Employer of Record in India

An Employer of Record is a company that legally employs staff in India on your behalf. TopSource becomes the registered employer of record for contracts, Provident Fund, ESI, professional tax and TDS, while your team manages the employee’s day-to-day work exactly as they would anyone else. You get people working in India without incorporating a company there, and without taking on the compliance liability that comes with being an Indian employer.

No. Employing through an EOR is the standard alternative to incorporation, and it is how most companies make their first hires in India. Setting up a private limited company means directors, registered premises, PAN and TAN, GST registration where applicable, and separate EPFO and ESIC registrations — typically months before anyone can legally start. With an EOR, your hire is employed compliantly from day one and you can incorporate later, once Indian headcount justifies it.

Yes. We register and remit Provident Fund (12% employer and 12% employee on basic pay plus dearness allowance), Employees’ State Insurance where the salary falls within the ₹21,000 monthly threshold, professional tax (state-specific), and monthly Tax Deducted at Source under the Income-tax Act, and we issue Form 16 annually. India’s four Labour Codes came into force on 21 November 2025, with final central rules notified on 8 May 2026, and each state is notifying its own rules alongside its existing Shops and Establishments Act. We track which rules apply in each state so your contracts and payroll stay compliant as they land.

Employing in India carries mandatory contributions that we calculate, deduct and remit on every payroll run:

• Provident Fund (EPF) — 12% employer and 12% employee on basic pay plus dearness allowance, against a statutory wage ceiling of ₹15,000 per month. The employer’s 12% splits into the pension scheme (8.33%) and the fund itself (3.67%); EDLI at 0.5% and administrative charges push real employer cost closer to 13%. Applies to establishments with 20 or more employees.
• Employees’ State Insurance (ESI) — 3.25% employer and 0.75% employee, for employees earning up to ₹21,000 a month in gross wages.
• Gratuity — 15 days’ wages per completed year, payable after five years of continuous service (one year for fixed-term employees under the Code on Social Security). Usually accrued at around 4.81% of salary.
• Professional tax — a state-level deduction borne by the employee, capped at ₹2,500 a year and not levied in every state.
• Statutory bonus — between 8.33% and 20% for eligible employees earning up to ₹21,000 a month.
• Income tax (TDS) — withheld monthly against the employee’s income-tax slab.

Thresholds and rules vary by state, and the new Labour Codes have changed the wage base several of these are calculated on. We handle all of it.

India’s employment framework spans central labour law, state-specific Shops and Establishments rules across 28 states and 8 union territories, and the four Labour Codes now in force, which makes ongoing compliance demanding even for experienced HR teams. An EOR takes on legal employer status, the statutory registrations and the compliance liability, so you can hire immediately without incorporation costs, a local bank account or an in-country compliance function. It is typically the right call for testing the Indian market, hiring a handful of specialists, or moving fast — while your own entity becomes more cost-effective once headcount grows substantially.

Yes. There is no prohibition on engaging staff through a third-party employer in India, and the model is widely used by multinationals, particularly for first hires and smaller teams. What matters is that the arrangement is structured properly: a compliant written contract, correct statutory registrations, genuine payroll run through the legal employer, and clear separation between employment and day-to-day direction of work. Done correctly it also protects you against the two risks companies most often trip over — worker misclassification and inadvertently creating a permanent establishment for tax purposes.

TopSource charges a transparent, flat monthly fee per employee — not a percentage of salary — so your costs stay predictable as salaries rise. Your total cost is the employee’s gross salary, plus the statutory employer contributions (Provident Fund, ESI where applicable, gratuity accrual, statutory bonus), plus our EOR fee. India’s headline employer contribution load is modest by international standards, but the new wage definition under the Code on Wages can raise it where salary structures are allowance-heavy. Use the cost calculator above to model a specific salary, or contact us for an exact quote.

Most employees can be legally onboarded within a few days to two weeks, once documentation is available — PAN, Aadhaar, bank details and prior employment records. That compares with the months typically needed to incorporate a private limited company, register for GST and TAN, and set up EPFO and ESIC accounts. Speed is one of the main reasons companies use an EOR for an initial India hire or a small team, before deciding whether a local entity makes sense.

Contractors suit genuinely independent, project-based work, but India applies substance tests rather than taking the contract at face value: if you control hours, tools and supervision, the relationship risks being reclassified as employment, with back-dated Provident Fund, ESI and tax exposure. An entity suits committed, long-term operations at scale. An EOR sits between them — full employment status and statutory benefits for the worker, no incorporation for you — and is usually the right answer for the first one to twenty hires, for testing the market, or while an entity is being set up.

An Employer of Record is the legal employer of your staff: it holds the contract, carries the statutory registrations, and takes on employment liability, so you do not need an Indian entity at all. A PEO operates as a co-employment arrangement supporting an entity you already have — it can administer payroll and benefits, but it does not replace your need to be incorporated. In practice, if you have no Indian entity you need an EOR; if you already have one and want to outsource the administration, a PEO or managed payroll service is the closer fit.

India has consolidated 29 central labour laws into four Labour Codes — on Wages, Industrial Relations, Social Security, and Occupational Safety, Health and Working Conditions. They came into force on 21 November 2025, and the final central rules were notified on 8 May 2026. The most significant change for cost is the definition of ‘wages’: excluded allowances such as HRA and special allowance cannot exceed 50% of total remuneration, and any excess is added back into the base used to calculate Provident Fund, gratuity and ESI — which can raise statutory costs by roughly 5-15% for allowance-heavy structures. The Codes also lower the threshold for paid annual leave to 180 days worked, confirm overtime at twice the normal rate, and extend gratuity to fixed-term employees after one year. Because labour is a concurrent subject, each state is notifying its own rules on its own timetable. We track every change so your contracts and payroll stay compliant — read our breakdown of India’s new labour law reforms and the new wage code’s impact on payroll.

Working days are capped at eight hours and working weeks at 48 hours, with overtime payable at twice the normal rate of wages. Eligibility for paid annual leave begins at 180 days worked in a year — reduced from 240 under the previous regime — with leave accruing at one day for every 20 days worked. Many state Shops and Establishments Acts provide more generous entitlements, and those continue to apply, as do public holidays, which vary by state. Maternity leave is 26 weeks for the first two children under the Maternity Benefit Act. We apply the correct entitlement for the state your employee actually works in.

Notice periods are generally set by the employment contract, commonly 30 to 90 days depending on seniority, though the relevant state’s Shops and Establishments Act may set its own minimum. Termination without cause typically requires notice or payment in lieu, and gratuity becomes payable once the employee has completed five years of continuous service — or one year, for fixed-term employees. Because enforcement varies by state and Indian courts lean towards employee protection, contracts drafted specifically for India, and a properly documented exit process, substantially reduce the risk of disputes. We manage the process and the final settlement.

Yes, and it is a normal progression. Companies routinely start with an EOR to get into India quickly, then incorporate once headcount and permanence justify it. When you get there we transfer the employees across to your entity, preserving continuity of service — which matters in India, because gratuity eligibility and leave accrual both depend on continuous service. There is no penalty for making the switch and no lock-in on our side.