Hiring in India with an Employer of Record
Employer of Record in India
What is an Employer of Record Service in India?
When a company based in Germany, the UK, the US, or anywhere outside India wants to hire Indian engineers, sales professionals, or operations staff, it faces a fundamental legal problem: you cannot legally employ someone in India without a registered Indian legal entity unless you use an Employer of Record India.
Foreign companies encounter complex hiring processes due to local labor laws, tax regulations, and compliance requirements. An Employer of Record India enables foreign companies to hire local employees without establishing a local entity, ensuring compliance with in-country laws and streamlining international expansion.
How an EOR Works in India
The EOR model follows a straightforward three-party structure:
- The client company (you) identifies the candidate and determines their role, compensation, and work scope.
- The EOR becomes the legal employer in India - signing the employment contract, registering the employee with EPFO and ESIC, processing payroll, filing TDS, and managing all statutory obligations.
- The employee works for you operationally - you direct their work, set KPIs, and manage day-to-day tasks.
This structure is fully compliant with Indian labor law. The EOR model helps manage employment relationships in accordance with Indian employment laws and employment regulations, ensuring all parties meet local compliance requirements. The EOR holds the legal employer liability; you hold the business relationship.
Who Uses an EOR to Hire in India?
| Company Type | Use Case | Why EOR |
|---|---|---|
| European SaaS companies (Series A–C) | Building engineering teams in Bengaluru, Hyderabad, Pune | No India entity; fast market entry; cost-efficient talent access |
| UK fintech companies | Hiring data engineers and compliance analysts | Avoid Branch Office registration; faster than subsidiary |
| Indian IT/SaaS companies expanding to EU | Hiring sales reps in Germany, Netherlands, UK | EOR covers EU-side employment while India HQ remains controller |
| US startups with India R&D ambitions | Distributed product and engineering teams | Entity setup not justified below 15–20 headcount |
How to Hire Employees in India Using an Employer of Record
Hiring through an EOR in India follows a structured process. Here is the step-by-step workflow:
Choose an EOR provider with proven India compliance infrastructure – EPFO/ESIC handling, TDS filing, gratuity management, state-specific payroll expertise.
Sign the client service agreement – defines scope, fees, employee headcount, notice period obligations, liability allocation, and data processing terms.
Share the offer details with the EOR – compensation structure (fixed + variable), designation, work location, probation period, and start date.
EOR issues the employment contract to the candidate – under Indian law, covering all mandatory clauses per the Industrial Employment (Standing Orders) Act and applicable state Shops & Establishment Act.
Employee Onboarding – EOR collects KYC documents (Aadhaar, PAN, bank account, educational certificates), registers the employee with EPFO and ESIC, and sets up payroll.
Monthly payroll run – EOR processes salary, deducts TDS, contributes PF/ESIC, generates payslips, and handles Form 16 issuance at financial year-end.
Ongoing HR and compliance support – leaves, claims, disciplinary matters, amendments to contracts, and offboarding when needed.
Time to hire: EOR vs. Entity Setup in India
- EOR (via PamGro): 3–7 business days from signed offer to Day 1
- Private Limited Company registration: 45–90 days minimum (MCA filings, DSC, DIN, PAN/TAN, GST, EPFO/ESIC)
- Branch Office / Liaison Office (RBI approval required): 4–6 months
- For companies testing the India market or hiring fewer than 20 employees, EOR delivers a 10–20x speed advantage over entity setup.
Employer of Record vs. Local Entity Setup in India
The two most common paths for legally employing people in India are using an EOR and registering a local entity. Here is a direct comparison:
When to use an EOR in India
- Hiring 1–25 employees in India without long-term entity commitment
- Testing the India talent market before committing to full entity setup
- Speed of hire is critical – the team needs to start within weeks, not months
- Your legal and finance teams lack India-specific compliance bandwidth
- EOR providers offer diverse solutions tailored to different business needs, from compliance management to rapid hiring
When to Set Up a Local Entity in India
- Headcount exceeds 25–30 employees and is growing steadily
- You need to sign Indian client contracts directly (Pvt Ltd required)
- India is a confirmed long-term market, not an exploratory one
- You require equity grants or ESOPs under Indian FEMA regulations
How to Onboard Indian Employees Through an Employer of Record
PamGro’s onboarding process for India-based employees is designed to get your hire from offer acceptance to first day in 3–7 business days. Here is what the process looks like:
Step | What Happens | Who Does It |
Day 1–2: Agreement & offer details | Client signs EOR service agreement; provides employee details, CTC, role, and start date | Client + PamGro |
Day 2–3: Employment contract issued | PamGro drafts and issues employment contract compliant with Indian law and state Shops & Establishment Act | PamGro |
Day 3–4: KYC document collection | Employee submits Aadhaar, PAN, bank account details, educational certificates, previous employment proof | Employee |
Day 4–5: EPFO/ESIC registration | PamGro registers the employee with EPFO (PF) and ESIC (health insurance) as required | PamGro |
Day 5–6: Payroll setup | Employee added to payroll; CTC structured per Indian tax optimization best practices (HRA, LTA, special allowance) | PamGro |
Day 7: Employee onboarded | Employee begins work; payslip generated on first pay cycle; benefits activated | PamGro + Employee |
Required documents from the employee: Aadhaar card (identity + address proof), PAN card (tax registration), bank account details (cancelled cheque), passport-size photograph, educational certificates (highest qualification), and previous employer’s relieving letter.
PamGro, as your employer of record in India, ensures that all employee entitlements are managed in full compliance with Indian labor laws. This includes statutory benefits such as maternity leave, sick leave, vacation days, and health coverage. For female employees, PamGro guarantees access to maternity leave and related protections, provided they have worked for the same employer for at least 80 days within the preceding 12 months, as required by law. This approach ensures that all legal requirements for employee entitlements are met and that your workforce receives the protections and benefits they are entitled to.
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How Much Does an Employer of Record in India Cost?
EOR Pricing Models
| Pricing Model | Typical Range | Best For |
|---|---|---|
| Flat monthly fee per employee | USD 200–500/month | Predictable budgeting; recommended for tech company hiring |
| Percentage of gross salary | 5–12% of employee’s gross salary | Higher-paid employees where flat fee is cheaper |
| One-time setup fee | USD 0–500 per employee | Some providers charge; PamGro includes in monthly fee |
What is included in an India EOR Fee?
- Employment contract drafting and execution
- EPFO and ESIC registration and monthly contributions
- TDS calculation, deduction, and quarterly filing
- Monthly payroll processing and payslip generation
- Professional Tax (PT) and Labour Welfare Fund (LWF) compliance
- Form 16 issuance at financial year-end
- HR support for leave management, contract amendments, and policy queries
- Benefits administration, including management of statutory and optional employee benefits
- Benefits management to support payroll, compliance, and employee well-being
- Offboarding and full and final settlement management
Not typically included (varies by provider): group health insurance premiums, gratuity insurance, background verification, immigration/visa support for foreign nationals, equity management.
EOR vs. Entity Setup: Total Cost Comparison
| Cost Item | EOR (PamGro) | Private Limited Company Setup |
| Setup cost | ₹0 | ₹50,000–₹2,00,000 (MCA + CA + legal fees) |
| Time to first hire | 3–7 days | 45–90+ days |
| Monthly overhead per employee | USD 200–500 flat fee | Payroll + compliance overhead (₹15,000–₹40,000/employee/month at low headcount) |
| Annual audit and ROC filings | None | ₹40,000–₹1,50,000/year (CA + ROC fees) |
| HR/compliance staff required | None | Typically 1 FTE per 25–30 employees |
| Wind-down cost | 30–90 day notice | 6–18 months MCA winding-up process |
| Break-even headcount | Favorable below ~25 employees | EOR cost exceeds entity overhead at ~25–30 employees |
How to Choose the Best Employer of Record Provider for India
Not all EOR providers have equal India compliance depth. Here is a checklist of what to evaluate when selecting an India EOR:
- India-owned or India-operated legal entity — not a third-party in-country partner (which increases liability and reduces accountability)
- EPFO and ESIC direct registration capability — not outsourced to a third-party payroll processor
- State-level compliance coverage — India has 29 states and 8 UTs each with their own Shops & Establishment Act; your EOR should handle multi-state hiring
- Payroll compliance track record — check for on-time TDS filings, PF ECR submissions, and ESIC returns
- Regulatory compliance — ensure the provider manages payroll while adhering to all local tax laws and employment regulations
- Workforce management — assess if the EOR offers tools and support for efficient workforce management, including onboarding, HR processes, and ongoing employee administration
- Onboarding SLA — best-in-class India EORs onboard in 3–7 business days
- Dedicated HR support — not just a ticketing system; a named HR contact for your India hires
- Transparent pricing with no hidden statutory add-ons
- Tech platform quality — can you track payroll, leaves, and documents in one place?
- Corridor specialization — if you are hiring across EU–India or UK–India, choose a provider with expertise in both sides of the corridor (not just India)
- Client references in your sector — EOR for tech SaaS vs. manufacturing have different complexity profiles
Employment Contracts in India
While India does not mandate written employment contracts under a single central statute, written contracts are considered best practice and are required under several state-level Shops & Establishment Acts. An EOR issues a compliant appointment letter + employment contract covering:
Designation, job description, and reporting structure
Total Cost to Company (CTC) breakdown — fixed pay, variable pay, HRA, LTA, special allowance
Working hours and leave entitlements
Notice period (typically 30–90 days in tech; stated explicitly)
Severance pay provisions, as required by Indian law and company policy
Termination procedures, ensuring compliance with local employment laws and proper handling of employee departure
Confidentiality, IP assignment, and non-solicitation clauses
Dispute resolution and governing jurisdiction (typically the state where the employee is based)
Fixed-term contracts are permissible in India but are less common for full-time professional roles. Most tech and SaaS hires use permanent employment contracts.
- Designation, job description, and reporting structure
- Total Cost to Company (CTC) breakdown — fixed pay, variable pay, HRA, LTA, special allowance
- Working hours and leave entitlements
- Notice period (typically 30–90 days in tech; stated explicitly)
- Severance pay provisions, as required by Indian law and company policy
- Termination procedures, ensuring compliance with local employment laws and proper handling of employee departure
- Confidentiality, IP assignment, and non-solicitation clauses
- Dispute resolution and governing jurisdiction (typically the state where the employee is based)
Leave Entitlements in India
Paid leave entitlements are statutory requirements in India, covering various types such as earned leave, sick leave, and maternity leave. These entitlements are governed by central and state laws, and an employer of record (EOR) like PamGro manages these statutory paid leave provisions to ensure full compliance with local regulations.
| Leave Type | Entitlement | Notes |
|---|---|---|
| Earned Leave (EL) / Privilege Leave | 15–21 days/year | Varies by state Shops & Establishment Act; can be carried forward |
| Sick Leave | 7–12 days/year | State-specific; not universally mandated centrally |
| Casual Leave | 6–12 days/year | State-specific; typically cannot be carried forward |
| Maternity Leave | 26 weeks (paid) | Maternity Benefit (Amendment) Act, 2017; for companies with 10+ employees |
| Paternity Leave | No central statute | Company policy; typically 5–10 days in tech sector |
| National Holidays | 3 mandatory + ~10 gazetted holidays | National holidays: Republic Day, Independence Day, Gandhi Jayanti |
| Bereavement Leave | No central statute | Typically 3–5 days per company policy |
Taxes and Payroll Deductions in India
India’s payroll involves multiple statutory deductions. Payroll calculations are based on the employee’s annual salary and basic salary, which form the foundation for determining allowances, benefits, and statutory contributions. An Employer of Record (EOR) manages payroll taxes, social security contributions, and ensures compliance with Indian tax laws and tax regulations on your behalf each month.
| Deduction / Contribution | Rate / Amount | Who Pays |
|---|---|---|
| Income Tax (TDS — Tax Deducted at Source) | Per income tax slabs (0–30%) | Employee (deducted from salary) |
| Provident Fund — Employee Contribution (EPFO) | 12% of Basic + DA | Employee |
| Provident Fund — Employer Contribution (EPFO) | 12% of Basic + DA (split: 8.33% Employees Pension Scheme (EPS) + 3.67% Employees Provident Fund (EPF)) | Employer |
| ESIC — Employee Contribution | 0.75% of gross salary | Employee (applies if gross ≤ ₹21,000/month) |
| ESIC — Employer Contribution | 3.25% of gross salary | Employer (applies if gross ≤ ₹21,000/month) |
| Professional Tax (PT) | ₹200/month (most states) | Employee; varies by state; Maharashtra, Karnataka, etc. |
| Labour Welfare Fund (LWF) | ₹6–₹25/month | State-specific; employee + employer contribution |
| Gratuity (Provision) | 4.81% of CTC provisioned | Employer; payable after 5 years of continuous service |
The EOR is responsible for filing payroll taxes and managing all statutory compliance, including contributions to the Employees Provident Fund, Employee State Insurance, and Employees Pension Scheme as part of social security contributions.
India operates dual income tax regimes (Old Regime with deductions vs. New Regime with lower rates). Employees choose their preferred regime; the EOR processes TDS accordingly. Form 16 (annual TDS certificate) is issued by the EOR to each employee at financial year-end (March 31).
Work Permits and Visas in India
For foreign nationals working in India, the following visa and permit types apply:
Employment Visa (E Visa): Required for any foreigner employed by an Indian company or EOR. Requires a minimum gross salary of USD 25,000/year (exemptions for ethnic cooks, translators, certain technical roles). Applied at Indian consulate/embassy in home country.
FRRO Registration: Foreign nationals staying in India for more than 180 days must register with the Foreigners Regional Registration Office (FRRO) within 14 days of arrival.
Business Visa (B Visa): Does not permit employment or receiving salary from an Indian entity. Not a substitute for an Employment Visa.
OCI / PIO Card Holders: Can work in India without an Employment Visa; EOR employment contract is sufficient.
Note: An EOR manages employment compliance for Indian nationals. For foreign nationals employed in India through an EOR, visa sponsorship may require additional documentation. PamGro advises clients on visa requirements as part of the onboarding process. EORs also manage international payments for foreign employees, ensuring compliance with Indian regulations.
Statutory Benefits in India
India mandates several statutory benefits. Tech sector norms often exceed the statutory minimums. An Employer of Record (EOR) in India ensures statutory employee benefits, including retirement benefits and job security, are provided in full compliance with Indian law. This includes mandatory schemes such as the Employees Provident Fund (EPF) and Employee Pension Scheme (EPS), which secure employees’ financial future after retirement, as well as adherence to regulations that guarantee job stability and employment rights.
| Benefit | Statutory Requirement | Tech Sector Norm |
|---|---|---|
| Provident Fund (PF / EPFO) | Mandatory for salaries up to ₹15,000 basic; voluntary above | Offered universally as part of CTC |
| ESIC (Health Insurance) | Mandatory for gross salary ≤ ₹21,000/month | Supplemented by group health insurance |
| Gratuity | Payable after 5 years of continuous service; 15 days per year of service | Provisioned monthly; paid on separation |
| Bonus | Mandatory under Payment of Bonus Act (8.33% of salary) for eligible employees | Variable performance bonus above statutory minimum |
| Group Health Insurance (GHI) | Not statutorily required | Industry standard; covers employee + family |
| Maternity Benefit | 26 weeks paid maternity leave (10+ employee companies) | Statutory minimum; some companies exceed |
| Gratuity Insurance | Not mandatory | Best practice for companies with 10+ employees |
Minimum Wage in India
India does not have a single national minimum wage. The Code on Wages (2019) introduced the concept of a National Floor Wage, which central and state governments are required to follow. As of 2025:
National Floor Wage: ₹178 per day (central government recommendation)
State minimum wages vary significantly — from approximately ₹350/day (Maharashtra for skilled workers) to ₹600+/day in Delhi and some categories
Minimum wages are further divided by skill category: unskilled, semi-skilled, skilled, and highly skilled
Minimum wage requirements specifically apply to full time employees, and the rates can differ based on both skill level and the state in which the employee works.
Tech and SaaS sector salaries are typically 5–20x the statutory minimum wage for professional roles
An EOR ensures all employment contracts comply with applicable state minimum wage notifications. PamGro monitors monthly wage revisions across all key Indian states.
Working Hours in India
Standard hours: 48 hours per week, 9 hours per day under the Factories Act, 1948
IT/ITES sector: Most tech employees are covered by state Shops & Establishment Acts, which typically permit 9-hour days with one weekly day off
Rest interval: Minimum 30-minute break after 5 continuous hours of work
Weekly off: One mandatory day off per week (typically Sunday for office workers)
Night shift restrictions: Special provisions apply for women in night shifts under several state Shops & Establishment Acts (Karnataka, Tamil Nadu, and others have specific requirements)
Overtime in India
Overtime rate: 2x the ordinary wage rate for hours worked beyond 48/week under the Factories Act
Shops & Establishment Acts: Overtime provisions vary by state; typically 1.5x–2x for non-factory IT employees
Managerial and supervisory employees: Generally exempt from overtime provisions in most state Shops & Establishment Acts
Maximum overtime: 50 hours per quarter under the Factories Act; varies for Shops & Establishment Act coverage
Most Indian tech companies structure compensation to include broad-based salary packages that implicitly account for extended hours, especially at senior levels. EOR employment contracts should clearly define overtime eligibility.
Probation Period in India
There is no statutory minimum or maximum probation period under central labor law
Industrial Employment (Standing Orders) Act, 1946: Allows probation of up to 3 months; some states permit 6 months
Industry norm for tech: 3–6 months, with a shorter notice period during probation (7–30 days vs. 30–90 days post-probation)
Extension of probation is permitted but must be communicated in writing before the original period ends
Termination during probation: Simplified, but employee must still receive proper notice or pay in lieu
Termination of Employment in India
India does not have at-will employment. All terminations must follow due process under applicable labor law. An EOR manages the entire offboarding process compliantly:
Notice period: Typically 30–90 days (as per employment contract); either party may give notice or pay in lieu of notice (PILON).
Industrial Disputes Act applicability: Applies to ‘workmen’ (non-supervisory roles in organizations with 100+ employees). Retrenchment requires prior government permission for companies with 100+ workers. Most tech employees (managerial/supervisory) are exempt.
Full and final settlement: Must be processed within 30–45 days of the last working day; includes salary dues, leave encashment, and reimbursements.
Gratuity payment: Due after 5 continuous years of service; calculated as 15 days’ last drawn salary per year of service.
Form 16 issuance: Annual TDS certificate issued within 60 days of financial year-end.
EPFO settlement: Employee can withdraw or transfer PF balance after termination.
An EOR handles every step of the termination process — issuing the acceptance of resignation or termination letter, calculating full and final settlement, processing gratuity, and filing all statutory closures. By ensuring compliance with Indian labor laws and following proper termination procedures, an EOR helps avoid legal disputes related to employment in India. This eliminates termination risk for the client company.