The document serves as a comprehensive reference guide for implementing contingent workforce management (CWM) programs in India, discussing the economic landscape, compliance challenges, and invoicing procedures. It emphasizes the complexity of India’s labor market, the need for understanding local taxation laws, and the importance of effective vendor management practices. Key sections address economic outlook, taxation requirements, vendor management systems (VMS), and the implications of various invoicing models on cash flow.

1. Reference Guide for Implementing
Contingent Workforce Management
Programs in India
Sameer Srivastava
April 25, 2017

2. Index
2
• Section A – India Economic, Staffing & CWM
Landscape 2016
✓ India – Economic Outlook for 2016
✓ Most Attractive Staffing Markets Globally
✓ Most Complex Contingent Markets Globally
✓ Customer Expectations – Supplier Selection &
Delivery
✓ India - Risk Assessment and Prioritization
✓ LinkedIn – Recruiting Trends for India 2016
✓ India Staffing Company Survey 2016
✓ Staffing firms concerns about current laws and
regulations
• Section B – VMS Localization and Configuration
✓ VMS Localization Summary – Labor and
Employment
✓ Personal and Data Privacy and Storage
✓ Tax Applications and Invoice Requirements
✓ Data Migration – Issue & Impact
✓ Invoicing Requirements
✓ Change Management – Time Sheets
✓ Implementation Best Practice for India
• Section C – Indian Taxation Laws Explained
(related to MSP/VMS)
✓ Matrix of Taxes – Background – TDS
✓ Matrix of Taxes – Background – Service Tax
✓ When and how they are deducted?
✓ When and how they are recouped?
✓ Who has the liability?
✓ When are they applicable?
• Section D – Invoice Presentation & Associated
Tax Implications
✓ Rules for presentation of Invoice
✓ Pay when paid model
• Section E – Additional Burden with Treasury
Model
✓ Impact on Cash Flow

3. Section A – India Staffing &
CWM Landscape 2016
April 25, 2017

4. India – Economic Outlook for 2016*
4
• The Indian economy is on a recovery path, supported by a large terms of trade gain (about 2½ percent of GDP) and
reduced external vulnerabilities, though downside risks remain.
• Important economic and structural reforms have been initiated, but further reforms are needed to boost India’s
growth potential.
• India’s growth outlook has improved, despite new headwinds. In the near term, economic recovery is expected to
continue to be underpinned by private consumption (which has benefited from lower energy prices and higher real
wages).
• Despite a sharp reduction in inflation over the past year, medium-term inflationary pressures and upside risks to
inflation remain
• Priority areas for reforms are well known: addressing long-standing supply bottlenecks, labor and product market
reforms, and improving the business climate.
• The Indian economy is on a recovery path, helped by a large terms of trade gain, positive policy actions, improved
confidence, and strengthened external buffers.
*International Monetary Fund Report on India March 2016 - IMF Country Report No. 16/75

5. Most Attractive Staffing Markets Globally
– SIA Report (Mar 2015)
5
• India comes in at the 37th position, out of the 55 countries considered in this
poll (Each country has been scored each component from 1 to 10 with 1 being
the least attractive compared to other staffing markets and 10 the most
attractive.):
• By Economic growth: 4th (Avg. GDP growth of 6.58% expected over the next 4 years)
• By Long Term Potential: 2nd (0.1% market penetration)
• English Speaking Staffing Market: 9th globally

6. Most Complex Contingent Markets
Globally 2016 | 26 May 2016 - SIA
6
▪ Out of 60 countries surveyed, India came 6th overall. But at the same time,
came 2nd in:
▪ Independent Contractor Usage &
▪ MSP VMS Maturity
▪ In India, the usage of the MSP/VMS model is driven by large corporations with
multi-region contingent workforce programs using India as the base for the
program.
▪ India also came at the 10th position for the least complex English speaking
contingent markets

7. Customer Expectations – Supplier
Selection & Delivery
7
Majority of clients onboard
suppliers based on their
past track record, including
compliance*.
In terms of delivery, 75%
clients expect suitable
candidates, without any
compliance hassles*.
*ISF Research report Aug 2015 – Expectation of Customers from Staffing Companies

8. India - Risk Assessment and Prioritization*
8
*SIA Global Risk Management Framework 2015

9. LinkedIn – Recruiting Trends for India
2016
9

10. India Staffing Company Survey 2016| 30
May 2016 - SIA
10

11. Which current laws and regulations are India
staffing forms most concerned about?*
11
*India Staffing Company Survey 2016| 30 May 2016 - SIA

12. Section B – VMS Localization
and Configuration
April 25, 2017

13. VMS Localization Summary – Labor and
Employment*
13
• Work week in general is approximate 43-48 hours
• Work day is 9 hrs adults and 4.5 hrs for children over 14 years
old; additional hours are prohibited for children; additional
hours for adults should be paid as overtime
• Annual leave accumulates at 1 day for every 20 work days for
adults; children over 14 years old may work and accumulate at
1 day for every 15 work days
• Service requirements apply to benefits
• Pension and bonuses are required under certain conditions
• Termination is federally regulated for companies over a certain
size
*IQN – India Localization Guide 2013

14. Personal and Data Privacy and Storage*
14
•Right to personal privacy is recognized
•Breach of confidentiality is sometimes used in lieu of
privacy laws and is accounted for in Indian tort
•Data Privacy regulations have been passed,
interpretation and enforcement are being determined
•Legislation should be monitored until case studies
indicate the enforcement path
•Data will be stored for eight years and storage location
is not regulated
*IQN – India Localization Guide 2013

15. Tax Applications and Invoice
Requirements*
15
▪ Service Tax is 15% domestically (Since June 2016)
▪ Reverse charge is in play for supplies outside of India
▪ 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
*IQN – India Localization Guide 2013

16. Data Migration: Issue & Impact
16
• 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

17. Invoicing Requirements (VMS)
17
• Discounts (Training, Tenure, Volume etc.)
• Service tax calculations (line by line vs. at the end)
• Conversion of rates from Monthly to Weekly/Daily (how
many hours to consider etc.)
• Paper invoice
• Invoice data:
• Supplier Service Tax Number (Individual to each
supplier)
• Supplier Invoice Number (Individual to each supplier)
• Supplier Address
• 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

18. Change Management – Time Sheets
18
•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.

19. Implementation Best Practices for India
19
• Getting suppliers engaged early to truly 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.
• Training and Re-Training of supplier on invoicing process (Over-communicate and
train).

20. Section C – Indian Taxation Laws
Explained (related to MSP/VMS)
April 25, 2017

21. Matrix of Taxes – Background – Tax
Deducted at Source
21
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.

22. Matrix of Taxes – Background – Service Tax
22
•Service Tax: Vendor/Sub-Vendor is obligated to charge
an additional fee of 15% on every bill raised as service
tax, this amount will have to paid along with the billed
amount.
•Service Tax Component can be claimed as input tax
against what is due and payable, by the party making
the bill payment.

23. When and how they are deducted?
23
•When they are 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 too.
•How are they deducted- These are deducted only on
the billed amount excluding Service Tax. This is the
statutory responsibility of the party making the bill
payment.

24. When and how they are recouped?
24
•They are recouped only at the time of filing of return
at the end of the year, if there exists a refund, then it
might take 3 to 4 years before the same is realized.
•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).

25. Who has the liability?
25
•TDS liability to pay to the Govt. Authority
resides with the legal entity who is making the
payment.
•Service tax liability payment to the Govt.
Authority resides with the Legal entity who is
raising the invoice.

26. When are they applicable?
26
•TDS is applicable on all billed amount, immediately
upon recording of invoice in the books of accounts or
at the time of making payment( in case of advance)
whichever is earlier.

27. Timeline for Raising an Invoice
27
•The service provider has to raise the invoice within 30
days from the completion of the service period and
has to mandatorily make the service tax liability
payment to the authority even if the payment from
client is not received in the subsequent month
Section D – Invoice Presentation
& Associated Tax Implications

28. Rules for presentation of Invoice
*Software export zones
• Invoices will have to be Submitted as a hard copy. Soft copy of
the invoices are not recognized as legal document.
• All invoices will have to be signed by the submitting party along
with company stamp.
• Invoices should include the description of the services along
with billing period
• Invoices will have to carry a Service Tax element of 15%
• All the invoices should have the registered name and address ,
PAN and Service Tax Registration Numbers, Bill To Legal Entity
and Address specific to the place registered with the S. Tax
dept. also following the SEZ ⃰ requirement if any for service tax
exemption.

29. Pay when Paid Model
29
• 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, so this
model will not fly.
• But if Vendor is ok with this model, MSP can pay the vendor only
when 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 MSP to pay any advances to cover for the pay
check.

30. Timeline for Raising an Invoice
30
•The service provider has to raise the invoice within 30
days from the completion of the service period and
has to mandatorily make the service tax liability
payment to the authority even if the payment from
client is not received in the subsequent month
Section E – Additional Burden
with Treasury Model

31. Impact on Cash Flow (Background)
31
•If all vendors put together invoice MSP say INR 30
Million in a month, MSP will be obligated to Deduct
INR 3 Million as TDS and deposit with government
treasury on behalf of the vendor, and pay the balance
to the Vendor.
•Similarly the customer while making the payment to
MSP will deduct INR 3 Million as TDS and deposit it
with government treasury on behalf of MSP and pay
the balance to MSP.

32. Impact on Cash Flow (Cont…)
32
•MSP will raise an additional invoice for its monthly fee
say to customer/ vendor, say at 2% of the total revenue,
this comes to INR 0.6 Million, customer/vendor will
deduct 10% and make the balance payment to MSP.
•In effect MSP will have a cash shortfall of 7.8% ( 10%(
Deducted by Customer on contingent bill)-2%( Fees
Received)-10% of 2%( TDS on 2%))of the revenue amount
month over month, and this needs to funded either by
other divisions or by our corporate.

33. Impact on Cash Flow (In conclusion)
33
•The aforementioned cannot be passed on to
customer, as this cash flow burden has to be
borne by MSP.
•We do not have any legal burden or obligation
that we can pass on to customer.

34. Timeline for Raising an Invoice
34
•The service provider has to raise the invoice within 30
days from the completion of the service period and
has to mandatorily make the service tax liability
payment to the authority even if the payment from
client is not received in the subsequent month
Thank You!
Sameer Srivastava
Sameer.Srivastava@outlook.com
+91 900 8777 422