Hire Employees in India: 2026 EOR, Payroll and Employment Guide

An Indian subsidiary is normally a private limited company, requiring at least two directors of whom one must be resident in India, registration with the Ministry of Corporate Affairs, and separate registrations for PF, ESI, professional tax and the applicable state Shops and Establishments Act.

An Employer of Record signs the Indian contract, runs payroll, handles EPF and ESI filings, manages state-level registrations and carries the compliance risk. The value in India is less about speed than about the number of separate authorities involved.

Sources: Companies Act 2013 · state Shops and Establishments Acts · verified 3 August 2026

The state layer is the thing to plan for. Hiring in Bengaluru, Mumbai and Gurugram means three sets of Shops and Establishments registrations and three professional tax regimes, even though EPF and ESI are central.

Minimum wages are set at state level and vary by state, skill category and sometimes by district or industry. There is no single national figure, and the central floor wage functions as guidance rather than a binding rate.

The structure of pay matters more than in most jurisdictions. Indian salaries are typically broken into basic, dearness allowance, house rent allowance and various other components, and statutory contributions attach to specific elements rather than to gross.

The new Labour Codes change this materially. The definition of ‘wages’ requires that basic and DA constitute at least 50% of total remuneration. Where employers have historically kept basic low to reduce provident fund liability, this raises PF, gratuity and bonus costs simultaneously. Model it before assuming existing structures carry across.

Payment must be made by the seventh of the following month for smaller establishments and the tenth for larger ones, with payslips issued and records retained.

Four representative profiles, costed with the 2026 contribution rates above. Salaries are illustrative market midpoints, not GX operating data — use them to see how the on-cost percentage behaves as pay rises, not as a salary benchmark for a specific role. EPF 12% and EDLI 0.5% on basic up to ₹15,000, administrative charges 0.5%, gratuity accruing at 4.81%, and ESI 3.25% where gross is ₹21,000 or below. Basic is taken at the 50% floor the Labour Codes require. India has no customary 13th month. For real market data on your roles, ask for a costing.

Sources: Income Tax Act 1961 · Payment of Bonus Act 1965 · state professional tax acts · verified 3 August 2026

The two-regime system is unusual and worth explaining to relocating staff. The new regime has lower rates but few deductions; the old regime has higher rates but allows house rent allowance, insurance premiums and other reliefs. Payroll must collect the employee’s election, and it can change annually for salaried employees.

Sources: Income Tax Act 1961 · Central Board of Direct Taxes · verified 3 August 2026, slab values pending line-by-line verification

Sources: Code on Wages 2019 · Code on Social Security 2020 · Payment of Gratuity Act 1972 · verified 3 August 2026

Double time for overtime is a notable difference from most markets, where 1.25 to 1.5 times is typical. It applies to workers covered by the relevant rules rather than to all salaried staff, and the boundary depends on wage level and state.

Because working hours, spread-over limits and rest intervals are set by state legislation, a company employing in several states will have several sets of rules to satisfy at once. This is the most common cause of accidental non-compliance for foreign employers.

Sources: Occupational Safety, Health and Working Conditions Code 2020 · state Shops and Establishments Acts · verified 3 August 2026

India has three national holidays observed everywhere: Republic Day, Independence Day and Gandhi Jayanti. Beyond those, holidays are set by each state and vary widely in number and date, with many following lunar calendars. Confirm the applicable state list before publishing a calendar.

The statutory package is the Employees’ Provident Fund, Employees’ State Insurance where wages fall under the threshold, gratuity after five years’ continuous service, and the statutory bonus for eligible employees.

Private medical insurance is effectively mandatory in practice for employees above the ESI threshold, and family cover is the norm rather than an enhancement. Parental cover is increasingly expected in competitive sectors.

Group term life and personal accident cover are standard at professional level. Meal cards, fuel reimbursement and leave travel allowance are common because they carry tax advantages under the old tax regime, though the shift toward the new regime is reducing their value.

Notice-period buyout, relocation support and joining bonuses are widely used in technology hiring, where counter-offers are frequent and candidates often hold multiple offers.

Indian termination law distinguishes between workmen, a defined category based on the nature of duties rather than seniority, and other employees. Workmen in establishments above a threshold size have significant protection under the Industrial Relations Code, including retrenchment compensation at fifteen days of average pay per completed year and, in some states, prior government approval.

For managerial and supervisory staff, the contract and the state Act govern. Three months is a common contractual notice period at senior level, and payment in lieu is normal practice.

Gratuity on exit

Payable after five years of continuous service, at fifteen days of last drawn wages for each completed year, calculated as wages multiplied by 15/26 per year. Because the 50% wage rule raises the wage base, gratuity liabilities have risen for employers who restructured salaries. Fixed-term employees now receive it pro rata without the five-year qualification.

Sources: Industrial Relations Code 2020 · Payment of Gratuity Act 1972 · state Shops and Establishments Acts · verified 3 August 2026

The Employment Visa is intended for skilled and qualified professionals and is not available for roles that could be filled locally, including most clerical and routine positions. An EOR with an Indian entity can act as the sponsoring employer.

Sources: Ministry of Home Affairs · Bureau of Immigration · verified 3 August 2026, salary threshold pending verification

India’s service PE provisions in several treaties are broader than the OECD model, and the tax authorities have historically litigated PE questions vigorously. Development centres and back-office operations have both been challenged. Take Indian tax advice before the first hire, not after the team has grown.

Sources: Income Tax Act 1961 · applicable double-taxation avoidance agreements · verified 3 August 2026

The Contract Labour Act regime also imposes obligations on the principal employer where labour is supplied through a contractor, including liability for unpaid wages and contributions. Engaging through an agency does not transfer the risk entirely.

Establish the state of employment first, because it determines leave entitlement, working hours, holidays and registration requirements. The shops and establishments legislation of the relevant state governs most office employment.

Register for EPF and ESI as applicable and obtain the employee’s Universal Account Number and Aadhaar-linked details. PF transfers between employers depend on this being correct at the outset.

Confirm the salary structure against the 50% wage rule under the Labour Codes before making the offer, since correcting it later increases cost and unsettles the employee. Issue a written appointment letter setting out designation, remuneration structure, notice and place of work.