How to start a recruitment business


How to Start a Recruitment Business

Human capital or human resources is India’s biggest asset. Well qualified Indian professional / workmen are available for employment in India at very competitive costs. Also, India has one of the largest population which lives abroad working in various positions. Therefore, there is plenty of opportunity in India for recruitment agencies. In this article, we look at the process for starting a recruitment business in India.

Business Registration

To start a recruitment business, the promoters first decide on a business entity. A recruitment business can be started as a Proprietorship, Partnership Firm, LLP, Private Limited Company or Limited Company. It is however recommended that the recruitment business be started as a LLP or Private Limited Company, as both entities offer Limited Liability Protection to its promoters. Since recruitment agency involves providing employment to a number of employees and compliance with stringent labor laws and ESI or PF Regulations, it is best to have limited liability protection for the promoters. Further, LLP and Private Limited Company also improve ease of transferability, ensuring continuity of business even in case the promoters wish to exit the business.

Tax Registration

A recruitment business provides recruitment or recruiting services. Therefore, a recruitment business would have to have a service tax registration and comply with service tax regulations. Service tax registration can be obtained for the recruitment business once the annual sales turnover crosses Rs.9 lakhs. The recruitment business would have to levy service tax at the rate of 14.00% and remit the same with the Government once the annual sales turnover crosses Rs.10 lakhs. VAT or TIN registration is typically not required for a recruitment business, as recruitment agencies are not involved in the selling of goods or products.

ESI / PF Registration

If the recruitment business provides employment only to 10 or less persons, ESI registration is not required. However, provides workers on contract basis to other business, then ESI registration must be obtained for the business. ESI registration is required when the number of persons employed in a business exceeds 10. PF registration is required when the number of persons employed in a business exceeds 20.

Recruiting Agent (RA) License

The Emigration Act, 1983 requires that those who wish to recruit Indian citizens for employment abroad be registered with the Protector General of Emigrants (PGE), The Ministry of Overseas Indian Affairs. Those registered with the Ministry of Overseas Indian Affairs for recruitment are known as “Recruiting Agents”. The requirement for obtaining Recruiting Agent license are as under:

  • Submit application for becoming Recruiting Agent in the prescribed format
  • Demand draft for Rs.25,000/- in favor of PAO, MAIO, New Delhi
  • Passport size photos of the promoters
  • Details of the promoters including business activity in the last five years
  • Certified specimen signature of the promoters
  • Asset and liability statement of the promoters
  • Income tax returns of the promoters
  • Degree certificate of the promoters
  • Bank guarantee for an amount of Rs.20 lakhs

In addition to submitting the above documents and information, the following must be maintained by the Recruiting Agent after registration:

  • Office premises of not less than fifty square meters of built-up area, having a waiting hall for at least thirty persons, a room for the purpose of conducting interview and and office space equipped with furniture, photocopier, telephone with subscribers truck dialing and international dialing facility, fax, computers and other office amenities as may be specified by the registering authority by order in writing;
  • Work stations for the office personnel;
  • Internet facility, email accounts and a web portal containing detailed information about the recruiting agent, the validity status of the registration certificate, the services offered , the cost of services, the mode of payment of service charges, the remedies available to emigrants for redressal of grievances, vacancies available along with the details of the jobs, the employers and the contract conditions as well as the recruitments made in the past with such particulars as the registering authority may specify by order in writing;
  • Adequate and duly trained staff;
  • A signboard, to be displayed in front of the business premises or so fixed that it is conspicuously visible to the public from outside the office premises indicating the name and the registration number of the recruiting agent and the year of registration;
  • Arrangements for skill testing for the trades for which he recruits the intending emigrants.

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