Employer of Record Guide in India
India's vast talent pool offers incredible opportunities, but navigating its complex employment landscape requires expertise. This comprehensive guide breaks down everything you need to know to hire compliantly and unlock access to one of the world's most dynamic workforces.
Capital City
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Services available in this country:
Key stats and facts
From Mumbai's financial district to Bengaluru's tech hub, India's diverse economic landscape spans multiple time zones and languages. Understanding the market fundamentals—including in-demand skills, tax structures, and regional variations—is your first step toward successful expansion.
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Your EOR guide in India
India's employment regulations involve intricate state-federal dynamics that can make compliance challenging for global employers. Our detailed breakdown covers everything from minimum wage variations to mandatory contributions, helping you navigate the legal requirements with confidence.
Minimum Wage
India operates a complex minimum wage system with significant variations across states and skill categories.
National Framework:
- National Floor Level Minimum Wage (NFLMW): ₹178 per day (unchanged since 2019)
- Revision Frequency: Typically revised twice yearly (April and October)
Note: Writer should verify current minimum wage rates as research shows discrepancies between sources
Skill-Based Categories (Central Government Benchmark):
| Skill Level | Monthly Rate (₹) |
|---|---|
| Unskilled | 20,358 |
| Semi-skilled | 22,568 |
| Skilled | 24,804 |
| Highly skilled | 26,910 |
State Variations: Each state sets its own minimum wage rates, which can vary significantly. For example, Delhi's rates differ substantially from rural states like Bihar or Odisha.
Upcoming Changes: The Code on Wages, 2019 remains pending full implementation, which will introduce mandatory national floor wages.
Payroll Cycle
Legal Requirements:
- Establishments with <1,000 employees: Payment by 7th of following month
- Establishments with ≥1,000 employees: Payment by 10th of following month
- Standard Practice: Monthly payroll is most common
- Industry Variations: Construction and manufacturing may use bi-weekly or weekly cycles
Individual Income Tax
Note: Writer should verify current tax brackets as research shows conflicting information between sources
New Tax Regime (Default):
| Income Bracket (₹) | Tax Rate |
|---|---|
| Up to 4,00,000 | 0% |
| 4,00,001 to 8,00,000 | 5% |
| 8,00,001 to 12,00,000 | 10% |
| 12,00,001 to 16,00,000 | 15% |
| 16,00,001 to 20,00,000 | 20% |
| 20,00,001 to 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Additional Charges:
- Health and Education Cess: 4% on income tax amount
- Standard Deduction: ₹75,000 for salaried individuals
- Surcharges: Apply for high-income earners above certain thresholds
Tax Residency Criteria
Primary Rule: Individuals present in India for 182 days or more during a financial year are considered tax residents.
Alternative Rule: 60 days or more in current year AND 365 days or more in preceding four years.
Special Provisions:
- 60-day period extended to 182 days for Indian citizens employed abroad
- RNOR (Resident but Not Ordinarily Resident) status affects foreign income taxation
- Double Taxation Avoidance Agreements may influence foreign worker liabilities
Employer Payroll Contributions
Mandatory Contributions:
| Contribution Type | Rate | Applicability |
|---|---|---|
| Employees' Provident Fund (EPF) | 12% of basic wages + DA | Establishments with 20+ employees |
| Employees' State Insurance (ESI) | 3.25% of gross wages | Employees earning up to ₹21,000/month |
| Gratuity | 15 days salary per year | After 5 years of service |
Total Employer Burden: Approximately 15.25% to 16.5% of payroll (excluding gratuity accrual)
Working Hours
Note: Writer should verify working hours requirements as research shows conflicting information between sources
Standard Framework:
- Daily Limit: 8-9 hours per day (varies by sector)
- Weekly Limit: 48 hours per week
- Applicable Laws: Factories Act, 1948 and state-specific regulations
- Exemptions: Managerial and supervisory staff often exempt from standard working hour regulations
Overtime Pay
- Rate: Double the ordinary rate of wages
- Threshold: Beyond 8-9 hours per day or 48 hours per week
- Maximum Limits: Generally 50-100 hours per quarter (varies by state)
- Alternatives: Compensatory time off available with mutual agreement
Bonus Payments
Legal Framework: Payment of Bonus Act, 1965
- Eligibility: Employees earning up to ₹21,000/month in establishments with 20+ workers
- Rate: Minimum 8.33%, maximum 20% of annual wages
- Service Requirement: Minimum 30 days worked in financial year
- Termination Impact: Prorated bonus payable in final settlement
Full-Time vs. Part-Time
- Full-time Threshold: 48 hours per week
- Benefits Eligibility: All employees entitled to statutory benefits if eligibility criteria met
- Part-time Benefits: Prorated based on hours worked
Vacation Leave
- Minimum Entitlement: 15 days paid annual leave after completing 240 days of service
- Accrual Rate: 1.25 days per month
- Pay Calculation: Based on average daily wage over preceding 12 months
- Termination Payout: Unused leave must be compensated in final settlement
Sick Leave
- Entitlement: 12 days paid sick leave per year
- Medical Certificate: Required for absences exceeding 2 consecutive days
- Long-term Disability: ESI scheme provides benefits up to 2 years for covered employees
Maternity Leave
- Duration: 26 weeks paid leave for first two children, 12 weeks for subsequent children
- Eligibility: Minimum 80 days worked in 12 months preceding expected delivery
- Job Protection: Reinstatement to same or similar position guaranteed
- Funding: Employer-funded (ESI benefits available for covered employees)
Parental Leave
Currently, there is no statutory paternity leave requirement at the national level. Paternity leave provisions are subject to individual employer policies and may vary significantly across organisations.
Bereavement Leave
No statutory bereavement leave requirement exists at the national level. Duration and eligibility are subject to employer discretion and company policies.
Personal & Family Leave
India does not currently mandate statutory provisions for:
- Family responsibilities leave
- Emergency or caregiving leave
- Domestic violence leave
These provisions remain subject to individual employer policies.
Summary
| Leave Type | Duration | Paid? | Funding |
|---|---|---|---|
| Annual Leave | 15 days/year | Yes | Employer |
| Sick Leave | 12 days/year | Yes | Employer |
| Maternity Leave | 26 weeks (first two children) | Yes | Employer/ESI |
| Paternity Leave | No statutory requirement | Varies | Employer policy |
| Bereavement | No statutory requirement | Varies | Employer policy |
Note: Complete termination information was not available in the research provided. Writer should verify all termination requirements, notice periods, and severance calculations.
Termination Types
Termination With Cause:
- Requires documented evidence of misconduct or performance issues
- Must follow due process including show cause notices and opportunity to respond
Termination Without Cause:
- Requires appropriate notice or payment in lieu
- Subject to specific procedural requirements under labour laws
Additional termination procedures, notice periods, severance calculations, and legal protections require verification with qualified legal counsel.
Note: Statutory holiday information was not available in the research provided. Writer should verify all public holiday requirements, regional variations, and holiday pay obligations.
India observes numerous national and regional festivals as public holidays, with significant variations across states. Common national holidays include:
- Republic Day (January 26)
- Independence Day (August 15)
- Gandhi Jayanti (October 2)
Complete statutory holiday calendar and pay requirements need verification.
Note: Onboarding requirements were not available in the research provided. Writer should verify all documentation, compliance, and setup requirements.
Required Documentation
Employment in India typically requires:
- Employment contract in local language where applicable
- PAN (Permanent Account Number) for tax purposes
- Aadhaar card for identity verification
- Bank account details for salary payments
- Educational certificates and experience letters
Compliance Requirements
- Labour law registrations: Various state and central labour law compliances
- Provident Fund registration: For eligible employees
- ESI registration: For covered employees
- Professional tax: State-specific requirements
Complete onboarding procedures, document requirements, and compliance timelines require verification with qualified legal counsel.
Worker Classification
India distinguishes between employees and independent contractors, with specific criteria determining classification:
- Employees: Subject to labour law protections, entitled to statutory benefits
- Contractors: Operate independently, responsible for own tax compliance
- Misclassification Risks: Can result in penalties, back payments, and legal liability
Cultural & Workplace Norms
Indian workplace culture emphasises:
- Hierarchy and respect: Traditional respect for seniority and authority
- Festival celebrations: Accommodation for diverse religious observances
- Work-life integration: Growing emphasis on flexible working arrangements
- Communication styles: Generally indirect and relationship-focused
Remote Work Considerations
Remote work has gained acceptance, particularly post-pandemic:
- Equipment provision: Employer responsibilities for necessary tools
- Working hours: Must still comply with labour law requirements
- Cross-border considerations: Tax and compliance implications for international remote work
What We Handle
Borderless AI manages:
- Employment contracts and local compliance
- Payroll processing and tax withholdings
- Statutory benefit registrations
- Labour law adherence
- Local language documentation where required
This guide provides general information only. Specific legal requirements should be verified with qualified legal counsel familiar with current Indian employment law.
Built-in benefits packages for India
When the world is your competition, it pays to incentivize new hires and existing alike. Borderless AI benefits packages typically inlucde:
Medical Insurance
Dental Insurance
Retirement Contribution
Life Insurance
Vision Insurance
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