Employer of Record in India

How an Employer of Record works in India

An Employer of Record (EOR) hires employees on behalf of foreign clients, thus allowing them to employ talent without setting up a legal entity in India. While the foreign company sources the candidates as well as manages their daily work, the EOR acts as the legal employer and provides a compliant employment contract, completes the onboarding process and ensures adherence to the local legislation throughout the employment lifecycle.

Rivermate’s EOR service in India combines in-country HR expertise and extensive first-hand knowledge with a network of local partners, enabling access to competitive employee benefits. The Rivermate platform provides a central hub for managing every aspect of the employment relationship, making it easier for companies to hire compliantly in a foreign market.

India labor market: At a glance

The hiring market
Greatest hiring activity:	Major employment hubs (Mumbai, Delhi, Chennai, Pune, Hyderabad). Bangalore is particularly strong for technology roles.
Hiring timelines:	Local: around 1 week, depending on job type, local compliance implications and potentially regional holidays. Foreign national: 2-3 months for immigration procedures.
In-demand sectors:	Software development, AI, engineering, shared services. Setup of Global Capability Centers (GCC) is common.
Sectors with skills shortages:	Automotive, renewable energy, textiles, agriculture

The salary market
Employer tax contributions:	EPF contribution: 12% on EPF wages (base + dearness allowance + retaining allowance) EDLI: 0.5% on EPF wage
	EPF admin: 0.5% on EPF wage ESI contribution: 3.25% on ESI wages Labor Welfare Fund: variable Statutory wage ceilings and other conditions apply.
Minimum wage:	Disparate across regions, set both by Central and individual State Governments and periodically reviewed. Employers must pay at least the higher of the two minimum wages defined by the appropriate governments (Central or State). Only indicatively, Delhi’s minimum wage for a skilled worker in 2025 was set at ₹22,411/month.
Average gross monthly salary:	Regular employees: average ₹22,699 with extensive variability across sectors and regions.
High-rank white-collar employees in major cities may reach ₹45,000 - ₹150,000/month
Income tax brackets:	Dual progressive tax regime applicable, both subject to tax exemptions and allowances (less so in the New Tax Regime).

New Tax Regime - default, annual tax brackets:
Income bracket	Tax %
0 - ₹400,000	0%
₹400,000 - ₹800,000	5%
₹800,000 - ₹1,200,000	10%
₹1,200,000 - ₹1,600,000	15%
₹1,600,000 - ₹2,000,000	20%
₹2,000,000 - ₹2,400,000	25%
₹2,400,000+	30%

Old Tax Regime, annual tax brackets:
Income bracket	Tax %
0 - ₹250,000	0%
₹250,000 - ₹500,000	5%
₹500,000 - ₹1,000,000	20%
₹1,000,000+	30%*

What will it really cost to hire in India?

Salaries in India typically follow a 12 payroll cycle schedule, with no statutory requirement for 13th or 14th payments. They are generally paid on the last day of the month or in the first few days of the following month, mostly via direct bank transfers.

Under applicable rules, wages must be paid before the 7th day of the following month. Statutory payments (employee deductions and employer charges) are typically due by the 15th of the following month (EPF) or the 21st of the following month (ESI).

Base salary

An employee’s Basic Wage in India includes their basic pay plus a cost-of-living Dearness Allowance (DA) and any Retaining Allowance (RA). DA is an adjustment paid to employees to account for the impact of inflation on their purchasing power, typically as a percentage of base pay, subject to periodic review, but with no statutory minimums or maximums for private-sector employees. RA is paid to retain employees in seasonal occupations during off-seasons. With the exception of these two, other allowances are typically excluded from the basic wage definition.

Employer taxes and contributions

The Employees’ Provident Fund (EPF) contribution in India is a social security pension-type contribution funded both by the employer and the employee at a rate of 12% each, applicable on “EPF wages” (basic wage, dearness allowance, any retaining allowance).

Unlike the employee’s 12% EPF which goes to their individual EPF account, the 12% paid by the employer is split between the employee’s EPF (3.67%) and the centralized Employees’ Pension Scheme (EPS, 8.33%).

Additionally, a statutory charge of 0.5% for Employees’ Deposit Linked Insurance (EDLI) and 0.5% for administrative charge for EPF in certain cases is applicable.

For standard EPF coverage, a statutory wage ceiling of ₹15,000 per month applied before 17 September 2026. This amount has recently been revised to ₹25,000. Therefore, an employer is not generally required to contribute above a threshold of ₹25,000 unless a higher-wage contribution rule applies, as is the case with expats/international workers which are subject to different rules.

However, if an employer voluntarily agrees to contribute to the full actual basic salary, the 8.33% contributed to the EPS remain capped but the 3.67% payment to the individual employee’s EPF are levied on the actual base salary.

In addition to the EPF, some employers also mandatorily contribute to the Employee State Insurance (ESI). This statutory social-insurance scheme provides medical care and other benefits (including sickness, maternity and disability) to the employees covered by the scheme whose wages do not exceed ₹21,000.

Where applicable, the employer contributes 3.25% of the wages each month (the employee pays 0.75%). Employees exceeding the monthly threshold are generally outside the scope of the scheme and no contributions are paid for them. Worth noting is that the ESI contribution requirement applies to non-seasonal factories and commercial establishments employing at least 10 workers.

Statutory benefits

Under the Code on Wages, India maintains a mandatory Statutory Bonus payable to employees earning below a certain wage threshold defined in an official notification (currently ₹21,000 per month combined basic pay, dearness allowance and retaining allowance). This bonus must be paid annually to establishments employing at least 20 people on any day during the accounting year. Employees are eligible if they worked at least 30 days in that accounting year. A minimum amount equivalent to 8.33% of wages (calculated on a capped base) is guaranteed.

Additionally - and important for budgeting purposes - India mandates a gratuity pay which is a statutory liability that is normally accrued or provided for rather than paid monthly.

Certain states also require state-specific payments, such as the Labor Welfare Fund (LWF) contribution, which is used by state boards to fund worker social costs (healthcare, education, etc.). Individual states set the nominal amounts payable and only some states have mandated such payments.

India’s regular working hours are set at 48 hours per week and limited to 8 hours per day. Public and festival holidays vary by state and company. Employers must observe holidays required under applicable legislation and publish the list of observed holidays each year.

Some statutory benefits payable in India include:

• Annual leave: Different types of paid leave, including Earned Leave (EL) or Privilege Leave (PL). Typically, employees who have worked at least 180 days in a calendar year are entitled to 1 day of paid leave for every 20 days worked. Generally, the entitlement ranges from 15 to 21 days of paid leave per year, depending on the state rules applicable. Leave can be carried forward subject to certain limitations.
• Maternity benefit: Paid leave of 26 weeks during pregnancy and childbirth.
• Paid sick leave and casual leave: These two types of leave overlap, with casual leave typically used for short-term absences, including minor sickness, while sick leave is usually for illness or injury. Both vary according to state and establishment.
• Compensatory Off: Leave granted when an employee works on an off day or public holiday, in lieu of a day off.

Other types of non-mandatory leave may also apply in certain cases. Overtime is typically paid at double rates.

Additional benefits

In addition to mandatory benefits, employers in India often offer supplementary benefits to enhance compensation packages. These packages vary widely across sectors and companies but often include private health insurance for locals and expats not covered by ESI, due to the perceived weakness of the public healthcare system.

Other optional benefits typically provided include meal allowances, transportation support and sports and wellness benefits.

Calculate employment costs

Hiring in India in practice

Market condition	What an employer needs to know
Talent availability	One of the globally largest and most diverse talent pools; hiring hubs typically in major metros (Mumbai, Delhi, Chennai). Bangalore is positioned as India’s major technology hub, along with Hyderabad and Pune.
Top-paying sectors	Digital skills (AI/ML, data science, cybersecurity). Most recently, heightened activity in the military and construction sectors, as well as import-export.
Workplace culture	Significant variation. Clear communication, defined roles, hierarchical structures, and awareness of regional and religious diversity are important.
Key employer challenge	Disparate employment legislation across regions. Steady salary increases (about 9% per year), with some sectors (tech and specialized manufacturing) showing even higher growth. Notice period management.

India offers foreign companies access to a large and increasingly skilled talent pool, along with competitive employment costs. These factors - alongside India’s large domestic market and growing tech and business-services capabilities have contributed to continued investment and expansion by multinationals. This is evident through the rapid expansion of global capability centers (GCCs).

However, employers must navigate fragmented national and state-level employment requirements, with obligations varying across states, establishments, industries and work arrangements.

Our local HR expert, Sakshi Jain, highlights several key issues employers must be aware of when hiring in India:

• State and local requirements: Different states in India have different compliance regulations but even within a single state, there may be differences in the applicable rules and regulations from one city to another.
• Employment structure: The nature of the engagement and the employee’s role can affect the applicable tax, social security and regulatory requirements. Employers should be particularly detailed with job descriptions in order to evaluate potential implications.
• Insurance and risk: Insurance and statutory compensation requirements may add to employment costs, particularly for employees working in higher-risk or on-site/industrial roles.
• Foreign national hires: Expat hires face strict regulatory scrutiny during immigration procedures.

What you should know when hiring expats in India

In practice, expats are usually engaged for fixed-term durations such as project setup, training or knowledge transfer.

India’s Employment Visa is primarily intended for highly skilled or qualified foreign professionals. The visa is generally granted for a period of one year (or the duration of the contract, whichever is shorter), subject to rules and eligibility requirements.

Employment visas are not ordinarily granted to applicants in positions for which qualified local nationals are available. In order for the application to be successful, candidates should also be hired for a minimum annual salary, which periodically changes. The applicant’s nationality, role, place of employment, sponsoring entity and supporting documentation can affect the requirements and processing time. Usually, work permit procedures take about 2-3 months.

Compliance risks employers must know about

Mandatory breakdown of salary elements

In India, salary packages must be itemized into distinct elements (either mandatory or optional) on both the employment contract and monthly payslips. Beyond basic pay, Dearness Allowance (DA) and Retaining Allowance (RA), optional components such as House Rent Allowance (HRA) and Leave Travel Allowance (LTA) must be shown as separate pay elements. This separation is essential because different elements may feed into the calculation of contributions and taxes differently.

Probationary periods

Probationary periods typically range from three to six months and can be extended if required. Unlike in some other jurisdictions, where employment seamlessly converts after the probation period with no further action required, Indian labor practice requires the employer to issue a written confirmation letter confirming permanent status.

Terminations and severance

With a termination-related legal framework defined at both the central and state levels, terminating an employee in India requires strict adherence to procedure, contractual notice terms and legal grounds. Subject to definition in the individual employment contract, termination notice periods range from 30 to 90 days and depend on company policy, seniority and role.

Particular care must be exercised by employers who initiate redundancy (“retrenchment”) processes. During retrenchment, employers must give at least one month’s written notice. Employees who have worked for at least one year are also eligible for severance, the amount of which depends on the length of service and the worker’s average pay. Eligible employees are also due gratuity during terminations, as well as earned leave encashment (accumulated but unused leave).

Benefits of hiring employees through an EOR in India

If you are considering hiring a candidate in India or exploring the option of setting up a small team there, you may have considered opening your own legal entity in the country. However, this will require you to navigate complex, fragmented administrative procedures, which can be difficult without local assistance.

An EOR, like Rivermate, is an alternative option. Rivermate can hire your employees in India using an existing entity. With local expertise, Rivermate manages the full employee lifecycle while you stay confident in compliance with complex laws.

Ready to hire in India?

Hiring in India involves much more than finding the right candidate. You can rely on Rivermate to handle the complexities of India’s fragmented employment legislation so that you can hire with confidence.

Talk to an India Hiring Expert

Sources:
National Skill Gap Study for High-Growth Sectors
The Code on Wages 2019
National Statistics Office: Labor Market Dynamics in Million-plus Cities
MoSPI Periodic Labour Force Survey (PLFS) Annual Report
PwC: India Taxes on Individual Income
Cabinet Approves Higher EPFO Wage Ceiling of Rs. 25,000, Expanding Mandatory Coverage
Deloitte: India 2026 Average Increment