Professional Employer Organization (PEO) in India 2025

Hiring in India is exciting, but the maze of labor laws, payroll, and compliance can feel overwhelming. A PEO in India makes it simple by acting as your local HR partner, so you can hire and pay employees without setting up a legal entity. In this guide, we’ll break down everything global businesses need to know about PEO services in India. per month, depending on the provider, number of employees, and benefits included. Some charge a flat fee, while others take a percentage of total payroll. Additional one-time setup or onboarding costs may also apply.

What is a PEO in India?[toc=What is PEO in India]

A PEO (Professional Employer Organization) in India is a partner that helps global companies hire employees, run payroll, and comply with Indian labor laws without setting up a local legal entity. It acts as a co-employer, where the PEO manages HR, payroll, benefits administration, and tax filing, while the client company handles the employee’s day-to-day work and performance.

For US or other global businesses expanding into India, a PEO simplifies compliance with local employment laws such as the Maternity Benefit Act and ensures smooth HR operations. It takes care of payroll management, benefits administration, risk management, and other administrative services so companies can focus on their core business activities while staying compliant with all statutory requirements.

How do PEOs in India operate?[toc=How PEO Works]

PEOs in India generally operate by utilizing an Employer of Record (EOR) business model, which means they use their local legal entity to act as the full legal employer of your staff, enabling global businesses to hire employees immediately without the obligation of setting up their own entity. This model allows for maximum compliance and minimizes the client company's legal exposure in the new country.

From our experience working with global clients, here is the breakdown of how a PEO service provider in India executes this operation:

1. Legal and Contractual Foundation: The EOR Model

• Legal Entity as Employer: The professional employer organization (PEO), acting as an EOR in this context, has a properly registered legal entity in India. This entity becomes the official employer of record for all regulatory and employment law purposes.
• Service Agreement: The client company (the foreign business) signs a service agreement with the PEO in India. This contract clearly defines the PEO's role in handling HR processes, such as payroll management, benefits administration, and risk management, while affirming the client company's right to manage the employee's day-to-day work, output, and culture.

2. Employee Onboarding and Compliance

• Employment Contracts: The PEO drafts and issues a legally compliant employment contract to the new hires. These contracts are fully compliant with all central and state-specific Indian labor laws and include provisions for statutory requirements like the Maternity Benefit Act and minimum wage standards.
• Statutory Registration: The PEO's local team manages all necessary statutory registrations for the employee, including registrations for the Provident Fund (PF), Employee State Insurance (ESI), and Professional Tax. They become the point of contact for all government and regulatory bodies concerning legal compliance.

3. Payroll, Tax, and Benefits Management

• Global Payroll Execution: The PEO handles the entire global payroll operation. This involves calculating gross-to-net salary, deducting the correct amount of payroll taxes (TDS), and remitting statutory contributions to the relevant government bodies. This ensures that the client company can pay employees compliantly and on time.
• Benefits Administration: The PEO manages the administration of both mandatory statutory benefits and supplementary employee benefits. They leverage their large client pool to provide access to more robust and competitive benefits packages, which aids the client company's talent acquisition strategy.

4. Ongoing HR Support and Risk Mitigation

• HR Support: The PEO provides dedicated HR support and hr consulting to both the client company and the employee, serving as a trusted partner for questions on local legal entity requirements, disciplinary issues, and performance management guidance.
• Regulatory Compliance Monitoring: A core function of the professional employer organisation is continuous monitoring of the ever-changing local employment laws. They provide real-time compliance assistance to ensure the client company's employment practices are always up-to-date, thereby mitigating legal and financial risk.

By executing these functions, the PEO in India effectively becomes the administrative engine, allowing the global business to focus solely on its core business activities and the successful integration of its international employees.

Why do global companies use PEO services in India?[toc=Why Use PEO in India]

Global businesses use PEO services in India to hire talent quickly, stay compliant with Indian labor laws, and avoid the heavy cost and complexity of setting up a local entity. A PEO makes it possible to test and scale in India without long incorporation timelines or legal risks.

From our experience helping global companies expand into India, here are the main reasons they choose a Professional Employer Organization (PEO):

1. Compliance with complex labor laws: India has over 40+ central labor laws and 100+ state-specific regulations. A PEO company ensures compliance with the Income Tax Act, Provident Fund (PF), Maternity Benefit Act, ESI, and other statutory benefits, removing the risk of fines or disputes.
2. No need for a local legal entity: Without a PEO, you must create an own entity (subsidiary or branch) in India to hire employees legally. This process takes months, requires tax registrations, and brings ongoing compliance costs. A PEO lets you bypass this by acting as the legal employer.
3. End-to-end HR and payroll management: PEOs handle payroll processing, tax deductions, employee benefits administration (health insurance, retirement plans), and HR functions like contracts and onboarding. This removes the administrative burden from your HR department.
4. Faster market entry and cost savings: Setting up an entity in India can take 3–6 months. With a PEO, you can hire employees in just weeks and avoid upfront investments in offices, compliance staff, and HR infrastructure.
5. Employee satisfaction and retention: By offering statutory benefits, health insurance, and smooth HR support, PEOs help ensure employees feel supported and valued, which is critical for retaining top talent.

According to NAPEO, small businesses using PEOs report 10–14% lower employee turnover compared to non-PEO peers. For companies hiring in India, that means better stability and lower rehiring costs.

How is PEO different from EOR in India?[toc=PEO vs EOR]

The main difference between a PEO (Professional Employer Organization) and an EOR (Employer of Record) in India lies in the legal employer status. With a PEO, you usually need to have a local entity in India, whereas with an EOR, you can hire without setting up an entity since the EOR becomes the full legal employer.

Here’s a simple comparison to help you understand:

In short, a PEO in India supports companies that already operate locally and need HR expertise, while an EOR is perfect for businesses that want to hire in India without forming a local entity.

How to hire through a PEO in India?[toc=How to Use PEO]

Hiring through a PEO in India is a streamlined, step-by-step process that allows a global business to onboard talent quickly and compliantly without the need to set up its own entity or local legal entity.

Here is the step-by-step guide on how to hire international employees using the services of a professional employer organization PEO in India:

Step 1: Partner Selection and Service Agreement

The first crucial step is to select one of the best PEO service providers in India. You will define the scope of services, which will typically include payroll processing, benefits administration, tax filing, and legal compliance.

• Action: Sign a service agreement with the chosen PEO partner. This agreement defines your company (the client company) as the party responsible for the employee's day-to-day management and work, and the PEO as the employer of record responsible for the legal and administrative employment related responsibilities.
• Key Focus: Look for a PEO with a proven track record in risk management and expertise in state-specific local employment laws.

Step 2: Recruitment and Candidate Selection

Your company manages the recruitment process and talent acquisition to find the right candidate, just as you would for a local hire. The PEO's role begins once you have selected your ideal candidate.

• Action: Define the role, compensation (salary, bonuses, etc.), and competitive benefits you wish to offer. The PEO can assist with salary benchmarking to ensure your offer is locally competitive and meets all statutory requirements.

Step 3: Employment Contract Drafting and Onboarding

The PEO steps in to formalize the employment relationship, taking on the role of the full legal employer on paper.

• Action: The PEO service provider drafts a fully compliant employment contract between the PEO's local legal entity and the new hire. This contract explicitly includes all mandated statutory benefits, such as contributions to the Provident Fund (PF), Employee State Insurance (ESI), and leave entitlements under acts like the Maternity Benefit Act.
• Time Savings: Utilizing the PEO for this step accelerates the hiring process significantly, allowing the client company to focus on the new employee's strategic orientation.

Step 4: Payroll and Compliance Setup

Once the contract is signed, the PEO takes on the full administrative burden of making the employee legal and compliant in India.

• Action: The PEO initiates the setup of the employee on its global payroll system. This involves registering the employee with the necessary government authorities and ensuring all initial documentation for tax compliance is complete. The PEO is responsible for accurate calculation and deduction of payroll taxes (TDS) and other contributions.

Step 5: Ongoing HR and Administrative Management

This is the continuous phase of the partnership, where the PEO provides daily HR support and manages all administrative tasks.

• Action: Every month, the client company simply provides the PEO with the approved payroll inputs (e.g., salary, commissions, leave taken). The PEO then uses its infrastructure to pay employees, manage payroll operations, file all necessary government reports, and administer all employee benefits. The PEO's continuous monitoring of regulatory compliance ensures the client company avoids potential legal disputes and penalties associated with changing labor laws.

This smooth process allows the global business to deploy its global workforce efficiently, allowing management to concentrate entirely on the employee's productivity and the company's core business activities.

Looking for the best PEO providers? Dive into our complete guide on the Top 10 PEO Service Providers in India to find the right fit for your business.

Which compliance rules matter most for PEO in India?[toc=Compliance Rules]

When working with a PEO in India, compliance with Indian labor laws and tax regulations is essential. These rules govern how you hire employees, manage payroll processing, and deliver employee benefits administration. Ignoring them can lead to fines, audits, or even legal disputes.

Here are the most important compliance rules your PEO will handle:

1. Income Tax Act

This law governs how salaries are taxed. Employers must deduct TDS (Tax Deducted at Source) from employee salaries and deposit it with the government every month. A PEO ensures accurate calculations, applies the right exemptions, and files returns on time to prevent penalties.

2. Employees’ Provident Fund and Miscellaneous Provisions Act (EPF)

Both employer and employee contribute a percentage of wages into the Provident Fund, which builds a retirement corpus for employees. A PEO manages PF registration, contributions, and compliance filings with the Employees’ Provident Fund Organisation (EPFO).

3. Employees’ State Insurance Act (ESI)

For employees earning below a statutory threshold, contributions must be made to the Employee State Insurance scheme, which covers medical care, sickness, maternity, and disability. A PEO ensures eligible employees are enrolled and contributions are paid correctly.

4. Payment of Gratuity Act

This act requires employers to pay gratuity to employees who complete five or more years of service. A PEO tracks eligibility, calculates the amount due, and ensures proper disbursement, protecting you from legal disputes at the time of separation.

5. Maternity Benefit Act

Female employees are entitled to up to 26 weeks of paid maternity leave, along with medical bonuses and protection from termination during this period. A PEO ensures your employment contracts and HR policies align with these provisions.

6. Shops and Establishments Acts (State-specific)

Each Indian state has its own law covering working hours, overtime, leave policies, and holidays. Since rules differ by state, a PEO’s local expertise helps ensure compliance for employees in multiple regions.

7. Payment of Bonus Act

Eligible employees are entitled to receive a minimum bonus each year, usually calculated as a percentage of wages. A PEO ensures this requirement is integrated into payroll management and handled transparently.

8. Labor Codes (Wages, Social Security, Industrial Relations, and OSH)

India is consolidating existing laws into four new labor codes. These will affect wage structures, social security benefits, retirement plans, and workplace safety standards. A good PEO monitors these changes and updates HR processes to keep your company compliant.

A PEO in India shields you from the complexity of local employment laws, ensuring full regulatory compliance while employees receive their rightful statutory benefits like PF, ESI, gratuity, and maternity leave.

What are the risks of using PEO services in India?[toc=PEO Risks]

The biggest risk of using PEO services in India is legal exposure if your business does not have a local legal entity. By law, PEOs in India operate under a co-employment model, which requires you to already own an entity. If you use a PEO without one, you may face compliance risks and potential legal disputes.

Here are the main PEO risks to be aware of:

1. Entity Requirement Risk: Unlike an EOR, a PEO in India cannot act as the sole legal employer. If you do not have a local entity, relying on a PEO may put you in violation of employment laws and tax regulations.
2. Compliance Gaps: PEOs handle HR processes like payroll management, employee benefits administration, and tax filing, but ultimate responsibility for regulatory compliance lies with your entity. Any oversight in meeting Indian labor laws (for example, Provident Fund, ESI, or gratuity) could result in fines or penalties.
3. Co-Employment Complexity: The co-employment relationship can sometimes create confusion between the client company and the PEO regarding employer responsibilities, especially in sensitive matters like termination procedures, income tax deductions, or maternity benefits.
4. Limited Global Flexibility: If your goal is to hire employees in multiple countries, a PEO service provider may only support you in India. For broader global HR and global payroll coverage, a global PEO or EOR service provider may be a better fit.
5. Employee Perception: Employees may sometimes feel disconnected if they see their official employer as a PEO rather than your company. Without proper communication, this can affect employee satisfaction and retention.

To sum up, the main risks with PEO services in India revolve around the legal requirement of having your own entity and the shared nature of employer responsibilities. Businesses without an entity should instead consider an EOR in India to ensure full legal compliance and avoid exposure under local labor laws.

Is a PEO in India the right choice for your business?[toc=Is PEO Right Choice]

A PEO in India is the right choice if you already have a local legal entity and want to outsource HR processes, payroll management, and employee benefits administration while focusing on core business activities. However, if you do not have an entity in India, an Employer of Record (EOR) is usually the better option.

When a PEO in India makes sense

• You already operate through a local entity in India.
• You want to simplify payroll processing, tax filing, and regulatory compliance.
• You need professional support with employment contracts, statutory benefits, and HR services.
• You prefer to reduce the administrative burden on your HR department and ensure accurate compliance with local labor laws.

When a PEO may not be the best fit

• You do not have a local entity in India. PEOs require one because they work on a co-employment model.
• You want a partner who takes full legal employer responsibilities. In this case, an EOR in India is more suitable.
• You are planning to expand into multiple countries and need a single provider offering global payroll and international employment support.

A PEO in India is ideal for businesses that already have an entity but want to streamline HR management services and reduce compliance risks. If you are just entering India and do not have a legal presence, an EOR company will give you a faster, more compliant start.

Why is Wisemonk the preferred choice for PEO in India?[toc=Why Choose Wisemonk]

Wisemonk is a leading India-focused Employer of Record (EOR)) and Professional Employer Organization (PEO) partner for global businesses with a local entity. We help international companies simplify HR functions, payroll processing, and compliance management, making it easy to hire and manage employees in India with complete confidence and legal assurance.

What sets Wisemonk apart:

• Local expertise with global standards: Deep knowledge of Indian labor laws, tax regulations, and statutory benefits, combined with global best practices.
• Seamless payroll and HR management: Transparent processes for employment contracts, tax filing, and employee benefits administration.
• Employee-first approach: Competitive health insurance, retirement plapeons, and welfare programs that enhance employee satisfaction.
• Dedicated HR support: On-the-ground HR professionals who provide direct assistance to your employees, ensuring smooth day-to-day operations and higher retention.
• Scalability: Flexible solutions whether you are hiring 5 employees or 200, supporting both startups and enterprises.

Client review/feedback:

“What I really like most about Wisemonk is their support and the overall onboarding experience. They make sure to setup everything on time and they even helped me with equipment and software setup. Their platform has all the features a company need to manage their remote team. It's been a pleasant experience so far.”

— Subhash S.
Operations Manager
Read the full review on G2 →

“I'm impressed by the high-quality individuals they're able to bring to the table.”

— Dan Sampson
VP of Engineering, Cobu
Read the full review on Clutch →

Beyond EOR services, we provide advanced support in background verification, tax optimization, contractor management, company registration and office setup support for building offshore teams or Global Capability Centers (GCCs) in India. With Wisemonk, you gain a trusted partner dedicated to making your India workforce efficient, compliant, and ready to scale.

Why wait? Reach out to us today and let our experts take the stress out of navigating Indian PEO services, so you can focus on what truly matters: growing your business!

FAQs

Which company provides PEO services in India?

Several global and India-focused providers offer PEO services, including Wisemonk, Deel, Rippling, Papaya Global, and Remote. Wisemonk stands out as an India-specialized PEO and Employer of Record (EOR) partner that helps international companies manage payroll, HR, and compliance seamlessly across India’s diverse labor landscape.

What are the three types of PEO?

The three main types of PEOs are:

1. Domestic PEOs, which support companies operating within one country.
2. International PEOs, which enable businesses to hire employees across multiple countries without setting up entities.
3. Industry-specific PEOs, which cater to specialized sectors like IT, healthcare, or manufacturing, offering tailored HR and compliance solutions.

What is a PEO service provider?

A PEO service provider is a third-party partner that helps businesses manage HR functions such as payroll processing, benefits administration, tax filing, and compliance with labor laws. In India, a PEO operates under a co-employment model, where it shares employer responsibilities with the client company while ensuring all statutory and regulatory requirements are met.

What is the difference between a BPO and a PEO?

A BPO (Business Process Outsourcing) company focuses on outsourcing specific business functions like customer support or accounting, while a PEO (Professional Employer Organization) handles employment-related responsibilities such as payroll, HR, and compliance. In short, a BPO manages tasks, whereas a PEO manages people under local labor laws.

How much do PEO services in India cost?

The cost of PEO services in India typically ranges from $100 to $200 per employee per month, depending on the scope of services, company size, and compliance requirements. Providers like Wisemonk offer transparent pricing models that include payroll management, statutory benefits administration, and end-to-end HR support for global companies hiring in India.