Employer of Record in India

An Employer of Record (EOR) service simplifies the complexities of global hiring, allowing companies to quickly and compliantly employ talent in foreign countries without establishing a local entity. This service is especially valuable for businesses looking to expand into new markets like India, which has unique labor laws and compliance requirements. Partnering with an EOR enables you to focus on managing your team while the EOR handles the legal and administrative burdens of employment.

If you are considering hiring in India, an EOR partner like Rivermate https://rivermate.com/employer-of-record provides the infrastructure to manage local employment, ensuring your operations remain compliant with Indian regulations.

What is an Employer of Record in India?

An Employer of Record in India is a third-party organization that legally employs your workers on your behalf. This means the EOR becomes the legal employer, taking on all responsibilities and liabilities associated with employment, while your company retains full control over the day-to-day management of your employees. EORs allow businesses to hire employees in India without needing a registered local entity or understanding the intricate details of Indian labor law. You maintain operational control over your team members, including their daily tasks, performance management, and project assignments.

How an Employer of Record (EOR) Works in India

When you partner with an EOR in India, the EOR acts as the legal employer for your local team members. Here is what an EOR typically handles:

• Legal employment: The EOR legally employs your workers in India.
• Payroll processing: They manage payroll processing, including salary calculations and timely disbursements.
• Tax compliance: The EOR ensures full compliance with all local and national tax regulations, including income tax, provident fund (PF), and Employees' State Insurance (ESI) contributions.
• Benefits administration: They administer employee benefits, such as health insurance, retirement plans (like PF), and other statutory benefits.
• HR compliance: The EOR navigates local labor laws, ensuring employment contracts, terminations, and workplace policies comply with Indian regulations.
• Visa and immigration: Some EORs also assist with visa and immigration processes for foreign employees.
• Risk management: They assume liability for employment-related risks, protecting your company from legal challenges.

Benefits of Using an EOR for Hiring in India

Utilizing an EOR service for hiring in India offers several advantages:

• Rapid market entry: Quickly hire employees in India without establishing a legal entity, accelerating your expansion.
• Reduced compliance burden: The EOR manages complex Indian labor laws, payroll, and tax regulations, minimizing your compliance risks.
• Cost efficiency: Avoid the significant costs and time associated with setting up and maintaining a local subsidiary.
• Access to top talent: Hire the best candidates anywhere in India, regardless of your company's physical presence.
• Streamlined HR: Outsource administrative HR tasks, freeing up your internal resources.
• Legal protection: The EOR assumes legal responsibility for employment, shielding your company from potential liabilities.

Choosing between an EOR and PEO in India

In India, the distinction between an EOR (Employer of Record) and a PEO (Professional Employer Organization) is important. An EOR legally employs your workers on your behalf, taking on all associated liabilities and compliance responsibilities. This model is ideal for companies without a legal entity in India.

A PEO, on the other hand, typically co-employs your staff. Your company remains the legal employer, and the PEO provides HR support, payroll, and benefits administration. PEO services are generally suitable for companies that already have a legal entity in India and need assistance with HR functions. When expanding into India without a local presence, an EOR is the more appropriate solution.

How EORs protect your company’s IP in India

An EOR protects your company's Intellectual Property (IP) in India by including specific clauses in the employment contracts with your local employees. These contracts typically include provisions for:

• Confidentiality: Employees sign agreements to protect your proprietary information and trade secrets.
• Non-disclosure: Clauses prevent employees from sharing sensitive business data.
• Assignment of IP: Agreements ensure that any IP created by the employee during their employment belongs to your company, not the individual.
• Data protection compliance: EORs ensure that data handling practices comply with Indian data protection laws, safeguarding sensitive company information.

Costs of using an Employer of Record in India

The cost of using an EOR in India varies based on several factors, including the EOR provider, the number of employees, the complexity of benefits packages, and additional services requested. Typically, EOR fees are structured as a percentage of the employee's salary or a flat monthly fee per employee. These fees cover payroll processing, tax compliance, benefits administration, and HR support. It is important to request detailed quotes from EOR providers to understand the full scope of their services and associated costs.

How to hire employees in India

Hiring employees in India requires navigating specific labor laws and cultural nuances. Understanding these elements helps ensure a smooth and compliant hiring process.

Agreements / Employment contracts in India

Indian labor law requires formal employment contracts for employees. These contracts should clearly outline:

• Job title and responsibilities: Define the employee’s role and duties.
• Compensation: Specify salary, allowances, and any bonuses.
• Working hours: Detail daily and weekly working hours.
• Leave policy: Explain annual leave, sick leave, and public holidays.
• Probationary period: State the duration and conditions of any probationary period.
• Termination clauses: Outline procedures and notice periods for termination by either party.
• Confidentiality and IP: Include clauses for protecting company information and IP.

Hiring independent contractors in India

Hiring independent contractors in India requires careful distinction from employment to avoid misclassification risks. An independent contractor provides services under a specific contract for service, not a contract of employment. Key differences include:

• Control: Companies have less control over how independent contractors perform their work.
• Integration: Contractors are not typically integrated into the company's core operations or hierarchy.
• Benefits: Contractors do not receive employee benefits, such as provident fund, ESI, or paid leave.
• Taxation: Contractors are responsible for their own tax remittances.

Properly drafted service agreements are crucial to define the scope of work, payment terms, and IP ownership, while clearly stating the individual is an independent contractor, not an employee.

Probationary periods in India

Probationary periods are common in India. The typical duration for a probationary period ranges from three to six months, though it can sometimes extend up to one year depending on the industry and role. During this period, employers assess the employee's suitability for the role. Employers may terminate employment during or at the end of the probationary period with a shorter notice period, often without cause, provided the contract specifies these terms.

Average working hours in India

The average working hours in India are generally 8 hours per day and 48 hours per week. The Factories Act and Shops and Establishments Acts, which vary by state, govern these regulations. Overtime work is permissible but typically capped at a certain number of hours per quarter and requires additional compensation, usually at twice the ordinary rate of wages. Employees are also entitled to rest intervals during the workday and weekly rest days.

How an employer of record helps you hire in India

An EOR significantly simplifies and de-risks the hiring process in India. An EOR:

• Ensures legal compliance: Drafts compliant employment contracts tailored to Indian labor laws.
• Manages onboarding: Handles all necessary paperwork and registrations for new hires.
• Provides local expertise: Offers guidance on Indian employment regulations and best practices.
• Handles payroll and taxes: Manages all payroll calculations, deductions, and remittances to Indian authorities.
• Administers benefits: Sets up and manages statutory and supplementary benefits packages.
• Mitigates risks: Shields your company from legal penalties associated with non-compliance.
• Facilitates global expansion: Allows you to hire quickly and efficiently without establishing a local entity.An Employer of Record (EOR) service simplifies the complexities of global hiring, allowing companies to quickly and compliantly employ talent in foreign countries without establishing a local entity. This service is especially valuable for businesses looking to expand into new markets like India, which has unique labor laws and compliance requirements. Partnering with an EOR enables you to focus on managing your team while the EOR handles the legal and administrative burdens of employment.

If you are considering hiring in India, an EOR partner like Rivermate https://rivermate.com/employer-of-record provides the infrastructure to manage local employment, ensuring your operations remain compliant with Indian regulations.

What is an Employer of Record in India?

An Employer of Record in India is a third-party organization that legally employs your workers on your behalf. This means the EOR becomes the legal employer, taking on all responsibilities and liabilities associated with employment, while your company retains full control over the day-to-day management of your employees. EORs allow businesses to hire employees in India without needing a registered local entity or understanding the intricate details of Indian labor law. You maintain operational control over your team members, including their daily tasks, performance management, and project assignments.

How an Employer of Record (EOR) Works in India

When you partner with an EOR in India, the EOR acts as the legal employer for your local team members. Here is what an EOR typically handles:

• Legal employment: The EOR legally employs your workers in India.
• Payroll processing: They manage payroll processing, including salary calculations and timely disbursements.
• Tax compliance: The EOR ensures full compliance with all local and national tax regulations, including income tax, provident fund (PF), and Employees' State Insurance (ESI) contributions.
• Benefits administration: They administer employee benefits, such as health insurance, retirement plans (like PF), and other statutory benefits.
• HR compliance: The EOR navigates local labor laws, ensuring employment contracts, terminations, and workplace policies comply with Indian regulations.
• Visa and immigration: Some EORs also assist with visa and immigration processes for foreign employees.
• Risk management: They assume liability for employment-related risks, protecting your company from legal challenges.

Benefits of Using an EOR for Hiring in India

Utilizing an EOR service for hiring in India offers several advantages:

• Rapid market entry: Quickly hire employees in India without establishing a legal entity, accelerating your expansion.
• Reduced compliance burden: The EOR manages complex Indian labor laws, payroll, and tax regulations, minimizing your compliance risks.
• Cost efficiency: Avoid the significant costs and time associated with setting up and maintaining a local subsidiary.
• Access to top talent: Hire the best candidates anywhere in India, regardless of your company's physical presence.
• Streamlined HR: Outsource administrative HR tasks, freeing up your internal resources.
• Legal protection: The EOR assumes legal responsibility for employment, shielding your company from potential liabilities.

Choosing between an EOR and PEO in India

In India, the distinction between an EOR (Employer of Record) and a PEO (Professional Employer Organization) is important. An EOR legally employs your workers on your behalf, taking on all associated liabilities and compliance responsibilities. This model is ideal for companies without a legal entity in India.

A PEO, on the other hand, typically co-employs your staff. Your company remains the legal employer, and the PEO provides HR support, payroll, and benefits administration. PEO services are generally suitable for companies that already have a legal entity in India and need assistance with HR functions. When expanding into India without a local presence, an EOR is the more appropriate solution.

How EORs protect your company’s IP in India

An EOR protects your company's Intellectual Property (IP) in India by including specific clauses in the employment contracts with your local employees. These contracts typically include provisions for:

• Confidentiality: Employees sign agreements to protect your proprietary information and trade secrets.
• Non-disclosure: Clauses prevent employees from sharing sensitive business data.
• Assignment of IP: Agreements ensure that any IP created by the employee during their employment belongs to your company, not the individual.
• Data protection compliance: EORs ensure that data handling practices comply with Indian data protection laws, safeguarding sensitive company information.

Costs of using an Employer of Record in India

The cost of using an EOR in India varies based on several factors, including the EOR provider, the number of employees, the complexity of benefits packages, and additional services requested. Typically, EOR fees are structured as a percentage of the employee's salary or a flat monthly fee per employee. These fees cover payroll processing, tax compliance, benefits administration, and HR support. It is important to request detailed quotes from EOR providers to understand the full scope of their services and associated costs.

How to hire employees in India

Hiring employees in India requires navigating specific labor laws and cultural nuances. Understanding these elements helps ensure a smooth and compliant hiring process.

Agreements / Employment contracts in India

Indian labor law requires formal employment contracts for employees. These contracts should clearly outline:

• Job title and responsibilities: Define the employee’s role and duties.
• Compensation: Specify salary, allowances, and any bonuses.
• Working hours: Detail daily and weekly working hours.
• Leave policy: Explain annual leave, sick leave, and public holidays.
• Probationary period: State the duration and conditions of any probationary period.
• Termination clauses: Outline procedures and notice periods for termination by either party.
• Confidentiality and IP: Include clauses for protecting company information and IP.

Hiring independent contractors in India

Hiring independent contractors in India requires careful distinction from employment to avoid misclassification risks. An independent contractor provides services under a specific contract for service, not a contract of employment. Key differences include:

• Control: Companies have less control over how independent contractors perform their work.
• Integration: Contractors are not typically integrated into the company's core operations or hierarchy.
• Benefits: Contractors do not receive employee benefits, such as provident fund, ESI, or paid leave.
• Taxation: Contractors are responsible for their own tax remittances.

Properly drafted service agreements are crucial to define the scope of work, payment terms, and IP ownership, while clearly stating the individual is an independent contractor, not an employee.

Probationary periods in India

Probationary periods are common in India. The typical duration for a probationary period ranges from three to six months, though it can sometimes extend up to one year depending on the industry and role. During this period, employers assess the employee's suitability for the role. Employers may terminate employment during or at the end of the probationary period with a shorter notice period, often without cause, provided the contract specifies these terms.

Average working hours in India

The average working hours in India are generally 8 hours per day and 48 hours per week. The Factories Act and Shops and Establishments Acts, which vary by state, govern these regulations. Overtime work is permissible but typically capped at a certain number of hours per quarter and requires additional compensation, usually at twice the ordinary rate of wages. Employees are also entitled to rest intervals during the workday and weekly rest days.

How an employer of record helps you hire in India

An EOR significantly simplifies and de-risks the hiring process in India. An EOR:

• Ensures legal compliance: Drafts compliant employment contracts tailored to Indian labor laws.
• Manages onboarding: Handles all necessary paperwork and registrations for new hires.
• Provides local expertise: Offers guidance on Indian employment regulations and best practices.
• Handles payroll and taxes: Manages all payroll calculations, deductions, and remittances to Indian authorities.
• Administers benefits: Sets up and manages statutory and supplementary benefits packages.
• Mitigates risks: Shields your company from legal penalties associated with non-compliance.
• Facilitates global expansion: Allows you to hire quickly and efficiently without establishing a local entity.

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.