Hiring in India: EOR Guide & Compliance Overview

Overview

If you plan to hire in India in the next 30 days, start with an EOR for your first 1-5 employees and revisit entity setup once you reach 15+ local staff.

India is one of the largest EOR markets globally, massive talent pool, competitive salaries, and complex-enough labor laws that most foreign companies avoid direct entity setup until they have 50+ employees. Employer costs add 15–25% above gross salary depending on the compensation level. The complexity isn’t in any single rule, it’s in the layering of central laws, state-specific amendments, and establishment-level registrations that vary by location and employee count.

To operationalize this in India, cross-check country-specific EOR options, live job demand, and pricing risk signals before final budget approval.

Setting up your own private limited company in India takes 4–8 weeks on a clean run, requires at least one resident director, a minimum authorized capital of ₹1,00,000, and ongoing compliance with the Ministry of Corporate Affairs, including annual filings, board meetings, and statutory audits. Most companies burning through that process are doing it for 50+ headcount. Below that threshold, EOR is almost always the cheaper and faster path. India’s appeal for remote hiring is straightforward: the country produces over 1.5 million engineering graduates a year, English is the default professional language, and IST overlaps with European business hours by 3–4 hours, enough for real-time collaboration without graveyard shifts.

The risks are specific. PF compliance audits from the EPFO can go back seven years and penalties compound fast. Shops and Establishments Act registrations differ not just by state but by municipality, and an EOR that is registered in Bangalore does not automatically cover a hire in Mysuru. Misclassification is the other live wire: India’s labour inspectors are increasingly scrutinizing contractor arrangements, and a finding that your “independent contractor” is actually an employee triggers retroactive PF, ESI, and gratuity liability. An EOR eliminates that risk entirely because the employment relationship is real from day one.

For comprehensive compliance detail, see our regional guide.

Key Employment Facts

Item	Detail
Minimum wage	Varies by state and skill category; Delhi: ₹17,494/month (unskilled); no single national minimum
Working hours	48 hrs/week max (Factories Act); 9 hrs/day max; new Labour Codes propose 48 hrs/week across all sectors
Probation period	3–6 months (standard); can be extended to 12 months contractually
Notice period	Typically 1–3 months; 3-month notice is standard for IT/professional roles
Severance	15 days’ average pay per year of service (retrenchment compensation under Industrial Disputes Act, applies to workmen with 1+ year service)
Paid leave	12–21 days/year (varies by state and applicable statute); typically 12 days earned leave + sick leave + casual leave
Employer costs %	~12% PF (on basic up to ₹15,000/month) + 3.25% ESI (if salary ≤₹21,000/month) + gratuity provision (~4.8% of basic)

Employer Cost

India’s primary statutory employer contributions are Provident Fund (PF), Employee State Insurance (ESI), and gratuity accrual. Effective rates vary significantly by salary level due to caps.

Provident Fund (PF): 12% of basic salary. The statutory calculation cap is ₹15,000/month basic (employer minimum = ₹1,800/month), but most IT companies contribute on the full basic salary. For a developer with basic salary of ₹40,000/month: PF employer = ₹4,800/month.

ESI: 3.25% of gross salary for employees earning ≤₹21,000/month. Above that threshold, ESI doesn’t apply — most senior tech professionals fall above it. For junior roles at ₹15,000–₹21,000/month gross, ESI adds 3.25% to employer cost.

Gratuity provision: Payable after 5 years of continuous service at 15 days’ wages per year. Amortized monthly, this accrual adds approximately 4.8% of basic salary to the true employment cost even before the obligation triggers.

For a mid-level developer with ₹100,000/month CTC and basic salary structured at ₹50,000/month: PF employer = ₹6,000, gratuity provision = ₹2,400. Total statutory employer add-on: approximately ₹8,400/month. Total employer cost: ~₹108,400/month — 8–10% above CTC for mid-senior tech hires, rising to 15–25% for junior roles where ESI also applies. The pending Labour Code consolidation may standardize wage definitions across PF, ESI, and gratuity — which could raise employer costs 2–5% for companies currently structuring compensation with a low basic salary.

Statutory Benefits

Provident Fund (PF): Employer contributes 12% of basic salary (capped at ₹15,000/month for mandatory contribution, but many companies contribute on full basic). Employee matches 12%. This is the single largest employer cost in India.

Employee State Insurance (ESI): Employer contributes 3.25% for employees earning ≤₹21,000/month. Covers medical care, sickness benefits, maternity benefits, and disability.

Gratuity: Payable after 5 years of continuous service at 15 days’ wages per year of service (capped at ₹20,00,000). The EOR provisions for this accrual monthly.

Professional Tax: A state-level tax deducted from employee salary, capped at ₹2,500/year in most states. Rates and slabs differ — Maharashtra charges a monthly slab based on gross salary, while some northeastern states don’t levy it at all. The EOR handles registration and deduction, but confirm they’re registered in your employee’s specific state.

Labour Welfare Fund (LWF): Small contributions (₹6–₹25/employee depending on state) paid by both employer and employee, usually semi-annually. The amounts are trivial but non-compliance attracts disproportionate penalties during inspections. Not every state mandates LWF — your EOR should know which do.

Maternity leave: 26 weeks (Maternity Benefit Act, 2017) for the first two children; 12 weeks for the third.

Group life insurance is not legally required but is a near-universal expectation for professional roles, especially in tech. Most EOR providers include a basic term life policy (1–2x annual CTC) as part of their standard benefits package. Excluding it will make your offer non-competitive against domestic employers.

India’s four new Labour Codes — on wages, social security, industrial relations, and occupational safety — were passed by Parliament in 2019–2020 but implementation remains stalled as states draft their rules. When enforced, they will consolidate 29 existing central laws and standardize definitions of wages across PF, ESI, and gratuity calculations. The practical impact: employer costs could rise 2–5% for companies currently structuring compensation with a low basic salary. Reputable EOR providers are already modeling for this shift.

Work Visas and Immigration

Most EOR hiring in India involves local nationals who need no work authorization. India produces enough English-speaking talent across tech, finance, and operations that foreign worker relocation is the exception, not the rule. When it does come up — typically for senior leadership or niche technical roles — the visa process is manageable but bureaucratic.

Visa/Permit Type	Who It’s For	Duration	Processing Time
Employment Visa	Foreign nationals employed by an Indian entity, salary above USD 25,000/year	Up to 5 years	4–8 weeks
Business Visa	Short-term business activities (meetings, conferences, no employment)	Up to 5 years, 180-day stays	1–3 weeks
Project Visa	Foreign workers on specific project contracts	Duration of project, up to 1 year	6–10 weeks

An EOR’s Indian entity can sponsor Employment Visas as the legal employer. The process requires filing with the Foreigners Regional Registration Office (FRRO) and registering the employee within 14 days of arrival. Most EOR providers outsource the visa application to an immigration partner rather than handling it in-house. Ask your EOR whether they manage the process end-to-end or hand you off to a third-party firm — the difference matters when timelines slip.

India imposes a minimum salary threshold of USD 25,000/year for Employment Visa holders, which effectively screens out junior roles. Certain nationalities face additional security clearance requirements that add 2–4 weeks to processing. The visa is tied to the sponsoring employer, so switching from one EOR to another means reapplying. India does not have a formal quota system for foreign workers, but immigration officers can and do reject applications where the skillset is readily available domestically.

Top EOR Providers for India

Deel has extensive India operations and handles multi-state compliance across major hiring hubs (Bangalore, Hyderabad, Mumbai, Delhi-NCR, Pune). Onboarding takes 3–5 business days for standard hires with no work permit requirement. Pricing starts at $599/employee/month. Deel is the best choice when speed matters — they have the most streamlined onboarding flow and the largest India team of any global EOR. Remote operates through its owned Indian entity, which gives them direct control over compliance and IP assignment. Expect 5–7 business days for onboarding. Remote’s owned-entity model is worth the slightly longer timeline if IP protection is your top concern, especially for engineering hires. Multiplier has strong APAC roots and competitive pricing for India, often $50–100/month cheaper than Deel and Remote for similar roles. They’re the strongest pick for companies building APAC-concentrated teams where you want one provider across India, Singapore, and the Philippines. Gloroots is an India-headquartered provider offering deep local expertise and lower pricing than global players.

For most companies hiring 1–10 employees in India, Deel or Remote will cover you. If you’re scaling to 20+ and cost sensitivity increases, look at Multiplier and Gloroots — the per-employee savings compound meaningfully at that headcount.

Termination Rules

India’s termination framework distinguishes between “workmen” (broadly non-managerial employees) and non-workmen (managers, supervisors, technical experts). For workmen in establishments with 100+ employees, the Industrial Disputes Act (IDA) requires prior government permission before retrenchment. Most professional IT hires (developers, PMs, analysts) are classified as non-workmen and aren’t subject to IDA restrictions — they’re governed by their employment contracts and the applicable Shops and Establishments Act.

Statutory retrenchment compensation under the IDA: 15 days’ average pay per year of service for workmen with 1+ year of continuous service. Non-workmen terminations are governed by the contractual notice period (30–90 days is market standard in IT). The employer must pay salary through the notice period; early release by mutual agreement is common, with any shortfall deducted from the final settlement.

Gratuity is payable on any separation — termination, resignation, or retirement — after 5 years of continuous service. Formula: (basic salary × 15 × years of service) ÷ 26. For a developer at ₹50,000/month basic with 6 years of service: gratuity = ₹173,077 (~$2,070). Add 3 months’ notice pay at ₹100,000 CTC/month and accrued leave. Total separation cost for a 6-year employee: approximately ₹473,000–₹500,000.

The probation period (3–6 months) typically allows termination with shorter notice (1 week to 1 month) and before gratuity accrual begins meaningfully — the lowest-risk exit window.

Frequently Asked Questions

Why do notice periods in India run 60–90 days, and can the EOR enforce them?

Long notice periods are an industry norm in India’s IT sector, often contractually set at 90 days. They exist because companies invest heavily in training and want to prevent immediate talent poaching. The EOR, as the legal employer, can enforce the contractual notice period, an employee who doesn’t serve full notice can have the shortfall deducted from their final settlement (including unpaid leave and gratuity advance). In practice, many companies negotiate early release. EOR providers handle this negotiation routinely.

How does Provident Fund work, and what’s my actual cost exposure?

PF is mandatory for establishments with 20+ employees (most EOR entities qualify). Employer contributes 12% of basic salary, the statutory cap is ₹15,000/month basic, meaning the minimum employer PF contribution is ₹1,800/month. However, if the employment contract defines basic salary higher than ₹15,000/month, PF is calculated on the full basic. EOR providers typically structure compensation to optimize the PF split between basic and allowances, but this must be done carefully to avoid PF tribunal challenges.

What are the state-specific complications I should know about?

India’s labour laws are not uniform. Key variations: Professional Tax rates and slabs differ by state (Maharashtra caps at ₹2,500/year; Karnataka at ₹2,400/year). Shops and Establishments Act registration requirements vary by city and employee count. Labour Welfare Fund contributions vary by state. Bonus eligibility thresholds (Payment of Bonus Act) apply to employees earning up to ₹21,000/month. The EOR handles all of this, but ask specifically about registrations in your employee’s state, some providers are registered only in major metros.

What happens with IP assignment for engineers hired through an EOR in India?

This is the question every tech company should ask and most forget to. When you hire an engineer through an EOR, the employment relationship is between the employee and the EOR’s Indian entity. Under the Indian Copyright Act, 1957, copyright in work created during the course of employment vests in the employer — which is the EOR entity, not you. The EOR then assigns that IP to your company via the service agreement. This chain of assignment is legally sound but only if the contracts are drafted correctly. Confirm that your EOR’s master service agreement includes an explicit IP assignment clause covering all work product, inventions, and copyrightable material. Remote’s owned-entity structure makes this particularly clean because there is no third-party partner in the chain. For Deel and Multiplier, the assignment flows through their local entity to the client, which works but adds a contractual layer you should review. If your engineers are working on patentable inventions (not just code), Indian patent law requires separate assignment agreements — the employment contract alone may not suffice. Get this reviewed by IP counsel before your first hire, not after.

To connect this guidance with live hiring demand, see hiring your first international employee and remote jobs by country.