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India is a top sourcing market for global employers to hire skilled talent. With over 1.4 billion citizens and more than 500 million workers, India is a leading destination for workers with technical, engineering, financial, and business service skills. India graduates over 1.5 million engineers and several hundred thousand graduates in business, finance, and healthcare every year. Professional-level English is widely spoken, making communication easy for foreign employers and employees.
Expanding to India, however, can be challenging. India has a different set of labour laws for every state. All 28 states and 8 union territories have their own Shops and Establishments Act, Minimum Wages, and compliance rules. Employers are responsible for statutory payroll deductions like Provident Fund (PF), Employee State Insurance (ESI), professional tax, and TDS, which all vary by location and salary slab.
For global employers without a local entity, compliance, payroll, and benefits can become a heavy burden, especially for a distributed workforce. An EOR in India can serve as the legal employer of record for the team. An India Employer of Record provides contracts of employment, payroll processing, statutory payments, and HR administration, in full compliance with local Indian laws
An Employer of Record (EOR) in India is a third-party legal entity that hires and legally employs individuals on behalf of the client. An EOR takes on important employer duties and responsibilities, including drafting compliant employment contracts and employment relationships, operating payroll, making statutory contributions, withholding/remitting taxes, managing benefits, and ensuring compliance with central and state labor laws. However, the client company retains complete control over the day-to-day work, performance, and management of the employee’s role.
EORs are different from Professional Employer Organizations (PEOs). PEOs partner with companies on a co-employment basis and are engaged by companies that already have a registered entity in India. An EOR, on the other hand, assumes 100% legal employer responsibilities and allows companies to hire staff without setting up a local entity. EORs are the best option for businesses testing the Indian market or hiring their first employee in India.
EORs also manage the complex labour system in India, which encompasses four central labour codes: the Code on Wages, Industrial Relations Code, Social Security Code, and Occupational Safety and Health and Working Conditions Code, as well as the Shops and Establishments Acts, which vary from state to state. Their teams will ensure compliance with all these legislations for companies operating in any state in the country.
Typical EOR services include processing employment agreements, payroll and statutory deductions, EPF, ESI, gratuity payments, and processing employee benefits like health insurance claims.
India’s labour system operates at two levels: central (national) and state-level. The national government establishes general laws that are applicable across the country, and each of the states can implement its own set of laws to regulate workplaces within the state.
In 2019 and 2020, 29 existing labour laws were subsumed by the Indian Parliament into four central Labour Codes.
These codes have been enacted by the central government. They will come into full effect once the states frame their own rules for implementation. This is why the process has been phased.
Some day-to-day aspects of employment, such as employee registration, hours of work, leave, and local workplace rules, continue to be governed by each state’s Shops and Establishments Act, which varies from state to state. Employers will need to review their state’s Shops and Establishments Act to ensure compliance.
Minimum wages also vary by state and based on job categories and skill level. Professional tax is levied by the state. For example, in Maharashtra, the professional tax is capped at ₹2,500 per year for higher-earning employees, whereas in Delhi, the professional tax is currently zero.
The Code on Wages, 2019, mandates that an employer provide every employee with a written letter of appointment, setting out the principal terms of employment. Many state Shops and Establishments Acts also require an appointment letter or contract in writing.
Typical contents of employment contracts in India are as follows:
Fixed pay and variable pay should be identified separately in the contract because statutory contributions are only calculated on fixed pay. In most cases, the basic salary is only 40-50% of total pay, and the remainder is paid as various allowances, for example, house rent allowance (HRA), transport allowance, and special allowance.
With respect to the Provident Fund (PF), it is contributed as per the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, on the basis of basic salary plus dearness allowance (DA). The employment contract must have an equal pay for equal work clause as per the Indian Labour Law. It must also include a statement regarding the employer’s policy for preventing sexual harassment, as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
In India, the working hours are primarily regulated by the Factories Act, 1948, and by the Shops and Establishments Acts in each state.
Typically, the law permits a working time of 9 hours a day and 48 hours a week. All hours exceeding this limit are considered overtime and must be compensated.Â
Employers must also provide:
Employers are required by law to maintain records of the working hours, attendance, and overtime payments. Labour officers are authorized to check these records to ensure employers are following the state and central labour laws.
Paid leave in India is regulated by the Factories Act, 1948, and the state Shops and Establishments Acts. Therefore, leave entitlements may vary from state to state, as well as for factory and non-factory employees.
In general, workers in India are entitled to:
In India, the maternity benefits are regulated by the Maternity Benefit Act, 1961. The act was recently amended in 2017. A woman gets the benefit of 26 weeks of paid maternity leave for the first two children. For the third and subsequent children, they receive 12 weeks of paid maternity leave.
Adoptive mothers who are adopting a child below the age of three months and the commissioning mothers who have a child through surrogacy receive 12 weeks of paid maternity leave.
Termination of employment in India is generally governed by different labor laws, which prohibit unfair dismissal. The termination procedure varies depending on the nature of the employee’s job, the grounds for termination, and the applicable law.
For the majority of the employees, the notice period is prescribed under the employment contract itself or by the state Shops and Establishments Act (typically ranging between 30 and 90 days), and the employer can require the employee to either serve the notice period or be paid the salary in lieu of such notice period.
Where an employee is terminated for misconduct or unsatisfactory performance, the employer is required to follow a fair procedure which includes a written notice of the charges, a proper inquiry, and an opportunity for the employee to explain their situation.
Workers who are covered under the Industrial Disputes Act, 1947, are entitled to some additional protection. In case of retrenchment or redundancy, the employer must give one month’s notice (or pay in lieu) and pay compensation equivalent to 15 days’ average pay for every completed year of service. The employer must also inform the relevant labour authority in advance of retrenching workers in larger establishments.
Employers in India must adhere to various social security laws that ensure the welfare of their employees. They must register employees who are eligible under the Employees’ Provident Fund (EPF) scheme and contribute 12% of the employee’s basic salary plus dearness allowance. Employer’s contribution is broken down into:
Employers must also contribute to the Employees’ State Insurance (ESI) scheme if the employee earns up to ₹21,000 per month. This social security programme provides medical and cash benefits to employees. The employer’s contribution rate towards ESI is 3.25% of the employee’s gross salary.
Under the Payment of Gratuity Act, 1972, gratuity is payable to an employee if they have worked for at least 5 years. Fifteen days’ wages will be calculated for every year. The maximum amount of gratuity is ₹20 in most cases.
Using an Employer of Record (EOR) in India provides a number of significant benefits for fast and compliant business growth.
Remote People is a global EOR provider that enables companies to hire employees in India without having to create an entity in the country. They provide payroll, benefits, and help with compliance.
| Key Features | Transparent flat-fee pricing, compliance coverage in all 29 states of India, payroll and benefits management |
| Pros | Trusted full-service EOR support for both contractors and employees, and transparent pricing starting at $199 per employee per month |
| Cons | Limited public information is available about onboarding time or cost breakdown; it’s best to reach out and obtain a direct quote. |
Deel is one of the largest global EOR platforms worldwide and supports hiring and payroll in India. The Deel platform also makes it possible for companies to manage onboarding, compliance, and payments from a single dashboard.
| Key Features | Global EOR coverage, automated payroll, and integrations with HR and accounting software |
| Pros | Great for multi-country hiring, intuitive platform with excellent automation |
| Cons | Pricing is on the premium side, and some support hours are catered to more Western time zones |
Globalization Partners provides enterprise-level EOR solutions, supporting hiring and payroll in India through its own local entities and expert HR teams.
| Key Features | Dedicated account management, robust compliance infrastructure, full benefits packages |
| Pros | Great for larger organizations, reliable compliance and support, high-quality service |
| Cons | Premium pricing, long onboarding process, and minimum contract requirements may apply |
Pebl is a regional EOR provider with a localized focus on supporting hiring in India. They are India experts who offer flexible packages designed for smaller and mid-sized teams.
| Key Features | India-focused expertise, flexible packages, and competitive pricing |
| Pros | Local market expertise with a strong understanding of employment laws, budget-friendly for smaller teams, highly responsive with an India-based support team |
| Cons | Fewer self-service and automation features than larger EORs |
Expat Orbit is a firm that primarily focuses on the compliance aspects of employing foreign nationals in India. It also has expertise in the immigration space, which makes it a good all-around choice for global companies that wish to send in expatriates to India.
| Key Features | EOR as well as immigration services, visa/permits help, cross-border payroll compliance |
| Pros | Good for expatriate management, lightens administrative workloads, deep expertise with complex tax/visa procedures |
| Cons | Costs more due to its specialization, not the best if the business owner is only hiring locally |
Remunance is an Indian based payroll and EOR provider with a reputation for being remarkably accurate and compliant. Local and foreign employers can use it to hire in India.
| Key Features | Support for hiring in multiple Indian states, granular payroll reports, and compliance-focused |
| Pros | Low price point, reliable payroll accuracy, transparent practices |
| Cons | Smaller tech stack, domestic India operations only |
Wisemonk is an India-focused EOR and HR service for startups and growing businesses. It differentiates itself by pairing tech and personal support.
| Key Features | India-only focus, pricing for startups, simplified onboarding |
| Pros | Low cost, responsive local team, good startup focus |
| Cons | Younger company with limited international experience |
EOR pricing in India varies widely across service providers and levels of service. Global EOR providers typically charge between $599 and $699 per employee per month. Premium providers may charge $800 or more. Regional and India-focused EOR providers are more price competitive, with fees between $300 and $500 per employee per month. These fees are in addition to the employee’s gross salary and the employer’s statutory contributions. These fees are in addition to the employee’s salary and the employer’s mandatory contributions.
The employer is required to pay contributions (both mandatory and non-mandatory) in addition to the salary and employee contribution. As mentioned earlier, the employer contributes 12% of the basic salary, plus dearness allowance, and additional administrative and insurance charges under the EPF. The employer’s contribution to ESI for employees earning less than ₹21,000 per month would be 3.25% of the gross salary. Gratuity is calculated at approximately 4.81% of basic wages as an estimate for provisioning for eligible employees.
For example, if an employee is earning ₹100,000 per month and ₹45,000 is the basic salary, employer costs will include:
There are a few other alternatives to hiring with an EOR in India. Alternatives include setting up a private limited company, hiring contractors, and using staffing agencies.
Companies can choose to register a private limited company in India. The setup provides total control over recruitment and HR, as well as an end to ongoing EOR fees. It starts by registering at least two directors (one of whom must be an Indian resident).Â
Then, the company chooses and reserves a name. Next, the incorporation documents will be prepared, and the fees for the Certificate of Incorporation will be paid. This takes 6-10 weeks and costs between ₹50,000 and ₹2,00,000.Â
Ongoing requirements after registration are an annual audit, tax filings, quarterly board meetings, and statutory records.
Contractors/freelancers are another alternative. This arrangement doesn’t require the business to set up a local entity but comes with misclassification risks. If contractors are hired in a way that shows they work primarily for one client or on a fixed schedule, or if they provide a continuous service, then the local authorities may reclassify them as employees, which may result in back payments of Provident Fund, ESI, professional tax, TDS, gratuity, and penalties.
Staffing agencies provide an alternative to both hiring directly and using an EOR. The agency hires people to work and then, on the client company’s behalf, assigns them to short-term or project-based work. The agency manages payroll and statutory compliance for workers, while charging a markup. However, this option is only a good fit for temporary workarounds, as workers are still employees of the staffing agency.
India is one of the biggest sources of skilled workers in the world, boasting highly skilled professionals who are more cost-effective than those in many other countries. India has a robust education system, a massive pool of English-speaking talent, and a growing expertise in technology, all of which make it a great country for global hiring. Navigating the country’s complex labor and employment laws, which differ by state, can be challenging.
The fastest and most compliant way for companies without an entity to hire in India is with the help of an Employer of Record (EOR). EORs legally employ your staff, signing the contract, handling payroll and all employment taxes and benefits, while clients continue to manage daily operations. EORs help you hire employees in India in days, instead of waiting weeks to establish your own legal entity.
Remote People is our top pick for an EOR in India, thanks to its transparent pricing, rigorous compliance, and easy-to-use platform. Other excellent EORs to consider for your hiring needs in India include Deel for multi-country hiring, Globalization Partners for large enterprises, Pebl for smaller teams focused on India, Expat Orbit for hiring expats, Remunance for low-cost, accurate payroll, and Wisemonk for startups.
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