Hire employees in India
Everything a foreign company needs to know before employing people in India: whether you need an entity, what drives the cost of an employee, how payroll works, which benefits are mandatory, and why the state you hire in matters as much as the country. India's four Labour Codes took effect in November 2025 and the rules are still settling, so this page tells you what to check rather than quoting stale numbers. Written for CHROs, CFOs, General Counsel and founders.
Quick answers
The questions leadership teams ask first, answered directly. Detail follows further down the page.
Do I need a local Indian entity to hire?
Not necessarily. Foreign companies can engage talent in India through three routes:
- Employer of Record. An EOR that already holds an Indian entity and registrations employs the person on your behalf and runs payroll and compliance. You direct the day to day work. Most first hires and small teams go this route.
- Direct local entity. You incorporate a wholly owned subsidiary (private limited company), a branch office or a liaison office, each with different permitted activities and tax treatment, then complete company, tax and labour registrations: provident fund, state insurance, professional tax and the state Shops and Establishments Act. Confirm current requirements and timelines with local counsel.
- Independent contractor. Lawful for genuinely independent, defined-scope, non-integrated work. See the contractor section below.
When should I use an EOR instead of incorporating in India?
An EOR makes commercial sense when you are:
- Making your first hires in India or standing up a pilot team.
- Hiring under roughly 15 to 30 people with an uncertain long-term footprint.
- Prioritising speed to hire over owning the entity.
An entity becomes the right answer for a large, long-term workforce, or when sales activity or regulatory requirements (certain licences, government contracts, specific sectors) call for an Indian corporate presence. Confirm current entity thresholds with local counsel.
What does an employee actually cost beyond salary?
Gross salary is only part of the bill. Total cost typically includes employer statutory contributions (provident fund, pension allocation, linked insurance, gratuity accrual and statutory bonus where the employee qualifies), professional tax administration, mandatory leave and holiday pay, and EOR or payroll fees. No percentage or wage ceiling is settled in this edition; confirm current EPFO, ESIC and state notifications before you model a cost.
How difficult is termination in India?
Procedurally structured, and it varies materially by state, contract type, employee category and reason. This is not an at-will environment. Termination for cause, performance-based termination and retrenchment (redundancy) each carry their own notice, process and, in some cases, government notification or approval requirements, all to be verified against the Industrial Relations Code and the state's implementation before any exit.
Can Dryft Global legally employ my team in India?
Dryft may be able to act as Employer of Record in India where our India coverage, local partner arrangement and service scope support the specific role, industry and structure. Do not assume availability, pricing, timelines or entity names from this page. Confirm current availability, eligible role types, pricing and service terms with your Dryft representative before committing to a hiring timeline.
Hiring routes compared
Here is how the three routes stack up.
| Factor | Direct entity | Dryft Global EOR | Independent contractor |
|---|---|---|---|
| Speed to hire | Slower; entity setup and registrations required | Faster; existing registrations, subject to current India coverage | Fast, but classification risk applies |
| Entity required | Yes | No, for the hiring company | No |
| Statutory compliance ownership | Hiring company | Dryft, per the service agreement | Contractor; limited exposure if genuinely independent |
| Misclassification and PE risk | Managed directly by the hiring company | Helps manage certain risks; does not eliminate all exposure | Elevated if the relationship resembles employment |
| Termination complexity | Full statutory process applies | Statutory process applies, managed through the EOR | Contract-based, subject to reclassification risk |
| Best fit | Large, long-term workforce | First hires, pilot teams, uncertain commitment | Defined-scope, non-integrated project work |
What an employee costs in India
Whether each benefit applies depends on headcount, wage level and state. No rate or threshold is settled in this edition, so the table sets out what each component is and who administers it.
| Component | Employer share | Notes |
|---|---|---|
| Provident Fund (EPF) | Employee and employer contributions to a retirement fund, subject to a wage ceiling; EPFO | |
| Pension Scheme (EPS) allocation | A portion of the employer PF contribution is diverted to the pension scheme; EPFO | |
| EDLI insurance | Employer-funded life cover linked to PF membership; EPFO | |
| Employees' State Insurance (ESI) | Health and cash-benefit insurance for employees below a wage threshold; ESIC | |
| Gratuity | Lump sum on separation after qualifying tenure, on a statutory formula | |
| Statutory bonus | Payable to eligible employees within wage thresholds | |
| Employee compensation | Cover for injury or illness arising from employment | |
| Statutory subtotal | Depends on headcount, wage level, state and salary structure | |
| Professional tax | Administration only | State tax on employment income, deducted and remitted by the employer; not every state |
| Total employer on-cost | Contributions plus leave, holiday pay and EOR or payroll fees |
A worked example is deliberately omitted: no on-cost percentage is settled enough to multiply. Ask us for a cost model built on current notifications for your state, headcount and salary structure.
Payroll and tax
Indian payroll runs monthly. Withholdings and employer contributions are remitted by fixed deadlines; a date around the 15th of the following month is commonly cited for certain EPF remittances. Payslips must show the statutory wage components. The Code on Wages defines "wages" for contribution purposes, generally requiring that a specified proportion of total remuneration be treated as basic wages rather than allowances. That definition flows into provident fund, gratuity and other calculations, so verify the proportion and its transition treatment before finalising any salary structure.
Income tax withholding
The employer withholds income tax from salary and remits it, applying the slabs for the financial year, the tax regime the employee has elected where a choice exists, and any exemptions or deductions claimed through the employer. Check current slabs and mechanics against Income Tax Department guidance for the relevant year.
Statutory minimum wage
There is no single national minimum wage. Minimum wages are set at state level and vary by skill category (unskilled, semi-skilled, skilled, highly skilled), by industry and sometimes by zone within a state. Never apply one figure across states or roles; confirm the state and category notification in force at the time of hire.
Leave and mandatory benefits
Leave combines central floors with state rules, so confirm each item below for every state of hire.
- Annual, sick and casual leave. Set by the Occupational Safety, Health and Working Conditions Code and the state Shops and Establishments rules; they differ by state and establishment type.
- Public holidays. National holidays plus state or regional holidays that vary by location. Track the calendar per state and do not carry forward last year's dates.
- Maternity benefit. Paid leave and job protection for eligible employees around childbirth; verify current duration and eligibility.
- Gratuity and statutory bonus. A lump sum on separation after qualifying tenure, and a bonus for eligible employees within wage thresholds; verify tenure, formula and eligibility.
- Working time. Hours, rest days and overtime multipliers come from the central Code and state rules and differ by state.
Termination and notice periods
Probation is common and set in the appointment letter, with duration varying by seniority and company policy; confirm any statutory limit or default against current guidance rather than past practice. Notice is generally specified in the appointment letter or the applicable state rule and varies by role and tenure. Fixed-term employment is expressly recognised, with entitlement parity considerations that must be verified. The table sets out how each type of exit is treated.
| Termination type | What applies |
|---|---|
| For cause or misconduct | Documented process required; procedural fairness expectations under the Industrial Relations Code and state rules |
| Performance-based | Documentation and process expectations apply; not a low-friction at-will exit |
| Retrenchment (redundancy) | May require notice, compensation and in some cases prior government approval, depending on establishment size |
| Protected categories | Employees on maternity leave and those with certain union-related protections carry additional restrictions |
| Disputes | Labour courts, conciliation officers or industrial tribunals, depending on the dispute |
- Verify before you act. Notice periods, retrenchment compensation formulas and approval thresholds depend on the current Industrial Relations Code rules and the state's implementation status. Consult local counsel before any termination.
- Standing Orders. Establishments above a headcount threshold must adopt Standing Orders on employment conditions, which shape disciplinary and exit procedures; confirm thresholds and content.
Can I use independent contractors?
Yes, for genuine, well-documented, defined-scope work, but misclassification risk is real and increasingly scrutinised under the Labour Codes. Authorities and courts look at the substance of the relationship, not its label. Lower risk: the contractor sets their own hours, works for several clients, delivers a defined output, uses their own equipment and works to a defined term. Higher risk: fixed hours matching the employee schedule, exclusivity, internal reporting lines, a company laptop, email address or systems access, and an indefinite engagement with employee-like duties. Where those signs appear, the exposure is back pay for statutory benefits and possible penalties, and the common fix is to convert the worker to EOR-based employment. Dryft may support that conversion where India coverage and role eligibility allow; confirm current terms with Dryft first.
The legal framework in brief
India is a federal system. Central employment law was consolidated from 29 statutes into four Labour Codes, effective 21 November 2025, with central rules notified progressively into 2026. Each state notifies its own rules under each Code and states are at different stages. Confirm the central and state rule status for every jurisdiction of hire before relying on any provision.
- Code on Wages. Minimum wages, payment of wages and the definition of "wages" that drives contribution calculations.
- Industrial Relations Code. Termination, retrenchment, Standing Orders, union recognition and dispute resolution.
- Occupational Safety, Health and Working Conditions Code. Working hours, rest days, overtime and leave floors.
- Code on Social Security. Provident fund, pension, insurance, gratuity, maternity benefit and employee compensation.
- State Shops and Establishments Acts, minimum wage and professional tax notifications. State rules on hours, leave, holidays, wages and registration, applied by the employee's actual work location.
- Data protection framework. Governs employee data, HR systems, monitoring and cross-border transfers; confirm current status, as implementation timelines have evolved.
- Immigration rules. Foreign nationals need an employment visa, and employers have reporting duties including FRRO registration where applicable.
Where the talent is
India is one of the world's largest and most strategically important labour markets for global employers, with particular depth in technology, business process outsourcing, engineering, accounting and shared services. Because obligations differ by state, where the team sits shapes your compliance load, and Shops and Establishments rules follow the employee's actual work location, not your registered address.
| State | Why employers hire there |
|---|---|
| Karnataka | Technology, BPO and shared services; own Shops and Establishments rules, minimum wage and professional tax |
| Maharashtra | Technology, BPO and shared services; own state rules and holiday calendar |
| Telangana | Technology, BPO and shared services; own state rules and holiday calendar |
| Tamil Nadu | Technology, BPO and shared services; own state rules and holiday calendar |
India Implementation Kit
This page tells you the rules. The kit tells you what to do, in what order, and what goes wrong when you skip a step. Built from Dryft's own onboarding checklist for India.
- Step-by-step implementation checklist, from hiring route selection to first payroll
- State selection: where the worker will actually perform work
- Minimum wage category and rate confirmation for the state and role
- EPF, EPS, EDLI, ESI, gratuity, bonus and maternity applicability checks
- Income tax withholding setup for the financial year
- State professional tax and public holiday calendar confirmation
- Contractor versus employee classification rationale template
- Visa and FRRO steps, and local counsel sign-off before first payroll
This guide is general information, not legal, tax or immigration advice. Indian employment law, including the four Labour Codes and their central and state rules, is in active implementation, and nothing here should be treated as settled. Confirm current rules with a qualified adviser or with Dryft before acting. Last reviewed September 2026.
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