Planning to hire employees in India? Here’s a quick guide

India’s talent market is one of the fastest-growing and most dynamic in the world. When you hire employees in India, you tap into a large, skilled, and cost-effective workforce across many industries. 

For international companies, hiring in India presents a major opportunity, but navigating local laws and regulations can be complex. 

Here, we’re covering how to hire Indian workers, outlining key legal considerations, and explaining how an Employer of Record (EOR) like Payoneer Workforce Management can simplify and streamline the entire hiring process in India.

How to hire employees in India

If your company is looking to hire employees in India, there are a few different ways to do it, each with its pros, cons, and considerations.

1) Set up a legal entity in India

With this option, you can hire employees directly and operate fully within Indian regulations, though it is a complex, costly, and time-consuming process. 

You’ll need to register with multiple government departments, open local bank accounts, and stay compliant with India’s tax, labor, and corporate laws. 

Opening a local legal entity may make sense for companies with long-term plans in the region, but it might be too much for many smaller organizations to handle.

2) Hire contractors in India

Hiring individual contractors in India is another option. Flexible and low-commitment, it’s good for short-term or limited-scope projects with a fixed end date.

Hiring contractors allows companies to avoid the cost and complexity of setting up a local entity, but it comes with its own set of risk factors. Misclassifying a worker who functions as an employee can lead to legal issues, fines, and tax penalties. 

3) Use an Employer of Record in India 

An Employer of Record is a third-party organization that legally employs your team in India on your behalf. 

You manage the employee’s day-to-day work, while the EOR handles:

• Employee onboarding & offboarding
• Employment contracts
• Payroll & Taxes
• Benefits administration (Localized insurance etc.,)
• Legal compliance
• Work visas & permits
• Talent discovery
• Background checks
• Device procurement
• Office space facilitation 

It’s a fast and flexible solution for companies expanding into India without the complexity of direct employment.

Read more about working with an Employer of Record in India.

Where to find employees in India

Once you’ve decided how you’ll hire in India, the next step is finding the right talent. Here are some of the most common ways to source candidates.

1) Popular job boards in India

Online job boards are widely used in India and are a good starting point for reaching a broad talent pool. Popular platforms include:

• Naukri
• Foundit
• Quikr Jobs
• Shine
• LinkedIn
• Indeed
• Internshala (for internships and entry-level jobs)

2) Work with local recruitment agencies

Another option is to work with a recruitment agency in India. They can help you source employees faster and will likely be able to help with any language barriers that may arise. 

However, working with a recruitment agency comes with limitations in the form of talent networks with skill mismatch and additional costs.

3) Recruit through an EOR in India

If you’d rather have someone else manage the nitty-gritty of recruitment in India, you can work with an EOR. 

With this approach, you’ll still drive the recruitment process and candidate selection, but the EOR will handle things like employment contracts, onboarding, benefits, and payroll compliance.

Onboarding employees in India

After hiring and conducting background checks, it’s time to onboard. A smooth onboarding process helps set the tone for a successful working relationship in the long run. 

Here are some key tips to effectively onboard employees in India:

• Collect required documents: Ensure you have copies of government-issued ID, proof of address, PAN card, bank details, and education/employment certificates.
• Provide a clear employment contract: Include role details, salary, probation terms, and benefits in line with Indian labor laws.
• Use bilingual materials: Providing onboarding materials and training in both English and local languages can improve clarity and reduce miscommunication.
• Set up payroll and benefits: Register for applicable statutory benefits like Provident Fund (PF), Employee State Insurance (ESI), and make sure your processes are in line with local laws. 
• Clarify leave policies: Clearly outline employees’ leave entitlements and the associated processes. 
• Assign a local point of contact: If your team is global, having someone based in India or familiar with local practices can help bridge the communication gap.
• Prepare any resources: A written description of company policies, a handbook about the company’s culture, and access to an employee directory will be helpful when welcoming new employees. 
• Schedule meet-and-greets: Provide names and job titles of everyone the new hire will be working with, and coordinate introductions. This is especially important for remote work!

If you’re using an EOR, they’ll manage most of this for you, including document collection, payroll setup, and compliance, so your new hires are ready to hit the ground running.

Key employment laws and requirements in India

Before hiring in India, it’s essential to understand the country’s laws and requirements. 

1) Employment contracts

Though not legally required, a written contract is best practice when you hire employees in India. The contract should clearly outline:

• Job title and description
• Start date and probation period
• Salary and payment schedule
• Working hours and location (if applicable)
• Leave entitlements
• Termination conditions and notice period
• Confidentiality and non-compete clauses (if relevant)

Contracts must comply with Indian labor laws and be signed by both parties before the employee starts work. 

2) Employee benefits

Employers in India are required to provide a range of statutory benefits, including:

• Annual leave: Typically 15 to 20 days per year, depending on state laws and company policy
• Sick leave: Usually 12 days annually
• Casual leave: Employees often receive 6 days of paid annual leave for unexpected personal events.
• Maternity leave: Employers must offer up to 26 weeks of paid leave for eligible employees. Adoption leave is also mandatory.
• Public holidays: There are 3 mandatory public holidays. The rest vary by state, but most employees receive an average of 25 paid public holidays per year. 
• Provident Fund: A mandatory pension scheme with employer and employee contributions
• Employee State Insurance: Health insurance for employees earning below a certain threshold
• Gratuity: A lump-sum payment due after 5 years of continuous service

Employers must also comply with any state-specific rules and may offer additional benefits like bonuses or private health insurance.

3) Working hours and holidays

In India, standard working hours are typically 9 hours per day, up to 48 hours per week, spread over 6 days. Employees should not work more than this without overtime pay, regulated under the Factories Act, 1948, and the Shops and Establishments Acts.

India recognizes 3 mandatory national holidays:

• Republic Day: January 26th 
• Independence Day: August 15th 
• Gandhi Jayanti: October 2nd 

The total number of paid public holidays varies by state. On average, employees receive 25 days annually.

Employees are entitled to between 15 and 20 days of paid annual leave per year, depending on the state and company policy. This is in addition to public holidays and sick leave.

4) Tax obligations

Employers in India are responsible for several key tax and social security contributions on behalf of their employees, including:

• Income tax: Employers must deduct tax at source (TDS) from employee salaries based on applicable income tax slabs and deposit it with the government.
• Employees’ State Insurance (ESI): This is mandatory for employees earning INR 21,000 per month or less. Employers contribute 3.25% of wages, and employees contribute 0.75%.
• Employees’ Provident Fund (EPF): Both the employer and the employee contribute 12% of the employee’s basic salary.
• Employees’ Pension Scheme (EPS): A portion of the employer’s EPF contribution (8.33%) goes to EPS for retirement benefits.
• Health and education cess: A 4% cess is levied on the income tax that an employee owes and is used to fund public health and education initiatives.

5) Termination and severance

In India, terminating an employee requires following specific legal guidelines to avoid violating labor laws.

Typically, employers must provide at least one month’s written notice or give payment instead of notice. For employees under probation, the notice period may be shorter, typically ranging from 7 to 15 days.

Employees with more than 6 months of continuous service are entitled to severance (also called retrenchment compensation) equal to 15 days’ wages for every completed year of service. 

Payoneer Workforce Management makes it easy to hire employees in India

While choosing to hire in India is a great move for company growth, it involves navigating complex regulations around legal entities, contracts, benefits, taxes, and compliance. 

Payoneer Workforce Management simplifies this process by managing all the legal, payroll, and compliance responsibilities for you, so you can focus on growing your team quickly and confidently without the usual hurdles.

We help companies employ independent contractors and full-time employees in 160+ countries, without the complexities of setting up a local legal entity. 

Partner with us when hiring employees in India for access to our unified platform, which allows you to:

• Onboard new hires quickly and compliantly without a local entity
• Run global payroll securely and in a few clicks
• Stay compliant with local employment laws
• Handle taxes, benefits, work permits, timesheets, background checks, and more

From hiring in days to multi-currency payroll, we have everything a business needs to hire, pay, and manage their global team.

Talk to us today to learn how to hire Indian workers and grow your team, with minimal legal hassles.

FAQs about how to hire in India 

1) How can I legally hire an employee in India?

To legally hire employees in India, companies can set up a local legal entity, hire independent contractors, or partner with an Employer of Record (EOR). However, setting up a local entity is expensive and time-consuming, and hiring contractors comes with risks of worker misclassification.

2) Where can I find employees in India?

To find the right talent in India, companies can post job openings on local job boards like Naukri.com, Monster India, Shine.com, as well as on global platforms such as LinkedIn and Indeed. Another effective approach is working with local recruitment agencies or partnering with an EOR to hire in India, as they may offer to assist with the hiring process, onboarding, and ongoing administration. 

3) How do U.S. companies pay Indian employees?

U.S. companies can pay employees in India using international wire transfer or payment platforms or partner with an Employer of Record (EOR) to pay employees in India in rupees. The EOR also handles tax withholding and benefits, helping you easily comply with Indian labor laws.