Hire and pay employees

Yes. You can legally hire full-time employees in India without a local entity by using an Employer of Record (EOR) service. The EOR becomes the legal employer in India, handling employment contracts, payroll, statutory contributions (EPF, ESI, Professional Tax), and compliance with state-specific labour laws – while you manage the employee’s day-to-day work. TopSource operates its own entity in India, ensuring direct employment rather than subcontracting through third-party aggregators.

The total cost of hiring in India is typically 20–25% above the employee’s gross salary. This includes mandatory employer contributions: Provident Fund (12% of basic salary), Employee State Insurance (3.25% for employees earning up to ₹21,000/month), Professional Tax (₹200/month in most states), gratuity accrual (approximately 4.81% of basic salary after 5 years), and statutory bonus (8.33–20% of wages for eligible employees). Use TopSource’s employment cost calculator on this page for an instant country-specific estimate.

India mandates several statutory benefits that all employers must provide: Employee Provident Fund (EPF) — 12% employer and 12% employee contribution on basic salary; Employee State Insurance (ESI) – 3.25% employer and 0.75% employee for those earning ≤₹21,000/month; gratuity – payable after 5 years of continuous service at 15 days’ wages per year; 26 weeks of paid maternity leave for the first two children; and statutory bonus of 8.33-20% for employees earning up to ₹21,000/month.

India’s four new Labour Codes (effective November 2025, full state implementation expected April 2026) introduce significant changes for all employers. The most impactful change is the 50% basic salary rule – basic wages must now constitute at least 50% of total CTC, which increases employer PF and gratuity costs by approximately 5-15%. Other changes include: mandatory Full & Final settlement within 48 hours of separation, fixed-term employees receiving full statutory benefits from day one and expanded social security coverage for gig and platform workers.

Through an EOR like TopSource, onboarding typically takes 2-5 business days once the candidate accepts the offer. This includes drafting a compliant employment contract, PF/ESI registration, PAN and Aadhaar verification, bank account setup, and background checks. Setting up your own legal entity in India, by contrast, takes 4-6 months and costs ₹30-50 lakh ($5,000–$15,000) in legal, registration, and compliance setup fees.

CTC is the total annual cost an employer incurs for an employee in India, including salary and all statutory contributions. A typical CTC structure includes: basic salary (minimum 50% of CTC under 2026 rules), House Rent Allowance (40-50% of basic), special allowances, employer PF contribution (12% of basic), ESI (3.25% if applicable), gratuity provision (4.81%), and statutory bonus. The employee’s take-home pay after PF, ESI, Professional Tax, and income tax deductions is significantly lower than the CTC figure – typically 65-75% of CTC for mid-level roles.

Notice periods in India typically range from 30 to 90 days depending on seniority level and state-specific Shops & Establishments Act rules. India does not permit at-will termination — employers must follow documented performance improvement processes before terminating for cause. Severance pay (retrenchment compensation) is mandatory at 15 days’ average wages per completed year of service under the Industrial Disputes Act. Under the 2026 Labour Codes, companies with 300+ workers now require government approval for mass layoffs (raised from the previous threshold of 100).

Under the 2026 Labour Codes, Full and Final settlement is now mandatory within 48 hours of an employee’s last working day. F&F includes unpaid salary, earned leave encashment, pro-rata bonus, gratuity (if eligible), reimbursements, and deductions for notice period recovery or outstanding advances. Employers must also issue a relieving letter, experience certificate, and Form 16 (tax certificate). Failure to complete F&F within the mandated timeline can result in penalties and employee grievances escalated to labour courts.

India has 3 mandatory national holidays: Republic Day (January 26), Independence Day (August 15), and Gandhi Jayanti (October 2). Beyond these, the number and type of holidays vary significantly by state – employers must follow the holiday schedule prescribed by each state’s Shops & Establishments Act. Most companies observe 10-14 public holidays annually, combining national holidays with regionally important observances like Diwali, Holi, Eid, Christmas, and state-specific festivals. Employers hiring across multiple Indian states must maintain separate holiday calendars for each location.

In India, the classification depends on the degree of control, integration, and economic dependence. An employee works under the employer’s direction with set hours, uses company equipment, is integrated into the organisational hierarchy, and receives statutory benefits. A contractor works independently, controls their methods and schedule, and typically works for multiple clients. Indian courts and tax authorities have reclassified contractors as employees when the relationship exhibits employment characteristics, ordering backdated PF, ESI, and bonus payments going back 3–7 years. The penalty risk makes correct classification critical.

Employee State Insurance (ESI) is mandatory for employees earning up to ₹21,000 per month, providing medical, sickness, and maternity benefits. For employees above this threshold, there is no statutory requirement for private health insurance, but it has become a standard market practice and a critical component of competitive compensation packages. Most Indian employers offer Group Mediclaim policies covering the employee plus dependents (spouse, children, and sometimes parents) with sum insured typically ranging from ₹3–5 lakh.

Under the Maternity Benefit Act 1961 (amended 2017), women employees are entitled to 26 weeks of fully paid maternity leave for the first two children (up to 8 weeks can be taken before the expected delivery date). For the third child onwards, the entitlement is 12 weeks. Mothers adopting a child under 3 months receive 12 weeks of leave. Employers with 50+ employees must provide a creche facility. Importantly, employees cannot be terminated during pregnancy or maternity leave except with specific government permission. These protections apply regardless of whether the employer is an Indian entity or an EOR.

Most foreign professionals require an Employment Visa (E-Visa) with a minimum salary threshold of USD 25,000 per annum. Business Visas (B-Visa) are available for short-term meetings and site visits but do not permit full-time employment or drawing a local salary. Foreign nationals staying in India for more than 180 days must register with the Foreigners Regional Registration Office (FRRO) within 14 days of arrival. India does not currently have a digital nomad visa. Intra-company transfer visas exist for multinational companies relocating employees to their Indian entity.

Under the Payment of Bonus Act 1965, employers must pay a statutory bonus to employees earning up to ₹21,000 per month who have worked at least 30 days in the financial year. The minimum bonus is 8.33% of wages (effectively one month’s salary) even if the company makes a loss. The maximum is 20% of wages, based on the company’s “allocable surplus” or profits. Bonus is typically paid within 8 months of the financial year close (by November 30), though many companies disburse it during Diwali. For employees earning above the threshold, companies often pay an ex-gratia bonus to maintain parity.

TopSource operates its own legal entity in India with a dedicated in-country team of payroll, compliance, and HR specialists not a network of third-party partners. This means direct employment contracts, faster onboarding (2–5 days), and single-point accountability for multi-state compliance across all 28 states and 8 union territories. TopSource also provides an interactive employment cost calculator, salary benchmarking data, and quarterly compliance audits giving you proactive insight rather than reactive support. With 20+ years of India payroll experience and the Portico platform for real-time visibility, TopSource combines local expertise with global scale.