The GIC Cookbook -...

A guide to establishing a new

Global In-house Centre (GIC)

in India

The GIC Cookbook

GIC: “An offshore, owned,

integrated, strategic platform for

leveraging global talent assets.”

Copyright © 2016 by ANSR ● All Rights Reserved

November 2016 Edition

Copyright © 2016 ANSR ● All Rights Reserved 1

GICs are rapidly maturing and moving up the value chain,

driven by the dynamic macro-economic circumstances,

changing business environment and emerging technologies.

GICs today are playing a vital role in the development of

India as a source of high quality talent and cost benefits.

This GIC Cookbook succinctly provides an exhaustive

overview of the GIC establishment process in India. In

addition, the Cookbook also highlights the key strategic

levers that contribute to GIC success, as well as, some best

practices from high-performing GICs.

I hope that this Cookbook will serve as a ready reckoner to

any global enterprise considering establishing a GIC in India,

as well as established GICs that are looking to scale /

optimize their presence in India.

Global In-house Centers (GICs) continue to integrate and

mature and have now emerged as a mainstream operating

model for leading global enterprises in their endeavors to

accelerate their transformation journey.

GICs are demonstrating significant paradigm shift from

being offshore service delivery centers to strategic enablers

to support the growth, differentiation and innovation

agenda of global enterprises.

The GIC Cookbook is aimed at providing global enterprises

with an overview of the activities required to establish and

operationalize a GIC in India. Additionally, this Cookbook will

help existing GICs benefit from the learnings and best

practices associated with this operating model.

Lalit Ahuja

CEO - ANSR R. Chandrashekhar

President - NASSCOM

FOREWORD

Contents Overview ................................................................................................................................................. 3

GICs and Outsourcing .......................................................................................................................... 4

GICs in India ........................................................................................................................................ 5

Talent in India ..................................................................................................................................... 6

GIC Establishment ................................................................................................................................... 7

Business Case ...................................................................................................................................... 7

Location Analysis ............................................................................................................................. 7

Strategy and Execution Framework .................................................................................................... 8

Legal and Regulatory ....................................................................................................................... 8

Finance and Tax ............................................................................................................................ 10

Infrastructure ................................................................................................................................ 14

Talent ............................................................................................................................................ 16

GIC Operating Model ........................................................................................................................ 20

Critical Success Factors and Risks ..................................................................................................... 20

GIC Best Practices and Trends .............................................................................................................. 21

Innovation through start-up engagements ...................................................................................... 21

Cultural integration and alignment ................................................................................................... 21

Regulations for Expatriates ........................................................................................................... 22

Attracting and engaging talent ......................................................................................................... 23

Conclusion ............................................................................................................................................. 23


Overview The Indian IT/ITES industry has grown exponentially over the last few decades, with a direct workforce

of ~4 Million, generating a total revenue expected to touch $146B in 2016. India has the world’s largest

talent pool for the IT/ITES domains, which is expanding rapidly, with 5.8 million graduates in 2015,

with ~25% specializing in domains related to IT/ITES.

The three main contributors of the Indian IT/ITES industry in India are:

Third party service providers

Product companies and start-ups

Global In-house Centres (GICs), previously known as captive centres.

There has been a significant increase in the adoption of the GIC model by several global enterprises

with approximately 2000 GICs operational globally, half of which are situated in India. GICs in India

account for ~25% of the global offshore market.

Some of the key strategic drivers for GIC establishment are listed in the graphic below:


GICs and Outsourcing GIC and Outsourcing models offer different benefits to global organizations, while each have their own

limitations. The table below highlights the key differences between both GICs and Outsourcing:

Attributes GIC Outsourcing

Talent Higher productivity in steady state because of superior quality of talent

Ownership of leadership / talent assets

Ability to enhance retention

Powerful mechanism to develop focused expertise/capabilities

Ready for immediate deployment

Shared resources

Quality and productivity issues

Higher attrition

Lack of belongingness and culture

Costs 10 – 15% lower costs in steady state (2-3 years)

Initial capital investments required

Multiple benefits beyond savings to the enterprise

Higher costs in steady state because of bench, marketing and administrative overheads

No Capital Expenditure Required

Primary value driver is cost

Innovation Process Improvement, Innovation, COE’s, Business Transformation

Limited opportunities to support innovation agenda

Structure Owned entity Arms-length, contractual relationship, project/process driven

Scope of work End to end

Maximize value from global services

Ability to support complex work

Project based

Non-core, transactional work

Delivery arm than a strategic arm

Control Increased control

Tightly integrated with the parent company helps create and drive impact

Loss of control over the company's business processes, operations and deliverables

Operating Model Highly integrated

From traditional cost savings to end to end ownership model

One team, multiple locations, team extension

Arms-length; service level agreement driven

Risk Upfront investment

Lower risk with information security and data loss

Low risk in terms of financial impact

Threat to Information security and confidentiality, loss of data


GICs in India Currently, over 1000 global enterprises have setup GICs in India. The illustration below highlights some

of the most prominent GICs in India:

Some key statistics regarding the growth of GICs are shown in the graphic1 below:


Talent in India India is a talent rich location with a young population and the largest employable talent pool globally,

with the IT-ITES industry being a major employer. This talent pool is also enabled and supported by a

substantial and fast-growing expat population. Key highlights include:

Around 4 million people employed in IT-ITES industry in India

~5.5 million annual out-turn of graduates, resulting in steady supply of fresh talent across

various disciplines like engineering, mathematics, economics, IT, finance and accounting

India has the second largest English speaking population in the world, which enables seamless

cross-office global operations

India has the second largest talent pool for

o Mobile apps - Android/ IOS talent is estimated at ~ 90,000 growing at a CAGR of 12.0%

o Scrum masters/agile coaches - ~14,000

o Software product development engineers

A subset of this vast talent pool, working in the GIC environment, may share skills with their peers in

the IT-ITES industry, but differ significantly at a core cultural level. This pool of “GIC talent” has the

following differentiating characteristics:

GIC Talent and leadership are culturally aligned with the home-office, working with the

relevant business context, thereby leading to empowered teams and higher productivity.

These teams consist of work with global leaders, function under global reporting relationships

and are driven by ownership and accountability of their respective functions.

Ownership and accountability is a key characteristic of GIC talent. GIC leaders and teams

typically own complete functions, are accountable for business outcomes and influence

strategic decisions without the traditional authority. They deliver on business outcomes rather

than only processes and discrete projects, thereby impacting enterprises significantly.

Academic focus is another key characteristic of GIC talent. Typically, they would have or would

be interested in pursuing higher education, adding to the skillsets of the talent pool and the

enterprise eventually.

This group is also characterized by better standards of communication skills and are typically

culturally acclimatized to working in cross-office environments. They have the ability to

comprehend and provide feedback, communicate issues and collaborate to resolve them.

Essentially, these teams can work in a globally distributed environment that is operationally

and culturally integrated.

These teams are typically lean and carry no bench workforce unlike service organizations.

There is typically a deep emphasis on focussing on and growing specific skills, thereby adding

value to the enterprise.

Workforce strength at Indian GICs is rapidly rising:


Approximately 60% of the talent employed in India based GICs (across all domains with the exception

of BFSI) are focussed on technology. Some of the key technology skills, that are widely available

include:

Software testing and quality assurance

Application support, maintenance & development

Data warehousing

Web development

Software architectural design and deployment

Enterprise solutions & tools

Business intelligence & analytics

Infrastructure services

Cloud

Digital (Mobile, digital and omni-channel)

GIC Establishment

Business Case The first step towards establishing a GIC is to develop a business case outlining the strategic drivers,

required investment & the expected benefits/ outcomes (financial & non-financial) from the GIC

initiative. A typical GIC business case would comprise of the following:

Definition of GIC objectives and scope of activities

Development of a comprehensive business plan for the GIC including:

o Identifying a location for the GIC

o Budgeting GIC facility build out and IT infrastructure costs

o Identification of a suitable legal, tax and regulatory structure

o High level organizational design and talent acquisition strategy

o Multi-year financial plan & financial metrics

o Peer/competitive group benchmarking

o Development of a detailed project plan for operationalization of the GIC

o Key operational and strategic risks, and risk mitigation initiatives

Recommendations

Location Analysis The location decision is a critical factor contributing to the GIC success. Given below are some critical

selection criteria impacting the location decision:


Strategy and Execution Framework Setting up a GIC includes establishing a legal entity, financial planning, funding, design & build of the

real estate & IT infrastructure, and hiring of the leadership and operations talent. The framework

below outlines the key decisions & activities that lead to a detailed execution plan across different

work streams:

An overview of the above activities has been provided in the following sections.

Legal and Regulatory

Corporate Structuring

For the purposes of incorporating a legal entity, an optimal and tax-efficient corporate structure needs

to be developed which involves:

Identification of shareholders of the entity

Identification of the type of legal entity

o Setting up a Private Limited Company (PLC) or a Limited Liability Partnership (LLP) (a

relatively newer form of business presence) are the two key options that could be explored

for a permanent form of business set up in India. While there are other forms of business

presence, like a Liaison Office, Project Office and Branch Office, they are intended more for

temporary or restricted operations and hence not suitable where a more permanent form

of business set is envisaged. The key differentiators between a PLC and LLP are summarised

in the table below:

Attributes LLP PLC

Permitted activity Can be engaged in sectors for which 100% FDI is allowed under the automatic route and no FDI linked conditions are applicable

As permitted by the Memorandum of Association and subject to FDI guidelines

Members Minimum 2 partners 2 to 200 shareholders

Liability Limited except in case of fraud, wrongful act

Limited

Corporate Law compliances

Relatively easier Much more than a LLP

Internal Management As determined in the LLP Agreement

Mandatory to hold at least 4 board meetings in a year and maintain documentation with respect to the same


Corporate tax rate 30% (plus applicable surcharge and cess)

30% (plus applicable surcharge and cess)

Minimum Alternate Tax/ Alternate Minimum Tax (Whether applicable)

Yes (MAT is 18.5% on Adjusted total profits) (plus applicable surcharge and cess)

Yes (MAT is 18.5 % on book profits) (plus applicable surcharge and cess)

Applicability of Dividend Distribution Tax

No Yes- at an effective rate of 20% (approx.)

External Commercial Borrowings (ECB)

Not permitted Permitted; subject to applicable conditions/ restrictions

o Identification of the Board of Directors of the GIC

Incorporation

Typically, the process for incorporation consists of the following steps:

Application of the Digital Signature Certificates (DSCs) and Digital Identification Numbers

(DINs) for the directors

o DSCs are required for digitally signing any legal documents

o DIN is a unique identification number assigned to new directors

Registration of the name of the Indian entity, following the guidelines laid out by the Registrar

of Companies (RoC)

Creation of the Memorandum of Association (MoA) & Articles of Association (AoA) for the

GIC, which define the objectives of the entity, secretarial guidelines and initial shareholding

information

Submission of the application for incorporation, which involves filling out the mandatory

incorporation forms with the RoC along with the required affidavits and declarations from the

directors and subscribers.

Obtaining the certificate of incorporation

Regulatory Approvals

Once the Indian entity has been incorporated, the organization can apply for other regulatory

approvals, which are required to run a business in India. The key registrations include:

Permanent Account Number (PAN): Required for payment of taxes on income of a company,

filing of returns and as a unique identifier for the company

Tax Account Number (TAN): Required to withhold tax on payments made by a company

Value Added Tax (VAT): Required for commercial transactions such as procurement, sales etc.

Importer Exporter Code (IEC): Required for import/ export activities, including procurement

from foreign vendors.

Service Tax (ST): Required for all commercial transactions involving procurement of or

rendering of services

Apart from the above regulations, the entity would also need to file for labour law registrations as

they start on-boarding team members.


Finance and Tax

Banking

Apart from receiving the initial capital infusion & regular operations, a bank account is also critical for

statutory and SEZ registrations.

Following are the different types of bank accounts that could be considered:

Current account – This is required for all the INR transactions. No interest is generally paid on

the balance held in this account

Exchange Earners Foreign Currency (EEFC) Account – Exporters can open this account. The

advantage of this account is that the funds received can be retained in foreign currency. As

per current regulations, any balance held beyond one month is mandatorily converted into

INR

Special Foreign Currency (SPFC) account – Exporters based out of an SEZ unit can open this

account. This is similar to EEFC account. However, the balances can be held in foreign currency

without any restriction on timing

GICs are required to comply with provisions of certain Acts laid out by the Central Treasury bodies

(Foreign Exchange Management Act, Foreign Trade Policies etc.). The key regulatory compliances with

respect to banking are as follows:

All foreign currency receipts are to be routed through designated banks. The company should

obtain a Foreign Inward Remittance Certificate (FIRC) for all the amounts received. These

copies of FIRC are required to be submitted for further return filing

The foreign currency payments (unlike the domestic transactions) cannot be routed through

the general online banking mode. The authorised documentation for the payments have to

be physically submitted to the banks in the formats prescribed by the statutes

GICs are required to ensure that any receivables or payables in foreign currency are not aged

beyond six months or any other limits prescribed by the relevant Acts. In case of ageing

beyond the prescribed limit, the GIC might require special approval from banks or central

banking authorities before settling the transaction

Exporters of services (GICs) are required to regularise exports. This would mean that the GIC

is required to draw a correlation between the revenue invoice raised with the FIRC received.

This has to be done on an ongoing basis

In case the funding plans include External Commercial Borrowings, the Bankers play a key role

in filing the ECB agreement and obtaining approvals. Once approved, the GIC is also required

to file ECB returns on a monthly basis

The banking partner engaged by the GIC acts as an Authorised dealer and represents the GIC in all

communications with the Central Treasury body.

Capitalization

It is important to fund the Indian business with an appropriate mix of instruments to as to ensure:

o Ease of funding

o Tax efficiency of funding and repatriation

o Ease of compliance and management

The table below provides a high level comparison of some basic funding instruments that could be

explored by a GIC:


Parameters Equity ECB Advance against services

Eligibility /approval requirements

Automatic FDI route

Automatic route (up to US$ 200 M)

No restrictions

Utilization No restrictions Capital expenditure and general corporate purposes

No restrictions

Sources To be introduced by the shareholders in agreed ratio

Direct shareholders with at-least 25% equity; or Indirect shareholders with at-least 51% equity; or Group company with common overseas parent

Recipient of services

Debt Equity Ratio Not applicable Debt: Equity ratio of 4:1 for loans over US$ 5M

Not applicable

Interest rate

Not applicable

6 months LIBOR plus 300 basis points

Not mandatory – may be charged but capped to LIBOR+ 100 basis points

Repatriation Through payment of dividend and buy back of shares – liable to applicable taxes

Through payment of interest and repayment of capital

To be settled against export consideration

While there are other funding instruments also that could be explored (such debentures or debt

securities – both listed and unlisted, ADRs, GDR, FCCBs etc.) the above table provides a comparison of

simple funding instruments that could be adopted by a GIC.

Corporate Tax Rates

Direct tax

Indian tax year runs from 1 April to 31 March of the subsequent year. The Indian tax laws require the

taxpayer to discharge its tax liability in advance during the course of the year in quarterly instalments

followed by self-assessment and return filing after the end of the tax year. The effective rate of tax for

an Indian company is 30%, increased by applicable surcharge and education cess of 3%. The rate of

applicable surcharge for FY 2016-17 is as under:

If the income of the tax payer exceeds INR 1 crore but is less than INR 10 crore

7%

If the income of the tax payer exceeds INR 10 crore 12%

However, the tax laws also provide that where the total tax liability of a company computed at the

rate mentioned above is less than tax computed at 18.5% of the “book profits” of the Company, the

Company would be required to pay tax 18.5% on its “book profits”, increased by applicable surcharge

and education cess- such tax is referred to as Minimum Alternate Tax (MAT). Excess of MAT paid over

normal tax liability can be claimed by the tax payer in 10 subsequent years as per the credit mechanism

prescribed for the same.

Profits distributed by a company are liable to dividend distribution tax at approximately 20%.


Indirect tax

The tax structure in India also includes levy of various indirect taxes comprising of a mix of central and

state levies, such as customs duty, excise duty, sales tax, value added tax, service tax, stamp duty,

profession tax etc.

The above indirect tax regime is also proposed to be replaced by a comprehensive Goods and Services

Tax (GST) – proposed to be implemented from 1 April 2017.

Benefiting from Tax Incentives

The Indian government provides tax benefits to encourage foreign investments into India and to boost

exports. Setting up the entity in a Special Economic Zone (SEZ) or Software Technology Parks of India

(STPI) units provides a number of benefits. However, to avail these benefits, the entity needs prior

approval as well as needs to file compliances on a regular basis after operationalization.

Here are some of the key considerations that determine whether a SEZ or a STPI unit is suitable to

setup the GIC.

Parameters SEZ STPI

Sectors Benefited Benefits offered are for a wide range of sectors and not only software

Promotes software units

Regulatory Body Regulated by the Ministry of Commerce

Regulated by the Ministry of Communication and Information Technology

Locational restrictions

Benefits confined to units located in a specifically demarcated area. Minimum lock in of 3 to 5 years

Benefits can be availed by a unit located anywhere which has obtained approval from the STPI authorities and is bonded by customs authorities. No minimum lock in criteria.

Direct tax incentives Profits of a SEZ unit are eligible for exemption from income-tax in a phased manner over a period of 15 years

No exemption available from income-tax

Indirect tax incentives

Indirect tax benefits available to units in SEZ include:

Exemption from customs duty

Exemption from excise duty

Reimbursement of Central Sales Tax/ Value added Tax – based on rules of the specific states

Exemption from service tax

Partial exemption from stamp duty

Indirect tax benefits available to units in STPI include:

Exemption from customs duty

Exemption from excise duty

Reimbursement of Central Sales Tax/ Value added Tax – based on rules of the specific states

Sales in Domestic Tariff Area up to 50% of Free On Board Value of goods permitted


Compliances Various compliances to be undertaken to substantiate export activities and receipt of foreign currency, such as filing of monthly, quarterly and annual filings, documents related to availing service tax exemption, maintenance of bond register, etc.

Various compliances to be undertaken – largely similar to compliances prescribed for SEZ, such as filing of monthly, quarterly and annual filings, tentative annual report, maintenance of bond register, etc.

Transfer pricing

Indian transfer pricing provisions require tax payers to enter into international transactions with its

Associated Enterprise (AE) at Arm’s Length Prices (ALP). Thus, the margins that the GIC charges for its

services contracts with the home-office/parent organization, should be compliant with the transfer

pricing regulations. Typically, GICs adopt the transactional net margin method to compute the transfer

pricing mark-up, resulting in a mark-up between 17-20% for a technology focussed GIC.

The regulations also permit for Advance Pricing of Agreements (APAs) for a maximum period of 5

years, with an option to roll back up-to 4 years.

Financial Systems

The Indian entity needs a financial system (ERP or accounting tools) in order to have control over

financial reporting, to ensure compliance to statutory requirements as per Indian laws. Compliances

specific to India with regards to the Financial reporting are as follows:

Statutory audit – To be completed within six month of the fiscal year end.

Tax audit (to be completed before income tax return filing)

Audits by the Direct/Indirect tax authorities (like service tax, VAT, transfer pricing authorities)

In addition to the above, GICs have to adhere to the Group Consolidation Standards and book close

timelines.

As part of the Annual Director’s report, the Directors of the Company have to undertake that the

financial controls laid by the Company are commensurate to its size and the financial reporting done

by the Company is true and fair. The Companies Act 2013 has become more rigid regarding the role

of Directors in this regard.

The audits from the other authorities also call for submission of information which needs to be

extracted from the financial system.

Some key considerations that need to be addressed during the setup of the financial systems in the

Indian GIC include:

Identification of the accounting package to be implemented. It is important to consider if the

accounting package used in the home office can be implemented in the Indian entity within

stipulated timelines.

Customization of the accounting package to meet the Indian statutory requirements and the

Group reporting requirements.

Customisation of the delegation of authority to ensure compliance with Indian laws.

Customisation of the financial processes to be laid. This would include understanding the

Group level policies and customizing to the Indian requirement.


Infrastructure

Site selection

Once the location for the GIC has been selected, the site selection for the facility can begin. Some key

criteria that need to be considered during the site selection process are highlighted below:

Facility design

Creating an open, agile, exciting, professional and approachable environment that fosters innovation,

growth & disruptive thinking while aligning the look and feel of the facility to mirror the home office

are some key imperatives of the design exercise. Key parameters for the facility design include:

Branding: The facility design is a manifestation of the organizational brand and is critical to

how the facility will be perceived by employees, candidates and vendors. This is especially

important if the entity doesn’t have a presence in the Indian market and brand awareness is

low.

Cultural and Business Alignment: Depending on organizational culture and business needs,

the facility needs to have the optimal mix of collaboration workspaces, meeting rooms,

workstations and cabins to allow for seamless collaboration, ensuring high productivity and

innovation.

GIC Best Practices: Leveraging best practices at existing successful GICs can lead to the optimal

spend on facility design and higher productivity. For instance, receptions at GICs are typically

functional rather than opulent. This is because, most visitors to the GIC are either employees,

candidates or vendors. Having an opulent reception area wouldn’t have any impact on

business.

IT Infrastructure Design

Given that the GIC is located in a different geography than the home office, robust IT infrastructure is

mandatory to ensure that cross-office teams can collaborate seamlessly and efficiently. Typically, the

key focus areas when setting up the IT infrastructure include:

Data & IP security: Most GICs extend or leverage home-office infrastructure and frameworks

depending on their business requirements. This ensures that critical data is protected and the

best practices used by the home-office can be replicated by the GIC.

Collaboration: While facility design leads to development of spaces for collaboration, the voice

and AV infrastructure/technology facilitates seamless cross-office communication, leading to

higher productivity. Such infrastructure needs to be incorporated in the home offices as well,

if absent.


Standards & specifications: It is typically recommended that the GIC workforce is subject to

standards and specifications, similar to those enforced in the home office. This leads to higher

productivity, uniform IT infrastructure and an increased sense of ownership amongst the

employees. Standards and specifications need to address:

o End user computing infrastructure- Laptop/Desktop

o Applications & software provided to employees

o Availability of printer/scanner/ancillary IT infrastructure

Connectivity: When the IT infrastructure is being designed, it is critical to assess and identify

the connectivity requirements on the basis on number of users and business requirements.

The GIC should be then provided with adequate speed and capacity to connect, for efficient

engineering operations and for seamless collaboration, through both voice and video.

Business Continuity: Typically, GICs are setup with adequate IT infrastructure to remain

operational, fully functional and self-sustaining, even during outages.

A sample Logical Network Diagram shown below provides an illustration of the IT infrastructure setup

to GIC in Bangalore.

Procurement & Vendor Development

It is recommended that procurement standards and norms used by the home-office are replicated

during the GIC establishment as well. Some best-practices and control mechanisms often followed by

GICs during establishment include:

Rigorous vendor screening and vendor due diligence before vendor shortlisting

Strict controls around spend vis a vis budgets. Segregation of budgeted vs unbudgeted spends

Issuance of PO/payments only post approval by authorized personnel

Purchase order tracking

Controls around material receipting

Accounting with three-way match – PO/Invoice/Delivery confirmation

Construction and facility fit-out

Once the design phases have been completed, and the vendors have been selected, the construction

and facility fit-out process can begin. Key activities that are critical for a successful and efficient

implementation are listed below:


Talent

Organizational Design

The organizational structure that a GIC will adopt is driven by:

Organizational strategy

Alignment of goals and objectives across teams

Functional ownership and accountability

Basis these drivers, the organizational design will lead to the identification of reporting structures and

strategic leadership positions within the GIC.

Typically, GIC teams function as an extension of the home-office, i.e. one team in two different

locations. In such cases, the level of integration is very high, and the functional ownership lies with

the home-office. This means that organizational design must account for the fact that leaders in the

India office report directly to the functional heads in the home-office. The illustration below highlights

a sample organizational design, which may be used for such GICs:


If functional ownership was to remain in India or if the India GIC was to function more independently,

the organizational design must address the requirement that more senior leaders would be required

in India.

Employer Branding

To attract the right talent, it is first important to run an internal exercise to identify the employer value

proposition in an Indian context. Often, candidates in India might not be aware of the global

organization if their presence in India is limited. So, the employer branding exercise and recruitment

collaterals should showcase any key differentiators including culture, quality of work, career growth

opportunities and the focus on employee development. It is important to leverage the existing brand

legacy as it would showcase the culture of the organization, while tweaking it from an India and GIC

recruitment perspective.

The employer value proposition should also address talent retention, through timely rewards and

recognition, flexibility, differentiated benefits and providing employees with a sense of ownership.

Total Rewards

Before talent acquisition can begin, the GIC needs to determine its compensation and benefits

strategy. Many GICs adopt a Total Rewards strategy to attract, motivate, engage and retain talent.

The six elements of total rewards that collectively define an organization's strategy to attract,

motivate, retain and engage employees are:

Compensation: Pay provided by an employer to its employees for services rendered (i.e., time,

effort, skill). This includes both fixed and variable pay tied to performance levels. In addition,

long-term incentives can also be provided to employees in the form of ESOPs and RSUs, which

can improve retention.

Benefits: Programs an employer uses to supplement the cash compensation employees

receive. These include insurance, payments to provident fund, gratuity and employee

wellness programs, that provide security for employees and their families. Additionally, some

other key benefits unique to a GIC environment include Cafeteria services, transportation/cab

facility to pick-up and drop employees and access to higher education and certification

programs, all of which are considered best practices for a GIC.

Work-Life Effectiveness: A specific set of organizational practices, policies and programs, plus

a philosophy that actively supports efforts to help employees achieve success at both work

and home. These include privileged leave, maternity/paternity/adoption leave, bereavement

leave, sabbaticals and flexitime.

Recognition: Either formal or informal programs that acknowledge or give special attention to

employee actions, efforts, behaviour or performance and support business strategy by

reinforcing behaviours (e.g., extraordinary accomplishments) that contribute to

organizational success. These may include secondments or transfers to global offices, and

opportunities to transition of cross-functional roles.

Performance Management: The alignment of organizational, team and individual efforts

toward the achievement of business goals and organizational success. Performance

management includes establishing expectations, skill demonstration, assessment, feedback

and continuous improvement

Talent Development: Provides the opportunity and tools for employees to advance their skills

and competencies in both their short- and long-term careers.


Career Path

While a robust Total Rewards strategy is critical to retaining the best talent, building and providing

them with compelling career paths is equally important to engage talent for the long-term. Some

approaches that can be followed to achieve are:

Opportunities to lead global roles based in India

Opportunities to transition to global leadership roles in the home office

Harmonization with the career path followed across the globe

Individual & managerial tracks to ensure growth opportunities across the firm

Possibilities to transition to cross-functional roles

The graphic below illustrates how the career path at the GIC is closely harmonized with the career

path of the parent organization.

Talent Acquisition

The graphic below highlights how talent acquisition typically works at GICs:


During establishment of the GIC, there is a higher reliance on external recruitment agencies. This is

because there is a need to acquire talent before the GIC is operationalized. Over time, GICs

increasingly use alternate recruitment channels as well.

Labour Law Compliance

Similar to financial and tax compliance, any entity operating in India is liable to be compliant with the

Indian labour laws. Some of the key compliance activities are listed in the table below:

Compliance item Activities Description

One time registrations

Shops & Establishment Act, Contract Labour and Registration Act (CLRA), Professional Tax (PT), Provident Fund (PF), Gratuity Act, X6 vacancies, Notice board etc.

When the first employee on boards and the operations go live, the company is required to conduct these one-time registration activities. These registrations cover company information such as company name, principal employer, address, headcount details of the facility, third party contractors etc.

Ongoing filing of returns and maintenance

Required compliance filings should be complete based on the yearly statutory calendar

Once the one-time registration activities are completed, the monthly, quarterly, half yearly and yearly returns need to be filed as per the statutory calendar

On-boarding compliance forms

PF declaration (UAN) needs to be maintained for reference

PF nomination to be signed and sealed by the Authorized Signatory and handed over to authorities for PF allotment

Gratuity Form F to be filled and a copy is to be shared with the employees

There are 3 compliance forms that an employee will have to fill in as they join the organization. PF allotment and nomination, PF declaration and Gratuity nomination

Register and labour inspection books

These books to be maintained by the organization as labour authorities often conduct random inspections.

Register and labour inspection books are to be maintained at the facility of the company. Any inspection conducted by the respective authority o premise.

Tool Management

Authorized signatory on the EPFO tool is required.

Once the one-time registrations are complete, the company will have to identify a maximum of 2 authorized signatories for approval/rejection on the EPFO tool for all employee/company related activities


GIC Operating Model

The GIC operating model serves as a blueprint for how resources are organized and operated to get

critical work done. It encompasses decisions around the shape and size of the business, how people

work together within and across these boundaries, how the GIC will add value to the home-office, and

what norms and behaviours should be encouraged.

The operating model is an extension of the organizational design which defines the appropriate

boundaries between various functions and teams, as well as the size and shape of the organization

with indicative resource levels and locations. Other dimensions that need to be defined as part of a

robust GIC operating model would include:

Governance, which defines the mechanisms and interaction points by which governance will

be implemented, including board oversight responsibilities, committee and management

responsibilities, accountability matrices, management hiring and firing authority, risk

oversight policies and procedures, and performance measures and metrics

Policy infrastructure, which enable the behaviours and activities required for effective

governance by establishing compensation policies, promotion policies, business and

operating principles, performance measurement and management, training, and leadership

and talent development programs. Policy infrastructure should comprise of an optimal mix of:

o Enterprise-wide policies that work irrespective of location,

o Modified policies, that need to be localized to adhere to Indian regulatory

requirements

o Additional India specific policies, that are widely used in the GIC environment as best

practices

Change management strategy, which includes evangelizing the GIC within the home-office,

providing clear communication on the GIC strategy and its impact on the home-office,

managing insourcing from service providers without productivity loss, identifying and

resolving issues and permeating the home-office culture within the GIC

Critical Success Factors and Risks

A successful GIC establishment incorporates the following factors that contribute towards its success:

Alignment of offshoring strategy with overall enterprise strategy

Understanding of offshoring market dynamics

Cultural integration

Engagement models/options

Knowledge management

Change Management

Alignment of goals & objectives

Performance management systems

Risk assessment & mitigation strategies

Robust governance structures

Effective communication plans


Key risks that need to be addressed through a mitigation plan have been listed below:

Lack of control over quality of service provided by Vendor Partners

Lack of alignment of GIC Strategy across the parent organization and poor transition planning

Weak governance mechanisms and clear definition of roles and responsibilities

Currency fluctuations

Lack of cultural integration between the GIC and the home-office

Regulatory changes on Tax Laws, Transfer Pricing, Repatriation etc.

GIC Best Practices and Trends

Innovation through start-up engagements GICs are increasingly using engaging with start-ups to drive their innovation agenda. The graphic below

provides an overview of drivers for GICs engagement with start-ups, areas of engagement as well as

models of engagement.

GICs that have deep engagements with start-ups include Target, Lowe’s, Societe Generale and

Barclays.

The corporate accelerator model has proven to be the most popular engagement model. GICs typically

setup their own accelerator programs, where start-ups are identified to solve for specific use-cases

that would help the parent organization. The start-ups are then provided with mentorship and

business context to help drive the innovation agenda of the enterprise.

Cultural integration and alignment A high degree of cultural integration and alignment leads to higher productivity and an increased sense

of belonging amongst employees, resulting in retention of the best talent. Apart from the

infrastructure design, the organizational culture manifests through organizational policies and

exposure to the global organization.

GICs typically have expat leaders working at the Indian GIC on secondments. These leaders embody

the culture of the parent organization, and are able to provide more context about the parent

organization to the employees at the GIC. Additionally, frequent cross-office travel opportunities are

presented to employees, which provides them the relevant business context and allows them to

experience the culture at the home-office.


Regulations for Expatriates Expatriates coming to India or the GIC need to ensure that they come pursuant to the right type of

visa – the key ones being business visa and employment visa. Business visas are intended for short

duration visits and for carrying out limited activities, such as liaising, attending meetings, set up of

India business, negotiations etc. Employment visas, on the other hand, are intended for expatriates

coming to India for the purpose of taking up employment in India.

All expatriates with employment visa are required to compulsorily register with the local police

authorities (FRRO) within 2 weeks of their arrival in India. Expatriates coming on a business visa are

required to register with FRRO if the visa specifically so stipulates.

An expatriate on employment with an Indian company is permitted to maintain an Indian Bank

account to receive their salary. They can also remit their income after payment of applicable taxes in

India. Expatriates employed with a foreign company coming on a deputation to Indian branch,

subsidiary or Group Company of the foreign company can receive their salary in an overseas bank

account as well, provided the taxes on the entire salary are paid in India.

The income of an expatriate, liable to tax in India, would depend upon his residential status, which is

determined based on the number of days that the individual is physically present in India during the

year under consideration as well as the past 10 years. The income liable to tax in India basis the

residential status is highlighted below:

Residential Status Scope of total income liable to tax

Resident and Ordinarily Resident Worldwide income

Resident and Not Ordinarily Resident Income received or deemed to be received in India; or

Income accruing or deemed to be accruing in India

Non Resident

The rate of tax applicable to an individual tax payer on aggregate income is as follows:

Income slab (INR) Rate of tax (%)

Up to 250,000 NIL

251,000 to 500,000 10%

500,001 to 1,000,000 20%

More than 1,000,000 30%

An additional education cess at 3% is applicable on the income tax. For incomes exceeding INR 10

Million, the above rate of tax to be increased by a surcharge of 12%.

Expatriates are also liable to contribute to Indian social security schemes.


Attracting and engaging talent GIC talent is very segmented, differentiated and mostly young. GICs are now commonly using multiple

innovative approaches to recruit, on-board and engage talent, which have been highlighted below:

Conclusion GIC establishment is an organization wide strategic initiative. A well-planned establishment process

along with the building blocks of organizational alignment and sponsorship provides the right

foundation for a successful GIC.

The GIC Cookbook can act as a guide in aiding the enterprise leadership understand all aspects

related to establishing a GIC in India. Along with providing a ready reckoner on Indian regulations

relevant to a GIC, it also introduces multiple customizable frameworks that can be used by

enterprises to develop their GIC strategy.

The GIC Cookbook -...

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