Employer of Record in India

An Employer of Record in India hires your team on your behalf. You manage day-to-day work. The EOR becomes the legal employer and handles compliant contracts, payroll, taxes, and benefits under Indian law. You can hire in India without setting up a local entity.

Rivermate acts as your EOR in India, helping you hire fast and stay compliant. Learn more at Rivermate: https://rivermate.com/employer-of-record

How an Employer of Record (EOR) Works in India

• You choose the candidate and compensation. The EOR confirms eligibility, runs checks when needed, and issues a locally compliant offer and employment contract.
• The EOR onboards the employee and registers them for required statutory programs. This includes provident fund, state insurance where applicable, professional tax, and labor welfare fund where applicable.
• Monthly payroll runs in Indian rupees with compliant tax withholding. The EOR remits TDS, provident fund, ESI, and other statutory contributions. Employees receive payslips and Form 16 for tax purposes.
• The EOR administers leave, holidays, expense reimbursements, and statutory benefits. Policies align with state Shops and Establishments rules and national laws.
• The EOR maintains mandatory registers and filings. This covers PF and ESI filings, TDS returns, statutory bonus, and gratuity provisioning.
• For foreign nationals, the EOR supports visa sponsorship and FRRO registration when the role and salary meet Indian requirements.
• The EOR manages employee relations and offboarding. This includes notice procedures, final settlements, leave encashment, gratuity where eligible, and relieving letters.
• Using an EOR does not create a local legal entity for you. It also does not decide your permanent establishment status. That depends on your business activities in India.

Benefits of Using an EOR for Hiring in India

• Hire in weeks without opening an entity
• Reduce compliance risk and penalties
• Pay teams on time with accurate taxes and contributions
• Offer market-fit benefits that help you attract talent
• Control costs with a single monthly invoice
• Scale up or down with flexible contracts
• Get local HR support in Indian employment matters
• Keep focus on your product and customers

Choosing between an EOR and PEO in India

A PEO in India supports HR and payroll, but you still need your own Indian entity. Co-employment models used in some countries do not map cleanly to Indian law. An EOR is the legal employer, so you can hire without an entity.

Use an EOR when:

• You do not have an Indian entity
• You want to test the market or hire a small team fast
• You need a compliant stopgap while you set up a subsidiary

Use a PEO when:

• You already have an Indian entity
• You want outsourced HR, payroll, and benefits administration while you keep employer of record status

How EORs protect your company’s IP in India

• Strong contracts: The EOR issues locally enforceable employment agreements with confidentiality, invention assignment, and non-solicit clauses that name your company as the IP owner.
• Clear assignment chain: Employees assign all work product to the EOR, and the EOR assigns it to you through a back-to-back deed. This ensures clean title to IP.
• Defined scope: Contracts define background IP, foreground IP, moral rights waivers where available, and ongoing cooperation for filings.
• Process controls: The EOR enforces need-to-know access, secure device policies, and return of materials at offboarding.
• Documentation: The EOR collects invention disclosures and executes assignment and waiver documents that meet Indian legal and stamp duty requirements.
• Data security: The EOR supports secure data handling, approved tools, and transfer restrictions to protect code and trade secrets.
• Enforcement support: The EOR maintains records and assists with evidence and notices if you need to enforce your rights.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in India includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in India.

India's tax system requires employers to fulfill social security and payroll tax obligations, including contributions to EPF (12% of basic salary, reduced to 10% for certain establishments), ESI (employer contributes 3.25% of gross salary), and potentially Labour Welfare Fund, depending on the state. Employers must also deduct income tax at source (TDS) from employee salaries based on applicable slabs and remit it to the government, issuing Form 16 by June 15 annually.

Key tax rates and deadlines include:

Employees can claim deductions under sections like 80C (up to INR 1.5 lakh), 80D for medical insurance, HRA, LTA, and interest deductions under 80TTA/80TTB. Foreign workers' tax liabilities depend on residency status and applicable DTAAs, with special considerations for expatriates and foreign companies, including transfer pricing and income sourced in India. Compliance with these regulations is essential to avoid penalties.

India's salary landscape in 2025 is highly industry- and region-dependent, with metropolitan cities offering higher compensation. Typical salary ranges for key roles vary widely; for example, Software Engineers earn between INR 4,00,000 and 25,00,000 annually, while Data Scientists can earn up to INR 35,00,000. Industry-specific benchmarks highlight the importance of skills and experience in determining pay.

Minimum wages are governed by state-specific regulations under the Minimum Wages Act, with rates differing based on job category and location. For instance, unskilled workers may earn around INR 350 daily, translating to roughly INR 9,100 monthly, but these rates are subject to change. Employers must ensure compliance with regional minimum wages.

Compensation packages often include bonuses and allowances such as statutory bonuses, performance incentives, Dearness Allowance (DA), House Rent Allowance (HRA), and Leave Travel Allowance (LTA). Salary payments are predominantly made via direct bank transfers on a monthly cycle, with statutory deductions like TDS, Provident Fund, and ESI mandatory. Emerging trends indicate rising demand for tech skills, remote work, and skills-based pay, contributing to moderate overall salary growth in sectors like e-commerce, fintech, and renewable energy.

Indian labor laws mandate various leave types to promote employee well-being, including annual vacation, public holidays, sick leave, and parental leave. Employers must adhere to statutory minimums and stay updated on regulations to ensure compliance and foster a positive work environment.

For annual leave, employees typically become eligible after 240 days of service, with accrual rates of 1 day per 20 days worked for adults and 1 day per 15 days for under-18s. The minimum entitlement ranges from 12 to 18 days annually, with options for carry-forward and encashment in many states. Public holidays include national observances like Republic Day, Independence Day, and Gandhi Jayanti, with regional holidays varying by state. Employees working on holidays are usually entitled to compensatory leave or overtime pay.

Sick leave policies vary by state and company, generally offering 5 to 14 days, often requiring medical certification for extended absences. Maternity leave is governed by the Maternity Benefit Act, providing 26 weeks of paid leave for eligible women, while paternity and adoption leaves are typically offered as company benefits without statutory mandates. Additional leave types such as bereavement, study, sabbatical, marriage, and compensatory leave are provided based on company policies to support employee needs.

India's employee benefits landscape combines statutory obligations with voluntary offerings to attract and retain talent. Mandatory benefits include Provident Fund (12% employer and employee contributions), Employee State Insurance (contributions vary by state), gratuity (for employees with ≥5 years service), maternity leave (26 weeks), minimum wages, and paid leaves. Employers must also provide certain statutory bonuses and adhere to leave policies.

Beyond legal requirements, companies often offer optional benefits such as health insurance (coverage amounts typically INR 300,000–INR 1,000,000), life insurance, flexible work arrangements, professional development, transportation allowances, and employee stock options (ESOPs). Health insurance plans usually cover dependents and include features like outpatient and maternity coverage, with employers bearing most premium costs.

Retirement benefits extend beyond the Provident Fund, with options like the National Pension System (NPS), superannuation funds, and gratuity. Benefit offerings vary by industry and company size; tech firms tend to provide comprehensive packages including ESOPs and flexible work, while manufacturing and SMEs focus more on core statutory benefits and basic perks.

Employment agreements in India are vital for establishing clear, legally compliant employer-employee relationships. They outline terms such as job role, salary, working hours, leave policies, confidentiality, termination conditions, and governing law, ensuring both parties' rights and obligations are protected. Different types include indefinite (permanent), fixed-term, probationary, part-time, and consultancy agreements, each suited to specific employment scenarios.

Key clauses must be included for enforceability, such as parties' details, job description, compensation, working hours, leave, confidentiality, termination, and intellectual property rights. Probation periods typically last 3-6 months, allowing employers to assess suitability, with possible extensions. Confidentiality and non-compete clauses safeguard business interests; however, non-compete enforceability is limited and depends on reasonableness.

Employment contract modifications and terminations require written agreement and adherence to legal notice periods and grounds. Termination can be for cause or without cause, with employees generally entitled to severance pay after five years of service. Employers must ensure fair procedures to avoid wrongful termination claims.

Remote work in India has grown significantly, driven by technological progress and changing workplace norms. While there is no specific nationwide law for remote work, existing labor laws apply similarly to on-site employees, emphasizing employment contracts, working hours, leave policies, compensation, workplace safety, and tax considerations. Employers must ensure compliance with statutory limits, provide equitable benefits, and address safety and ergonomic concerns, especially when employees work from different states.

Key legal aspects include adherence to the Factories Act, Shops and Establishments Acts, Minimum Wages Act, and tax regulations. Remote employees are entitled to the same leave benefits and wages as on-site staff, with employers responsible for maintaining safe work systems and ensuring fair compensation.

Employment termination in India is governed by laws such as the Industrial Disputes Act, 1947, and state-specific Shops and Establishments Acts. Key considerations include notice periods, severance pay, grounds for termination, procedural compliance, and employee protections. Employers must adhere to legal protocols to avoid disputes, penalties, or reputational damage.

Notice Periods vary by employee category:

Severance Pay applies to workmen with ≥1 year of continuous service:

Grounds for Termination include misconduct (with a fair process) or economic reasons like restructuring. Termination with cause requires disciplinary procedures, while without cause must follow principles like "last in, first out" unless justified otherwise.

Procedural Steps for lawful termination:

• Issue show cause notice (if misconduct)
• Conduct fair inquiry
• Issue a termination letter with reasons and effective date
• Settle dues (salary, leave encashment, severance)
• Maintain detailed documentation

Employee Protections allow challenging wrongful dismissal, with courts able to order reinstatement or compensation. Employers should ensure compliance and seek legal advice to mitigate risks associated with employee terminations.

India's economy is experiencing a notable increase in freelancing and independent contracting, driven by the demand for work flexibility and access to global talent. For employers, understanding the legal distinctions between employees and independent contractors is crucial to avoid misclassification, which can lead to legal and financial repercussions. Key factors in determining the nature of the relationship include the degree of control, integration into business operations, economic independence, mutual obligations, provision of tools, and payment structure.

Contracts with independent contractors should be well-drafted, including clear terms on scope, payment, termination, confidentiality, and intellectual property (IP) rights. It's essential to assign IP rights to the client to avoid ownership disputes. Contractors manage their own taxes, such as income tax and GST, and are not covered by employer-sponsored benefits. Common sectors employing independent contractors include IT, creative services, consulting, media, education, healthcare, and professional services, where specialized skills and project-based work are prevalent.

India's expanding economy attracts foreign professionals, necessitating understanding of visa and work permit regulations. The most common work visa types include:

Employers must ensure compliance with application procedures, which involve submitting relevant documentation, sponsorship proof, and adhering to renewal timelines. The process emphasizes legal adherence to avoid penalties and ensure smooth employment operations.