How to hire employees in India: Process, costs & more in 2026

To hire employees in India, you can either set up a legal entity or partner with an Employer of Record (EOR) to hire without an entity; for short-term projects, you can engage independent contractors. You’ll also need a thorough understanding of local laws and employment regulations specific to the country.

This article covers how to engage Indian workers, outlines key legal considerations, and explains how an Employer of Record (EOR) like Payoneer Workforce Management can help simplify and streamline engaging talent in India.

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 significant opportunity; however, navigating local laws and regulations can be complex. 

Hiring in India? Payoneer Workforce Management helps handle employment contracts, compliance, and more. Schedule a demo today!

How to hire employees in India?

If your company is looking to hire employees in India, there are several ways to do so, each with its own pros, cons, and considerations.

Here are some ways you can hire employees in India:

Set up a legal entity in India	Hire contractors in India	Use an Employer of Record in India
You can hire employees directly and operate fully within Indian regulations. – It is a complex, costly, and time-consuming process.  – Needs registration with multiple government departments.  – Need to open local bank accounts and stay compliant with India’s tax, labor, and corporate laws.  – Ideal for companies with long-term plans in the region, but it might be too much for many smaller or mid-sized organizations to handle.	Hiring individual contractors in India is flexible and low-commitment. – It is good for short-term or limited-scope projects with a fixed end date. – It helps companies avoid the cost and complexity of setting up a local entity. – Worker misclassification might be an issue, as misclassifying a contractor who functions as an employee can lead to legal issues, fines, and tax penalties.	An Employer of Record is a third-party organization that legally employs the team in India on your behalf.  The EOR assists with: – Employee onboarding & offboarding – Employment contracts – Payroll & Taxes – Benefits administration (Localized insurance, etc.) – Legal compliance The EOR also offers support with: – Work visas & permits – Talent discovery – Background checks – Device procurement – Office space facilitation  A fast and flexible solution for companies expanding into India without the need for setting up a local entity.

Suppose a UK-based company wants to hire an employee in Bengaluru at a gross salary of INR 80,000/- per month. The company can either set up an Indian entity and hire or seek assistance from an EOR. 

Here is a side-by-side comparison of the one-year cost for one hire at INR 80,000/- per month gross. (These are approximate costs, not including the actual entity setup cost)

Aspects	Entity	EOR
Onboarding cost	INR 48,000/- to INR 1,10,600/-	Zero (Typically covered in the EOR fee)
Time for first hire	6 to 10 weeks	3 to 7 days
Annual compliance without payroll	INR 50,000/- to INR 80,000/-	Included in EOR fee
PF/ESI/TDS management	Outsourced to CA or in-house	Included in EOR fee
Suitable for	Ideal for long-term India presence	Ideal for quick expansion with 1 to 100 or even more hires

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

Where to find employees in India

Once you’ve decided how you will hire in India, the next step is finding the right talent. There are various sources from which you can find the right employees for various job profiles in India. 

Here are some of the most common ways to source candidates and find employees in India.

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) Use 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, as some providers may offer talent discovery and recruitment support as an optional service at additional cost. 

With this approach, you’ll still drive the recruitment process and candidate selection, but the EOR can help streamline employment contracts, onboarding, benefits, and payroll compliance.

How to onboard employees in India?

To onboard employees, you must issue employment contracts, set up a payroll, collect documents, and initiate a company induction session, with team introductions. A smooth onboarding process helps set the tone for a successful working relationship in the long run. 

After finalizing the candidate and conducting background checks, it’s time for employee onboarding. The process of employee onboarding in India involves certain steps, as mentioned below.

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

Tips	Details
Collect required documents	Make sure 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	Provide onboarding materials and training in English, and optionally in local languages, as it may 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 candidate will be working with, and coordinate introductions. This is especially important for a global team.

If you’re using an EOR, it may offer guidance to manage most of this, including document collection, payroll setup, and compliance support, so the local talent can integrate seamlessly.

What are the key employment laws and requirements in India?

Before onboarding talent in India, it is essential to understand the key employment laws and requirements in the country. The employment laws mandate protections for businesses and workers alike. Here are the most prominent employment laws and requirements in India: 

• Industrial Relations Code, 2020: This Act consolidates and amends the laws relating to Trade Unions, employment conditions in industrial establishments, and simplifies compliance while balancing business flexibility and worker protections. 
• Code on Wages, 2019: This is a landmark Indian law that consolidates four major wage-related acts and universalizes minimum wage coverage. The code ensures gender equality, streamlines compliance, and offers bonus and wage protections to all workers. 
• Code on Social Security, 2020: The Code on Social Security, 2020, consolidates nine labor laws into one framework. This law provides universal social security with benefits such as medical care, provident fund, gratuity, maternity leave, and more. 
• The Occupational Safety, Health, and Working Conditions Code, 2020: The law consolidates 13 central labor laws into a uniform and single legislation. The law regulates working hours, leave, workplace safety, and welfare facilities across organizations with 10 or more workers.

1) What should an employment contract in India include?

Though not legally required, a written contract is a good practice when hiring 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) What are the employee benefits in India?

Employers in India are required to provide a range of statutory benefits. Some of them are:

Benefits	Details
Annual leave	Typically, 18 days per year, depending on state laws and company policy.
Sick leave	Usually 7 days annually.
Casual leave	Employees often receive 7 days of paid casual leave for unexpected personal events.
Maternity leave	Employers must offer up to 26 weeks of paid leave for eligible female employees. Adoption leave is also mandatory.
Public holidays	There is a minimum of 8 public holidays in India. There are 3 mandatory National holidays. The remaining 5 are festive holidays, which vary by state.
Provident Fund	A mandatory pension scheme with employer and employee contributions (12% employer + 12% employee capped at INR 15,000).
Employee State Insurance	Health insurance for employees earning below INR 21,000 per month.
Gratuity	A lump-sum payment is 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) What are the working hours and holidays in India?

In India, standard working hours are 40 hours per week spread over 5 or 6 days. They may extend to 48 hrs, including breaks. 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. Employees receive a minimum of 8 days annually.

Employees are entitled to between 18 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) What are the tax obligations in India?

Employers in India are responsible for several key tax and social security contributions on behalf of their employees. Here are some of the prominent tax obligations in India:

Tax obligations	Details
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.

For more information, read our guide about payroll in India.

5) How do employee termination and severance work in India?

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

Employees with more than 240 days of continuous service are entitled to severance (also called retrenchment compensation) equal to 15 days’ wages for every completed year of service. 

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 30 days.

What happens if you hire in India without an EOR?

Hiring in India without an EOR increases the chances of exposure for the business to compounding financial and legal consequences. These include steep tax penalties, employee misclassification lawsuits, and more. Non-compliance also invites reputational damage for the business organization. 

While hiring in India with an EOR, the EOR handles statutory taxes, payroll, and takes care of labor law compliance. 

Here is a brief comparison of hiring in India with and without an EOR:

Important parameters	Hiring without an EOR	Hiring with an EOR
Entity requirement	Businesses have to set up a Pvt. Ltd or an LLP, which takes almost 3-6 months, or more.	There is no entity requirement. The EOR has you covered.
Legal employer	You are the legal employer.	The EOR is the registered legal employer in India.
Provident fund compliance	EPFO can invoke penal provisions for non-compliance. This includes detention of the employer, attachment of bank accounts, along with criminal action under the Indian Penal Code Section 406/409.	EOR handles 12% employer PF contributions and monthly deposits without delays or errors with the EPFO.
Employment contracts	When a foreign entity issues employment contracts without Indian registration, it is legally unenforceable.	While hiring with an EOR, the employment contracts are compliant with Indian labor law and the labor codes.
Worker misclassification risk	Labelling contractors as full-time employees is worker misclassification, which can lead to serious penalties for the employer.	With an EOR, the risk of employee misclassification is reduced.
Onboarding speed	Without an EOR, the employee onboarding process might take months, as it includes entity registration, labor registration, and tax registration before hiring.	With an EOR, the employee onboarding time is approximately 3 to 7 days only.
TDS (Tax deducted at source)	A wrong step with TDS can invite penalties from the Indian Income Tax Department.	The EOR withholds and remits TDS on salaries every month.

Ready to explore Payoneer Workforce Management in India?

While choosing to engage talent 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 helps simplify this process by assisting with managing onboarding, payroll, and local compliance for you, so you can focus on growing your team.

We help companies engage talent in 160+ countries, without the complexities of setting up a local legal entity. 

Partner with us when engaging local talent in India for access to our unified platform, which allows you to:

• Onboard talent quickly and compliantly without a local entity
• Run global payroll with statutory contributions in a few clicks
• Guidance to stay compliant with local employment laws
• Assistance with taxes, benefits, work permits, timesheets, and more

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

Book a demo today to learn how Payoneer Workforce Management can help.