The difference in salary pay scale can be up to 25 percent as the city compensatory allowance and employee conveyance allowance is a much smaller portion of paychecks in tier two and three cities when compared with tier one cities. Labor costs also vary by region in India wages in tier two and three cities are much lower than tier one due to lower costs of living and affordable real estate. For instance, the average minimum wage for contract workers in India is US$148 per month (Rs 10,000) and US$234 in China.Įmployers should note that the minimum wage in India is indicative it is often utilized as a benchmark, especially in the employment of unskilled and semi- skilled labor in the manufacturing sector. India offers competitive advantages with its lower wage structure and access to a vast labor market.
Labor costs in Indiaįirms entering the Indian market often choose to make the decision after assessing the comparative costs of labor. This defines their job roles, wages, disbursal of benefits, and their rights and obligations. In terms of area of operation, employees are categorized as managerial personnel and workmen. In terms of skill, employees are categorized as unskilled, semi-skilled, skilled, and highly skilled. The government’s labor laws usually classify employees on the basis of skill and area of operation. Companies seeking skilled labor need to be prepared to compete to recruit from this comparatively small pool. The expansion of higher education has created a larger skilled talent pool, but it still only amounts to about ten percent of the country’s overall labor market. Businesses that don’t need skilled labor can source employees with some ease. Naturally, the structure of India’s labor market is diverse foreign companies need to understand this structure to benefit from India’s demographic dividend.Ī majority of the working population is engaged in the unorganized, or informal sector, working for small businesses or manufacturing units that employ less than ten individuals.
India possesses a large labor pool as almost half its population of 1.2 billion is of working age.