders to
build out a BRD may result in gaps
Global Program Director presence
during meetings to build the
confidence of the local stakeholders
that we know what we are doing
Establish a clear approval path
at the start of the project so you
don’t end up with each item
requiring 20+ approvals
Access to supplier contracts early and
standardize (even if the client will
maintain the contracts). Additional time
required for supplier vetting process
Significant work needs to be done on
data collection and what numerical
value is put into the tool for invoicing
purposes

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THANK YOU. QUESTIONS?