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Starting a Manpower
Services Agency in India
With a population of 1.27
billion people and a vibrant younger generation, India boasts of one
of the biggest and brightest talent pool in the world. This talent
pool of young aspirants has attracted many of the leading companies
from around the world to start their operations in India, as well
employ Indians at various roles in foreign countries. India has the
second largest non-resident citizen population in the world with over
25 million Indian living abroad, second only to China. With such
human wealth potential, it is important to channelize, focus and
create a productive population, and recruitment agencies play a major
role in this area. The prospects for starting a recruitment agency in
India is bright and growing, as more companies start their operations
in India and more youngsters aspire for better employment prospects.
In this article, we look at the rules and regulations surrounding the
starting up of a recruitment agency in India and registering as a
Recruiting Agent with the Ministry of Overseas Indian Affairs.
Business
Constitution
Recruitment agencies will
usually have to enter into binding contracts with their client for
providing manpower, and will also enter into contract with
job-seekers for providing employment opportunities. The business will
also have to be registered with Service Tax Department, Ministry of
Overseas Indian Affairs and Employer State Insurance (ESI)
Corporation / Provident Fund. Therefore, considering the number of
contracts to be entered into with clients and jobseekers, and the
liability created in-terms of legal compliance, it is best for
recruitment agencies to be started-off as a Company.It is important
for the business structure to carry Limited Liability status, so the
promoters are protected from unforeseen liability raising on account
of the business. In addition to to limited liability, a company or a
limited liability partnership also offers business continuity,
transferability and better access to credit, which will help the
recruitment agency business scale-up quickly.
Tax Registrations
Services provided by a
recruitment agency are taxable under the Manpower
Services tax
regimen at the rate of 12.36%. The service tax is applicable on the
gross amount of service fee charged by the business and recruitment
agencies must obtain service tax registration. However, small service
providers who do not render taxable services of more than Rs.10 lakhs
in a financial year is exempt from paying service tax. In addition,
services provided to Foreign Diplomatic Mission / Consular Post,
services to UN Agencies, export of services, etc., are also exempt
from paying service tax.In case the recruitment agency hires candidates on its role, ESI registration may also be mandatory. Employee’s State Insurance (ESI) is a self-financing social security and health insurance scheme for Indian workers. For all employees earning INR 15000 or less per month as wages, the employer contributes 4.75 percentage and employee contributes 1.75 percentage, total share 6.5 percentage. This fund is managed by the ESI Corporation (ESIC) according to rules and regulations stipulated therein the ESI Act 1948, which oversees the provision of medical and cash benefits to the employees and their family through its large network of branch offices, dispensaries and hospitals throughout India. ESIC is an autonomous corporation under Ministry of Labour and Employment, Government of India.
Registering as
Recruiting Agent with Ministry of Overseas Indian Affairs
If the Recruitment Agency
is going to be involved in the business of recruiting Indian citizens
for overseas employment, then the business must be registered with
the Ministry of Overseas Indian Affairs as a Recruiting Agent. The
application for becoming a Recruiting Agent must be submitted to the
concerned office of the Ministry of Overseas Indian Affairs in the
prescribed format along with supporting documents, Demand Draft for a
fee of Rs.25,000 and a Bank Guarantee of Rs.20 lakhs. Only those
agents registered with the Ministry of Overseas Indian Affairs can
recruit Indian Citizens for employment abroad as per The Emigration
Act, 1983.
Manpower agency fees
are paid to a recruitment agency when they succeed in placing a
suitable company.fees are variable based on the placement, the
industry, position, market condition and other factors. Such fees may
be possible on the employer and employee coming to an agreement on
various issues before an employment contract starts. It is also
referred as placement agency fees.
There are two types of fees.One is the employer-paid fee and
second is the applicant-paid fee. Under the employer-paid fee, the
employer have a total responsibility for the fee. The employee pays
nothing.This is the more common type of fee arrangement which is
preferred by Recruitment agencies. They may not ever notice that a
fee has been attached to their job placement.
Author
: Yogita
Yadav
Address: 305, Silicon Tower, Behind Samrtheshwar
Temple, Off CG Road, Ahmedabad,
India 09.
Mobile No: +91 9898434323
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