Hire and pay independent contractors in India

India is the world’s go-to destination for hiring – a labor market that seamlessly blends quality talent with affordability to build a scalable workforce. 

Whether you aim to expand globally or seek specialized skills unavailable locally, tapping into a global workforce can boost your organization’s success. Hiring contractors in India offers customizable, scalable and hassle-free opportunities for growth. However, Indian labor laws and cultural intricacies should be at your fingertips for compliant and productive operations.

In this blog, we’ll walk you through everything you need to know about hiring contractors in India, from finding them, essential hiring criteria, steps for engagement, and payment methods to crucial legal regulations and best practices, helping you simplify and streamline the process.

Why Hire Independent Contractors in India?

India has become one of the world’s top destinations for hiring independent contractors combining affordability, talent, and flexibility. Whether you’re expanding operations or need specialized skills, hiring in India offers scalable, compliant growth opportunities.

• Access to specialized skills: From software development to creative design and customer support, Indian contractors bring high-quality expertise and global experience.
• Strong educational background: India’s education system produces skilled, English-proficient professionals who easily adapt to international work cultures and contribute innovative ideas.
• Cost-effectiveness: Hiring contractors in India helps reduce costs related to benefits, office space, and taxes. Due to currency advantages, Indian rates are often a fraction of Western markets.
• Flexibility and scalability: Contractors allow businesses to expand or downsize quickly based on project needs without long-term commitments.
• Time zone advantage: India’s time zone enables round-the-clock productivity for companies with global operations.

1. Legal Requirements for Hiring Contractors in India

Before hiring independent contractors in India, it’s important to understand the country’s basic compliance framework.
Indian labor and tax laws treat contractors differently from employees, so misclassification can lead to penalties.

Here are a few essentials to keep in mind:

• Contract Labor (Regulation and Abolition) Act, 1970: Governs how companies engage contract workers and sets rules for registration and licensing.
• Income Tax Act, 1961: Payments to contractors may require Tax Deducted at Source (TDS). Ensure timely deductions and filings to stay compliant.
• Goods and Services Tax (GST): Some contractors must charge GST on their invoices if their annual turnover crosses the registration threshold.
• Double Taxation Avoidance Agreement (DTAA): If your company is based outside India, this helps avoid paying tax twice on the same income.

Keeping these basics in check ensures you operate compliantly while avoiding legal and financial risks.

2. Preparing an Independent Contractor Agreement

A clear, well-drafted Independent Contractor Agreement (ICA) protects both your company and the contractor. It defines responsibilities, deliverables, and payment terms while keeping the relationship legally sound.

Here’s what to include:

• Scope of work: Define the project, timelines, and expected outcomes.
• Payment terms: Mention currency, mode of payment, and due dates.
• Confidentiality & IP rights: Clearly state ownership of work and data.
• Termination & dispute resolution: Add notice periods and a method to resolve disputes (e.g., arbitration).‍
• Compliance clause: Note that the contractor is responsible for their taxes and benefits.

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How to Hire Contractors in India — A Step-by-Step Guide

Hiring independent contractors in India is a great way to access world-class talent while staying flexible and cost-efficient. Here’s a simple step-by-step guide to help you attract, evaluate, and onboard top contractors the right way.

Step 1 — Define the Role and Deliverables

Start by creating a clear project brief. Define the role, required skills, deliverables, and expected outcomes.
Mention whether the role is project-based or ongoing, and clarify that it’s for an independent contractor, not a full-time employee. This helps you avoid confusion or misclassification later.

Step 2 — Post the Job on the Right Platforms

Share your job listing where skilled Indian contractors are most active — such as LinkedIn, Upwork, Freelancer, or Toptal.
For local reach, try Indian job portals like Naukri, WorkIndia, or Freshersworld. Referrals and professional networks can also be a quick way to find vetted talent.

Step 3 — Screen and Select the Right Candidate

Shortlist candidates based on their portfolios, reviews, or work samples.
Use quick, focused assessments such as a small test project or technical task followed by a video interview to evaluate communication and reliability.
Stay flexible with time zones and prioritize proven, self-managed professionals.

Step 4 — Prepare an Independent Contractor Agreement

Once you’ve selected your contractor, formalize the relationship with a written Independent Contractor Agreement (ICA).
It should clearly define:

• Scope of work and deliverables
• Payment amount and schedule
• Confidentiality and IP ownership
• Termination and dispute terms
  

Keep language independent (avoid “supervision” or “work hours”) to maintain legal clarity.

Step 5 — Set Payment Terms and Schedule

Agree on how and when payments will be made hourly, milestone-based, or fixed-fee.
Include clear acceptance criteria for each payment milestone, such as “Payment within seven days after project approval.”
This transparency builds trust and keeps both sides aligned.

Step 6 — Onboard, Manage, and Maintain the Relationship

Give your contractor the tools, access, and context they need to succeed from day one.
Use collaborative tools like Asana, Slack, or Notion for project tracking and communication.
Check in regularly, offer feedback, and review performance before deciding whether to renew, extend, or close the engagement.

Hiring contractors in India doesn’t have to be complex.
Gloroots simplifies every step from contracts and compliance to payments and onboarding.Book a demo today!

Things To Know Before Hiring Independent Contractors In India

Before hiring independent contractors, a robust understanding of classification of independent contractors in India, Indian employment laws, and contractor expectations is indispensable.

1. Classification of Independent Contractors in India

Defining Independent Contractors:

Regulated by The Contract Labor (Regulation and Abolition) Act, 1970:

• Independent contractors are engaged to produce specific results through labor or subcontracting beyond just supplying goods.

Classification of Contract Workers:

• Contract laborers are engaged either by an independent contractor or indirectly by an establishment.
• They often handle multiple projects and may work for various employers simultaneously.

Coverage of Various Worker Types:

• Temporary and fixed-term workers fall under labor statutes.
• Gig and platform workers, recognized under The Code on Social Security, perform non-traditional roles.

‍Criteria for Worker Classification:

Tests Used in India:

• Courts use the control and integration tests to differentiate between employees and independent contractors.
• The control test examines the relationship and direction of work, while the integration test assesses integration into the employer's operations.

Influence of Equipment Ownership:

• Ownership of equipment influences worker classification; use of substantial employer-provided tools may imply a contract of service.

Steps to Avoid Misclassification:

• Allow flexible work hours and locations.
• Permit contractors to work for multiple companies simultaneously.
• Encourage the use of contractors' equipment.
• Avoid non-compete agreements.

Ensuring accurate classification between independent contractors and employees is crucial, avoiding legal pitfalls and maintaining organizational integrity.

▶Read our Classifying Independent Contractors Checklist packed with vital insights that you need to know. 

2. Legal Requirements in India

• Indian Employment Law Overview: Governed by the Indian Constitution and the Concurrent List (Seventh Schedule). The Contract Labor (Regulation and Abolition) Act (CLRA) regulates contract labor, with restrictions on perennial nature activities and a need for registration certificates and licenses for hiring over 20 contractors.

• Occupational Health, Safety and Working Conditions Code 2020 (OSH Code): Soon to replace CLRA. Introduces higher penalties for non-compliance, redefines contractor roles, and limits contractor engagement based on an establishment's core activity.

• Visa and Work Permits: Verify if the contractors require specific visas or work permits to render services from India. Ensure compliance with immigration laws.

Taxation Considerations:

• Income Tax: Independent contractors need to complete IRS W-8 BEN forms for NRA taxpayer information. Self-employed contractors pay taxes through TDS (Tax Deducted at Source). 

• Understand the tax implications for hiring international contractors in terms of IRS regulations, such as Form 1099 reporting.

• Withholding tax, known as tax deduction at source (TDS) in India, applies to payments made to non-residents for services performed within India. This tax, governed by the Indian Income Tax Act, involves deducting a portion of payments to contractors at specified rates. Understanding the applicable rates and provisions under the Double Taxation Avoidance Agreement (DTAA) is crucial to ensure correct withholding and timely remittance to the Indian tax authorities.

• Under the DTAA, withholding tax obligations vary based on the agreement between countries, impacting cross-border transactions and tax liabilities for international entities.

• Goods and Services Tax (GST) Implications: Indian contractors providing taxable services may fall under the purview of GST. Depending on the nature of the services and their GST registration status, contractors might be required to charge GST on invoices. Additionally, the reverse charge mechanism might shift the responsibility of paying GST to the recipient of services. Ensuring compliance with GST regulations, including registration thresholds, payment, and reporting, is essential to meet Indian tax obligations.

• Income Tax Filing and Liability: Self-employed individuals must file income taxes annually by July 31. Tax liability depends on income levels and age, as per the Income Tax Act of 1961.

Minimum Wage and Working Conditions:

• Minimum Wages Act: Local governments set minimum wages. The Code on Wages of 2019 aims to establish a standard minimum wage for all employees, including foreign contractors, based on living standards and regions.

• Employee Protection Laws: Indian laws protect employees from harassment and discrimination, and ensure workplace safety, child labor laws, and privacy regulations.

Termination Regulations:

• Industrial Disputes Act: Termination rules vary based on employee type and company size. Natural justice principles apply to terminations related to misconduct, while larger employers require government permission for certain dismissals.

Documentation and Reporting Regulations:

• IRS Reporting: Understand the reporting requirements for payments made to international contractors, such as filing Form 1099.
• Documentation of Services: Maintain detailed records of services rendered, invoices, and any communication related to the contractual agreement.

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3. Understanding Contractor Expectations

Spend some time understanding India's work culture and professional norms sets the stage for successful collaborations. 

For instance, Indian contractors might follow diverse work patterns or communication styles. Recognizing and accommodating these differences leads to smoother interactions and higher productivity.

▶Looking for more information on hiring independent contractors globally? 

Read our guide here.

Paying an Independent Contractor in India

Planning your payment process early helps you avoid compliance issues and build trust with your Indian contractors.
From choosing the right structure to ensuring tax compliance, a well-defined system ensures timely, transparent, and hassle-free payments.

1. Choose the Right Payment Structure

Indian contractors can be paid hourly, per project, or based on specific milestones.
You can also agree on partial or upfront payments depending on project size and mutual trust.

Common options include:

• Upfront payment — suitable for small, short-term projects; include refund contingencies in the contract.
• Milestone payments — release payments as work is completed and approved.
• Completion payment — ideal for defined projects where full payment is made after delivery.

The key is to align your payment plan with both your business needs and the contractor’s expectations. Always specify this clearly in the contract to avoid disputes later.

2. Pick the Most Suitable Payment Method

Select a method that balances speed, cost-efficiency, and compliance.
Here are the most common options:

a. International Bank Transfer (SWIFT)

A secure, traditional method for transferring funds directly between global bank accounts.
However, it may take up to five business days and involves higher transaction fees for both sender and receiver.

b. Online Money Transfer Platforms

Services like Wise, Payoneer, and Remitly allow faster transfers at lower fees. They also provide better currency conversion rates and digital tracking.
Always verify availability and transaction limits based on your country of operation.

c. Money Order or Cashier’s Check

These are safe but slow and outdated methods, often involving manual processing and higher turnaround times. They’re best suited for occasional or one-time payments.

d. Global Payroll or Contractor Payment Platforms

Modern businesses increasingly use centralized platforms to pay international contractors securely and compliantly.
These systems automate invoicing, manage currency conversion, and ensure payments meet local Indian tax and compliance standards.

For example, a Canadian company hiring multiple marketing specialists in India can use an EOR or global payment solution to approve invoices, manage TDS compliance, and pay in local currency all from one dashboard.

3. Ensure Compliance and Transparency

When paying contractors in India, companies must account for tax deduction at source (TDS) and applicable GST if the contractor is registered.
Maintaining clear payment records, signed invoices, and digital receipts helps ensure both parties remain compliant and audit-ready.

Opting for a Global Payroll Platform when paying an independent contractor in India provides various benefits.

Simplify Global Payments with Gloroots

With Gloroots, you can hire and pay independent contractors in India effortlessly all while staying 100% compliant with local tax and labor laws.
Our unified platform automates contracts, payments, and compliance so you can focus on scaling your global workforce.

Where To Find Contractors In India?

Dive into online platforms and job portals to find a wealth of options:

1. Popular Job Listing Websites:

Explore Upwork, Freelancer, Guru, Toptal, Fiverr, Naukri.com, Indeed etc. LinkedIn acts as a thriving nexus, empowering you to discover top-tier contractors in India. These hubs connect you with an extensive pool of talented contractors, allowing you to scout for specific skills and expertise, all at competitive rates.

2. Leveraging Freelancer Communities and Forums:

Engage with freelancer communities and forums to connect directly with contractors worldwide. These interactive spaces serve as invaluable networking platforms, offering insights, experiences, and a broad range of talent for your project requisites. 

3. Local Networks and Referral Systems:

Tapping into Local Networks and Referral Systems brings unique benefits, allowing you to forge connections within industry circles and local talent hubs. These associations often result in reliable recommendations and streamlined access to adept contractors who match your specific needs. Likewise, Engaging with Professional Associations and Networks offers robust resources, granting access to a specialized talent pool that meets industry benchmarks. This avenue ensures you land solid quality leads.

What To Look For While Hiring Contractors In India?

When hiring contractors in India, keep these key factors in mind:

• Expertise and Experience: Seek Indian contractors with the necessary skills and proven track record in their field. Verify qualifications and past projects to gauge their suitability for your requirements.

• Communication and Availability: Ensure hired contractors have strong communication skills and can align with your preferred work hours. Clearly define expectations for responsiveness and availability.

• Flexibility and Adaptability: Discuss and agree on work schedules to accommodate the flexibility independent contractors often offer. Aligning expectations ensures a harmonious working relationship.

• Cultural Understanding: Look for contractors familiar with local practices and global standards. Their cultural grasp eases communication and fosters smooth project execution, reducing misunderstandings.

Considering these factors while hiring contractors in India ensures finding skilled professionals aligned with your expectations.

Simplify Hiring and Payments in India with Gloroots

Managing independent contractors in India can be complex. From proper classification and contracts to tax compliance and secure payments, the process requires careful attention to detail. Gloroots simplifies these challenges by providing a comprehensive Employer of Record (EOR) platform that handles onboarding, contracts, and adherence to Indian labor laws.

Our platform also ensures secure, timely payments and ongoing payroll management, allowing your HR team to focus on strategic growth rather than administrative tasks. By partnering with Gloroots, you can collaborate smoothly with Indian contractors while staying 100% compliant.

Contact us today to see how Gloroots can streamline your hiring and payments in India.

FAQ's

1.What is an independent contractor in India?

An independent contractor is a professional engaged to complete specific tasks or projects without being a full-time employee. They are responsible for their own taxes, benefits, and work schedules, and their classification must comply with Indian labor laws to avoid penalties.

2.How do I legally classify contractors in India?

Proper classification depends on the nature of the work, control over the contractor, and use of tools or equipment. Following the control and integration tests, allowing flexible hours, and avoiding employee-like benefits ensures compliance with Indian labor regulations.

3.What payment methods are recommended for Indian contractors?

Secure global platforms like Wise, Payoneer, Deel, and Rippling are ideal. Payments can be made in INR or foreign currency, and contracts often include partial upfront payments tied to project milestones for transparency and performance control.

4.Are contractors responsible for taxes in India?

Yes, independent contractors handle their own taxes, including TDS (Tax Deducted at Source) and GST if applicable. Employers are not required to withhold income taxes, but proper documentation and invoicing are essential for compliance.

5.How can Gloroots help manage Indian contractors?

Gloroots streamlines hiring, onboarding, compliance, and payments through a unified EOR platform. It ensures 100% legal compliance with Indian labor laws, handles payroll, and simplifies international contractor management, saving time and reducing administrative workload.