Employer of Record in India: 2026 Cost and Compliance Guide

India has the world's largest pool of English-speaking engineering and technology talent, concentrated in Bengaluru, Hyderabad, Pune, Chennai, Delhi NCR and Mumbai. Statutory employer costs are low compared with Europe, mainly provident fund and gratuity, but salary structuring, state-level rules and tax exposure make compliance complex.

In late 2025, India replaced 29 central labour laws with four Labour Codes (wages, social security, industrial relations, and occupational safety). One headline change is a uniform definition of wages: basic pay and dearness allowance must be at least 50% of total remuneration, which raises the base for PF and gratuity for many employees.

An Employer of Record (EOR) can employ your team in India without a subsidiary, but permanent establishment risk is a frequent concern for foreign companies in India. This guide covers costs, the Labour Codes, key rules, provider comparison and when to set up an Indian private limited company. Figures link to official sources. We do not test or use the providers listed; see our methodology.

An Employer of Record in India employs staff on behalf of foreign companies. It issues the Indian employment contract and offer letter, structures the salary to comply with the Labour Codes, registers the employee for the Employees' Provident Fund (EPF) and, where eligible, the Employees' State Insurance (ESI), deducts income tax (TDS), professional tax and labour welfare fund contributions where applicable, and provides for gratuity.

Indian salaries are usually expressed as CTC (cost to company), which often already includes the employer's PF contribution and sometimes gratuity and insurance. When comparing offers and EOR quotes, check whether the salary figure is CTC or gross pay, as this changes the total by several percent.

India's tax authorities actively examine whether foreign companies have a permanent establishment (PE), for example where employees conclude contracts or represent the company to Indian customers. An EOR does not remove PE risk if the employee's activities create one. Take tax advice for sales and leadership roles.

Indian employment cost has three layers: gross salary (the fixed annual pay to the employee), statutory employer costs (provident fund and gratuity, plus ESI for lower earners) and the EOR fee.

The model assumes basic pay is 50% of gross, in line with the Labour Codes, and that EPF is paid at the statutory minimum on the ₹15,000 monthly wage ceiling. Many employers contribute on full basic pay instead, which roughly doubles or triples the PF cost at professional salaries.

Annual cost at example salaries

What these figures include and exclude

• ESI (3.25% employer) only applies to employees earning up to ₹21,000 a month, so it is not included at these salary levels.
• If the employer contributes PF on full basic pay, as many companies do, PF rises to about 6% of gross at these salaries.
• Employee PF (12% of basic), professional tax and income tax (TDS) are deducted from pay and are not employer costs.
• Maternity leave of 26 weeks is paid by the employer (for employees not covered by ESI), a significant contingent cost.
• Gratuity is shown as an annual provision; it becomes payable after five years of service (one year for fixed-term employees under the Labour Codes).

Estimate your own cost

Enter a salary to see the estimated annual cost, including mandatory employer contributions and an EOR fee. Change the fee to match the quotes you receive.

The four Labour Codes took effect on 21 November 2025, but many details depend on central and state rules that are still being finalised. State Shops and Establishments Acts also govern leave, hours and holidays.

Definition of wages

Basic pay plus dearness allowance must be at least 50% of total remuneration. Excess allowances are added back to wages for statutory calculations.[1]Verify

Appointment letters

Employers must issue appointment letters to employees under the Labour Codes.[4]Verify

Probation

Not fixed by statute for most employers. Three to six months is typical and set in the contract.Verify

Working time

Up to 48 hours a week, with daily limits and overtime at twice the ordinary rate. State rules set details such as daily hours and weekly offs.[4]Verify

Leave

Annual leave accrues under the OSH Code and state Shops and Establishments Acts (commonly 15–21 days). Public holidays also vary by state.[4]Verify

Maternity benefit

26 weeks of paid maternity leave for the first two children, paid by the employer unless the employee is covered by ESI.[2]Verify

Gratuity

15 days' wages for each year of service, payable after 5 years of continuous service (or pro rata after 1 year for fixed-term employees), capped at ₹20 lakh.[2]Verify

Termination

Notice is set by contract (often 30–90 days). Retrenchment of 'workers' requires notice and compensation of 15 days' wages per year of service; managerial staff are generally governed by their contract.[3]Verify

These EOR providers publish information about employing in India. Prices are their own published starting rates in USD. Because Indian salaries are lower than in the US or Europe, the flat fee can be a large share of cost, so ask for India-specific pricing.

In India, ask how the provider structures salaries under the Labour Codes, whether PF is paid on the wage ceiling or on full basic, how gratuity is funded and billed, and which state's rules apply.

For each provider's products, pricing model and fit signals, see the EOR provider directory.

Most foreign companies set up a wholly owned private limited company (Pvt Ltd) under the automatic foreign direct investment route, which is open for most sectors. It needs at least two shareholders and two directors, one of whom must be resident in India, and registration with the Ministry of Corporate Affairs, followed by tax (PAN, TAN, GST) and labour registrations.

Running costs include a chartered accountant, statutory audit, company secretarial compliance, transfer-pricing documentation for intra-group services, payroll and labour compliance, and corporate tax (about 25% under the concessional regime).

For a step-by-step version of this calculation, see EOR vs local entity: a break-even framework.

1. 1

   Define the role and compensationDay 0

   Agree compensation and clarify whether the figure is CTC or gross. Decide on health insurance, variable pay and notice period.

2. 2

   Compare itemised quotes1–3 days

   Request India quotes with a sample salary structure, PF basis, gratuity handling, insurance and offboarding costs. Use the estimator to sanity-check totals.

3. 3

   Sign the service agreement

   Review IP assignment, confidentiality, data protection (DPDP Act) and termination cost handling.

4. 4

   Offer letter and onboarding3–10 days

   The EOR issues the appointment letter and contract. The employee provides PAN, Aadhaar, their UAN (PF account number) and bank details, and completes background verification if required.

5. 5

   Ongoing administrationMonthly

   Monthly payroll with TDS, PF and professional tax filings, quarterly TDS returns, annual Form 16, and leave tracking under state rules.

Rates and rules on this page are based on the following official sources. Numbers in brackets in the tables above link to these entries.

1. 1
   Code on Wages, 2019

   Ministry of Labour and Employment

   The uniform definition of wages and minimum wage framework.

2. 2
   Code on Social Security, 2020

   Ministry of Labour and Employment

   Provident fund, ESI, gratuity and maternity benefit.

3. 3
   Industrial Relations Code, 2020

   Ministry of Labour and Employment

   Standing orders, retrenchment and dispute resolution.

4. 4
   Occupational Safety, Health and Working Conditions Code, 2020

   Ministry of Labour and Employment

   Appointment letters, working hours and leave.

5. 5
   Employer contributions

   Employees' Provident Fund Organisation (EPFO)

   EPF, EPS and EDLI contribution rates and wage ceiling.

6. 6
   ESI contributions

   Employees' State Insurance Corporation (ESIC)

   ESI coverage threshold and contribution rates.

India's statutory employer costs are low, so total cost through an EOR is driven mainly by the fee: roughly 1.1× salary for senior engineers up to 1.5× or more for junior roles at a flat US$599-equivalent fee. Negotiate India-specific pricing.

Get salary structures right under the new Labour Codes, be precise about CTC versus gross, and take tax advice on permanent establishment for revenue-generating roles.

For an engineering centre, compare against your own subsidiary with our EOR vs local entity guide, and see the Philippines for another major Asian talent market.