Employer of Record in India

Hiring independent contractors has boomed in popularity because of the cost savings and flexibility they offer. It can be a great option if you require niche skills or short-term project support. Contractors allow businesses to access specialized skills quickly, without the time and cost of setting up a local entity.

However, it’s important to know the limits of this model: contractors are not a substitute for full-time employees. Relying on them for ongoing, long-term roles can create serious compliance risks, including employee misclassification, which can lead to fines, back taxes, and reputational damage.

Playroll’s contractor management solutions make it simple to compliantly engage, onboard, and pay contractors around the world. We provide clear visibility into agreements, streamline payments, and reduce compliance risks – so you can focus on getting the work done. And when you’re ready to take the next step, we can help seamlessly convert contractors into full-time employees through our global Employer of Record service.

Businesses can only operate smoothly in India if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in India below, to avoid any compliance issues.

Employment Contract Requirements

In India, though written employment contracts are not mandatory, the Industrial Employment Act of 1946 requires documentation of specific formalities. Fixed-term contracts are allowed for short-term roles, but consecutive short-term contracts are not permitted. Employment agreements must include the following:

• Job duties and responsibilities
• Compensation details, written in Indian Rupees (including benefits, bonus pay and options for retirement savings plans)
• Working hours, holidays and leave entitlements
• Terms of employment (where applicable and provisions for termination)
• Dispute resolution clauses concerning key employees

Onboarding Process

We can help you get a new employee started in India quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

India's labor laws, including the Factories Act, 1948, and the Occupational Safety, Health, and Working Conditions Code, 2020, establish clear guidelines for working hours and overtime to protect employee welfare. Standard working hours are capped at 9 hours per day and 48 hours per week, with any additional hours classified as overtime, which must be compensated at twice the regular wage rate.

Specific provisions exist for different industries and employee categories, such as managerial roles and certain sectors like healthcare and transportation. Employers are responsible for ensuring compliance with these regulations, including providing adequate rest periods and adhering to rules regarding night shifts and weekend work. Non-compliance can result in substantial penalties, including fines and imprisonment. Understanding and implementing these laws is vital for maintaining a lawful and productive work environment in India.

India does not have a single national minimum wage. Instead, minimum wages are set by state governments and vary based on location, skill level, and type of work. While the Central Government maintains a national floor wage of ₹178 per day, this is a non-binding reference point rather than an enforceable wage and should not be treated as a standard monthly rate.

In practice, state-notified minimum wages are significantly higher and are usually defined on a monthly, skill-based basis. For example, in Delhi, the monthly minimum wage effective April 1, 2025 – and still applicable as of January 2026 – is ₹18,456 for unskilled workers, with higher rates for semi-skilled, skilled, and graduate or clerical roles. State governments periodically review and adjust these wages to reflect inflation and changes in the cost of living, often through Variable Dearness Allowance (VDA) updates.

While India has expressed a long-term policy objective of moving toward a living wage framework, with technical support from the International Labour Organization (ILO), this has not yet been implemented as a legal requirement as of 2026. For now, statutory minimum wages set by states remain the enforceable standard, and employers should continue to monitor regulatory developments as labour policies evolve.

Setting up a local legal entity in India can be time-consuming and expensive. It often involves complex paperwork, local representation, banking, registrations, and ongoing tax filings, which isn't cost-effective if you're simply looking to hire a few employees or test the market. An Employer of Record removes these barriers entirely. Instead of spending months establishing a presence, an EOR lets you hire and onboard employees within days while staying fully compliant.

This enables faster market entry and greater agility. Whether you’re launching a pilot program, supporting a regional client, or adding specialized talent, you don't need to commit to long-term infrastructure to explore new business opportunities. The EOR handles local employment logistics while you retain day-to-day oversight of your hires. This model lets you scale up or down based on business needs, giving you more flexibility with less overhead and risk.

Employers in India must navigate several key payroll taxes, including Tax Deducted at Source (TDS) on salaries, Employees' Provident Fund (EPF) contributions, and, in certain states, professional tax. TDS requires employers to deduct income tax from employees' salaries based on applicable income slabs and remit it to the government.

The EPF mandates both employer and employee to contribute 12% of the employee's basic salary and dearness allowance towards retirement savings. Professional tax, where applicable, is a state-level tax deducted from employees' salaries, with rates varying by state. To ensure compliance with these obligations and streamline payroll processes, employers can utilize payroll management software, which helps consolidate payroll data and adhere to India's regulatory requirements.

One of the biggest risks in global hiring is payroll mismanagement. In India, even small errors in tax reporting or social contribution payments can trigger audits, fines, or reputational damage. For companies without in-country expertise, the risk isn’t worth taking. An Employer of Record removes this burden by owning the legal responsibility of payroll, executing every step with built-in compliance.

Key Ways an EOR Supports Payroll in India:

• Mitigates Compliance Risk: Oversees all legal obligations for payroll, tax filings, and recordkeeping.
• Local Regulatory Expertise: Interprets and applies India’s latest labor and tax changes in real time.
• Free Processing: Reduces mistakes in wage calculations and reporting through built
• Payroll Record Management: Maintains compliant payroll audit trails and documentation for each employee.

India does not issue a standalone "work permit" in most cases; instead, foreign nationals typically work under an Employment Visa (E Visa) or, for short visits, a Business Visa (B Visa). Long-term foreign employees may also need to register with the Foreigners Regional Registration Office (FRRO) or Foreigners Registration Office (FRO) and obtain a Residential Permit once in India, depending on their visa duration and nationality.

Employers in India play a central role by issuing a detailed employment contract, confirming salary thresholds, and providing corporate documentation to support the visa application. The foreign national usually applies for the Employment Visa at an Indian embassy or consulate abroad, and must maintain compliance with visa conditions, including role, employer, and location, as well as any FRRO/FRO registration and reporting obligations.

In India, leave entitlements are governed by both central and state laws, leading to variations across regions and industries. Under the Factories Act of 1948, adult workers are entitled to one day of leave for every 20 days worked, totaling approximately 15 days of annual leave per year. These leaves are exclusive of public holidays, which are provided separately. Sick leave provisions typically range from 5 to 12 days per year, depending on state regulations, and often require a medical certificate for extended absences.

The Maternity Benefit Act grants female employees 26 weeks of paid maternity leave for the first two children, with reduced entitlements for subsequent children. For women who are having two or more surviving children, the duration of paid maternity leave is 12 weeks. Employers must ensure compliance with these regulations and clearly communicate leave policies to employees to foster a fair and supportive work environment.

Employers in India are required to provide mandatory benefits such as the Employees' Provident Fund, Employees' State Insurance, gratuity, and maternity leave to ensure the financial and social security of their employees.

To attract and retain top talent, many employers also offer supplemental benefits like private health insurance, additional retirement plans, performance-based incentives, and initiatives promoting work-life balance. Understanding and implementing these benefits, while adhering to legal requirements, is crucial for employers operating in India.

In India, benefits play a central role in attracting and retaining top talent. Employees often expect more than just a paycheck – they're looking for stability, healthcare coverage, pension plans, and other perks that show a company is invested in their well-being. If you're not familiar with what’s standard or required, you risk falling short. An Employer of Record helps bridge that gap by administering a locally competitive benefits package that meets both legal requirements and employee expectations.

An EOR doesn't just check boxes, they make sure your employees receive benefits that are timely, properly communicated, and well-managed from the moment they’re onboarded. From managing healthcare contributions to adjusting for regional differences in leave or bonus entitlements, an EOR acts as both a legal and operational partner. The result is a better employee experience, less administrative burden on your internal team, and greater confidence that your offer is aligned with what top candidates in India actually want and need.

In India, employment termination is governed by a robust legal framework designed to protect employees while allowing employers to manage workforce needs. Employers must adhere to notice period requirements, which vary depending on whether the employee is classified as a 'workman' under the Industrial Disputes Act, 1947.

Workmen are generally entitled to a notice period ranging from 30 to 90 days, while non-workmen follow the terms of their employment contracts. In cases of gross misconduct, termination can occur without notice, provided a fair inquiry is conducted. Severance pay, or retrenchment compensation, is mandatory for workmen with at least one year of continuous service, calculated at 15 days' average pay for each completed year of employment. Non-workmen may receive severance based on their contract or company policy.

The termination process includes reviewing the employment contract, conducting inquiries if needed, issuing proper notice, settling final dues, and providing necessary documentation such as termination letters and tax forms. Employees have legal protections against unfair dismissal, and those terminated without valid reason or due process may challenge their dismissal in labor courts. Employers handling redundancies must follow specific legal procedures, including prior notice, severance pay, and, in some cases, government approvals. Under the Industrial Relations Code, companies with up to 300 workers in the manufacturing sector can implement redundancies without government approval, an increase from the previous threshold of 100 workers.

Employers with at least 10 employees must notify the Ministry of Manpower within five working days if they make at least five employees redundant over a six-month period. Adhering to these legal obligations ensures compliance and minimizes risks of disputes.