How to Hire in India: EOR Guide for the World’s Largest Talent Market

India is the world’s most populous country and its largest talent market, with over 500 million working-age adults, a deep pool of English-speaking graduates, and highly developed capability clusters in technology, engineering, financial services, pharmaceuticals, and business process outsourcing. Bengaluru, Hyderabad, Pune, Chennai, and Mumbai anchor a technology and professional services ecosystem that rivals any in the world. For global companies building distributed or remote-first teams, India is frequently the first market they enter at scale. For global employers, compliant hiring in India requires navigating a layered statutory framework: the four new Labour Codes enacted on 21 November 2025 (Code on Wages, Industrial Relations Code, Occupational Safety Code, and Social Security Code), the Employees’ Provident Fund (EPF) scheme, the Employees’ State Insurance (ESI) scheme, income tax withholding under the new default tax regime for FY 2025-26, and state-level obligations that vary by location.

An Employer of Record India provider registers with the Employees’ Provident Fund Organisation (EPFO), the Employees’ State Insurance Corporation (ESIC), and the relevant state tax authorities, manages monthly TDS (Tax Deducted at Source) filings, EPF and ESI remittances, and drafts Labour Code-compliant employment contracts, without requiring you to establish a local Private Limited Company (Pvt Ltd) or Limited Liability Partnership (LLP). Global Deployments provides Employer of Record services in India through its vetted in-country partner network, covering employment, payroll, and statutory compliance under one engagement, with no local entity required on your side.

The Legal Framework for Hiring in India

India’s employment framework underwent a landmark consolidation when the four new Labour Codes came into force on 21 November 2025, merging 29 central labour statutes into four unified codes: the Code on Wages 2019, the Industrial Relations Code 2020, the Occupational Safety, Health and Working Conditions Code 2020, and the Code on Social Security 2020. The new codes introduced a redefined concept of “wages” that requires at least 50% of total compensation to comprise basic pay, materially affecting EPF and gratuity calculation bases for employees with complex allowance structures.

The Income Tax Act governs TDS on employment income. From FY 2025-26 (assessment year 2026-27), the New Tax Regime under Section 115BAC is the default tax regime for all individuals. Employees may opt out of the new regime and elect the old regime, but the new regime applies unless explicitly rejected. The Income Tax Department administers all TDS obligations.

Employment in India also involves compliance with state-level Shops and Establishment Acts, Professional Tax (levied by states and municipalities), and sector-specific regulations. Foreign nationals working in India require a valid Employment Visa and must register with the Foreigners Regional Registration Office (FRRO) within 14 days of arrival.

Key Compliance Obligations for 2026

• TDS (Tax Deducted at Source): Employers must deduct income tax at source from employee salaries monthly under Section 192 of the Income Tax Act. Monthly TDS must be remitted to the government by the 7th of the following month. Quarterly TDS returns (Form 24Q) are filed with the Income Tax Department. Annual Form 16 salary certificates must be issued to all employees by 15 June each year.
• EPF Registration and Contributions: Establishments with 20 or more employees must register with the EPFO. Employees earning a Basic plus Dearness Allowance (DA) of up to ₹15,000 per month are mandatorily covered. Both employer and employee contribute 12% of Basic plus DA. The employer’s 12% is split: 8.33% to the Employees’ Pension Scheme (EPS) and 3.67% to the EPF account. The EPS contribution is capped at ₹1,250 per month. EPF contributions must be remitted by the 15th of the following month.
• ESI Registration and Contributions: Factories and specified establishments with 10 or more employees in ESI-notified areas must register with ESIC. ESI applies to employees earning gross salary up to ₹21,000 per month (₹25,000 for persons with disabilities). The employee contributes 0.75% and the employer contributes 3.25% of gross salary. ESI contributions must be remitted by the 15th of the following month.
• Professional Tax: Levied at the state level, Professional Tax applies in several states including Maharashtra, Karnataka, West Bengal, and Tamil Nadu. Rates and slabs vary by state, with a constitutional cap of ₹2,500 per year per employee. The employer deducts Professional Tax from employee salaries and remits it to the relevant state authority.
• Gratuity: Under the Payment of Gratuity Act 1972 (now consolidated under the Social Security Code), employees who have completed five years of continuous service (one year for fixed-term employees under the new codes) are entitled to a gratuity of 15 days’ wages for every completed year of service. The maximum statutory gratuity is ₹20 lakh. Under the new Labour Codes’ revised definition of wages, the gratuity base has increased for many employees.
• National Minimum Wage: India operates a multi-level minimum wage system. The National Floor Level Minimum Wage is ₹178 per day. In metro cities (Area A), the April 2026 Variable Dearness Allowance (VDA) revision sets the minimum for unskilled central government sphere workers at approximately ₹21,346 per month and for highly skilled workers at ₹28,444 per month. State-specific minimum wages apply across all other employment sectors and vary significantly by state, skill category, and industry.

2026 Income Tax Brackets (New Default Regime, FY 2025-26)

The New Tax Regime under Section 115BAC is the default tax regime from FY 2025-26. All employees are taxed under the new regime unless they explicitly opt for the old regime. A Section 87A tax rebate of up to ₹60,000 applies, effectively making income up to ₹12 lakh tax-free under the new regime. A 4% Health and Education Cess applies to the total tax liability computed under the brackets below.

Section 87A rebate: effective zero tax liability for total income up to ₹12 lakh under the new regime. Surcharge applies for incomes above ₹50 lakh. 4% Health and Education Cess is applied on all tax liability after the rebate.

2026 Statutory Contributions

Work Standards and Leave Entitlements

The new Labour Codes set a maximum working day of 12 hours (with mandatory rest intervals) and a maximum working week of 48 hours. A four-day working week is permissible provided the daily limit and weekly total are observed.

• Annual Leave (Earned Leave): Under the Factories Act (now consolidated), workers earn one day of leave for every 20 days worked, equating to approximately 15 working days per year. Under most state Shops and Establishment Acts, employees are entitled to 18 working days of earned leave per year. Leave can be carried forward, subject to caps prescribed by the applicable act.
• Casual and Sick Leave: Most state Shops and Establishment Acts provide 7 days of casual leave and 7 days of sick leave per year. These entitlements vary by state and are in addition to earned leave.
• Maternity Leave: Under the Maternity Benefit (Amendment) Act 2017 (consolidated under the Social Security Code), female employees are entitled to 26 weeks of paid maternity leave for the first two children and 12 weeks for the third child onward. Eligibility requires at least 80 days of work in the 12 months preceding the expected delivery date. Adoptive and commissioning (surrogate) mothers are entitled to 12 weeks from the date of handover, following the Supreme Court ruling of March 2026.
• Paternity Leave: No central statutory paternity leave exists in India. Many technology and professional services employers provide between 5 and 15 working days by company policy.
• Public Holidays: India observes 3 national public holidays (Republic Day, Independence Day, Gandhi Jayanti) plus state-specific gazetted holidays that vary by location. Employers are required to provide a minimum of 3 national holidays; additional holidays are governed by the relevant state’s Industrial Establishment (National and Festival Holidays) Act.

Termination and End of Service

• Notice Period: Employment contracts and company standing orders govern notice periods for most employees. Under the new Industrial Relations Code, the general statutory minimum notice for non-workmen is 30 days. For workmen in establishments with 100 or more workers, retrenchment requires prior written permission from the appropriate state government.
• Final Settlement: The new Labour Codes require all employers to settle full and final dues (including outstanding salary, earned leave encashment, and gratuity where applicable) within two working days of the employee’s exit, replacing the previous practice of paying at the next payroll cycle.
• Retrenchment Compensation: For workmen (as defined under the Industrial Relations Code) retrenched after one year of continuous service, retrenchment compensation of 15 days’ average pay per completed year of service is mandatory, in addition to the applicable notice period or pay in lieu.
• Gratuity on Exit: Payable to all eligible employees (5 years’ continuous service, or 1 year for fixed-term workers under the new codes) at 15 days’ wages per year of service, capped at ₹20 lakh.

Why Use an Employer of Record in India

Incorporating a Pvt Ltd company in India requires registration with the Ministry of Corporate Affairs, PAN and TAN registration with the Income Tax Department, EPFO and ESIC registration, state-level Shops and Establishment Act registration, and Goods and Services Tax (GST) registration where applicable. For international companies hiring 1 to 20 employees in India, an EOR eliminates every element of this infrastructure cost and delivers full statutory compliance from the first payroll run.

Global Deployments provides Employer of Record services in India through its vetted in-country partner network, managing TDS filings, EPF and ESI remittances, Professional Tax, Labour Code-compliant employment contracts, gratuity accrual, and full and final settlement processing under one engagement.

Global Deployments | Part of Africa Deployments Ltd. Address: The Strand, Beau Plan Business Park, Mauritius BRN: C19167158 | VAT: 27738392 global-deployments.com | Phone: +23057138629

Conclusion

Hiring compliantly in India in 2026 requires active management of monthly TDS filings with the Income Tax Department, EPF remittances to the EPFO by the 15th of each month, ESI contributions to ESIC, state-level Professional Tax, full and final settlement within two working days under the new Labour Codes, and gratuity accrual from the point of eligibility. The Employees’ Provident Fund Organisation (EPFO) at epfindia.gov.in, the Employees’ State Insurance Corporation (ESIC) at esic.gov.in, and the Income Tax Department at incometaxindia.gov.in are the primary regulatory authorities governing employer obligations. An Employer of Record partner with in-country expertise in India manages the full statutory compliance stack across all applicable central and state-level obligations, so your India team is onboarded, paid, and legally protected from day one.

Eugene Fuhrman