Hire and pay employees
Hire and pay employees in India
TopSource enables you to tap into India’s premier talent pool without the complexity of setting up a local legal entity. Our comprehensive Employer of Record (EOR) service manages the entire lifecycle from seamless onboarding and compliant payroll to statutory benefits and tax filings. We handle the local red tape so you can focus on scaling your team across India with total confidence.
Ultimate Employment Guide to Hiring in India
Payroll
Payroll in India
Frequency & Setup
- Payroll cycle is strictly monthly as per standard Indian business practices.
- Employers must register with the EPFO (Provident Fund) and ESIC (Insurance) authorities before the first payroll run.
- Employers must issue digital or physical payslips (Form 16/12BA) showing all statutory deductions and employer contributions.
Employer Responsibilities
- Withhold Professional Tax based on specific state-level slabs and regulations.
- Manage Gratuity provisions for employees who complete five years of continuous service.
- File monthly and quarterly returns via the Unified Shram Suvidha Portal and Income Tax portal.
- Ensure compliance with the 2026 Labour Codes regarding the 50% allowance cap on basic wages.
Taxes
Taxation in India
Corporate & Personal Tax
- Income Tax (TDS) must be deducted monthly based on the employee’s chosen tax slab.
- Corporate entities must account for Goods and Services Tax (GST) compliance for inter-company service agreements.
- Permanent Establishment (PE) risk must be managed when hiring without a local entity.
Compliance Filings
- Quarterly filing of Form 24Q to report salary TDS to the Income Tax Department.
- Issuance of Form 16 annually to employees for their personal income tax filings.
- Monthly Professional Tax (PT) deposits to respective state governments.
Termination
Termination of Employment in India
Notice Periods & Severance
- Standard notice periods typically range from 30 to 90 days, depending on the employee’s role, seniority, and specific state regulations.
- For involuntary “termination for convenience” (retrenchment), employers must provide 15 days of severance pay for every completed year of service.
- Under the 2026 mandate, all “Full and Final” (F&F) settlements must be completed within 48 hours of the employee’s last working day.
Legal Protections
- Employees on probation (typically 3–6 months) may be terminated without notice unless otherwise stated in the contract.
- Termination of pregnant employees or those on maternity leave is strictly prohibited and constitutes unfair dismissal.
- Misconduct-based termination (fraud, theft, insubordination) may exempt the employer from notice requirements, provided a formal domestic inquiry is conducted.
Time off
Leave Entitlements & Public Holidays
Leave policies in India vary by state under the Shops and Establishments Act, but generally center on three mandatory categories: Earned, Casual, and Sick leave.
Annual & Statutory Leave
- Earned/Privilege Leave: Typically 15 to 21 days per year, usually accrued at a rate of 1 day for every 20 days worked.
- Casual & Sick Leave: Most states mandate 7 to 12 days of sick leave and 6 to 7 days of casual leave for urgent personal matters.
- Maternity Leave: A mandatory 26 weeks of paid leave for the first two children, provided the employee has worked 80 days in the prior 12 months.
Public Holidays
- There are 3 mandatory national holidays: Republic Day (Jan 26), Independence Day (Aug 15), and Gandhi Jayanti (Oct 2).
- In addition to national days, employers must provide 7 to 11 regional/festival holidays based on the state’s official gazetted list.
Benefits
Statutory & Supplementary Benefits
Beyond basic salary, Indian law requires specific social security contributions to ensure long-term financial stability for the workforce.
Mandatory Retiral Benefits
- Provident Fund (EPF): A 12% contribution from both employer and employee toward retirement savings for those earning below a specific threshold.
- Gratuity: A lump-sum loyalty payment for employees with 5 years of service; however, under 2026 reforms, fixed-term employees may qualify after just 1 year.
- Employee State Insurance (ESI): Mandatory medical and disability insurance for employees earning below ₹21,000 per month.
Common Supplementary Benefits
- Group Health Insurance: Highly recommended for white-collar talent to cover hospitalization for employees and their dependents.
- Statutory Bonus: An annual payment ranging from 8.33% to 20% of salary for eligible employees, often distributed during major festivals like Diwali.
Onboarding
Hiring & Joining Formalities
Onboarding in India requires meticulous documentation to satisfy labor audits and ensure immediate enrollment in statutory benefit portals.
Compliance Documentation
- Collection of mandatory KYC documents: Aadhaar card (identity), PAN card (tax), and proof of address.
- Execution of a compliant employment contract detailing the 50% “Wage” cap under 2026 Labour Codes.
- Submission of Form 11 (for EPF) and Form 1 (for ESI) to register the new hire with social security authorities.
Verification & Setup
- Background verification (BGV) is standard practice, covering education, criminal records, and prior employment history.
- Initial orientation must include a walkthrough of the company’s Prevention of Sexual Harassment (POSH) policy, a legal requirement for entities with 10+ employees.
Additional Considerations
Compliance & Cultural Nuances
Successfully managing a team in India requires balancing strict federal laws with the diverse cultural landscape of its 28 states.
Regulatory Compliance
- POSH Act: Companies must form an Internal Committee (IC) to handle workplace harassment complaints and file an annual report.
- Working Hours: Standard work weeks are capped at 48 hours, with mandatory overtime pay (typically double the regular rate) for additional hours.
- Labour Welfare Fund (LWF): Many states require small monthly contributions from both employer and employee for social welfare.
Cultural Integration
- Relationships are central to business success; personal rapport and “small talk” are often prerequisites for professional trust.
- India is a hierarchical society; clear definitions of seniority and reporting lines are expected within the workplace structure.
Calculate payroll costs in India
Discover the full costs associated with employing and paying team members in India
Employment Cost Calculator
*Indicative figures only and not definitive legal advice. Local regulations change frequently. Consult an expertUnited Kingdom
| British Pound | United Kingdom | |
|---|---|---|
| Base Salary (per month) | ||
| Local employer’s cost | ||
| Total Cost (Annual) | ||
| Total Cost (Monthly) |
What else you should know about employing in India
Working Hours
Termination & Severance
Paid Annual Leave
Minimum wage
Onboarding & Contracts
Indian Employment Contracts & Onboarding
Employment Contract Essentials
While oral contracts exist, a written Employment Agreement is the industry standard for IP protection and clear terms of service.
-
Key Clauses: Defines job role, CTC structure (including statutory bonuses), and a 3-6 months probation period.
-
Restrictive Covenants: Includes confidentiality and non-solicitation. Note that post-termination non-competes are generally difficult to enforce under Section 27 of the Indian Contract Act.
-
Notice Period: Typically, 30 to 90 days, governed by seniority and state-specific Shops and Establishments Acts.
The Onboarding Checklist
A structured process ensures statutory compliance and avoids legal penalties.
-
KYC & Tax: Mandatory collection of PAN and Aadhaar for identity and tax filing.
-
Statutory Benefits: Enrollment in EPF (for 20+ employees), ESIC (for eligible salary brackets), and Professional Tax (PT) based on the state (e.g., Maharashtra).
-
Salary Accounts: Employers typically facilitate local bank account setups to streamline monthly payroll disbursements.
Indian Work Visas and Employee Relocation
Immigration and Work Visas in India
Employing or relocating staff to India requires compliance with the Ministry of Home Affairs regulations. Employers must ensure foreign nationals have the correct work authorization before starting employment.
Most skilled professionals require an Employment Visa (E-Visa). This typically carries a minimum salary threshold of USD 25,000 per annum. For short-term meetings or site visits, a Business Visa (B) may be used, though it does not allow for full-time employment or drawing a local salary.
Mandatory Registration & Compliance
Foreign nationals staying in India for more than 180 days must register with the Foreigners Regional Registration Office (FRRO) within 14 days of arrival. Failure to register can lead to legal penalties and issues with exit permits.
Processing times vary, making early planning essential. Employers are responsible for right-to-work checks and maintaining valid documentation. Many companies use an Employer of Record (EOR) or immigration support to ensure compliance and support a smooth relocation for employees moving to India.
*Don’t let visa delays stall your expansion. Secure compliant work authorization and onboard your Indian team in record time.
Minimum Wage & Payroll in India
Minimum Wage & Payroll in India
Minimum Wage & Pay Frequency
India does not have a single national minimum wage; instead, rates are determined by state, industry, and skill level.
-
Minimum Wage: For the Central Sphere (skilled workers), the rate is approximately ₹24,804 per month (~$275/month). However, state-specific rates can vary significantly, such as in Delhi or Maharashtra.
-
Pay Frequency: Salaries are mandatory to be paid monthly. Under the Code on Wages, payments must be made by the 7th of the following month for establishments with fewer than 1,000 employees (or the 10th for larger ones).
Sick Pay
Sick leave (often called Medical Leave) is primarily governed by state-specific Shops and Establishments Acts.
-
Entitlement: Employees typically receive 7 to 12 days of paid sick leave per year at 100% salary.
-
ESI Benefit: For employees earning below ₹21,000/month and registered under Employees’ State Insurance (ESI), the ESI Corporation provides sickness benefit (approx. 70% of wages) for up to 91 days in a year if the illness exceeds the employer-paid leave.
-
Documentation: A medical certificate is generally required for absences exceeding 2 or 3 consecutive days.
Maternity & Parental Leave
-
Maternity Leave: Under the Maternity Benefit Act, eligible women receive 26 weeks of fully paid leave for the first two children (up to 8 weeks can be taken before delivery). For the third child onwards, the entitlement is 12 weeks.
-
Adoption/Surrogacy: Mothers adopting a child under 3 months or “commissioning mothers” (surrogacy) are entitled to 12 weeks of paid leave.
-
Paternity Leave: There is currently no statutory mandate for paternity leave in the private sector in India, though it is standard practice for competitive employers to offer 5–15 days as a company benefit.
*India’s shifting labor codes and state-specific professional taxes make payroll accuracy a high-stakes task for any business.
Statutory Bonus & Benchmarking
Statutory Bonus (India’s 13th-Month Pay)
In India, the “13th-month pay” is legally mandated as an annual bonus. It is designed to ensure employees share in the organization’s profits or receive a minimum deferred wage.
Key Compliance Requirements
-
Mandatory Minimum: Employers must pay a minimum bonus of 8.33% of the annual salary (effectively one month’s “wage” as defined by the Act) even if the establishment suffers a loss.
-
Maximum Cap: The bonus can go up to 20% of the annual salary, depending on the “allocable surplus” or profits of the company.
-
Eligibility: Applies to employees earning up to ₹21,000 per month who have worked at least 30 days in the financial year. For those earning above this, the bonus is often paid as a discretionary “ex-gratia” to maintain parity.
-
Payment Timeline: Must be paid within 8 months of the close of the financial year (typically by November 30th), though it is culturally common to disburse it during major festivals like Diwali.
Employer Responsibilities
-
Register for Social Security: Ensure the establishment is registered under the EPF and ESIC acts (mandatory for 10–20+ employees depending on the state).
-
Occupational Safety: Comply with the Employees’ Compensation Act, 1923, by providing compensation for workplace accidents, often managed through statutory insurance.
-
Works Committees: Establishments with 100+ employees may be required to constitute a Works Committee to promote industrial harmony and resolve internal grievances.
*While statutory bonuses are the legal floor, staying competitive in India’s talent market requires knowing exactly what your peers are offering.
India Payroll: Social Security, Taxes, and Employer Costs
The costs for Provident Fund (EPF) and State Insurance (ESI) in India are split between the employee and employer, supporting the nation’s comprehensive social security framework. However, Gratuity and EDLI premiums are fully employer-funded, with Gratuity being a statutory benefit paid for long-term service. These contributions form a key part of employer compliance in India and should be factored into total payroll costs when hiring in India.
India Statutory Contributions
| Component | Employee Share | Employer Share |
|---|---|---|
| Provident Fund (EPF) | 12% | 12%* |
| State Insurance (ESI) | 0.75% | 3.25% |
| Gratuity | Nil | ~4.81% |
| EDLI (Insurance) | Nil | 0.50% |
*Note on EPF: The employer’s 12% is further divided into the Employees’ Pension Scheme (EPS) at 8.33% (capped at ₹1,250) and the remaining 3.67% goes to the Provident Fund (EPF) account.
In India, Provident Fund (EPF) and State Insurance (ESI) costs are shared between the employer and employee to support the national social security framework. Conversely, Gratuity and EDLI premiums are entirely employer-funded, with Gratuity serving as a statutory benefit for long-term service. These contributions are vital for employer compliance and must be factored into the total cost of hiring in India.
Statutory Contribution Ceilings
-
Provident Fund (EPF/EPS): Capped at ₹15,000/month. Contributions are calculated on this limit unless the employer chooses to contribute on the full basic salary.
-
State Insurance (ESI): Capped at ₹21,000/month. Employees exceeding this gross wage are exempt from mandatory ESI.
Other Employer Levies
-
EPF Admin Charges: 0.50% of PF wages for fund management.
-
EDLI (Insurance): 0.50% employer contribution for life insurance coverage.
-
Labour Welfare Fund (LWF): Nominal, state-specific monthly or half-yearly levies.
-
Gratuity Provision: A statutory accrual (approx. 4.81% of basic) for staff with 5+ years of service.
Public Holidays and Employment Regulations in India
Public holidays in India are a key element of the country’s employment laws and HR regulations. Unlike many nations with a standardized list of national holidays, India’s employment regulations combine both mandatory national observances and a diverse range of state-level festivals. As a result, the number and type of public holidays in India vary depending on the state where employees work—for example, Maharashtra or Tamil Nadu may have more recognized regional holidays than Delhi.
Under various laws like the National and Festival Holidays Act, employees are generally entitled to a paid day off on public holidays, with three holidays being compulsory nationwide: Republic Day (January 26), Independence Day (August 15), and Gandhi Jayanti (October 2). When business operations require work on these days, employers must provide substitute rest periods (compensatory offs) or pay double the regular wages to follow all employment law compliance requirements. HR professionals and employers hiring in India should track holiday entitlements by location, ensure that employment contracts reflect the correct state-specific Shops and Establishments Act rules, and plan workforce scheduling accordingly.
Properly managing public holidays and employment regulations in India is not only a matter of legal compliance but also an important part of maintaining employee satisfaction and ensuring fair, transparent workplace practices in a culturally diverse workforce.
| Date | Holiday | Type / Region |
|---|---|---|
| 26 Jan | Republic Day | National Holiday (Mandatory) |
| 4 Mar | Holi | Gazetted – Most States |
| 21 Mar | Id-ul-Fitr | Gazetted – Subject to Moon Sighting |
| 3 Apr | Good Friday | Gazetted – Most States |
| 14 Apr | Ambedkar Jayanti | Widely Observed State Holiday |
| 1 May | Maharashtra Day / May Day | Maharashtra, Karnataka, and others |
| 15 Aug | Independence Day | National Holiday (Mandatory) |
| 14 Sep | Ganesh Chaturthi | Maharashtra, Gujarat, Karnataka, etc. |
| 2 Oct | Gandhi Jayanti | National Holiday (Mandatory) |
| 20 Oct | Dussehra | Gazetted – All States |
| 8 Nov | Diwali (Deepavali) | Gazetted – All States |
| 25 Dec | Christmas Day | Gazetted – All States |
Learn about other markets
We help organizations with employ and pay teams in over 180 countries. Learn about other markets, their employment laws and common HR practices.
Frequently Asked Questions About Hiring in India
The 2026 Labour Codes represent the most significant shift in Indian employment law in decades, consolidating 29 old laws into four streamlined codes. For global employers, the most critical change is the unified “Wage” definition, which mandates that allowances cannot exceed 50% of total remuneration. This impacts how you calculate Provident Fund (PF) and Gratuity. TopSource manages this transition for you, ensuring your compensation structures are compliant with the latest central and state-specific notifications to prevent retroactive financial liabilities.
Yes. You can hire talent in India through a Global Employer of Record (EOR) like TopSource. We act as the legal employer on record, managing localized contracts, payroll, and 2026-compliant benefits, while you maintain 100% functional control over the employee’s daily work. This allows you to go to market in days rather than the 6-9 months typically required for entity establishment, all while avoiding the complexities of Indian corporate tax and permanent establishment (PE) risks.
In 2026, statutory benefits have expanded to include more “parity” for fixed-term workers. Core requirements include:
-
Employees’ Provident Fund (EPF): 12% employer contribution for eligible employees.
-
Gratuity: Now applicable to fixed-term employees after just one year of service (previously five).
-
Social Security: Expanded coverage under the new 2026 codes for gig and platform workers.
-
Maternity Benefit: 26 weeks of paid leave for female employees.
-
Annual Leave: Minimums set by the state-specific Shops and Establishments Act.
Under the new 2026 regulations, employers are now mandated to settle all Full and Final (F&F) dues within 48 hours of an employee’s last working day (whether they resigned or were terminated). This is a major shift from the traditional 30-45 day window. TopSource’s automated payroll engine ensures that your exit processes are expedited to meet this strict 48-hour compliance window, protecting you from automatic notices triggered via the central Shram Suvidha portal.
Indian courts apply “control and integration” tests to determine status. If a worker is integrated into your business, uses your tools, and works under your direct supervision, they are likely an employee. Misclassifying them as a contractor to avoid social security contributions is a “Critical” risk in 2026. TopSource provides Contractor Misclassification Audits to help you identify these risks and transition talent to a compliant EOR model where necessary.
Unlike “platform-only” providers, TopSource offers a “Beyond EOR” suite that combines high-tech automation with high-touch expertise. With a legacy of deep-rooted operations in India, we don’t just process payroll; we provide fractional HR advisory, state-level compliance expertise, and 2026 Labour Code transition support. Our approach is service-agnostic, giving you the flexibility to move from EOR to your own entity seamlessly as your team scales.