Tap Into India's Talent Without Navigating 28 States of Labor Law.
India has the world's largest working-age population and deep talent pools in IT, engineering, finance, and operations. RecruitGo handles EPF, ESI, professional tax, TDS, gratuity, and state-level compliance across every Indian state so you can hire in days.
What Is an Employer of Record in India?
An Employer of Record (EOR) is a locally registered entity that legally employs workers in India on your behalf. RecruitGo's Indian entity becomes the legal employer. We sign the employment contract, register employees with EPFO (Employees' Provident Fund Organisation) and ESIC (Employees' State Insurance Corporation), withhold TDS (Tax Deducted at Source) and file with the Income Tax Department, handle professional tax across states, and manage all reporting under the Shops and Establishments Acts and other applicable labor legislation.
You retain full control over the employee's work, schedule, and responsibilities. They report to you, work on your projects, and function as part of your team. We handle everything that Indian labor law places on the employer, including the complexity of 28 states and 8 union territories each with their own labor regulations.
The state-level challenge: India's labor law operates at both central and state levels. Each state has its own Shops and Establishments Act, minimum wage notifications, professional tax rates, leave rules, and registration requirements. A company hiring in Mumbai, Bengaluru, and Delhi simultaneously must comply with three different sets of rules. EOR removes this complexity entirely. See full EOR vs entity comparison →
Who Should Use EOR in India?
What It Costs to Hire Through EOR
India's statutory employer costs are dominated by EPF (12% of basic + DA) and ESI (3.25% of gross wages for employees earning up to INR 21,000/month). Professional tax varies by state but is capped at INR 2,500/year. There is no mandatory 13th month pay. Gratuity applies after 5 years of service.
| Component | Monthly (INR) | Rate / Basis |
|---|---|---|
| Gross salary (CTC) | 50,000 | — |
| EPF (employer) | 3,600 | 12% of basic + DA (INR 30,000) |
| ESI (employer) | 1,625 | 3.25% of gross (if gross ≤ INR 21,000) |
| EDLI + admin charges | ~250 | ~0.5% + admin |
| Professional tax (employer) | ~208 | Varies by state (max INR 2,500/year) |
| Gratuity provision | ~1,730 | ~4.81% of basic (15 days/year) |
| Total employer cost | ~57,413 | ~115% |
* EPF is calculated on basic salary + dearness allowance, not total CTC. ESI applies only if gross monthly wages are INR 21,000 or below. For employees earning above INR 21,000, ESI does not apply, reducing employer cost significantly. Employer EPF contribution of 12% is split: 8.33% to EPS (capped at INR 15,000 base) + 3.67% to EPF. Professional tax varies by state (some states like Delhi and Haryana do not levy it). Gratuity provision assumes 15 days' wages per year per the Payment of Gratuity Act. EOR management fee not included above.
The ESI threshold matters: For employees earning above INR 21,000/month gross, ESI does not apply. Since most professional roles in India pay well above this threshold, ESI is typically relevant only for entry-level or operational staff. For a developer earning INR 80,000/month, your statutory employer cost drops to roughly EPF (12% of basic) + professional tax + gratuity provision, making India highly cost-competitive for mid-to-senior roles.
How Hiring Works Through EOR
You share the role, salary structure (CTC breakdown with basic, HRA, and allowances), location, and start date. We confirm state-specific compliance requirements and return a cost breakdown within 24 hours.
We draft an employment contract compliant with the applicable state Shops and Establishments Act, register the employee with EPFO and ESIC (if applicable), obtain a UAN (Universal Account Number), set up TDS withholding, and handle professional tax registration in the employee’s state.
We run monthly payroll in INR, calculate and remit EPF/ESI contributions by the 15th, deposit TDS by the 7th of the following month, file professional tax quarterly, and provide Form 16 at year-end. Gratuity is provisioned monthly.
India’s labor law landscape is evolving with the new Labour Codes (on Wages, Industrial Relations, Social Security, and Occupational Safety). We monitor central and state-level regulatory changes, minimum wage revisions across states, EPF/ESI threshold updates, and professional tax amendments.
EOR vs Indian Entity vs Contractors
| EOR | Pvt. Ltd. (MCA) | Contractor | |
|---|---|---|---|
| Time to first hire | 3 to 5 days | 2 to 4 weeks | Immediate |
| Setup cost | None | INR 30K to 100K+ | None |
| Foreign ownership | Not applicable | 100% FDI in most sectors | Not applicable |
| Multi-state compliance | Handled by EOR | Your responsibility per state | Not applicable |
| EPF/ESI registration | Handled by EOR | Your responsibility | None (risk if misclassified) |
| Gratuity liability | Managed by EOR | Your responsibility | None (risk if misclassified) |
| Best for | 1 to 20 people, multi-state | 50+, permanent ops | Short-term projects only |
Contractor misclassification risk: India's labor courts will reclassify contractors as employees if the relationship involves set hours, integration into your team, exclusivity, and ongoing engagement. Misclassification can trigger backdated EPF/ESI contributions, gratuity liability, and penalties. The upcoming Social Security Code further tightens definitions to include gig and platform workers.
Income Tax (New Tax Regime, FY 2025-26)
India's new tax regime under Section 115BAC is the default from FY 2023-24 onwards. It offers lower rates with fewer deductions. Salaried employees get a standard deduction of INR 75,000. Income up to INR 12 lakh is effectively tax-free due to the Section 87A rebate (INR 60,000), and for salaried individuals, the effective tax-free threshold is INR 12.75 lakh after the standard deduction. Employers withhold TDS monthly and deposit with the Income Tax Department by the 7th of the following month.
| Annual income (INR) | Tax rate (new regime) |
|---|---|
| Up to 4,00,000 | 0% (exempt) |
| 4,00,001 to 8,00,000 | 5% |
| 8,00,001 to 12,00,000 | 10% |
| 12,00,001 to 16,00,000 | 15% |
| 16,00,001 to 20,00,000 | 20% |
| 20,00,001 to 24,00,000 | 25% |
| Above 24,00,000 | 30% |
A 4% health and education cess applies on top of the income tax amount. Surcharge applies for income above INR 50 lakh. The old tax regime remains available as an option, offering more deductions (80C, 80D, HRA) but at higher rates. Your EOR manages TDS calculation under whichever regime the employee selects and issues Form 16 annually.
Professional tax: Levied by state governments on salaried individuals, capped at INR 2,500/year. Rates and applicability vary by state. Some states (Delhi, Haryana) do not levy professional tax. Maharashtra, Karnataka, West Bengal, and Andhra Pradesh are among those that do. Your EOR handles registration and monthly/quarterly filing in each applicable state.
EPF, EPS, and ESI
India's social security system is primarily funded through EPF (retirement savings) and ESI (health insurance for lower-wage employees). EPF applies to establishments with 20 or more employees. ESI applies to establishments with 10 or more employees (some states: 20+) where at least one employee earns INR 21,000/month or less.
EPF and EPS contributions
| Component | Employer | Employee | Basis |
|---|---|---|---|
| EPF (provident fund) | 3.67% | 12% | Basic + DA |
| EPS (pension) | 8.33% | — | Basic + DA (capped at INR 15,000) |
| EDLI (insurance) | 0.5% | — | Basic + DA (capped at INR 15,000) |
| Admin charges | ~0.5% | — | Basic + DA |
The EPS cap: The employer's 8.33% EPS contribution is calculated on a maximum base of INR 15,000/month. For employees with basic + DA above INR 15,000, the excess from the employer's 12% goes entirely to EPF. As of early 2026, the Supreme Court has directed the government to decide on increasing this wage ceiling (potentially to INR 21,000 or INR 25,000) within four months. Until an official notification is issued, the INR 15,000 cap remains in effect.
ESI (Employees' State Insurance)
| Detail | Rate |
|---|---|
| Employer contribution | 3.25% of gross wages |
| Employee contribution | 0.75% of gross wages |
| Wage ceiling | INR 21,000/month gross (INR 25,000 for persons with disability) |
| Applies to | Establishments with 10+ employees where at least 1 earns ≤ INR 21,000 |
| Covers | Medical care, sickness benefit, maternity benefit, disability, dependants’ benefit |
For most professional hires in India's IT and services sector, ESI will not apply because salaries exceed the INR 21,000 threshold. In those cases, employers typically provide private health insurance as a benefit instead. Your EOR manages both ESI compliance (where applicable) and private insurance coordination.
Employee Benefits and Leave Entitlements
Mandatory leave entitlements
Common additional benefits
India has no mandatory 13th month pay or statutory bonus for most private sector employees. However, competitive employers typically offer:
Termination Rules and Gratuity
Termination in India is governed by a mix of the employment contract, the applicable state Shops and Establishments Act, the Industrial Disputes Act (for workmen), and the Payment of Gratuity Act 1972. Notice periods are typically contractual (1 to 3 months for professional roles). During probation, shorter notice or no notice may apply depending on the contract terms.
Gratuity
Under the Payment of Gratuity Act 1972, employees who complete 5 continuous years of service are entitled to gratuity on separation (resignation, termination, retirement, or death). The rate is 15 days' wages for every completed year of service (or part thereof exceeding 6 months). Gratuity applies to establishments with 10 or more employees.
| Years of service | Gratuity entitlement |
|---|---|
| Less than 5 years | None (unless contract provides otherwise) |
| 5 years | 75 days’ wages (15 days x 5) |
| 10 years | 150 days’ wages |
| 15 years | 225 days’ wages |
| 20 years | 300 days’ wages |
Gratuity formula: (Last drawn salary × 15 × years of service) / 26. "Last drawn salary" includes basic pay and dearness allowance. The maximum gratuity payable is INR 25 lakh (increased from INR 20 lakh in 2024). For employees not covered by the Act, gratuity is governed by their employment contract. Your EOR provisions gratuity monthly to avoid large lump-sum liabilities.
Retrenchment (for workmen under the Industrial Disputes Act)
Establishments with 100 or more workers require government permission to retrench. Retrenchment compensation is 15 days' average wages for every completed year of service. The "last in, first out" principle applies unless there is a valid reason to deviate. Three months' written notice is required, or 3 months' wages in lieu. For non-workmen (managers, professionals), termination follows the employment contract, typically with 1 to 3 months' notice.
Working Hours and Overtime
The Factories Act limits working hours to 48 per week and 9 per day. Most professional roles follow a 5-day, 40 to 45 hour week by company policy. Overtime is payable at 2x the ordinary rate under the Factories Act. The Shops and Establishments Acts in most states follow similar limits, though exact provisions vary.
The new Labour Codes: India has enacted four new Labour Codes (on Wages, Industrial Relations, Social Security, and Occupational Safety) to replace 29 existing central labour laws. These codes simplify compliance, introduce new definitions for wages (affecting PF/gratuity calculations), expand social security coverage to gig workers, and standardize overtime rules. Implementation has been repeatedly delayed as states finalize their rules, but your EOR monitors all developments to ensure readiness when they take effect.
Frequently Asked Questions
For an employee with INR 30,000 basic + DA and INR 50,000 gross CTC, total employer statutory cost is approximately INR 7,400/month (EPF, EDLI, admin charges, professional tax, gratuity provision). ESI adds 3.25% only if gross is INR 21,000 or below. Total loaded cost is roughly 115% of CTC for most professional roles. EOR management fee is additional.
Typically 3 to 5 business days from signed agreement to the employee’s first day. This compares to 2 to 4 weeks for setting up a Pvt. Ltd. company (ROC registration, PAN/TAN, bank account, EPFO/ESIC registration, Shops and Establishments registration per state).
No. ESI applies only to employees earning INR 21,000/month gross or below in establishments with 10+ employees (20+ in some states). Most professional hires in India’s IT and services sector are above this threshold and are not covered by ESI. Employers typically provide private health insurance instead.
No central law mandates paternity leave for private sector employees. Central government employees receive 15 days. Most progressive private companies voluntarily offer 5 to 15 days. Some companies (Zomato, Wipro) offer significantly more. It is strongly recommended to include paternity leave in your employment policy to remain competitive.
After 5 years of continuous service, employees are entitled to 15 days’ wages per year of service under the Payment of Gratuity Act. Maximum: INR 25 lakh. Applies to establishments with 10+ employees. Your EOR provisions this monthly.
India has 28 states and 8 union territories, each with its own Shops and Establishments Act, minimum wages, professional tax rates, leave rules, and registration requirements. Hiring in Mumbai (Maharashtra), Bengaluru (Karnataka), and Gurgaon (Haryana) means complying with three different regulatory frameworks simultaneously. EOR handles all of this.
India enacted four Labour Codes (Wages, Industrial Relations, Social Security, Occupational Safety) to consolidate 29 existing laws. They introduce a standardized wage definition (affecting EPF and gratuity calculations), expand social security to gig/platform workers, and simplify compliance. Implementation has been delayed as states finalize rules. Your EOR monitors all developments.
No. India has no statutory 13th month pay or mandatory bonus for most private sector employees. However, variable pay (10 to 30% of CTC) and annual performance bonuses are standard practice in most professional roles.
You can, but India’s labour courts will reclassify contractors as employees if the relationship involves set hours, integration into your team, exclusivity, and ongoing engagement. Misclassification triggers backdated EPF/ESI contributions, gratuity liability, and penalties. The new Social Security Code further tightens these definitions.
