Moving to India. Step 4: Employment Contracts

26 Jun, 2008
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Working abroad has been a wish of mine for some time now. Xebia offers me the opportunity to live and work in India. Through this blog series I will keep you informed of the progress and challenges of this project.
It has been quite a while since I wrote about our plans to go and work in India. A lot of people have asked me whether I had already returned so soon, assuming that I had already left! The truth is that our plans are still very much alive, but the past period has not been very exciting, so there was nothing much to blog about. Currently we are in the final stages of drafting the employment contracts and I would like to inform you about the structure we have in mind for this.

Contract triangle
Currently I have an employment contract with Xebia in the Netherlands. For me it would be easiest if this contract would remain in use and I would simply be posted in India under a deputation contract. Since I would be getting salary in India for a longer period, I would have to pay taxes to the Indian government. This would mean that the financial department in the Netherlands, responsible for paying my salary, would have to get in contact with the Indian governmental organization for taxes.
It seems more fit to sign an employment contract with Xebia in India. That way my salary would be paid in the same country as my taxes. The problem with signing a new contract for me is that the rights that I have built having a contract with Xebia over the last few years would have been forfeited. Also the Dutch laws on employment give a lot more protection to the employee than the Indian laws. We were looking for a way to retain these rights and protective rules, whilst signing a new contract.
After some consulting we decided upon keeping the original employment contract with Xebia in the Netherlands and putting this contract in a non-active state through an “unpaid leave” construction. This is a known construction in the Dutch juridical system, that practically suspends the execution of an employment contract for a certain period of time. The employment relation remains intact. During this period an employment contract between Xebia in India and me will be active, under which salary will be payable. To govern the relation between these two contracts, which are standard contracts, and to make some additional arrangements, an additional contract will be signed between Xebia in the Netherlands and me.
Additional arrangements
The new contract between Xebia in the Netherlands and me will contain the following arrangements:

  • The duration of our stay in India is set to 2 years. Extension is negotiable. We will be able to end the stay earlier, after discussing this with Xebia.
  • Additional cost are for Xebia. These cost are for example medical cost of vaccination, insurance, moving and travelling cost.
  • Pension.

Pension is under Dutch law an arrangement for postponed salary. It is practically a special type of saving. Taxes over this salary are payable when the pension is paid, thus after the employee ends his working live. As such it is mostly a fiscal arrangement: A part of the salary is saved and over this part no taxes are paid at that time. In addition, the employer also pays a part of the monthly pension amount.
The Indian fiscal system doesn’t have such an arrangement, as far as I know. The amount of money that would be paid for pension while working in India would be taxable. That would mean that taxes would be paid twice over this amount: Once to the Indian government (when the salary is paid) and once to the Dutch government (when the pension is paid). This could eventually cost a lot of money.
Under the Dutch fiscal law, an extra payment to a pension-fund can also be made when you have not been able to save for pension for a period of time due to working abroad. As additional arrangement for pension, Xebia will pay the amount that it would pay to my pension-fund over this period as a one-time bonus when the unpaid-leave period ends. I can then put this bonus into my pension-fund and use the fiscal advantages at that time.
Financial picture
The cost of my current contract to Xebia in the Netherlands will be the same as the cost of my future contract with Xebia in India. This means that I will get a lot of salary in India, compared to other employees. Most of my Dutch colleagues are quick in spotting this. They are definitely right (and I don’t understand why they don’t try to do the same… ;-)), but I do feel a bit offended by this slight suggestion of greediness and feel the need to explain.
For starters, life in India is definitely cheaper than live in India. Nonetheless, life in India for a foreigner that stays for a relatively short period, will definitely be more expensive than life for a native Indian. You have to do some investments for a rather short period, like furniture and cooking equipment. Those kind of things are all not very expensive, but you’ll be needing them for a rather short time, which makes them expensive in comparison. Some services will also be more expensive for foreigners and you need to be very careful not to be taken advantage of when doing any kind of financial
transaction, from paying your taxi to doing your grocery or renting a car. That’s just normal live for a ‘rich westerner’ in India.
The other explanation is that I offer Xebia the opportunity to have a native Dutch employee in India for free! I could have just stayed in the Netherlands and gotten the same salary, without taking this risk of leaving everything behind and going to India. Of course I don’t see it this way, and neither does my girlfriend. We think of this as a great opportunity and adventure. From the perspective of Xebia though, it makes a lot of sense.
Actually, I don’t mind the gloomy, smiling faces of the people that make these kind of remarks. They are right and I don’t mind the lower cost of living in India. We’ll try to feed some of it back into the community by doing some social, voluntary work and maybe helping out one good initiative or another.
The next step in this project will be to get visa from the Indian Embassy. It appears that this is a bit more difficult than we had anticipated. I’ll also be trying to get a better idea of my tasks in the Indian team and to get a grasp on the expectations of management in the Netherlands. This will also be the main purpose of a visit to India that is planned for August. The big move will be around October 1th.


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