Human Resource Practices

in India
Pramila Rao, Ph.D.
Background and Federal Laws

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 Welcome to India

Namaste (pressing of the palms

together) is the traditional greeting
of Indians.

• The Indian flag:

o Colors have symbolic
representation.

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 India Quick Facts

• Population: 1.1 billion.

• Political structure: Democratic republic.
• Government: President, prime minister and two Houses
of Parliament.
• The ruling party: Congress.
• Twenty-eight states and seven union territories.
• Seventeen distinct languages: Hindi and English are the
official languages.
• Religion: Hinduism (83%), Muslim (11%), Christian
(2%), Sikh (1.9%), Other (1.8).
• Literacy rate: 65%.
• Indian currency: Rupee ($1= 40 rupees).
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 History and Societal Background

• British colony for 100 years.

• Great national leader: Mahatma Gandhi.
> Ghandi introduced the concept of non-violence protest.

• The Indian social system is dominated by a caste

system.
 Four specific castes; Brahmins, Khastriyas,
Vaishyas, Shudras.
 Created distinct labor categories.
 Associated status differences.

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 Business Facts

• Today, India is the fourth largest economy in the world.

• Until 1991, there was an import substitution policy that
favored domestic industries.
• After 1991, there was active foreign investment with a
very strong trade liberalization policy.
> Foreign direct investment in India increased dramatically
($15.8 million in 1997 compared with 0.3 million in 1991).
• In 2000, the Y2K computer crisis required worldwide
computer remediation provided by software engineers.
• Indian software engineers were found to be very
dedicated and hard-working (Friedman, T. 2005; “The
World is Flat”).

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 Mercer’s 2006 Best Companies to Work For in
India

• Infosys Technologies Limited (IT industry).

• MindTree Consulting (IT industry).
• Satyam Computer Services Limited (IT industry).
• Dr. Reddy’s Laboratories Limited (pharmaceutical
company).
• Sapient Corporation (business and technology
consulting).
• Agilent Technologies (IT industry).
• Johnson & Johnson (consumer health care company).
• Covansys India (IT industry).
• HCL Comnet (IT industry).
• HSBC; Hongkong and Banking Corporation (banking
services).

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 Federal Employment Laws

• HR began to play a significant role with the early

enactment of these employment-related laws:
• The Workers’ Compensation Act of 1923 ensured that employers
compensate employees for work-related injuries.
• The Trade Union Act of 1926 gave formal recognition to trade
unions.
• The Industrial Disputes Act of 1947 led to the increased role of
industrial relations (employees were distinguished by the work
they did such as permanent, temporary, trainee etc.).
• The Factories Act of 1948 regulated the work environment in
factories to ensure the safety of employees.
• The Employees Provident Funds and Miscellaneous Provisions
Act of1952 required employers to provide contributions for
retirement.

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 Federal Employment Laws

• The Minimum Wage Act of 1948 established

minimum wages that vary from state to state.

• The Payment of Bonus Act 1965 provides for a

minimum bonus of 8.33 percent of salary, even if the
organization is not making any profit.

• The Persons with Disabilities Act (PWD) of 1995

was landmark legislation for disabled people in
India.

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 Indian HR Associations

• In the 1940s and early 1950s, two professional HR

associations were established to acknowledge the
importance of HR:
• Indian Institute of Personnel Management (IIPM).
• National Institute of Labor Management (NILM).
• In1980, the two associations merged to form the National
Institute of Personnel Management (NIPM).
• NIPM is the only group engaged in the advancement of
HR, industrial relations and labor welfare.
• NIPM has a working relationship with HR groups in the
United States, Australia and the United Kingdom.

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 Affirmative Action

• Affirmative Action:
• Based on the caste system.

• Federal jobs and admissions to colleges are

strongly influenced by quotas for caste reservations.

• State governments can set aside 50 percent of jobs

based on different castes. To get increased support
from the public, some states have 75 percent of job
reserved.

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Indian Culture and HR Practices

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 Cultural Profile (GLOBE Study)

• Power distance:
o India: 5.47 (rank 16).
o Morocco : 5.80 (highest score).

• Institutional collectivism:
o India : 4.38 (rank 25).
o Sweden: 5.22 (highest score).

• In-group collectivism:
o India: 5.92 (rank 4).
o Philippines: 6.36 (highest score).

• Uncertainty avoidance:
o India: 4.15 (rank 29).
o Switzerland: 5.37 (highest score) .

Source: Chhokar, J., Brodbeck, F., & House, R (Eds) .(2007). Culture and leadership across the world.
The GLOBE book of in-depth studies of 25 societies. Lawrence Erlbaum Associates. Mahwah, New
Jersey.
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 Definition of Cultural Dimensions (GLOBE Study)

• Power distance: The degree to which organizations and

societies accept power.
• Institutional collectivism: The degree to which
organizational and institutional practices encourage
collective action.
• In-group collectivism: The degree to which individuals in
societies reflect collectivist behavior.
• Uncertainty avoidance: The degree to which
organizations and societies avoid uncertainty by relying
on practices and procedures.
• Performance orientation: The degree to which upper
management in organizations and leaders in societies
reward group members for performance excellence.

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 Cultural Profile (GLOBE Study)

• Performance orientation:
o India: 4.25 (rank 9).
o Switzerland : 4.94 (highest score).

• Assertiveness:
o India: 3.73 (rank 53).
o Albania : 5.80 (highest score).

• Future orientation:
o India : 4.19 (rank 15).
o Singapore: 5.07 (highest score).

• Gender egalitarianism:
o India: 2.90 (rank 55).
o Hungary: 4.08 (highest score).

• Humane orientation:
o India: 4.57 (Rank 9).
o Zambia: 5.23 (highest score).
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 Definition of Cultural Dimensions (GLOBE Study)

• Assertiveness: The degree to which individuals in

organizations or societies are assertive in social
relationships.
• Future orientation: The degree to which individuals in
organizations or societies plan for the future.
• Gender egalitarianism: The degree to which
organizations or society promote gender equality.
• Humane orientation: The degree to which individuals in
organizations or societies reward individuals for positive
behavior.

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 National Culture and HR Practices

• Scholars have found a strong connection between

cultural dimensions and HR practices.

• High power-distance cultures create:

 Hierarchical organizational structures.
 Loyal and committed subordinate workers.
 Autocratic relationships between managers and
subordinates.

• What kind of HR practices would low power-distance

cultures adopt?
• What staffing practices would high power-distance
cultures encourage?

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 National Culture and HR Practices

• High institutional-collectivism cultures prefer:

 Group harmony and cooperation.
 Conformity to societal norms valued.

• High in-group collectivism cultures feel:

 A very close bond with their organization family, friends
and relatives.

• What kind of HR practices would low institutional

collectivism cultures adopt?
• What staffing practices would high in-group collectivism
cultures encourage?

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 National Culture and HR Practices

• High uncertainty-avoidance cultures create:

o Formalized procedures to minimize unpredictability.

o Clearly defined roles for employees.
o Focus on security and trust.

• What kind of HR practices would low uncertainty-

avoidance cultures create?
• What staffing practices would high uncertainty-
avoidance cultures encourage?

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 Indian HR Practices

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 Staffing Practices

• Resumes seek strong educational background.

• Employee referrals (predominantly used for middle and

senior management).

• Succession planning (predominantly used for middle

and senior management).

• Elaborate employment tests related to the job,

especially at entry level.

• E-recruitment: Naukri.com was the first e-portal

established in 1998 (naukri means job in Hindi ).

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 Staffing Practices

• Newspaper advertisements are used to brand the

company to potential applicants.

• Newspaper advertisements will specify age and gender

requirements.

• Personal questions will be asked in interviews/resumes

about:

 Age
 Marital status
 Family plans (women planning to start a family)
 Family background
 Caste background
 Photos to be included
 Verification of educational certificates
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 Training Practices

• Training (future orientation):

• Education is extremely valued, and training is an
extension of it.
• Entry point training programs (3 to12 months of
orientation).
• Ongoing training programs.
• Development programs (promotions involve
training).
• In-house training centers are a common feature in
Indian organizations.
• Deductive learning style in training: Known as “top-
down approach” where learning principles start with
general concepts and move toward specific
application.

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 Performance Appraisal

• Cultural dimensions of collectivism and power distance

make objective appraisals a challenge.

 Supervisors and subordinates develop close relationships.

 Organizational loyalty is as important as work
performance.
 Employee promotions are frequently based on seniority.

• Annual performance appraisals.

• Supervisors provide performance ratings that are
frequently inflated due to personal relationships.
• Employment at will does not exist in India. Employment
termination carries a social stigma.

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 Compensation and Benefits

• In addition to a base salary, compensation includes:

> House rent allowance (HRA*).
> Medical allowance.
> Dearness allowance (DA*).
> Leave travel allowance (LTA*).
> Commuter allowance.
> * These allowances are frequently referred by their acronyms

• Several categories of leave (vacation) exist:

> Sick leave: 7 days (medical certificate required).
> Casual leave: 7 days (for personal and family
emergencies, requires prior permission of boss).
Employees can take maximum 2 days at a time
> Annual leave: 3 weeks (after one year of employment).
> Federal holidays: About 20 days.

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 Compensation and Benefits

• Retirement age:
> 55-60 years (private sector);.
> 60 years (public sector).
• Retirement Benefits: Employees receive two lump-sum
payments when they retire:
> Provident Fund (similar to 401(k))
• Typical contributions: 10-12 percent of base salary
(employer and employee).
• Payable on retirement, voluntary separation, death.

> Gratuity
• Only employer contributes (15 days salary per year of
service).
• Tax-exempt for employees.
• Payable on retirement, voluntary separation, death.

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 Compensation and Benefits

• Organizations are seen as an extension of the family.

 Provide both short-term and long-term personal loans.

 Personal loans for housing, car, home maintenance and

family emergencies.

 Loan amounts vary by position and level in organization.

 All employees after their probation (confirmation) period

are eligible.

• Many medium and large organizations have cafeterias

with subsidized lunch facilities.

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 Compensation and Benefits

• Executives receive special benefits to reflect status

such as:

• Club memberships.
• Overseas training.
• Company housing.
• Company cars.
• Provided with drivers.
• International cars.
• Operational and maintenance costs.
• Phone bill reimbursements.
• Organizations provide business and cell phones.

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 References

• Budhwar, P., Luthar, H., Bhatnagar, J. (2006). The dynamics of HRM

systems in Indian BPO firms. Journal of Labor Research, 27(3), 339-
360.

•  Babu, V. (2006). Infosys: Incredible Infy; What's the secret sauce that
makes Infosys the best company to work for, year after year?
Business Today, pp 88.

• Budhwar, P., & Khatri, N. (2001). A comparative study of HR practices

in Britain and India. International Journal of Human Resource
Management, 12(5), 800-826.

• Challapalli, S. (2005). Those grand jobs. The Hindu, Business line.

Retrieved from
http://www.thehindubusinessline.com/catalyst/2005/03/31/stories/2005
033100070100.htm

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 References

• Chhokar, J., Brodbeck, F., & House, R. (Eds). (2007). Culture and
leadership across the world. The GLOBE book of in-depth studies of
25 societies. Lawrence Erlbaum Associates. Mahwah, New Jersey.

• Deshpande, S. (1992). Compensation Legislation in India. What US

investors need to know. Compensation & Benefits Review, 24(5), 57-
60.

• Grossman, R. (2006). HR's Rising Star in India. HR Magazine, 46-52.

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 References

• World Flag. http://www.worldflags101.com/i/india-flag.aspx.

• http://www.disabilityindia.org/pwdacts.cfm.

• Klie, S. (2006). HR around the world. Canadian HR Reporter, 7-8.

• Merchant, K. (2006). Companies in India offer a taste of the sweet life.

Financial Times (Asia edition), 23-24.
•
Ratnam, V., & Chandra, V, (1996). Sources of diversity and the
challenge before human resource management in India. International
Journal of Manpower, 17, (4/5), 76-96.
•
Tyler, K. (2006). Infosys Technologies Ltd. HR Magazine, 56–60.

• Saini, D., & Budhwar, P. (2004). HRM in India. In Managing Human

Resources in Asia-Pacific. Routledge. London and New York.
• Srinivasan, N. (2002). Flawed Law. India Together.

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Thank You!

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Resource made available by SHRM US