Employer of Record in India

An Employer of Record in India acts as the legal employer, handling payroll, taxes, and statutory compliance on your behalf.

India's four Labour Codes, combined with state-level Shops and Establishments Acts, create layered obligations that vary by state and industry, making compliance a significant operational responsibility for foreign employers.

• EOR hiring speed: 1 to 2 weeks, compared to 10 to 12 weeks for entity setup
• Employer statutory contributions: approximately 13 to 15.25% above gross salary
• Standard notice period: 30 to 90 days depending on role and state
• India produces approximately 1.5 million engineering graduates annually

This page covers hiring options, employment law, payroll, benefits, termination rules, and recent regulatory changes relevant to foreign employers.

Gloroots operates as an EOR provider in India. This guide is written to help readers evaluate all available hiring paths, not only the Gloroots model, so you can make an informed decision for your business.

What Is an Employer of Record in India?

An EOR signs the employment contract, registers the employee with EPFO and ESIC, withholds TDS, and bears all statutory employer obligations under Indian law.

Foreign companies hiring Indian talent without a local subsidiary use this model, as do companies testing the market before committing to entity setup.

The workflow runs as follows: the client selects a candidate; the EOR issues a compliant contract in INR; the EOR registers the employee with PF and ESI; the EOR runs monthly payroll with TDS deductions; the EOR administers leave and statutory benefits; and the client manages day-to-day work direction throughout. To understand the full mechanics, see how does EOR work.

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Your Hiring Options in India: EOR vs. Entity vs. PEO vs. Contractor

Foreign employers entering India have four main paths: an EOR, a wholly owned legal entity such as a Private Limited Company or LLP, a PEO under a co-employment model, and direct independent contractor engagement.

EOR and contractor arrangements suit early-stage hiring or small headcount. A legal entity makes more sense for 15 to 20 or more employees over the long term.

A PEO requires a local entity to already exist. Contractor engagement carries misclassification risk under Indian law and should be assessed carefully before use.

EOR is typically more cost-effective for headcounts of 1 to 15. Entity setup becomes the better option at 15 to 20 employees or when planning a Global Capability Centre. Explore Gloroots' EOR services to compare costs and coverage.

How to Hire in India Through an EOR: Step by Step

Hiring through an EOR in India follows six steps, from the initial hiring decision through offboarding. Each step includes India-specific compliance checkpoints tied to EPFO registration, TDS filings, state-level leave rules, and statutory benefit administration.

Step 1: Decide Between EOR and Entity

Start by projecting your India headcount. If you plan fewer than 15 employees, EOR is typically more cost-effective. If you are planning 20 or more employees or a Global Capability Centre, entity setup warrants evaluation. Refer to the four-path comparison table above for a full breakdown by setup time, compliance ownership, and cost structure.

Step 2: Vet and Select an EOR Provider

Confirm the EOR holds its own Indian legal entity rather than operating through a partner network. Verify EPFO and ESIC registration capability, check multi-state compliance coverage, and review the provider's SLA for onboarding speed before signing.

Step 3: Draft a Compliant Employment Contract

State salary in INR and include working hours, leave entitlements, termination provisions, an IP assignment clause, and an NDA. Issue an appointment letter in the format prescribed under the Occupational Safety, Health and Working Conditions Code. Post-employment non-compete clauses are void under Section 27 of the Indian Contract Act 1872.

Step 4: Onboard and Register Statutory Requirements

Collect PAN, Aadhaar, and bank details from each new hire. Enroll the employee in EPFO and ESIC where applicable, set up TDS registration, and issue a Universal Account Number (UAN) for provident fund tracking. Conduct background checks covering police clearance, CIBIL (with written consent), and education and employment verification.

Step 5: Run Compliant Monthly Payroll

Process salary in INR before the 7th of the following month. Deduct TDS per the applicable income slab and deposit EPF contributions: employer share is 12%, split as 3.67% to EPF and 8.33% to EPS. Employer ESI contribution is 3.25%. File quarterly TDS returns, issue Form 16 annually, and apply professional tax per the relevant state schedule.

Step 6: Manage Offboarding and Exit

Serve the contractual notice period, typically 30 to 90 days. Complete full and final settlement within 30 to 45 days, covering leave encashment, gratuity for employees with five or more years of service, and any statutory bonus. Facilitate PF transfer or withdrawal through the EPFO portal, issue a relieving letter and experience certificate, and deposit the Worker Re-skilling Fund contribution where applicable.

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How to Choose the Right EOR in India

Selecting the right EOR for India requires evaluating six criteria that determine whether a provider can deliver compliant, predictable employment at scale. Use these criteria to assess any provider, including when reviewing the best employer of record options available globally.

India's regulatory environment spans central labor codes and state-level rules that vary significantly across 28 states and 8 union territories. An EOR that performs well in one state may lack the infrastructure to support hiring in another. Evaluate each provider against the criteria below before committing.

• Local legal knowledge across states
• Payroll accuracy and statutory deposit track record
• Contract drafting aligned to Indian labor codes
• Benefits administration covering EPFO, ESIC, and gratuity
• Offboarding and full and final settlement support
• Transparent, country-specific pricing

Local Legal Knowledge Across States

Confirm the EOR maintains active compliance coverage in every state where you plan to hire, not only Maharashtra and Karnataka. This includes state-specific professional tax schedules, Shops and Establishments Act registration, and labour welfare fund contributions.

Own Entity vs. Partner Network

Confirm whether the EOR operates through its own registered Indian entity or relies on third-party partners. Own-entity providers carry direct liability and typically resolve EPFO and ESIC disputes faster.

Support Model and Response Times

Assess whether the EOR provides a dedicated account manager working in IST (UTC+5:30). Payroll queries must be resolved before the 7th-of-month wage payment deadline. Confirm the SLA for statutory filing errors before signing.

Pricing Transparency

Request an all-in per-employee fee covering statutory contributions, compliance filings, and benefits administration. At $599 per month, EOR fees can represent 30 to 50 percent of a junior Indian employee's CTC, so total cost modelling is essential. Review Gloroots pricing to model your full employment cost before committing.

Data Security and Compliance

Confirm the EOR's payroll data handling complies with the Digital Personal Data Protection Act 2023. This includes data localization requirements for employee personal data processed in India. Non-compliance carries regulatory risk for both the EOR and the client company.

Integration Capability

Check whether the EOR's platform integrates with your HRIS, expense management, and equity administration tools. India-specific requirements include UAN-linked PF portals and TRACES integration for TDS reconciliation. Gaps here create manual reconciliation work and filing risk.

Workforce and Talent Pool in India

India's labor force exceeds 520 million workers, with a median age of 28. Over 65 percent of the population is under 35, producing one of the world's youngest skilled workforces available to global employers.

Bengaluru, Hyderabad, and Pune dominate tech hiring. Mumbai leads in finance, while Chennai and Ahmedabad anchor manufacturing and engineering roles.

English is the primary language of business across white-collar roles. Hiring in India can be 50 to 60 percent more cost-efficient than North America or Western Europe. However, competitive tech markets in Bengaluru and Hyderabad show 20 to 30 percent offer decline rates, and average IT tenure runs just 2 to 3 years. Counter-offer culture is common, and candidates increasingly expect ESOPs or RSUs, health insurance covering employee, spouse, and parents, and annual bonuses of 15 to 30 percent. Companies hiring across the APAC region can compare conditions with the employer of record Singapore guide for regional context.

Employment Law Essentials in India

India's employment framework is governed by four consolidated Labour Codes: the Code on Wages 2019, the Code on Social Security 2020, the Occupational Safety, Health and Working Conditions (OSH) Code 2020, and the Industrial Relations (IR) Code 2020. These codes are expected to take full effect in November 2025.

Worker classification carries significant legal weight. Employees earning below INR 18,000 per month in supervisory, manual, clerical, or technical roles are classified as "workmen" under the IR Code. This classification grants stronger statutory protections, including retrenchment compensation and access to industrial tribunal proceedings. Misclassifying a workman as a non-workman exposes the employer to criminal sanctions under the Payment of Wages Act.

IP and confidentiality protections require careful drafting. Section 27 of the Indian Contract Act 1872 voids post-employment non-compete clauses. NDAs are enforceable during and after employment when narrowly scoped. Non-solicitation clauses are enforceable with reasonable restrictions. Employers must include IP assignment and NDA provisions explicitly in the employment contract to ensure enforceability.

Employment Contracts

Written contracts are not universally mandated across all states, but the OSH Code requires an appointment letter for every employee. Salary must be stated in INR. IP assignment and NDA clauses must be included explicitly. Post-employment non-competes are void under Section 27 of the Indian Contract Act 1872. Gloroots drafts locally compliant employment agreements that reflect these requirements.

Working Hours and Overtime

The statutory cap is 48 hours per week, set at 8 hours per day across 6 days. The new Labour Codes permit a 4-day work week at up to 12 hours per day. Overtime is paid at 200% of the regular hourly wage. Managerial and supervisory roles may be exempt. The IT sector commonly operates on a 5-day work week.

Minimum Wage

India has no single national minimum wage. The Code on Wages 2019 establishes a national floor wage, currently INR 178 per day, below which no state may set its minimum wage. State rates vary significantly: Delhi sets INR 16,792 per month, Maharashtra INR 13,472 per month, and Karnataka INR 12,385 per month for unskilled workers. Employers must apply whichever rate is higher: the national floor or the applicable state rate for the relevant skill category and industry.

Leave and Statutory Benefits in India

India mandates several categories of paid leave, statutory bonuses, and social security contributions. Entitlements vary by establishment type, state, and employee category. The table below summarizes the primary leave types.

Under the Payment of Bonus Act 1965, employees earning up to INR 21,000 per month are entitled to an annual bonus of 8.33% to 20% of annual wages, paid within 8 months of the financial year end.

Public holidays in India include 3 national holidays (Republic Day, Independence Day, Gandhi Jayanti) and a variable number of state and restricted holidays, typically totaling 10-14 days per year depending on the state and establishment.

Annual Leave

Employees earn Privilege Leave of 21 working days per year and Casual Leave of 7 days per year. Casual Leave does not accumulate and is capped at 3 consecutive days per instance. Privilege Leave carries forward up to 60-240 days depending on tenure. Under the new Labour Codes, the accrual threshold is reduced from 240 to 180 days of service.

Sick Leave

Employees are entitled to 9 days of paid sick leave per year under most state Shops and Establishments Acts. A medical certificate is required for absences of 3 or more consecutive days. Sick leave cannot be accumulated or carried forward, and employers bear the cost directly with no state reimbursement.

Maternity and Paternity Leave

Employees are entitled to 26 weeks of paid maternity leave for the first two children under the Maternity Benefit (Amendment) Act 2017, applicable to establishments with 10 or more employees. For the third child onwards, entitlement reduces to 12 weeks. Employers bear the full cost, and establishments with 50 or more employees must provide a creche facility.

Paternity leave is 7 working days, available for up to 2 children. It is not mandated by statute in the private sector but is widely offered. Leave cannot be accumulated or encashed and requires approximately 2 months of advance notice.

Public Holidays

Employees receive 12 public holidays per year. Three are fixed national holidays: Republic Day (26 January), Independence Day (15 August), and Gandhi Jayanti (2 October). The remaining 9 to 10 are state and regional festival holidays published annually by 15 December. Working on a public holiday earns 200% pay or a compensatory day off.

Payroll, Tax and Statutory Contributions in India

Payroll in India runs monthly. Wages must be paid before the 7th of the following month under the Code on Wages.

EPF employer contributions are split between the EPF account (3.67%) and the Employees Pension Scheme (8.33%, capped at INR 15,000 basic salary). Miscalculating this split is a common audit trigger and requires careful payroll configuration from day one.

Income tax for FY2025-26 under the new regime applies as follows: nil up to INR 4,00,000; 5% on INR 4 to 8 lakh; 10% on INR 8 to 12 lakh; 15% on INR 12 to 16 lakh; 20% on INR 16 to 20 lakh; 25% on INR 20 to 24 lakh; and 30% above INR 24 lakh. The Section 87A rebate makes income up to INR 12 lakh effectively tax-free (INR 12.75 lakh for salaried employees after the INR 75,000 standard deduction). A 4% Health and Education Cess applies on total tax.

Under the new Code on Social Security Rules 2026, ESI extended sickness benefit covers up to 730 days at 80% of the standard rate. The medical bonus has doubled to INR 15,000 and funeral expenses increased to INR 20,000.

The Payment of Bonus Act sets a minimum statutory bonus of 8.33% and a maximum of 20%, applicable to employees earning INR 21,000 per month or less.

Work Visas and Permits in India

Foreign nationals working in India require an Employment Visa, Intra-Company Transfer Visa, or Project Visa depending on their role and employer relationship.

An EOR can employ Indian nationals directly but cannot sponsor Employment Visas for foreign nationals. Visa sponsorship requires the client company to have a registered Indian entity or branch office. FRRO registration is mandatory for foreign nationals within 14 days of arrival in India.

Nationals from China, Pakistan, and Afghanistan are subject to additional government clearance requirements and should factor in extended processing timelines.

Equity and ESOP Consulting in India

ESOPs, RSUs, and phantom shares are standard practice in India's tech and startup talent market and function as a key retention tool.

Tax treatment is complex. RSUs are taxed as a perquisite at vesting. ESOPs are taxed at exercise on the spread between fair market value and exercise price. Capital gains tax applies at the point of sale. Cross-border grants may trigger FEMA compliance obligations and create double taxation risk for employees and employers alike.

Gloroots supports equity compliance structuring for India-based employees as part of its EOR services, covering perquisite valuation, payroll integration, and FEMA reporting obligations.

Misclassification Risk in India

Misclassifying an employee as an independent contractor in India triggers backdated statutory liabilities and, for 'workman' misclassification, criminal sanctions under the Payment of Wages Act.

Indian courts apply two legal tests to determine employment status: the Control Test, which examines supervision over how work is performed, and the Integration Test, which assesses whether the worker is embedded in core business operations.

Workers in manual, clerical, technical, or supervisory roles earning below INR 18,000 per month are classified as 'workers' under the Industrial Relations Code and receive stronger statutory protections. Misclassifying a worker as a non-worker exposes the employer to criminal liability.

Criteria courts examine

• Control and supervision over how work is performed, including instructions on method and timing.
• Integration into core business operations rather than functioning as an external service provider.
• Exclusivity clauses restricting the individual from working for other clients simultaneously.
• Monthly salary payment structure instead of project-based or milestone-linked fees.

Penalties for misclassification

• Backdated EPF and ESI contributions plus applicable interest and penalties from the date of engagement.
• Liability for missed TDS withholdings and resulting Income Tax Department penalties and interest.
• Retrenchment compensation and gratuity backdated for the full period of misclassified worker engagement.
• Criminal sanctions under the Payment of Wages Act for employers who misclassify a statutory 'workman'.

An EOR services model eliminates misclassification risk by employing workers directly under compliant Indian contracts with all statutory contributions in place from day one.

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Hiring, Onboarding, Termination and Offboarding in India

Hiring in India requires employers to follow a structured employment lifecycle covering background checks, statutory enrollments, compliant contracts, and a documented exit process.

India's discrimination protections apply from the point of recruitment. Employers must not discriminate on grounds of gender, religion, caste, or disability during hiring, onboarding, or any subsequent employment decision. The POSH Act additionally requires employers to maintain a safe workplace and an active Internal Complaints Committee before the first employee joins.

Background checks are a standard part of the pre-joining phase. Employers typically conduct Police Clearance Certificate checks for criminal records, CIBIL credit reports obtained with written candidate consent, and verification of education credentials and prior employment history.

Termination in India is governed by the Industrial Relations Code. Valid grounds include misconduct, redundancy, poor performance, and mutual agreement. Establishments with 300 or more workers must obtain prior government permission before carrying out any retrenchment, layoff, or closure. Retrenchment compensation is calculated at 15 days' average pay per completed year of service.

Offboarding requires a full and final settlement covering outstanding wages, leave encashment, gratuity where applicable, and statutory bonus. Employers must also deposit the Worker Re-skilling Fund contribution of 15 days' last drawn wages per retrenched worker within 10 days of retrenchment. Settlement should be completed within 30 to 45 days of the exit date.

Gloroots manages each phase of the employment lifecycle in India, from compliant onboarding documentation to accurate final settlement calculations, reducing administrative risk at every stage.

Onboarding

• Before Day One: Collect PAN, Aadhaar, and bank account details for payroll setup. Conduct a Police Clearance Certificate check, obtain a CIBIL credit report with written consent, and verify education and employment history. Issue the appointment letter in the prescribed OSH Code format including the Universal Account Number (UAN). Enroll the employee in EPFO and ESIC where applicable.
• Day One: Issue a signed employment contract in INR with IP assignment and NDA clauses. Provide the POSH Act policy and Internal Complaints Committee contact details. Complete IT device provisioning and system access setup. Conduct a compliance induction covering leave policy, working hours, and grievance procedures.
• First Week: Confirm UAN activation and PF account linkage. Register for professional tax in the applicable state. Complete benefits enrollment including health insurance and any supplementary benefits. Verify ESIC card issuance where applicable.
• Beyond: Run the first payroll with correct TDS, EPF split (3.67% EPF plus 8.33% EPS), and ESI deductions. Issue the salary slip with all statutory deductions itemized. Conduct a 30-day check-in for compliance and employee experience review.

Termination

Termination requires valid grounds: misconduct, redundancy, poor performance, or mutual agreement. Notice periods run 30 to 90 days depending on contract terms and seniority. Establishments with 300 or more workers must obtain prior government permission before any retrenchment. Retrenchment compensation is 15 days' average pay per year of service, plus a Worker Re-skilling Fund deposit of 15 days' last drawn wages paid within 10 days.

Offboarding

• Settlement: Calculate full and final settlement including outstanding wages, leave encashment, gratuity (applicable after 5 or more years of continuous service, or 1 year for fixed-term employees), and statutory bonus. Deposit the Worker Re-skilling Fund contribution if applicable. Complete settlement within 30 to 45 days of the exit date.
• Documents: Issue a relieving letter and experience certificate promptly. Provide Form 16 for the relevant financial year. Issue a PF transfer or withdrawal form via the EPFO unified portal. Provide ESIC benefit transfer documentation where applicable.
• Exit: Collect company property including laptop, ID card, and access cards via a clearance form with departmental sign-offs. Conduct an exit interview for knowledge retention. Deregister the employee from professional tax and state labour welfare fund where required. File the final TDS return reflecting exit-month salary.

What's New: Recent Regulatory Changes in India

India's four Labour Codes (Code on Wages 2019, Code on Social Security 2020, OSH Code 2020, and Industrial Relations Code 2020) are scheduled for full implementation in November 2025, replacing 29 central labour laws and fundamentally changing employer obligations across payroll, benefits, and workforce management.

• The new 'wages' definition requires that exclusions such as HRA and allowances not exceed 50% of total remuneration, raising the EPF calculation base for many employees.
• Fixed-term employees become eligible for gratuity after 1 year of service, reduced from the standard 5-year threshold that applies to permanent employees.
• The Worker Re-skilling Fund requires employers to deposit 15 days' last drawn wages per retrenched worker within 10 days of retrenchment.
• The government permission threshold for retrenchment, layoff, or closure is raised from 100 to 300 workers under the Industrial Relations Code.
• Gig and platform worker aggregators must contribute 1 to 2% of annual turnover to a new social security fund under the Code on Social Security.
• New ESI rules enhance sickness benefits up to 730 days at 80% of the standard benefit rate for specified diseases; the medical bonus doubles from INR 7,500 to INR 15,000; funeral expenses increase from INR 15,000 to INR 20,000; and insured persons aged 40 and above receive an annual free medical examination.
• Under the updated income tax new regime for FY2025-26, income up to INR 4,00,000 is taxed at nil, and the Section 87A rebate makes income up to INR 12 lakh effectively tax-free for salaried employees.

Employers should review payroll structures and EPF contribution bases before November 2025 to avoid retroactive compliance gaps. Assign a named compliance owner to monitor state-level Labour Code notifications, as implementation dates may vary by state. A quarterly review cycle is recommended.

Costs and Financial Planning for Hiring in India

Total employer cost in India exceeds gross salary by approximately 13 to 15.25% in statutory contributions alone, before benefits and EOR fees.

The CTC structure adds further complexity. Basic salary is typically 40 to 50% of CTC, with HRA, LTA, special allowance, and meal vouchers making up the remainder. Employers should budget 1.4 to 1.5x CTC before EOR fees. Statutory bonus, calculated at 8.33 to 20% of a capped wage, adds a further annual obligation for eligible employees. For a full breakdown of what drives these costs, see our guide on employer of record cost.

EOR is cost-effective for companies employing 1 to 15 people in India. At 15 to 20 or more employees, a direct entity typically becomes more economical. Review Gloroots pricing to model the right threshold for your headcount.

Common Challenges and How Gloroots Solves Them in India

India's most common hiring challenges are state-level compliance variance, EPF and ESI audit exposure, and talent retention in competitive technology markets.

Why Gloroots Is a Strong EOR Partner in India

Gloroots is best suited for companies hiring 1 to 15 employees in India who need compliant payroll, EPF and ESI administration, and multi-state Shops and Establishments coverage without establishing a local entity.

India-specific strengths include own-entity operations covering all 28 states, proactive Labour Code transition management ahead of November 2025, and equity plan administration compliant with FEMA and Income Tax Act requirements.

Gloroots onboards employees in India within 1 to 2 weeks, compared to 10 to 12 weeks for entity incorporation.

The platform is well suited to technology companies, GCC explorers, and startups validating an Indian team before committing to entity setup. Read more about EOR for startups or EOR for enterprises to see how Gloroots supports different growth stages.

Companies planning to scale beyond 15 to 20 employees should model the entity transition point. Gloroots can support that analysis and manage the transition timeline without disrupting active employees. For further context on the India market, see our guide on EOR in India.

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Conclusion

India's four Labour Codes take effect in November 2025, making this the highest-stakes compliance transition for employers in the market in a decade.

Companies hiring in India now should audit their payroll structures against the new wages definition, confirm their EPF and EPS split calculations, and assess whether their current headcount justifies EOR or entity setup before the transition deadline. If you are also evaluating other APAC markets, the employer of record Philippines guide covers a comparable hiring environment.

Frequently Asked Questions About Employer of Record in India

Is using an EOR legal in India?

Yes. Using an Employer of Record is fully legal in India. The EOR employs workers on behalf of the client company under Indian law, covering contracts, payroll, and statutory filings. The client company directs day-to-day work. This structure does not require the client to hold a local entity.

How long does it take to hire through an EOR in India?

Gloroots onboards employees in India within 1 to 2 weeks. This compares to 10 to 12 weeks for entity incorporation. The timeline covers contract execution, payroll setup, EPF and ESI registration, and benefits enrollment.

What does an EOR in India cost?

Employer statutory contributions add approximately 13 to 15.25% above gross salary. Gloroots EOR fees run approximately INR 616,012 per employee annually, compared to INR 3,503,416 in annual recurring entity costs for a direct setup. EOR is cost-effective for headcounts of 1 to 15 employees.

Do employees hired through an EOR in India receive the same statutory benefits?

Yes. Employees receive all statutory entitlements: EPF contributions, ESI coverage where applicable, gratuity after five years of service, statutory bonus for eligible employees, and paid leave as required under applicable state and central law. Gloroots also administers supplementary health insurance covering the employee, spouse, and parents.

What is the difference between an EOR and a PEO in India?

An EOR is the legal employer of record and carries full liability for employment compliance. A PEO co-employs workers and typically requires the client to hold a local entity. In India, most foreign companies without a local entity use an EOR structure, not a PEO.

Can an EOR sponsor a work visa in India?

EOR arrangements in India cover Indian nationals and residents. Work visa sponsorship for foreign nationals requires a registered Indian entity. If you need to place a foreign national in India, Gloroots can advise on the appropriate entity or immigration pathway.

What happens to EPF contributions when an employee leaves?

EPF contributions are held in the employee's individual account with the Employees' Provident Fund Organisation (EPFO). On leaving, the employee can transfer the balance to a new employer's EPF account or withdraw it after a qualifying period. The EPS portion follows separate withdrawal rules based on years of service.

How does the November 2025 Labour Code transition affect my existing employees?

The four Labour Codes redefine the wage base used to calculate EPF, ESI, gratuity, and statutory bonus. For many employees, the basic wage component will increase as a share of CTC, raising statutory contribution amounts. Gloroots updates payroll structures proactively as each state issues its notification, so existing employees transition without a break in compliance.