Employer of Record in India

An Employer of Record (EOR) in India legally employs your team on your behalf. Think of it as a simple way to hire in India without setting up your own local entity. This means the EOR handles all the legal and HR responsibilities that come with employment. You get to manage your team's day-to-day work, while the EOR takes care of the complex administrative tasks. If you want to hire talent in India, an EOR like Rivermate can make it happen quickly and compliantly.

How an Employer of Record (EOR) Works in India

Using an EOR in India simplifies your expansion. Here is how the process typically works:

1. You Find the Talent: You recruit and select the candidate you want to hire in India.
2. The EOR Hires Them: The EOR legally hires the employee through a local, compliant employment contract.
3. Onboarding Begins: The EOR manages the entire onboarding process. This includes everything from collecting necessary documents to setting up payroll.
4. We Handle HR and Legal: The EOR takes care of payroll, taxes, benefits, and ensures compliance with India's labor laws. You can find more about these regulations from the Ministry of Labour & Employment.
5. You Manage Your Team: You focus on your employee's daily tasks, projects, and performance. They are an integrated part of your team, just like any other employee.

Why use an Employer of Record in India

Expanding your team to India opens up a world of skilled talent. An EOR makes this process straightforward and secure. It removes the major hurdles of global hiring, letting you focus on growing your business.

• Enter the Market Faster: You can hire employees in India in a matter of days. This avoids the months it can take to establish a legal entity.
• Ensure Full Compliance: India has a complex web of central and state-level labor laws. An EOR understands these laws, from provident fund contributions to professional tax. This keeps you compliant with authorities like the Employees' Provident Fund Organisation.
• Reduce Costs: Setting up a subsidiary in India is expensive. An EOR saves you from high legal fees, setup costs, and the administrative burden of running a local company.
• Offer Competitive Benefits: EORs can provide your employees with access to comprehensive benefits packages, including health insurance and retirement plans. This helps you attract and retain top talent.
• Minimize Risk: The EOR assumes the legal responsibility for your employees. This protects you from the risks associated with non-compliance in a foreign country.

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.

Hiring in India is dynamic and growing. The country shows strong hiring intent, especially in sectors like IT, finance, energy, and healthcare. Many companies are embracing remote and hybrid work, creating more flexible opportunities across the nation. As you look to hire in India, it's important to understand the local employment laws to ensure a smooth and compliant process.

Employment contracts & must-have clauses

A written employment contract is essential for hiring in India. It protects both you and your employee by clearly defining the terms of employment. While there's no standard template, every contract should be in a local language and include these key clauses:

• Job Description: Clearly state the employee's title, roles, and responsibilities.
• Compensation: Detail the salary, bonuses, and any other benefits.
• Working Hours: Specify the daily and weekly work schedule.
• Leave Policy: Outline the annual, sick, and other leave entitlements.
• Probation Period: Define the length and terms of the probationary period.
• Confidentiality: Protect your company's sensitive information.
• Termination: Explain the conditions for ending the employment, including notice periods.
• Governing Law: State that the contract is governed by Indian law.

Probation periods

In India, a probation period allows you to assess a new employee's performance before confirming their permanent employment.

• Duration: Probation periods typically last from three to six months. For some senior roles, it may extend up to a year.
• Extension: You can extend the probation period if you need more time to evaluate the employee, but this should be specified in the employment contract.
• Termination: During probation, you can terminate an employee with a shorter notice period, usually between one to two weeks.
• Confirmation: At the end of the probation period, you must provide a written confirmation to the employee to make them a permanent employee.

Working hours & overtime

Standard working hours in India are regulated to ensure employee well-being.

• Standard Hours: A typical work week is 48 hours, with a maximum of 9 hours per day.
• Breaks: Employees are entitled to a 30-minute break after five hours of continuous work.
• Overtime: Any work beyond the standard 9 hours a day or 48 hours a week is considered overtime.
• Overtime Pay: You must pay employees double their regular hourly rate for any overtime work.

Public & regional holidays

India's diverse culture is reflected in its public holidays.

• National Holidays: There are three national holidays observed nationwide:
  • Republic Day (January 26)
  • Independence Day (August 15)
  • Gandhi Jayanti (October 2)
• Regional Holidays: Each state has its own list of regional holidays based on local festivals and events.
• Total Holidays: Most companies offer between 10 to 14 public holidays per year, depending on the state and company policy.

Hiring contractors in India

Hiring independent contractors in India can seem like a flexible option, but it comes with risks. The main challenge is worker misclassification. If Indian authorities determine that a contractor is treated like an employee, your company could face penalties, including back taxes and fines.

An Employer of Record (EOR) can help you avoid these risks. An EOR legally employs workers on your behalf, ensuring full compliance with local labor laws. This means the EOR handles:

• Payroll and Taxes: The EOR manages all payroll processing and tax deductions.
• Benefits: Your team in India receives statutory benefits like health insurance and retirement contributions.
• Compliance: The EOR ensures that all employment contracts and practices comply with Indian regulations.

By partnering with an EOR, you can hire talent in India safely and efficiently, without the legal complexities of hiring contractors directly.

In India, handling compensation and payroll means navigating a system with both fixed and variable components. Your employee's pay includes their basic salary, various allowances, and potential performance-based bonuses. It also involves mandatory contributions from both you and your employees to social security funds. Think of it as a partnership where both sides contribute to a safety net.

Payroll cycles & wage structure

In India, the payroll cycle is typically monthly, with employees paid on a consistent day each month. The wage structure is more than just a base salary. It's a combination of elements that make up an employee's total compensation, often called "Cost to Company" (CTC).

A typical salary structure includes:

• Basic Salary: This is the fixed part of the salary and usually makes up 40% to 50% of the total compensation.
• Allowances: These are additional payments for specific needs. Common allowances include House Rent Allowance (HRA) to help with housing costs and Dearness Allowance (DA) to offset inflation.
• Variable Pay: This portion is often tied to performance, either for the individual or the company, and includes bonuses and incentives.

Overtime & minimums

The standard work week in India is 48 hours. If an employee works more than these hours, you must pay them overtime. The overtime rate is typically double the employee's regular wages.

India has a complex system of minimum wages. There isn't one single national minimum wage. Instead, minimum wages are set by the state governments and vary based on the industry, skill level, and location.

Employer taxes and contributions

As an employer in India, you are required to contribute to several social security and welfare funds for your employees. These contributions are a key part of your payroll responsibilities.

Employee taxes and deductions

Employees also contribute to their social security and pay taxes on their income. You deduct these amounts directly from their salary each month.

In India, your employee benefits and leave are a mix of government-mandated rules and company-specific perks. The government sets the minimum requirements to protect employees. Smart companies, however, offer more to attract and keep the best talent. This creates a supportive environment where you can thrive.

Statutory leave

The Indian government requires employers to provide several types of paid leave. These are the basics you can expect:

• Earned Leave: You earn this leave based on the number of days you work. Typically, you get 1 day of leave for every 20 days worked. This adds up to about 15-18 days per year.
• Casual Leave: This is for short-term, unforeseen personal matters. You can usually take around 7 to 10 days of casual leave each year.
• Sick Leave: If you are unwell, you are entitled to sick leave. The number of days varies by state, but it is generally around 7 to 12 days per year.
• Maternity Leave: Female employees are entitled to 26 weeks of paid maternity leave for their first two children. For a third child, this is reduced to 12 weeks.

Public holidays & regional holidays

India is a diverse country with many festivals and events. This is reflected in its public holidays. There are three national holidays that everyone observes. Beyond that, holidays vary by state.

Typical supplemental benefits

Many companies offer extra benefits to stay competitive and support their employees' well-being. Here’s a look at what you can expect, divided into what's required by law and what's offered as an extra perk.

How an EOR can help with setting up benefits

Setting up employee benefits in India can be complex. An Employer of Record (EOR) simplifies this process for you.

An EOR acts as your legal employer in India. This means they handle all the administrative and HR tasks, including benefits. Here’s how an EOR can help:

• Ensures Compliance: An EOR understands India's complex labor laws. They make sure your benefits package meets all legal requirements.
• Manages Administration: From enrolling you in statutory benefits to managing supplemental perks, an EOR handles it all.
• Saves Time: By outsourcing benefits management to an EOR, your company can focus on its core business.
• Offers Competitive Packages: EORs have experience in the local market. They can help design a benefits package that is attractive to top talent in India.

When you part ways with an employee in India, the process is more than just a handshake and a farewell. You need to follow specific labor laws. Handling terminations and offboarding correctly protects your business and treats your former employees with respect. It’s about ensuring a smooth and compliant transition for everyone involved.

Notice Periods

In India, the notice period an employee serves depends on their employment contract and relevant laws. For many private sector jobs, the employment agreement is the most important document defining the notice period.

Common notice periods are:

• 30 to 90 days: This is a typical range you’ll find in many employment contracts. Junior roles might have a 30-day notice, while senior positions could require up to 90 days.
• One month: For employees classified as "workmen" under the Industrial Disputes Act, 1947, a one-month notice is often required.
• Payment in lieu of notice: Your contract can allow you or the employee to pay their salary for the notice period instead of them working it.

State-specific laws, like the Delhi Shops and Establishments Act, also have rules. For instance, in Delhi, you must give 30 days' notice to an employee who has worked for you for more than three months, unless the termination is due to misconduct.

Severance Pay

Severance pay is a final payment to an employee when they leave the company. In India, this is mainly governed by the Industrial Disputes Act, 1947.

Here’s what you need to know:

• Who is eligible? Employees who have completed at least one year of continuous service are generally entitled to severance pay if they are laid off or retrenched.
• How is it calculated? The standard calculation is 15 days of the employee's average pay for every year of completed service.
• When is it not required? You typically don’t have to pay severance if an employee resigns voluntarily or if you terminate their employment due to misconduct.

Another key component of the final settlement is gratuity. This is a lump-sum payment given to employees who have worked for at least five years with your company.

How Rivermate Handles Compliant Exits

Navigating the complexities of employee exits in India can be challenging. At Rivermate, we make sure every step of the offboarding process is handled correctly and in compliance with Indian labor laws.

Here's how we simplify it for you:

We handle the administrative and legal burdens so you can focus on a respectful and smooth transition for your departing employee.

Navigating India's visa and work permit system can feel complex. You need to get it right to legally work in the country. For any non-Indian citizen, securing the correct visa is the first and most crucial step. This ensures your employment is compliant with Indian immigration laws. The primary visa for working in India is the Employment Visa, but a Business Visa may be suitable for shorter, non-employment-related activities.

Employment visas & sponsorship realities

To get an Employment Visa, you need a job offer from a company that is legally registered in India. That Indian company must sponsor your visa application. This is a key requirement. Without a local sponsoring entity, you cannot get an Employment Visa.

This is where an Employer of Record (EOR) can help. An EOR is a locally registered company in India that can legally employ and sponsor workers on behalf of an international company. This means you don't need to set up your own legal entity in India to hire someone.

However, there are practical realities to EOR sponsorship:

• What an EOR can typically sponsor: An EOR's ability to sponsor a visa is tied to its registered business activities. This often includes roles in HR, management consultancy, business development, sales, and marketing. If the role you are hiring for aligns with the EOR's business scope, sponsorship is usually straightforward.
• What an EOR may not be able to sponsor: Highly specialized or technical roles that fall outside the EOR's registered business activities can be difficult to sponsor. For example, if an EOR is registered as a consultancy firm, it may not be able to sponsor a visa for a software engineer or a lab technician.

The practical route for most companies looking to hire in India without establishing their own entity is to work with an EOR. The EOR will handle the visa application, manage payroll, and ensure compliance with local labor laws.

To be eligible for an Employment Visa, you generally need to:

• Have a confirmed job offer from an Indian company.
• Possess specialized skills or qualifications for the job.
• Earn a minimum annual salary of USD 25,000 (with some exceptions).
• Have a valid passport.

Business travel compliance

For short-term visits to India for business purposes, you will likely need a Business Visa, not an Employment Visa. It's important to understand the difference to stay compliant. A Business Visa allows you to conduct certain activities, but it does not permit you to be employed and earn a salary in India.

Activities generally permitted on a Business Visa include:

• Attending business meetings and discussions.
• Exploring business opportunities or setting up a business venture.
• Buying or selling industrial or commercial products.
• Attending a conference or seminar.

You cannot engage in full-time employment on a Business Visa. For ease of travel, India offers an e-Visa program for citizens of many countries, which includes an e-Business Visa. This can be applied for online.

Here are the key things to remember for business travel:

If you are visiting India for more than 180 days on certain visas, including an Employment Visa, you must register with the Foreigners Regional Registration Office (FRRO) within 14 days of your arrival. Always check the specific conditions of your visa to ensure you remain compliant during your stay.