Employing someone in India means matching national labour rules to the employee's state, establishment and actual duties. Start with that applicability decision, then assign separate owners for salary, tax, insurance and employment changes.
The most consequential distinctions are which employees qualify as statutory workers, which payroll filings require a separate payment, and which protections must be satisfied before dismissal.
Rules checked 16 October 2026.
Which employment rules apply to your hire?
India's four Labour Codes commenced on 21 November 2025. They cover wages, industrial relations, social security, and occupational safety, health and working conditions. Central rules followed in May 2026; the appropriate government, state rules and saved instruments still matter. Describing the Codes as awaiting implementation is outdated. Official announcement
For example, the Industrial Relations Code excludes mainly managerial or administrative roles from its worker definition. A technical employee does not automatically lose worker protection because their salary is high. Each Code has its own test. Worker definition
State rules also change. Karnataka's September 2026 amendment places establishments with at least ten workers already registered under the OSH Code within a Shops Act exemption. Establish whether that exemption applies before using the residual state's contract, leave or dismissal rules. Karnataka Gazette
Employer obligations at a glance
Use the detailed sections below to establish each duty's scope.
Contracts and the start of employment
Use written terms that identify the employer, work location, role, start date, pay, hours, leave, probation, notice and employment type. OSH-covered employers must issue appointment letters. Where Karnataka's residual Shops Act applies, its appointment order is due within 30 days of appointment. Its amended rules also prohibit retaining original employee certificates and require a service certificate within seven days of the employee's application. State amendment Check prescribed forms and applicable language requirements; an English global template does not establish compliance. Probation depends on applicable service rules, standing orders and terms, rather than one national duration. OSH duties, Karnataka Act
An indefinite contract and a genuine fixed-term contract have different exit consequences. Specify the term in writing; fixed-term status does not remove proportionate statutory benefits or permit inferior statutory treatment of comparable work. Employment categories
Separate registration from permission to start
General OSH establishment coverage ordinarily begins at ten workers, with additional employee-count language for registration and special activity exceptions. Section 3 gives a new covered establishment 60 days to apply, but also prohibits employing employees without registration. Check deemed registration for an existing registered establishment and the relevant procedure before relying on the filing window. OSH registration
ESI ordinarily has a separate ten-person establishment test; PF ordinarily starts at twenty employees. Employee eligibility is another test. ESIC's post-Code notice retains establishment registration within 15 days of applicability. Its employer guidance directs enrolment of insurable employees before employment. Failure to insure can expose the employer to recovery of benefit costs. ESIC notice, Employer guide
For salary-tax deduction, obtain or validate TAN and collect employee PAN, tax-regime information and supported salary/claim details. Under the 2026 rules, a non-government payer applies through Form 135 before deduction; the fallback application window is 30 days after the end of the first deduction month. State profession-tax registrations remain separate. Income-tax rules
Copyright in work created in the course of employment generally belongs first to the employer absent a contrary agreement. Earlier work and every commissioned deliverable do not automatically follow that rule. Identify background materials and obtain the necessary assignment or licence for rights the employer needs. A copyright assignment must be written and signed, identifying the work, rights, duration and territory; omitted duration and territory generally default to five years and India. Assignment formalities, Copyright ownership
Pay, working time and employment records
Select the current minimum-wage notification for the appropriate government, skill category, location and effective period. India has no single office salary that settles every employer's minimum-wage duty. Wage periods cannot exceed one month; monthly wages are ordinarily payable before the seventh day of the following month expires. Authorized deductions are subject to the Code's limits. Wage rules
For OSH-covered workers, the statutory ordinary daily limit is eight hours. Provide the weekly rest day and required working intervals; ordinarily covered workers cannot work more than six days in a week, subject to authorized exceptions. Overtime attracts at least double ordinary wages under the applicable Code provisions. Where Karnataka's residual Shops Act governs, it provides nine daily and 48 weekly hours, with its own overtime limits. That state rule is not permission to override an applicable OSH limit. Record actual hours, overtime approval and rest. Working conditions, State hours
Issue wage slips showing earnings, authorized deductions and net pay. Central Wages Rules require delivery on or before payment and generally five-year register retention. State-sphere employers must use their applicable forms and retention rules. Keep attendance, wage, overtime, leave and deduction records reconciled to bank payments. Central Wages Rules
Follow salary through reporting and payment
For tax year 2026 to 2027, the Income-tax Act 2025 and new forms apply. The employer estimates annual taxable salary and deducts income tax when paying it. Foreign payment of salary does not itself remove Indian withholding duties. Tax-authority guidance confirms the post-April 2026 salary-payment trigger. The ordinary non-government calendar separates these actions:
These are statutory calendar rules; use an official extension before moving a due date. A submitted statement does not prove the money reached government. Form 130 is the annual salary-tax certificate, separate from the monthly payslip. Provide the perquisite/profits-in-lieu statement in Form 130's relevant columns where annual statutory salary is no more than ₹150,000, and Form 123 above that amount. Collect Form 124 evidence for applicable employee claims when estimating taxable pay. 2026 tax rules, Certificate guidance
For covered PF members, the standard employee and employer contributions are each 12%, subject to notified classes and membership rules. Allocate the employer pension share correctly and include employer-only deposit-linked insurance and applicable administration charges. Submit the monthly ECR and separately remit amounts within 15 days after month-end; reconcile member credits. Do not charge employer liabilities to the employee. 2026 PF Scheme
ESI ordinarily involves 3.25% employer and 0.75% employee contributions for eligible insured wages, with a current ordinary employee wage ceiling of ₹21,000 monthly. Upload employee contributions and pay the liability within the applicable monthly rule, ordinarily 15 days after month-end under the saved regulations. ESI supplies benefits subject to eligibility; it does not replace every employer-paid leave entitlement. Social Security Rules, ESIC coverage
Add the state liabilities
Karnataka's salary profession tax follows where the employee works, even when another state's head office pays salary. Register as an employer within the statutory 30-day commencement window. Taxable monthly salary of ₹25,000 or more generally attracts ₹200, with ₹300 in February, subject to exemptions. File monthly Form 5-A and pay by the twentieth of the next month; retain the separate annual reconciliation obligation. State tax guidance, Profession Tax Act
A scheduled Karnataka business also needs its own enrolment, distinct from employee-tax registration. Its ordinary annual own-tax deadline is before 30 April; new commencement and entity/branch classifications require their own check. The 2026 deemed-return concession for enrolled persons who paid does not abolish salary-employer returns. 2026 amendment
Maharashtra likewise separates employee PTRC and entity PTEC. Its 2026 circular confirms a 15 March deadline for March monthly and annual PTRC returns. Establish the assigned periodicity and payment calendar rather than importing Karnataka's twentieth-day rule. Maharashtra circular
Welfare funds are additional liabilities. Covered Maharashtra workers on the June/December register attract ₹25 employee and ₹75 employer half-yearly, with Form A-1 and payment before 15 July/15 January. Karnataka's covered employees attract ₹50 employee and ₹100 employer annually, payable by 15 January following the year. Register with the relevant Board and establish employee exclusions before deducting. Maharashtra guidance, Karnataka Board
For routine employee data, maintain a privacy policy, limit sensitive-data collection to lawful necessary purposes, obtain applicable consent and protect access, retention and disclosures. Apply these controls to payroll, health records and monitoring. The main DPDP processing duties are scheduled for May 2027; existing privacy/security rules still matter now. Current data rules, Commencement notification
Leave, benefits and ongoing employer duties
For OSH-covered workers, annual paid leave ordinarily accrues at one day per twenty days worked after at least 180 days in the calendar year. Track carry-forward and encashment. Residual state rights differ: Karnataka provides twelve days' paid sickness, accident or reasonable-cause leave per continuous-service year. Maharashtra's Shops Act provides eight casual days and its own earned-leave qualification and paid festival holidays. Determine the applicable layer before setting the leave policy. OSH leave, Karnataka leave, Maharashtra Act
ESI sickness cash benefit is insurance-funded, with contribution qualifications, ordinarily 78 contribution days in the corresponding period, and a 91-day limit across two consecutive benefit periods. It is distinct from employer-paid sick leave and has special first-period rules. Benefit eligibility
Administer family leave and return rights
The maternity chapter ordinarily covers shops and establishments with ten or more employees. An eligible woman generally needs 80 days worked in the preceding twelve months and receives 26 weeks, reduced to twelve where she has two or more surviving children. Identify whether the employer or ESIC pays: insured maternity benefit has separate contribution conditions. Maternity provisions
Legal adoptive and commissioning mothers receive twelve weeks from handover, regardless of the adopted child's age. The Supreme Court removed the adopted-child age restriction in March 2026. The national private-sector framework does not create a general paternity or gender-neutral parental-leave duration; applicable additional contractual or sector rights still count. Supreme Court judgment
Disclose maternity benefits at appointment and protect lawful absence and return terms. For employer-paid maternity benefit, pay the prenatal amount in advance on proof and the postnatal amount within 48 hours of proof. Nursing breaks continue until the child is fifteen months old; the chapter's crèche requirement applies at fifty employees. On the required proof, miscarriage or medical termination attracts six weeks, tubectomy two weeks, and specified pregnancy-related illness up to an additional month. Employer duties
Track gratuity eligibility and nominations during employment. For covered shops and establishments, ordinarily at ten employees, qualifying service generally requires five years; death, disablement and fixed-term expiry have exceptions. The ordinary benefit is fifteen days' last-drawn wages for each completed year or part exceeding six months, subject to statutory limits and special calculations.
Statutory bonus generally applies to covered establishments with twenty or more persons. Eligible employees need at least thirty days' work and wages within the appropriate government's notified limit. The statutory basis runs from a minimum 8⅓% to a maximum 20%, with prescribed calculation limits; payment is ordinarily within eight months after accounting-year close. A discretionary performance bonus does not replace this duty. Gratuity rules, Bonus provisions
Maintain safe work and required incident procedures. Prevent gender discrimination in recruitment and equal-work pay. Establish a sexual-harassment Internal Committee at ten employees, train staff and administer complaints confidentially; smaller workplaces use the Local Committee route. Publish and register the disability equal-opportunity policy, and provide the more detailed facilities and liaison arrangements required for private establishments at twenty employees. Workplace prevention, Disability policy
For covered industrial establishments, establish the grievance committee at twenty workers; a works committee at one hundred requires the government's order. Standing-orders coverage has a separate 300-worker threshold. These tests use workers, rather than every person on payroll. Representation duties
Changing terms and ending employment
Identify the legal reason, worker status, service and protected circumstances before choosing notice or payment. Listed service-condition changes for IR workers generally require prescribed notice and a 21-day waiting period. Contractual consent and applicable agreements must also be addressed. Changes to conditions
These branches come from the IR Code. Unjustified worker dismissal can lead to reinstatement or other Tribunal relief. Where Karnataka's residual Shops Act applies, dismissal after six months generally also needs reasonable cause and one month's notice/pay, subject to its proven-misconduct exception. State protection
Keep payment clocks separate. Retrenchment compensation is due at retrenchment; for removal, dismissal, retrenchment or resignation, wages are ordinarily due within two working days; qualifying gratuity is due within 30 days of becoming payable. Applicable statutory exceptions remain relevant. A routine monthly settlement cycle cannot replace these duties. Issue applicable service documents, update social-security records and preserve payment evidence. Final wages, Gratuity payment
Three situations that change the employer's action
1. A Bengaluru employee is paid by an overseas or out-of-state payroll team. The payment location does not settle Karnataka salary profession tax. Establish the local employer registration, monthly Form 5-A and payment alongside national salary withholding and quarterly reporting. Assign separate evidence of payment for each liability. Location rule
2. An establishment becomes ESI-covered and plans to enrol staff on day fifteen. The establishment filing window and employee insurance duty differ. Arrange eligible employee enrolment before work; an injury before paperwork is completed can create employer benefit-recovery exposure. The changed action is to resolve insurance at engagement, rather than schedule all registration work for the last filing day. Registration notice, Insurance duty
3. A qualifying one-year fixed-term appointment expires. Genuine expiry can be excluded from retrenchment while still triggering gratuity for an eligible fixed-term employee. Check both rules instead of assuming that exemption from retrenchment means no statutory exit benefit. Determine and pay qualifying gratuity within thirty days of becoming payable; identify the wage deadline from the actual exit classification separately. Expiry exclusion, Fixed-term gratuity
These are illustrative situations, not accounts of actual disputes.
Managing these obligations through an EOR
An employer of record can administer the employment agreement, payroll, deductions, benefits and employment records within the agreed arrangement. Borderless AI describes these services and lists India among its country offerings. Confirm the worker, state, activity and allocation of responsibilities for the proposed arrangement. India service, EOR services
Check labour-supply rules alongside that service assessment. The OSH contract-labour Part uses a fifty-contract-worker test, including a preceding-twelve-month lookback, and licensing for covered contractors. It restricts core-activity deployment subject to statutory exceptions; certain regular contractor employees are excluded from its contract-labour definition. A five-year contractor licence is not a five-year employee-assignment limit. Supply restrictions
The client still supplies accurate role, location, hours and management information and must coordinate changes and exits. An EOR arrangement does not automatically authorize regulated work, remove tax-presence exposure or transfer every liability.
Questions employers ask about employment law in India
Do the same rules apply across India?
National Codes establish major duties, but state law, the appropriate government, activity, headcount and worker category change the answer. Map those facts before issuing terms.
Can probation remove statutory rights?
A probation clause does not remove applicable wage, insurance, leave or protected-dismissal rules. Use the relevant service rules and contract rather than a presumed national probation duration.
Does submitting payroll returns finish compliance?
No. Check return acceptance and actual remittances against employee documents and member credits. Include employer contributions and state liabilities.
Can an employer dismiss by paying notice?
Notice payment satisfies only one part of the process. Worker status, protected circumstances and state rules can change the permitted route.
What should an employer establish before using an EOR?
Confirm who legally employs the worker, which registrations and labour-supply rules apply, who pays each liability, and what information and decisions the client retains.
For an India employment arrangement, talk to Borderless AI about the proposed worker, location and responsibilities. Our EOR services include employment agreements and payroll administration; suitability depends on the specific arrangement.
