The India Employer Handbook

Your first decision is whether to set up an Indian entity or hire through an Employer of Record. An entity makes sense at scale but takes months and carries continuous compliance. An EOR lets you hire in days with no entity — ideal for your first 1–25 hires, or for testing the market. Many companies start on an EOR and migrate to their own entity later.

Indian labour law is a mix of central acts and state-specific Shops & Establishments rules. Key pillars: written employment contracts, defined probation and notice, statutory leave, and a mandatory POSH (anti-harassment) framework. Worker classification matters — misclassifying employees as contractors carries real risk.

Salaries are structured as CTC, split into basic, HRA, allowances and reimbursements. Basic is typically 40–50% of gross and drives PF and tax. Expected benefits include PF, ESI (for lower wages) or private health insurance, paid leave, and increasingly flexible/remote arrangements. Annual increments and a 13th-month-style bonus are common expectations.

Monthly: TDS deposit, PF ECR and ESI contributions. Quarterly: TDS returns (Form 24Q). Annual: Form 16, PF/ESI returns, professional tax and POSH reporting. Miss a deadline and interest and penalties follow. See our live compliance calendar for the full schedule.

Monthly payroll means computing gross, applying statutory deductions (PF, ESI, PT, TDS), generating payslips, depositing dues and filing returns — accurately, on time, every month. Estimate any package with our Salary Calculator.

Exits must follow contract and statutory rules — notice or pay-in-lieu, full-and-final settlement, gratuity (after 5 years), and a relieving letter. Handle this well: India employees value a clean, respectful exit, and disputes are costly.

Budget beyond gross salary: employer PF and ESI, gratuity accrual, insurance, and (on an EOR) a management fee. Our EOR Cost Calculator gives you the all-in figure in your billing currency.