Employer of record in India

Hiring and paying employees in India has proven to be a beneficial practice for global companies; however, it can be complex. 

The country has strict labor laws that keep evolving, and employers must follow them. Using an Employer of Record (EOR) in India, like Payoneer Workforce Management (WFM), simplifies the entire process, from onboarding and payroll to compliance and contracts, without you needing to set up a local entity. 

Learn more about Payoneer WFM, one of the best EOR companies in India, and keep reading to learn how an India Employer of Record can help you hire quickly and compliantly.

How to hire employees in India

If you’re looking to expand your global team by hiring in India, there are three main ways to do so:

1) Setting up a local entity 

This is the most direct approach, but also the most complex. It involves registering a business in India, which can take several months and requires an understanding of local employment laws to stay compliant. 

2) Hiring independent contractors

A flexible option for short-term or project-based work, this approach can also carry compliance risks. Misclassifying employees as contractors can result in significant legal and financial penalties.

Learn more about hiring independent contractors in India.

3) Partnering with an Employer of Record 

Partnering with an EOR in India is the fastest and most compliant way to hire without setting up a legal entity. Employer of Record companies in India handle all the complicated details for you. 

This includes employing your workers with a local legal entity, managing payroll, benefits, taxes, and maintaining local compliance on your behalf. This leaves you time to manage employees’ daily activities and focus on growing your core business.

Each option has its pros and cons, but for many companies, especially those looking to scale quickly and compliantly, working with an EOR is the most efficient path forward.

Using an Employer of Record in India

An Employer of Record is a third-party organization that legally employs workers on behalf of your company. While you manage their day-to-day responsibilities, the EOR handles all the legal, administrative, and compliance aspects of employment.

Employer of Record services in India typically manage:

• Employment contracts in line with local labor laws
• Payroll processing and salary payments
• Statutory benefits and social contributions 
• Tax withholdings and filings
• Labor law compliance and regulatory reporting

Using an EOR is a practical solution for companies that want to hire employees in India without the time and cost of setting up a local entity. 

Payoneer WFM offers reliable EOR services in India, helping you grow quickly without the usual headaches of international expansion.

How to onboard employees in India

Onboarding a new remote employee in India involves some key steps to ensure a smooth and compliant start:

• Issue an employment contract that covers things like salary, benefits, termination, etc., in line with local Indian labor laws. 
• Collect necessary documentation, including bank details and tax information.
• Set up payroll and register the employee for statutory benefits. Also, set up tax deductions.
• Provide onboarding materials and access to internal systems and tools.

If you’re working with an Employer of Record in India, like Payoneer WFM, it’ll handle the local compliance and payroll setup. 

That leaves you to focus on getting your new hire up to speed on all your internal processes and day-to-day workflow.

Pay employees in India

When employing staff in India, it’s important to align with local payroll standards. Key details include:

• Payroll cycle: Most companies follow a monthly payroll cycle, with salaries paid by the first or on the last working day of the month.
• Fiscal year: India’s financial year runs from April 1st to March 31st.
• Minimum wage: This varies by state, job type, and skill level. The “national floor minimum wage” is INR 178 per day, though most skilled employees are paid far more than this.
• Bonus: Eligible employees are entitled to a statutory annual bonus, typically 8.33% to 20% of their salary.

Statutory deductions and contributions include:

• Employees’ Provident Fund (EPF): 12% of salary from both the employer and the employee
• Employee State Insurance (ESI): 3.25% from the employer, 0.75% from the employee (only for lower-income employees)
• Income tax (TDS): Withheld from monthly pay by the employer based on applicable tax slabs
• Professional tax: Rates vary by state and professional tax is deducted from employees’ salaries
• Gratuity: Paid by the employer if the employee completes 5 or more years of service

With all these regulations and mandatory deductions, managing payroll in India can be complex. 

Employer of Record companies in India help you efficiently pay your employees, without requiring you to navigate local tax and labor laws.

Employment laws in India

The following labor laws must be followed when employing workers in India: 

• The Code on Wages
• The Occupational Safety, Health, and Working Conditions Code
• The Industrial Relations Code
• The Code on Social Security

These laws cover:

• Working hours: No more than 9 hours per day or 48 hours per week 
• Overtime: Should be paid at double the rate as soon as maximum working hours are exceeded
• Probation period: Up to 6 months, during which termination notice periods are usually shorter (often 7 to 15 days)
• Minimum wage: Set by each state and varies by industry and skill level
• Paid leave: Includes vacation time, sick leave, and public holidays
• Maternity benefits: Up to 26 weeks of paid leave for eligible female employees
• Termination protection: Requires notice and, in most cases, severance pay
• Anti-discrimination laws: Protection against bias based on gender, caste, religion, etc

Minimum wage in India

India does not have a single nationwide minimum wage. Instead, it varies based on skill level, industry, and region. The national floor level wage is INR 178 (around $2.10) per day.

The average monthly salary for a skilled laborer in India ranges from INR 12,000 to INR 22,000 (approximately $140 to $255), depending on location and job type. 

This works out to roughly INR 550 to INR 1000 ($6.40 to $11.60) per day or INR 57 to INR 105 per hour ($0.67 to $1.23).

Workers in rural areas may earn closer to the lower end of the range, while skilled workers in major cities like Mumbai or Delhi earn closer to the higher end.

Minimum wage rates are periodically reviewed and updated to account for inflation and rising living costs, so employers should monitor local changes. The easiest way to do this is by partnering with an EOR in India to make sure your employees are paid correctly and in line with local regulations. 

Employment contracts in India

While Indian law does not require a written employment contract for most roles, having one is highly recommended. A well-written contract can protect both parties if something goes wrong. 

Key details to include in an employment contract:

• Contract type (fixed-term or indefinite)
• Start date of employment
• Job title and responsibilities
• Compensation details (base salary, allowances, benefits, and bonus eligibility)
• Working hours and leave entitlements (vacation time, sick days, and public holidays)
• Probation period length and conditions
• Termination clauses (required notice period, grounds for termination, and severance terms)
• Confidentiality, non-compete, and intellectual property clauses (if applicable)

Leave policy in India

India’s leave policies are complicated, with different rules applying to specific states. However, as an overview, here are some key things to know about leave entitlements in India:

• Public holidays: Employees get an average of 25 public holidays per year, varying by state and religious calendar.
• Vacation time: Employees get 15 to 20 days per year, depending on state law and company policy.
• Sick leave: Employees get up to 12 sick days per year.
• Maternity leave: Eligible female employees get up to 26 weeks of paid leave for their first 2 children, and 12 weeks of paid leave for any subsequent children. Adoption leave is also mandatory. 
• Other leave: This may include casual leave, bereavement leave, marriage leave, or sabbatical leave, based on company policy or state laws.

Understanding these leave entitlements is essential to avoid legal risks and maintain employee satisfaction. An EOR in India can help you easily manage employee leave.

Work permit in India

Any non-Indian citizen planning to work in India requires a valid work visa to be legally employed in India.

There are two main types of work visas:

• Employment visa: For skilled professionals hired by Indian entities.
• Business visa: For short-term business activities (not for employment).

Employment visas are typically granted to highly skilled professionals earning a minimum annual salary (around USD 25,000). 

The application and approval process can take up to 6 weeks, depending on the applicant’s nationality and the complexity of the case. Typically, visas cost between $140 and $220, again, depending on the length of the visa and the applicant’s nationality. 

Background check in India

While background checks are not legally required in India, they are common and recommended, especially if you’re hiring full-time employees.

Common types of background checks include:

• Identity verification
• Employment history and reference checks
• Education verification
• Criminal record checks
• Credit checks (typically for finance-related roles)
• Social media checks

These checks are usually conducted after a job offer is made but before onboarding. Before running a background check, you must get consent from the candidate, and all checks must comply with Indian data protection and privacy laws. 

Some background checks are illegal in India. Here’s what’s not allowed: 

• Any check that violates an individual’s privacy rights
• Any check that collects sensitive data without consent
• Discrimination based on the results of a background check (unless job-relevant)

Payoneer WFM’s Employer of Record India service ensures that background checks are carried out legally and ethically, helping you make informed hiring decisions while mitigating risk. 

Employment termination in India

Termination of employment in India must comply with Indian labor laws, any applicable state laws, and contract terms.

Key considerations include:

• Notice period: Most permanent employees must be given 30 days’ written notice or pay in place of notice. Collective dismissals or layoffs may require government approval in certain industries.

• Severance pay: If an employee is terminated due to redundancy, they are entitled to 15 days’ wages for every year of completed service, as per the Industrial Disputes Act. Gratuity must also be paid if the employee has completed 5 or more years of continuous service.

Company registration in India

Registering a company in India involves several legal and administrative steps. Here’s a high-level overview of the process:

1. Choose a business structure. Most foreign companies opt for a Limited Liability Partnership or Wholly Owned Subsidiary.
2. Obtain Digital Signature Certificates (DSC) and Director Identification Numbers (DIN) for the company directors.
3. Register the company name with the Ministry of Corporate Affairs.
4. Submit incorporation documents, including the Memorandum and Articles of Association.
5. Receive a Certificate of Incorporation, along with a Permanent Account Number (PAN) and Tax Account Number (TAN) for tax purposes.
6. Open a local bank account and comply with post-incorporation requirements, such as Goods and Services Tax (GST) registration.
   

The process can take several weeks and requires local legal and accounting expertise. See the official Indian government website for full details.

Global PEO in India

A Professional Employer Organization (PEO) and an Employer of Record (EOR) both help companies manage HR, payroll, and compliance. However, they serve different legal functions, especially when hiring internationally. 

A PEO acts as a co-employer. They can help with limited HR support services, like payroll and filing taxes. This model typically requires your company to have a legal entity in India.

An EOR, on the other hand, becomes the legal employer on your behalf. This means no local entity is required. The EOR handles things like employment contracts, payroll, tax filings, and compliance, while you manage the employee’s day-to-day responsibilities.

When building a global team with employees based in a complex market like India, an EOR is a more practical option. It allows you to hire quickly without setting up a local entity, stay compliant with local employment laws and tax rules, and reduce administrative overhead and legal risk.

Payoneer WFM offers one of the best EOR services in India

Hiring in India is a smart move for expanding companies because it gives you access to a highly skilled, diverse, and fast-growing workforce. However, navigating local employment laws, payroll requirements, and compliance risks can be challenging. 

That’s where Payoneer WFM’s EOR services in India come in. Payoneer WFM helps with:

• Fast, compliant hiring with no need to set up a local entity
• End-to-end management of payroll, tax, and statutory benefits
• Locally compliant employment contracts and termination support
• Simplified onboarding, leave management, and legal compliance
• Reduced admin and legal risk

If you’re looking to hire employees in India without the headaches, Payoneer WFM offers trusted EOR solutions tailored to your needs.
Get in touch with our team today to learn how Payoneer WFM can provide expert Employer of Record services in India.

FAQs about India Employer of Record 

1) What is the employer of record in India?

An Employer of Record (EOR) in India acts as the legal employer for workers in India on behalf of another international company. The EOR handles employment contracts, payroll, tax filings, and compliance with Indian labor laws, while the company maintains control over the employee’s day-to-day work.

2) What is the difference between an independent contractor and an employee in India?

In India, employees work under a company’s control, receive regular salaries and benefits, and are protected by Indian labor laws. Independent contractors, on the other hand, work on a project basis, manage their own taxes, and aren’t entitled to statutory benefits. Misclassifying employees as contractors can lead to compliance issues and penalties. An Employer of Record can help you correctly classify and manage your workforce in line with Indian regulations.

3) How much does an Employer of Record in India cost?

Using an Employer of Record in India costs less than setting up a local legal entity and managing recruitment, compliance, contracts, and payroll on your own. With Payoneer WFM, EOR services in India for full-time employees start at $199 per month.