- Hire employees in India through four options: use an Employer of Record (EOR) for quick hiring, set up your own entity for full control, hire contractors for short-term work, or partner with staffing agencies for flexible scaling.
- How to hire employees in India requires compliant employment contracts, accurate worker classification, thorough background checks, and complete onboarding documentation, including EPF and ESI registration.
- Key compliance requirements: Follow Indian labor laws on minimum wages, 48-hour work weeks, overtime, and 12% EPF contributions from both employer and employee.
- Mandatory benefits: Provide EPF, Employee State Insurance, gratuity after 5 years, paid leaves, and annual bonus payments as required by law.
- Manage payroll and taxes by registering for TAN and Professional Tax, deducting EPF, ESI, and income tax, and ensuring timely salary payments in INR.
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Thinking about hiring employees in India? You’re not alone, many global companies find the process daunting with all the unique legal, cultural, and compliance details to consider. That’s why we’ve put together this guide to make things easier. We’ll walk you through every step of hiring in India, from understanding employment laws and tax rules to mastering onboarding and building your team the right way. Whether you’re just starting out or looking to grow your presence, this guide will help you navigate the hiring process in India with confidence and clarity.
How can you hire employees in India?[toc=Different Hiring Options]
When you're looking to hire employees in India, you have a few different hiring options, each with its own set of pros and cons. The choice you make will depend on your business needs, the level of control you want, and how much time you're willing to invest in navigating the legal and compliance landscape.
From our experience helping global companies hire employees in India, here are the common methods for hiring in India:
- Set Up a Local Entity: If you're after full control over your operations in India, establishing a local entity might be the way to go. However, be prepared for a complex journey. This option requires registering your company, getting your Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), and complying with a host of local regulations. It’s a longer path but gives you autonomy once everything’s in place.
- Partner with an Employer of Record (EOR): If you’re looking to enter the Indian market faster without the heavy lifting of setting up a local entity, an Employer of Record (EOR). This third-party service acts as the legal employer for your team in India, handling payroll, taxes, benefits, and compliance with all the local labor laws. It’s a great way to start operations quickly and efficiently, especially if you’re not ready to dive into the legal complexities of running your own entity.
- Hire Independent Contractors: Freelancers or independent contractors offer flexibility, especially for short-term or project-based needs. While this might seem like an easy route, it comes with its own challenges. You’ll need to ensure you classify these workers properly, as misclassification can lead to compliance issues down the line. But if you get it right, it's a great option for businesses that need talent on demand.
- Partner with a Staffing Agency: A staffing agency can help you find and manage talent without having to worry about all the administrative work yourself. Staffing agencies typically handle recruitment, onboarding, and even payroll. This can be a great way to get access to local talent quickly, especially for roles that don’t require long-term employment, but it can come with a higher cost depending on the agency.
Each of these options has its own set of advantages depending on what stage your business is at and what your long-term plans are in India.
What does the hiring process in India look like?[toc=Recruitment Process]
Hiring employees in India involves a series of steps that ensure you meet legal requirements, recruit top talent, and onboard efficiently. Whether you choose to hire through an Employer of Record (EOR), establish a local entity, or use independent contractors, following a clear process is key.
Here's a breakdown of the step-by-step approach to hire employees in India, ensuring compliance with local labor laws and a smooth onboarding process:
Step 1: Define the Job Role
Be specific about responsibilities, required tech stack, experience range, and outcomes. Global companies often underestimate India’s talent depth, so clarity helps filter thousands of applicants fast. Include remote or hybrid expectations, shift overlap, and must-have compliance requirements like PF applicability.
Step 2: Source and Recruit Candidates
India’s talent market is fragmented, so use multiple channels to get quality applicants.
- Job portals: Naukri is the strongest for mid-senior roles. Shine and TimesJobs help widen reach. Freshersworld works only for entry-level hiring.
- LinkedIn: Essential for specialized roles, product teams, and leadership hiring.
- Referrals: India has a strong referral culture, so employees often recommend talent from prior companies.
- Agencies: Use India-based recruiters like Wisemonk who understand salary norms, notice periods (usually 30 to 90 days), and current talent demand.
Step 3: Screen and Shortlist Applications
Evaluate CVs for technical skills, domain knowledge, stability, and actual contribution since many engineers list team achievements. Shortlist based on capability and expected notice period because long notice periods can slow the hiring timeline.
Step 4: Conduct Interviews and Assessments
India’s hiring process typically requires multiple rounds. Combine:
- Technical interviews to validate hard skills
- Practical tests or take-home assignments
- Communication and collaboration checks since many roles need time zone overlap
Keep interview loops tight. Delays increase the chance of losing candidates to competing offers.
Step 5: Perform Background Checks
Standard checks include employment and education verification, criminal database screening, and ID validation like PAN or Aadhaar. Global companies should work with India-specialist verification partners to avoid delays or incorrect results. Always obtain documented candidate consent.
Step 6: Extend a Job Offer
Offer letters in India must clearly specify compensation structure, fixed versus variable pay, PF eligibility, probation period, notice period, and leave policy. Expect candidates to negotiate. Counteroffers from current employers are very common.
Step 7: Set Up Payroll and Benefits
To stay compliant, you must manage:
- Monthly payroll with TDS tax calculation
- PF, ESI, and professional tax which is state specific
- Gratuity eligibility
- Statutory leave and holiday rules
Step 8: Onboard and Integrate
Provide new hires with compliant employment contracts, equipment, access to tools, and onboarding documentation. India values structured onboarding, and clear expectations plus early engagement directly improve retention in the first 90 days.
By following a structured, compliant process for hiring employees in India, you not only ensure legal adherence but also set the foundation for a successful, long-term workforce. With years of experience helping 500+ global companies expand into India, Wisemonk supports your hiring journey with expertise in compliance, payroll, and seamless team integration.
For more details on onboarding and EOR services in India, check out our Employee Onboarding Checklist For Hiring in India 2025 guide.
What are the key Indian employment and labor laws?[toc=Employment & Labor Laws]
India's labor laws are complex, with a mix of federal and state-specific regulations that businesses must navigate. With over 29 central laws and more than 200 state laws, understanding the legal framework is essential for compliance when hiring employees in India.
The four key labor codes that are currently in effect or being implemented aim to simplify and consolidate existing laws include:
- The Code on Wages, 2019: This code consolidates laws on minimum wages, timely payment, bonuses, and equal pay. It introduces a national floor wage while allowing states to set higher minimum wages based on local conditions.
- The Industrial Relations Code, 2020: This code simplifies rules related to trade unions, working conditions, and industrial disputes. It also increases the threshold for requiring government permission for layoffs, from 100 to 300 employees.
- The Code on Social Security, 2020: Expands the scope of social security coverage to include gig workers, platform workers, and workers in the unorganized sector, ensuring better social protection for a broader range of workers.
- The Occupational Safety, Health and Working Conditions Code, 2020: This code amends laws regarding workplace safety, health, and working hours, particularly for establishments with 10 or more workers. It emphasizes the responsibility of employers to ensure a safe and hygienic working environment.
Key employment regulations in India
Understanding key employment regulations in India is crucial for foreign companies to ensure compliance and avoid legal challenges. These regulations cover employment contracts, working hours, leave policies, statutory benefits, and more, and are essential to maintaining a compliant and efficient workforce in India.
- Employment Contracts: While not always legally required, having a detailed written contract is a standard practice and highly recommended. The employment contract should outline job roles, compensation, working hours, benefits, and termination conditions to avoid future disputes.
- Working Hours: The standard working hours in India are capped at 48 hours per week, with daily limits often set at 9 hours. Overtime must be compensated at double the standard wage rate for hours worked beyond the regular working hours.
- Leave Policies & Public Holidays: Employees are entitled to various types of leave, including earned leave (typically 15 days per year), sick leave, and casual leave. Maternity leave is also mandated, with a duration of 26 weeks for the first two children and 12 weeks for subsequent children.
To learn more about the leave policies in India, refer to our article on Understanding Leave Policy Laws and Holidays in India - Statutory Benefits: In India, employers must contribute to key social security schemes. The Employees' Provident Fund (EPF) is mandatory for companies with 20+ employees, while the Employees' State Insurance (ESI) covers employees earning up to ₹21,000 per month in companies with 10+ employees. Employees are also entitled to gratuity after five years of continuous service.
Read more: Employee Benefits in India: 2025 Complete Guide - Supplementary Benefits: In addition to the mandatory benefits, many employers offer supplementary benefits such as performance bonuses, health insurance, and additional paid leave. These benefits can vary based on company policy and industry standards.
To learn more about employment laws in India, refer to our article on "Employment Laws in India: What Employers Must Know in 2025"
How to pay employees in India?[toc=How to Pay Employees]
Paying employees in India involves understanding salary structures, mandatory deductions, and setting up an efficient payroll process. To ensure full compliance with Indian labor laws, companies need to navigate a multi-step process, whether they manage payroll in-house or outsource it to a service provider.
Employee salaries structures in India
In India, employee salaries are typically structured around the Cost to Company (CTC), which represents the total cost incurred by the employer. The salary structure includes both fixed and variable components, alongside allowances and non-cash benefits.
- Fixed Pay: Includes basic salary, which forms the foundation for other benefits, and allowances such as House Rent Allowance (HRA), Conveyance Allowance, and Leave Travel Allowance (LTA).
- Variable Pay: This includes performance-based components like bonuses and commissions.
- Benefits: Non-cash benefits, such as employer contributions to the Employees’ Provident Fund (EPF), health insurance, etc.
- Gross Salary: The total of basic salary, allowances, and bonuses.
- Net Salary: The take-home pay after deductions.
Try our fully loaded cost calculator now and take the first step towards building your world-class team in India: Salary Calculator India: Simplify Your Take-Home Pay Calculation
Key mandatory deductions
In India, several deductions must be made from an employee’s salary, and employers are responsible for withholding and depositing these amounts with the government.
- Employees’ Provident Fund (EPF): Mandatory for businesses with 20 or more employees, with both the employer and employee contributing 12% of the basic salary.
- Employees' State Insurance (ESI): A social security scheme applicable to employees earning up to ₹21,000 per month. Employers contribute 3.25%, while employees contribute 0.75%.
- Tax Deducted at Source (TDS): Income tax withheld based on the employee's tax bracket.
- Professional Tax (PT): Varies by state, with a maximum deduction of ₹2,500 annually.
Set up payroll in India
Setting up payroll in India requires a few essential steps, whether you’re managing it yourself or outsourcing it.
Here's how to get started:
- Establish Legal Presence: Register a local entity or partner with an EOR.
- Tax Registration: Obtain a Permanent Account Number (PAN) and a Tax Deduction and Collection Account Number (TAN).
- Social Security Registration: Register with the EPF and ESIC.
- Gather Employee Information: Collect PAN, bank details, Aadhaar number, and investment declarations.
- Define Payroll Policies: Set up pay cycles, attendance rules, and bonus structures.
- Calculate Salary and Deductions: Compute salaries, applying mandatory and voluntary deductions.
- Disburse Salary: Pay employees via bank transfer and provide payslips.
- File Statutory Filings: Submit deductions for EPF, ESI, TDS, and PT with government departments.
Need help paying employees in India? Check out our Payroll in India: What Global Employers Need to Know for a step-by-step walkthrough on compliance, payroll setup, and tax regulations.
What are the compliance risks in India?[toc=Compliance Risks in India]
When hiring employees in India, compliance is non-negotiable. India has a complex web of central and state labor laws that govern employment, payroll, benefits, and termination. For global businesses expanding into India, understanding and managing these compliance risks is essential to avoid legal disputes, financial penalties, and reputational damage.
From our experience helping international companies hire employees in India compliantly, here are the key compliance risks you should watch out for:
1. Misclassification of Workers
One of the most common risks is misclassifying independent contractors as full-time employees.
If a contractor works under your supervision, receives fixed pay, and follows your schedule, Indian authorities may classify them as an employee, triggering liability for unpaid taxes, social security contributions, and even severance pay.
How to avoid it: Use clearly defined fixed-term contracts and ensure each agreement states the scope of work, payment structure, and intellectual property ownership.
2. Non-Compliance with Labor Laws
India has 40+ central and state labor laws, including the Shops and Establishments Act, Industrial Disputes Act, and Payment of Wages Act. These regulate minimum wages, working hours, overtime pay, and paid leave. Failing to follow these can result in fines or even suspension of business operations.
How to avoid it: Stay updated on local labor laws in each state where your employees are located and ensure your policies comply with them.
3. Tax and Payroll Errors
Incorrect tax withholdings, late income tax deposits, or missed social security contributions (EPF/ESI) can lead to audits and penalties from the Indian government.
How to avoid it: Automate payroll processing through a compliant system or partner with an Employer of Record (EOR) to ensure all tax deductions and filings are handled accurately.
4. Data Privacy and Employee Information
Indian employers must safeguard employee data in compliance with the Digital Personal Data Protection Act (DPDP), 2023. This includes storing data securely, obtaining employee consent, and limiting access to authorized personnel.
How to avoid it: Adopt transparent data management policies and use secure HR software that meets Indian and global privacy standards.
5. Termination and Severance Risks
Improper termination or not following due process under the Industrial Disputes Act (1947) can result in legal claims or reinstatement orders. Employees are entitled to notice periods, severance pay, and sometimes government approval for large layoffs.
How to avoid it: Document performance issues clearly, follow the employment contract terms, and issue written termination notices as required by law.
6. Intellectual Property and Confidentiality
For global companies outsourcing work to India, protecting intellectual property ownership is critical. Without clear clauses in employment agreements, employees or contractors may retain rights over their work.
How to avoid it: Include detailed IP transfer and confidentiality clauses in every employment contract or services agreement.
7. Foreign Entity Compliance and Permanent Establishment (PE) Risk
If a foreign company directly manages employees or generates revenue through Indian staff without a local entity, it could be deemed to have a Permanent Establishment under Indian tax law, leading to corporate tax liabilities in India.
How to avoid it: Hire through an EOR or set up a Private Limited Company to stay compliant and avoid triggering PE status.
Complying with Indian employment laws may seem complicated, but with proper guidance, it becomes manageable. Global businesses that proactively address payroll, tax, and labor compliance not only stay legally protected but also build strong, trustworthy relationships with their Indian workforce.
What is the work culture like in India?[toc=Work Culture in India]
India’s work culture combines professionalism, strong teamwork, and adaptability. For global businesses hiring employees in India, understanding local work ethics, labor expectations, and employment norms is key to building productive, long-term teams.
From our experience helping global companies hire and manage employees in India, here’s what defines the culture and how international employers can align with it effectively:
- Hierarchy and Respect for Authority: Indian workplaces are hierarchical, with decisions often coming from senior leaders who are highly respected.
- Relationship Building: Trust and personal connections matter deeply, and relationships often extend beyond the workplace.
- Teamwork and Collectivism: Employees prioritize group success over individual achievements, emphasizing collaboration and harmony.
- Communication Style: Communication tends to be polite and indirect, avoiding confrontation to maintain respect and harmony.
- Work-Life Integration: The lines between work and personal life are often blurred, with employees staying late or participating in team activities outside work hours.
- Adaptability and Flexibility: Indian professionals are highly adaptable, thriving in dynamic environments and adjusting quickly to changes.
For a deeper dive into this topic, check out our article: Work Culture in India: All You Need to Know.
How to terminate employees legally in India?[toc=Layoffs & Termination Laws]
Terminating employees in India requires strict adherence to local labor laws. Global companies must follow a structured, documented process to avoid disputes, penalties, or compliance failures.
Here’s the simplest way to handle terminations the right way:
1. Understand the legal framework first
Know the core laws that govern exits in India, including Shops and Establishments Act rules on notice, the Industrial Disputes Act for layoffs or retrenchment, and the Payment of Wages Act which requires final dues to be cleared within two working days.
2. Set the correct termination category
Before initiating any exit, identify whether it is misconduct, redundancy, restructuring, or voluntary resignation. Each category triggers a different legal requirement.
3. Follow notice period and compensation rules
Most full-time employees fall under a 30 to 90 day notice period depending on state and contract terms. Misconduct cases require a documented inquiry. Retrenchment payouts typically require 15 days’ average pay per year of service.
4. Execute a legally compliant process
- Issue a written termination letter with reason and effective date
- Conduct an internal inquiry for misconduct or performance disputes
- Settle all final dues within two working days
- Collect company assets such as laptops or access cards
- Maintain thorough records to avoid future legal claims
5. Consider special implications for foreign employers
- If employees are hired via an EOR, the EOR manages compliance, settlements, and notices
- Layoffs involving 100 or more employees require government approval
- To avoid permanent establishment risks, ensure the termination is executed through your India entity or EOR
6. Apply best practices to reduce legal risk
Use clear contracts, document performance issues, be consistent with policies, and maintain transparent communication. A local HR or legal expert can help navigate complex requirements.
For a deeper breakdown of termination laws, notice period rules, and severance compliance, explore our Complete Guide to Employee Termination in India.
Why choose Wisemonk to hire employees in India?[toc=Why Choose Wisemonk]
Wisemonk is a specialized Employer of Record (EOR) in India, built for global companies looking to hire, pay, and manage employees in India without the complexities of setting up a local entity. Wisemonk provides end-to-end workforce solutions tailored to India’s regulatory landscape, ensuring seamless compliance, payroll, and dedicated HR support for your offshore teams.
Why global companies trust Wisemonk for hiring in India:
- Fast talent acquisition and onboarding: Helping 500+ international companies hire top Indian talent with quick role kickoffs, structured preboarding, and day-one readiness powered by our India-first workflows.
- Accurate payroll and statutory operations: Managing $20M+ in monthly payroll with error-free TDS, PF, ESI, PT, compliant contracts, and fully automated filings across all Indian states.
- End-to-end employee lifecycle support: Supporting 2K+ employees with dedicated HR specialists who handle onboarding, offboarding, background checks, equipment procurement, and daily employee needs.
- Transparent and predictable pricing: Starting at $99 per employee per month with no hidden fees, no FX markups, and clean cost visibility that global teams can trust.
- Compliance and risk protection: Keeping global teams protected from misclassification, labor disputes, and accidental Permanent Establishment risk through airtight documentation and local labor law expertise.
Client review/feedback:
“Wisemonk has helped us hire right people from India for a Canadian entity. The process is so smooth we don't even notice that our payroll has people in both Canada and India.”
— Dinesh A.
Co-founder and CTO
Read the full review on G2 →
“Wisemonk has successfully hired high-quality candidates, which has impressed the client. The team is responsive to the client's requests and changes via Slack. The team also collaborates through a hiring tracker in Google Sheets. Wisemonk communicates via email and virtual meetings.”
— Dan Sampson
VP of Engineering, Cobu
Read the full review on Clutch →
Wisemonk services is designed to streamline every aspect of hiring and managing employees in India, so you can focus on growing your business while we handle the complexities.
Beyond these core services, Wisemonk also provide advanced support in contractor management, company registration, and work permit & visa assistance and building offshore teams or Global Capability Centers (GCCs) in India for businesses planning long-term India operations.
Ready to build your high-performing team in India? Book a Call Now!
