How to Hire Employees in India: 8 Steps, Costs and the Law

To hire employees in India, a foreign company chooses one of three legal routes: incorporate an Indian entity, employ through an Employer of Record, or engage independent contractors. Two of the three need no Indian entity at all, which is why most first hires never involve a subsidiary. What follows is the sequence we run for clients: the routes and what each costs, the eight steps from role definition to first payroll, the labor laws that apply as of September 2026, and how to actually pay and equip somebody on the other side of the world.

Can a foreign company legally hire employees in India?

Yes. A foreign company can employ people in India through three recognized routes: its own Indian entity, an Employer of Record that acts as the legal employer, or a genuine independent contractor engagement. What creates exposure is paying a full-time worker from an overseas account with no Indian employer of record at all.

The reason is mechanical rather than philosophical. Someone locally registered has to issue the employment contract, hold the provident fund and employee state insurance registrations, and deduct tax at source before the salary lands. A company with no Indian presence and no partner holding those registrations has nowhere to file, so the obligations do not disappear, they simply go unmet.

Three exposures follow from that, and they are the ones we see raised in diligence:

• No statutory registrations: provident fund, employee state insurance and salary tax withholding all require an Indian registered employer. Without one, contributions and returns that the law expects are never filed.
• Permanent establishment risk: where your India-based hire negotiates, concludes contracts or generates revenue for you, tax authorities can treat the parent as having a taxable presence in India. Our guide to permanent establishment risk in India covers the tests applied.
• Misclassification: paying a full-time worker on invoice to avoid payroll rarely survives scrutiny where there is control, exclusivity, fixed hours and team integration. The consequence is retrospective liability, and we cover it in contractor misclassification risk in India.

The compliant paths are well established, and the EOR route in particular is a normal, recognized structure in India. We set out the basis for that in is an EOR legal in India, and the entity-free mechanics in hiring employees in India without an entity. Where your specific structure sits close to a line, take Indian counsel rather than a vendor's word, including ours.

What are the legal ways to hire employees in India?

Three: incorporate an Indian entity and employ people directly, appoint an Employer of Record that employs them on your behalf, or engage independent contractors for genuinely project-based work. All three let you hire an Indian employee lawfully. They differ in who carries the registrations, the filings and the risk.

Set up your own Indian entity

Foreign companies generally choose between a Private Limited Company and a Limited Liability Partnership. The Private Limited Company is the default: it allows full foreign ownership under the automatic route in most sectors, supports stock option grants, and is what local investors expect. An LLP carries a lighter compliance load but cannot issue shares or options, which rules it out for most venture-backed companies.

Either structure needs at least one Indian resident director or designated partner. Incorporation is only the start: you then carry tax registrations, employer registrations, a bank account, annual filings, and transfer pricing documentation from year one if you transact with the parent. Our company registration in India service covers the setup itself.

Hire through an Employer of Record

An Employer of Record is the legal employer on paper in India while you run the actual work. It issues the contract, holds the registrations, runs payroll in rupees, files the returns, and administers statutory benefits and the exit settlement. You keep role definition, hiring decisions, performance management and day-to-day direction, and the contract assigns work product to your parent company. The step-by-step mechanics of doing this with no Indian entity are covered in hiring employees in India without an entity.

Engage independent contractors

This is the loosest arrangement and the easiest to get wrong. A defensible engagement has a written scope with deliverables and an end date, a contractor who sets their own hours and uses their own tools, proper invoicing, and tax withheld at source on payment. Where the same person joins your standup every morning, reports to a manager and draws a fixed monthly amount with no end date, that is employment. See paying contractors in India for the payment mechanics, Contractor of Record for the compliant contracting layer, and converting contractors to employees in India when the relationship has already drifted.

The short verdict we give clients: if you want people working this quarter and are not yet certain about a multi-year India commitment, use an EOR. If India is a permanent part of the plan and you need equity, local banking and full control, build the entity. Use contractors only where the work genuinely ends. The trade-offs are worked through in the best way to hire employees in India.

How do you hire an employee in India, step by step?

This is how to hire employees in India end to end, in eight steps: choose your employment model, define the role and package, source candidates, interview around the candidate's notice period, issue a written offer, sign an India-law employment contract, complete statutory onboarding and background checks, then run the first payroll with the right tax and social security deductions.

Step 1: Decide your hiring model

Pick between your own entity, an EOR and a contractor arrangement before anything else, because the choice changes every step from five onward. For a first India hire with no local entity, the EOR route is the usual answer. Locking this late is the most expensive mistake we see, because offers get made before anyone knows who will issue the contract.

Step 2: Define the role, location and package

Fix the job description, the seniority, and whether the role is remote, hybrid or office-based. Benchmark pay against the specific city rather than a national average, because the same role prices very differently across Indian metros. Structure the package with a high basic component: the Code on Wages, 2019 sets a floor on what counts as wages for provident fund and gratuity purposes, so allowance-heavy packages no longer escape it. We use a 50% basic split as our working default.

Step 3: Source candidates

Indian hiring moves through a predictable mix of channels: LinkedIn for senior and mid-level white-collar roles, Naukri for high-volume corporate hiring, specialist product-hiring platforms, entry-level and operations job boards, employee referrals, and retained agencies for niche or leadership mandates. Sourcing pools and pay bands vary considerably by role, and we cover those separately in our role-by-role hiring guides.

Step 4: Interview around the notice period

India does not run on two weeks' notice. There is no single national notice-period statute for salaried staff; it is set by the contract and by state Shops and Establishments rules, and in practice we commonly see one to three months. Build that into the plan. A candidate who accepts in week four may not start until the following quarter, so run interviews knowing the clock starts at resignation, not at signature.

Step 5: Extend a compliant written offer

A compliant offer letter names the role and reporting manager, the start date, the full package breakdown including basic pay, allowances, employer provident fund, gratuity provisioning and bonus eligibility, plus notice period, probation terms, leave entitlement and place of work. Counter-offers are common in Indian white-collar hiring, so keep a second candidate warm until the joining date is confirmed rather than until the offer is signed.

Step 6: Sign the employment contract

This is where the legal work sits, and it is drafted under Indian law regardless of where you are. The clauses that matter most: compensation and statutory contributions, working hours and leave aligned to the relevant state's rules, notice and termination process, intellectual property assignment: all work product assigned to the company, confidentiality: standard for any role touching customer or product data, and data protection aligned with the Digital Personal Data Protection Act, 2023. Non-compete clauses have narrow enforceability in India. Our guide to employment agreements in India covers the full clause set.

Step 7: Complete statutory onboarding and background checks

Before day one you collect the employee's tax identification number, complete identity verification, generate the provident fund account number, open the salary bank account, and register for employee state insurance where the wage level requires it. Run the background check in parallel: we take written consent before any check, which India's data protection regime expects. A basic check returns in about five minutes and a full report including a physical address visit takes 7 to 10 days, as of September 2026. See background verification in India and our employee onboarding checklist for India.

Step 8: Run the first month's payroll

Indian payroll runs on a fixed calendar and late filing carries interest. From April 1, 2026, salary tax withholding is governed by section 392 of the Income-tax Act, 2025, which replaced section 192 of the 1961 Act, and tax is deducted at the average rate of income tax for the tax year on estimated salary income. Employers file a quarterly statement in Form 138, which replaced Form 24Q, and each employee receives Form 130, the annual certificate that replaced Form 16, by June 15. From running payroll for 2,000+ employees across 300+ global clients, the first cycle is where new setups hit friction, usually because the package split was structured wrong or a provident fund account was not generated in time. Getting steps 6 and 7 clean is worth the extra week.

How much does it cost to hire an employee in India?

Budget the gross salary plus the employer's statutory layer: 12% provident fund on basic pay plus dearness allowance, 3.25% employee state insurance where monthly wages are ₹21,000 (about $221) or below, gratuity provisioning, and state professional tax. Add a provider fee from $99 per employee per month if you use an EOR.

What are the mandatory statutory contributions?

Every legally employed worker in India triggers a set of employer contributions. These are the verified positions as of September 2026, and they split between central rules that apply everywhere and state rules that change at the border.

The five-year gratuity condition does not apply on death, on disablement, or on expiry of a fixed-term contract, and a fixed-term employee qualifies after one year on a pro rata basis. The code caps gratuity at an amount notified by the central government rather than naming a figure; the notified ceiling is ₹20 lakh, carried forward from the Payment of Gratuity Act, 1972. Position as of September 2026.

A worked example, line by line

Take a support or operations role at a gross salary of ₹600,000 a year, which is about $6,327 at roughly ₹94.8 to the dollar as of September 2026. That salary sits above the employee state insurance wage ceiling, so no ESI applies. This is what the year actually costs.

The statutory layer here is about 8.1% on top of gross. Including the provider fee, the hire costs roughly 1.25 times gross; excluding it, about 1.06 times. Both multiples move with the salary, because provident fund is capped at a wage ceiling while the fee is flat, so higher-paid roles carry a proportionally smaller statutory load. Model your own numbers with our employee cost calculator, and see the cost of an Employer of Record in India for how provider pricing is built.

The point where your own entity costs less than an EOR is not a fixed headcount, and it moves with the per-employee rate you actually pay, so run it against your own numbers in EOR versus entity in India or the EOR versus entity calculator.

What Indian labor laws apply when you hire employees?

India's four labour codes have governed employment since November 21, 2025, sitting on top of state Shops and Establishments rules. Three commenced in full. The Code on Social Security commenced only in part, so the 1952 provident fund act still governs PF. State rules are still being finalized as of September 2026.

India's four labour codes took effect on November 21, 2025, consolidating 29 central labour laws. The Industrial Relations Code, the Occupational Safety, Health and Working Conditions Code and the Code on Wages are in force in full. The Code on Social Security commenced in part: a few provisions, including its provident fund contribution clause, are not yet notified, so the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 continues to govern PF contributions. As of September 2026, central and state rules under the codes are still being finalized.

That distinction matters more than it sounds. It means the statutory basis you cite for a provident fund contribution is still the 1952 act, not the new code, and a page or a payroll memo asserting otherwise is citing a provision that has not been brought into force.

What each code covers, in practice:

• Code on Wages, 2019 (central): the universal wage definition, the floor wage, and statutory bonus. It repealed the Payment of Bonus Act, 1965 from November 21, 2025, setting the minimum bonus at 8.33% of wages and the maximum at 20%. The eligibility wage and the calculation wage are not written into the code: section 26 leaves them to notification, and the amounts carried over from the 1965 act stay in force until they are replaced.
• Industrial Relations Code, 2020 (central): in force in full. It governs fixed-term employment, standing orders, trade unions, and the retrenchment and termination process. India does not recognize at-will employment, so grounds and process both matter.
• Code on Social Security, 2020 (central, partial): in force except for the provisions noted above. Gratuity sits here, under section 53.
• Occupational Safety, Health and Working Conditions Code, 2020 (central): in force in full. Working hours, written appointment letters and workplace conditions.
• State-level rules: Shops and Establishments registration, professional tax, holiday calendars and leave entitlements are set state by state, which is why a Bengaluru hire and a Mumbai hire are not administratively identical.

Fuller treatments sit in the new labour codes in India and labor and employment law in India, including leave, maternity benefit and the termination process. Where a decision turns on a state rule or on a code provision that has not commenced, get Indian counsel to confirm it before you act.

How do you pay employees in India from overseas?

Indian employees are paid in rupees into an Indian bank account, on a monthly cycle, by whoever is their legal employer in India. You either run that payroll through your own Indian entity or hand it to an EOR or payroll provider that pays in rupees and invoices you in your own currency.

Running it yourself means opening a rupee bank account, registering with the provident fund and employee state insurance authorities, and owning the full filing calendar in-house or through a local firm. That is the right answer once you have an entity and enough headcount to justify the operations. Everything about it is covered in how to pay employees in India and the India payroll guide.

Using a provider means you never touch an Indian bank. The provider pays from its own Indian infrastructure, withholds tax, remits contributions and sends you one invoice. That is the usual answer below roughly the point where an entity pays for itself.

Either way, these obligations attach to the pay run, as of September 2026:

• Salary in rupees: paid monthly to the employee's Indian bank account. Paying an India-resident employee in dollars is possible in narrow cases and creates currency risk and filing complications for them, so we advise against it.
• Tax deducted at source: withheld under section 392 of the Income-tax Act, 2025 and deposited within seven days of the end of the month, with tax deducted in March due by April 30.
• Quarterly statement: Form 138, due July 31, October 31, January 31, and May 31 for the fourth quarter of the preceding financial year.
• Annual certificate: Form 130 issued to each employee by June 15.
• Social security remittance: employee state insurance within 15 days of the end of the month.

Contractors are a different mechanism. You withhold at the contractor rate rather than at salary rates, and cross-border remittance carries its own documentation, which we set out in paying contractors in India.

How do you get a laptop and system access to an employee in India?

Two things have to land before day one: the machine and the accounts. Buy or ship a laptop, get it delivered to a verified Indian address, provision email, identity and application access against a real start date, and agree in writing who owns the asset and how it comes back at exit.

This is the part of hiring in India that nobody budgets for and that quietly decides whether a new hire is productive in week one or week four. The sequence we run:

1. Decide buy-local or ship-in: buying the machine in India is usually faster than shipping one from your own stock, because an international shipment has to clear Indian customs and the duty and tax fall to somebody. Where a device must be shipped, agree in advance who is the importer of record and who pays the charges.
2. Verify the delivery address before you order: Indian residential addresses are often described rather than numbered, and courier reattempts are the single most common cause of a missed start date. Confirm the address, a working phone number and a person who will be home.
3. Decide who owns the asset: if an EOR is the legal employer, the machine can sit on your books or theirs, and that choice affects the exit. Write it into the employment paperwork rather than settling it later.
4. Provision accounts against the start date, not the offer date: identity, email, single sign-on, code or CRM access and any hardware security key all need to be live on the morning of day one, which means requesting them a week earlier.
5. Plan retrieval at exit before you plan onboarding: recovering a laptop from a former employee in another country is difficult if nobody agreed a return process, a courier and a deadline at the start. This is the step almost every guide skips.

Equipment procurement is an add-on to our Employer of Record service rather than something we sell separately. If you want the mechanics, see shipping laptops to India and our guide to equipping remote employees in India. The broader operational friction is covered in hiring challenges in India.

Who owns the IP when you hire an employee in India?

For an employee, work produced in the course of employment generally belongs to the employer under India's Copyright Act, and the employment contract confirms it. For a contractor, the default runs the other way, so the agreement has to assign the rights expressly. Patents and inventions follow separate rules.

The practical consequence is that the risk sits almost entirely on the contractor side. Where a company has been paying an India-based specialist on invoice for two years with no assignment clause, the question of who owns the output is genuinely open, and it surfaces at exactly the wrong moment, which is diligence.

Three things go into the paperwork on any India hire:

• Assignment of work product: an express clause assigning code, designs, documentation and inventions to the parent company, worded to survive termination.
• Confidentiality and non-disclosure: enforceable in India and standard for any role touching customer data, pricing or product plans.
• Data protection: obligations under the Digital Personal Data Protection Act, 2023 where the role handles personal data belonging to your customers.

Where the person is engaged as a contractor, the assignment clause is not optional and neither is a classification review. If the working pattern has drifted toward employment, the classification problem and the IP problem arrive together. Test it with our misclassification check, read contractor misclassification risk in India, and see protecting intellectual property when hiring in India for the full position. Anything you intend to file as a patent should go past Indian counsel before the contract is signed.

Does it change if you are hiring from the US, the UK or elsewhere?

No. Where you are headquartered changes your own tax reporting, your treaty position and the rails you pay on. It does not change what India requires of an employer. The obligations that attach when you hire in India are the same whether you sit in New York, London or Singapore.

What does change is the paperwork on your side of the transaction, the treaty that governs permanent establishment risk, and how many hours of overlap you get. We have written these up market by market:

• United States: treaty position, IP assignment back to a US parent, and the afternoon overlap window. See US companies hiring employees in India.
• United Kingdom: mapping UK data protection duties onto India's regime and budgeting in pounds. See UK companies hiring employees in India.
• Canada: running an India team from a Canadian parent. See Canadian companies hiring employees in India.
• Singapore: near-identical business hours and a short flight, which changes how teams are managed. See Singapore companies hiring employees in India.
• Gulf and Middle East: payment rails and remittance routing are the main difference. See Gulf and Middle East companies hiring employees in India.

For a broader view of the market rather than a single route, start with our overview of hiring in India.

How does Wisemonk help you hire employees in India?

We are an India-native Employer of Record. We become the legal employer for your India hires, issue compliant contracts, run payroll in rupees, file provident fund, ESI and tax returns, and handle equipment and onboarding, so you can hire employees in India without an Indian entity of your own.

Most EOR providers are global generalists covering a hundred markets through local partners. Wisemonk is built for one country. That focus is why 300+ global companies run their India hiring with us, across 2,000+ employees and $20M+ in annual payroll, with a 4.8/5 rating on G2.

• Employer of Record: we employ your India hires from $99 per employee per month, with contracts, payroll, statutory filings, benefits and exit settlement handled end to end. Equipment procurement and shipping is available as an add-on, so laptops and accounts land before day one.
• Contractor of Record: compliant contracts, classification review, IP assignment and payouts for Indian contractors, through Contractor of Record.
• Entity setup: when India becomes permanent, we handle company registration in India and the employer registrations that follow.
• PEO and HR services: if you already hold an Indian entity, we run payroll, filings, benefits and onboarding under your own registrations through PEO services in India.

As the CEO of The Humble Bucks LLC, I had a great experience working with Wisemonk.io. They made our hiring process in India smooth, efficient, and cost-effective. We were assigned a dedicated recruiter who helped us find and hire three EOR employees at a very competitive price. Beyond hiring, Wisemonk's support team was extremely helpful in managing important operational logistics. They assisted us with coordinating meeting-related needs, including flight tickets, employee laptops, and other practical requirements, which saved us significant time and effort. Overall, Wisemonk has been a reliable partner for The Humble Bucks LLC. Their combination of recruiting support, EOR services, and hands-on operational assistance made the entire experience seamless. I would recommend Wisemonk to any company looking to hire and manage employees in India with confidence. Mandan M Sharma, CEO at The Humble Bucks LLC