Hiring in India

Hiring in India in 2026 is cheap on salary, light on statutory employer cost, and the only market in our coverage where the EOR platform fee itself becomes the largest line in the budget. Our India payroll and employment facts set out the EPF, ESI and gratuity rules alongside notice and statutory leave, each figure sourced and dated.

The biggest surprise for most international companies is the EOR fee-to-salary ratio. At USD 599 a month on a typical mid-level hire at INR 2,400,000 CTC (around USD 28,500), the platform fee alone takes about 25% of the employee's compensation before a single statutory contribution lands. At the India-specific rate of USD 399 a month that Gusto and Velocity Global publish, the ratio drops to about 17%. Once EPF at 12% of basic, ESI at 3.25% of gross for sub-₹21,000 earners, gratuity accruing at roughly 4.81% of basic, professional tax, and the labour welfare fund are included, statutory employer cost lands at around 13 to 17% of CTC. The EOR layer is still the larger number. That cost-stack inversion is one reason Pvt Ltd setup pays back faster in India than almost anywhere else. Indian Private Limited registration costs around USD 600 to USD 2,400, the break-even against EOR sits at 4 to 5 hires, and the gratuity cliff at 5 years quietly builds a real liability on the balance sheet from day one. This guide explains what hiring in India actually costs in 2026, how the Indian payroll and employment rules work in plain English, and when it makes sense to use an EOR, set up your own Private Limited Company, or hire contractors instead.

Why do international companies hire in India?

India lands on most international shortlists for five reasons that come up consistently in what we hear from companies hiring there. None of them are cost alone, even though cost is the line that gets the conversation started.

• Engineering depth at a sterling discount. Mid-level backend, data, and DevOps engineers in Bangalore, Pune, and Hyderabad typically cost 50 to 70% less than London or Berlin equivalents. A London fintech adding a Bangalore platform engineer on a ₹35 lakh CTC saves more than half against a Shoreditch hire at the same level.
• Four real tech clusters, not one. Bangalore anchors product and AI talent. Hyderabad runs cloud, salesforce, and pharmaceutical IT. Pune covers automotive, BPO, and engineering services. The National Capital Region (Delhi, Gurgaon, and Noida) holds enterprise sales, financial services, and government-adjacent tech.
• Time-zone bridge. Indian Standard Time overlaps EU mornings and US evenings, which makes India the practical follow-the-sun anchor for 24-hour engineering or support operations. A San Francisco team handing off to Hyderabad at 5pm Pacific picks up the start of the Indian business day.
• English-language working baseline. The legal system, contracts, financial reporting, and most professional communication run in English. There is no translation cost on offer letters and no extra localisation work on tooling at the scale you see in Korea or Japan.
• Deep applied-research pipeline. The Indian Institutes of Technology, the Indian Institutes of Information Technology, and the better private universities produce more applied engineers per year than the US and EU combined. Losing people to FAANG India offices is a real risk, but the volume of new graduates absorbs it.

The trade-offs are the cost stack we cover in the next section, and the legal grey area around EOR that quietly raises the amount of legal review work on every shortlist. Both are reasons India lands high on talent-availability lists and lower on procurement-simplicity ones.

What are the employer costs of hiring in India?

The main employer costs in India are Employees' Provident Fund (EPF) at 12% of basic salary, Employees' State Insurance (ESI) at 3.25% of gross wages for employees earning under ₹21,000 a month, gratuity that accrues at roughly 4.81% of basic for payout at 5 years, a state-level professional tax, and a small labour welfare fund contribution. On a ₹24 lakh CTC, core employer costs typically add around ₹300,000 to ₹408,000 per year before optional benefits or EOR fees. Once the gratuity 5-year cliff vesting, state-level Shops & Establishments registrations, and EOR fee disproportionality are factored in, the true employment cost is often far higher than foreign employers expect. The table below shows the typical cost structure for a ₹24 lakh CTC hire in India.

What are the employer costs of hiring in India?

Cost line	Rate	Annual on a ₹24 lakh CTC hire	Important considerations
EPF (employer share)	12% of basic	~₹144,000	Calculated on basic salary, not CTC. Most Indian comp structures set basic at 40 to 50% of CTC.
EDLI and EPF admin charges	~1.6% of basic	~₹19,200	Often dropped from quick EOR quotes. Confirm both lines are included.
ESI (employer share)	3.25% of gross	Only if gross is under ₹21,000/mo	Mid-level professional hires usually sit above the threshold. Junior and support roles often below.
Gratuity (accrued)	~4.81% of basic	~₹57,720	Vests at exactly 5 years. Provision from year one regardless.
Professional tax	State-variable, capped at ₹200/mo in most states	~₹2,400	Karnataka, Maharashtra, West Bengal, and Tamil Nadu levy it. Delhi and Uttar Pradesh do not.
Labour Welfare Fund	State-specific nominal	~₹20 to ₹60 per employee per year	Small in cash terms but flagged in any first Shops & Establishments inspection.
Statutory employer cost on top of CTC	~13-17% of CTC	~₹300,000-408,000	The EOR platform fee is usually the larger line on top of this.

CTC is the trap line for first-time buyers. The candidate quotes Cost to Company (CTC), but EPF and gratuity are calculated on basic salary, which in most Indian compensation structures is only 40 to 50% of CTC. A ₹24 lakh CTC with basic at 50% gives an EPF base of ₹12 lakh, not ₹24 lakh, which is why the headline 12% rate ends up as roughly 6% of CTC in cash terms. Add an EOR fee of around USD 599 a month (about ₹6 lakh a year) and the platform fee alone is roughly 25% of CTC on a mid-level hire. At the India-specific USD 399 rate published by Gusto and Velocity Global, it falls to about 17%. The figure that survives a CFO's post-hire review is the all-in monthly cost including platform fee, EPF, ESI if applicable, accrued gratuity, and any 13th-month bonus the offer letter promised. Anything quoted as "13 to 17% statutory plus EOR fee" without the gratuity provision is a placeholder, not a budget number.

What changed in India for 2026?

Five changes that affect any 2026 hiring plan for India, in order of how much they shift the budget or the compliance picture.

What changed in India for 2026?

Change	Effective status	What it does	Action for HR/Finance
Labour Codes (Wage, Industrial Relations, OSH, Social Security)	Notified; phased state-by-state through 2026	Redefines "wages" so basic must be at least 50% of total compensation; raises EPF base materially	Re-model CTC stack; many allowances will reclassify into basic and EPF base rises by 30 to 50%
EPF wage ceiling under review	Pending revision; long held at ₹15,000/mo	Expected uplift to ₹21,000 to ₹25,000 per month	Statutory employer EPF rises where contributions were capped at the old ceiling
ESI wage threshold	Currently ₹21,000/mo; revision proposed	A higher threshold would pull more mid-level hires into ESI	Re-classify any hires near the threshold and verify the EOR holds an ESI registration
Gratuity vesting (Labour Codes draft)	Proposed cut from 5 years to 1 year for fixed-term workers	Fixed-term hires would qualify pro-rata from year one	Audit the fixed-term and permanent classification mix before the code takes effect in your state
Karnataka work-from-home statutory recognition	In force	Brings IT and IT-enabled services WFH inside the Karnataka Shops & Establishments Act	Hours, rest, and leave rules apply to remote engineers; review the WFH policy

The practical wrinkle is that central law and the actual compliance picture for any one hire diverge in India more than in any other jurisdiction in our coverage. A Maharashtra-based engineer and a Karnataka-based engineer on the same EOR can sit under materially different leave rules, professional-tax obligations, and (once the Labour Codes apply) wage definitions. The named-state cost stack matters here as much as the named-CCNL stack does in Italy.

What employment laws should you know before hiring in India?

India does not have a single Employment Act. The compliance picture is a layered stack of central statutes (the EPF Act, the ESI Act, the Payment of Gratuity Act, the Industrial Disputes Act, and the Contract Labour Act) sitting under each state's Shops & Establishments Act, with the Labour Codes layered on top once notified locally.

What employment laws should you know before hiring in India?

Standard	Statutory minimum	Common contract uplift	Practical note
Working week	48 hours under the Factories Act; 9 hours a day under most Shops & Establishments Acts	40 hours common in IT and IT-enabled services contracts	Labour Codes allow a 12-hour day with a 48-hour weekly cap. Not yet enforced everywhere.
Earned leave	15 to 21 days a year, state-variable	+ sick leave 7 to 12 days, + casual leave 7 to 12 days	IT firms commonly bundle earned, sick, and casual leave into a single 18 to 24 day pool.
Public holidays	10 to 15 a year (state and central)	Usually statutory	Three are national: Republic Day, Independence Day, and Gandhi Jayanti.
Maternity leave	26 weeks paid under the Maternity Benefit Amendment 2017	Employer pays in full	Applies to firms with 10 or more employees. Crèche required at 50.
Paternity leave	No central statutory provision	5 to 15 days contractual in IT and IT-enabled services	EOR contracts often default to the provider's global standard, not the Indian norm.
Sick pay	Through the ESI scheme below ₹21,000/mo; contractual otherwise	7 to 12 days a year typical in IT contracts	Above-threshold hires get no statutory sick pay. Check the EOR contract template.
Notice period (workmen, Industrial Disputes Act)	1 to 3 months plus retrenchment compensation of 15 days per year of service	Government approval needed for establishments with 100 or more workmen	"Workman" means non-managerial. The split depends on role and pay.
Notice period (managerial and supervisory)	Contractual, typically 1 to 3 months	No statutory severance beyond gratuity	Most foreign hires sit here. Risk drops materially compared with workman classification.
Gratuity vesting	5 years of continuous service	15 days per year on basic; capped at ₹2 million	Cliff vesting. 4 years 11 months is nothing. 5 years is the full balance. Provision from year one.
Probation	No statutory cap (contractual)	3 to 6 months common	Extending unilaterally beyond 6 months invites a reclassification challenge.
Sexual Harassment Act 2013 (PoSH)	Internal Committee required at 10 or more employees	Statutory	The EOR usually does not run your Internal Committee. Structural policy gap with provider-employed staff.
State Shops & Establishments registration	Required for any commercial establishment	State-specific rules	The EOR registers under its own entity. Each state your hires sit in is a separate compliance unit.

The biggest classification cliff is the "workman" versus "managerial or supervisory" split under the Industrial Disputes Act 1947. A workman gets layoff protection, retrenchment compensation, and (above 100 workmen) government approval before termination. A managerial employee does not. The split is decided by the facts of the role and pay, not the job title on the offer letter.

Should you use an EOR or set up an entity in India?

The maths runs harder against EOR in India than almost anywhere else, because Indian Private Limited setup is genuinely cheap and the EOR platform fee is large relative to local salaries.

Should you use an EOR or set up an entity in India?

Factor	EOR	Own Indian Private Limited
Minimum capital	None (provider's entity)	₹100,000 (about USD 1,200), often unpaid at incorporation
Setup time	3 to 7 business days	2 to 4 weeks via the MCA online portal
First-year all-in cost	USD 399 to 799/month per hire	₹50,000 to ₹200,000 (USD 600 to USD 2,400) for registration, legal, and CA fees
Annual run-rate from year 2	USD 399 to 799/month per hire (flat)	₹150,000 to ₹400,000 a year (CA, ROC, GST, payroll provider)
Break-even headcount	Cheaper at 1 to 3 hires (USD 399 rate) or 1 to 2 (USD 599 rate)	Cheaper from 4 or more hires; pays back in weeks at 5 or more
Wind-down	Contract notice plus gratuity if 5 years or more	6 to 12 month strike-off, ₹100,000 to ₹300,000 in legal and CA fees
Director requirements	None (provider's directors)	At least 2 directors, one of whom must be a resident Indian
Compliance burden	Provider handles ROC, GST, EPF, ESI, TDS, and state filings	Monthly EPF and ESI, quarterly TDS and GST, annual ROC. A chartered accountant is mandatory.
5-year cost, 7-person team	~USD 168,000 (at USD 399/mo) to USD 252,000 (at USD 599/mo)	~USD 25,000 to 40,000 (run-rate after setup)

The arithmetic tightens it further. At USD 599 a month over a 7-person Indian team for 5 years, EOR costs around USD 252,000. The Private Limited setup runs USD 600 to USD 2,400 plus around USD 8,000 a year in run-rate, totalling roughly USD 25,000 to USD 40,000 over the same period. The crossover happens inside the first six months at any meaningful headcount. The reason EOR still wins at 1 to 3 hires is the resident Indian director requirement and the monthly ROC and CA cycle, neither of which scales down to a single hire usefully. Both add fixed cost that an EOR absorbs at no extra fee, which is why the model holds up for small pilots even when the per-hire fee looks high.

What are the biggest compliance risks when hiring in India?

Four risks, in order of how often they catch our readers out: the EOR legal grey area under the Contract Labour Act, gratuity provisioning slippage at the 5-year cliff, state-level Shops & Establishments registration gaps, and the workman-versus-managerial classification cliff under the Industrial Disputes Act.

What are the biggest compliance risks when hiring in India?

Risk	Source	Practical effect
EOR legal basis is a grey area	No specific EOR statute. The arrangement relies on the Contract Labour (Regulation and Abolition) Act 1970 and contract structure	The quality of the provider's Indian legal opinion matters more than in jurisdictions with an explicit EOR framework
Gratuity cliff at 5 years	Payment of Gratuity Act 1972	Termination at 4 years 11 months equals no liability. At 5 years exactly, the full 15-days-per-year balance vests. Provision from year one regardless
State Shops & Establishments gap	Each state's Shops & Establishments Act	Each state your hires sit in is a separate compliance unit. Remote workers can trigger registration in their state
Workman versus managerial split	Industrial Disputes Act 1947	Workman classification triggers retrenchment compensation and (above 100 workmen) government approval before termination
Contractor reclassification	Contract Labour Act, GST inputs, and the control-and-supervision test	Long-running consultants doing employee-pattern work get reclassified. Back EPF, gratuity, and TDS exposure follows

The EOR grey area is the question Legal teams raise first and that EOR vendors handle worst. India has no statutory EOR framework comparable to the UK Agency Workers Regulations or the German Arbeitnehmerüberlassungsgesetz. The legal basis sits in contract law and provider-side interpretation of the Contract Labour Act, which historically targets contractor-style staffing in core production environments. The gratuity cliff is the cleanest unforced error on this market. A 5-year service threshold means a hire at 4 years 11 months generates zero gratuity liability, and a hire at exactly 5 years generates the full balance, around ₹290,000 on a ₹24 lakh CTC. We have seen finance teams treat gratuity as a contingent liability that never books because nobody hits 5 years. Three years in, the second cohort of Indian hires lands the 5-year anniversary, the balance vests, and the provision was never made. The fix is to provision from year one as accrued liability on the balance sheet. The maths is the same as TFR in Italy: cliff vesting plus deferred salary equals real cash out, even if it does not feel real before year three. State-level Shops & Establishments registration is the boring risk that produces the most actual fines. Each state where you have hires is its own compliance unit, and a Bangalore-led IT team that hires a Mumbai sales lead has just opened a Maharashtra compliance trigger. EOR providers register under their own entity, which usually covers this, but it is worth asking the question explicitly and pulling the registration evidence anyway.

Which hiring model fits your India plans?

Here is how we think about choosing between the options, matched to the real questions People Ops leads bring to us.

Which hiring model fits your India plans?

If you...	Best model	Why	See also
Are hiring 1 to 3 people to test the Indian market	EOR (push for the USD 399 rate)	No resident director needed; payroll live in days; the provider handles the CTC structure	India EOR providers and pricing
Have 4 to 5 hires in a single state with a 12 to 18 month horizon	EOR borderline; model the Private Limited	EOR break-even sits at 3 to 5. Run the named-state cost stack and a CA quote before locking	India EOR providers and pricing
Have 5 or more hires, or hires across 2 or more states	Own Private Limited plus global payroll	Setup pays back in weeks. CTC structure under direct control. No platform-fee burn	India global payroll providers
Engage a genuinely independent specialist with multiple clients	Contractor (consultancy invoice plus GST)	The control-and-supervision test passes if there is no exclusivity, set hours, or tooling-mediated control	India contractor management guide
Run short-tenure project hires of under 12 months	EOR (avoid the gratuity cliff)	No exposure to 5-year vesting. Clean off-boarding through the provider's entity	India EOR providers and pricing
Have workman-grade roles at scale	Own Private Limited plus Indian employment counsel	Industrial Disputes Act exposure rises with workman headcount. The EOR cannot run the works-committee relationship for you	India global payroll providers
Have Legal teams citing Contract Labour Act exposure	Own Private Limited	Removes the EOR grey-area question from the procurement chain entirely	India global payroll providers

The single most useful thing a People Ops lead can do is build the full cost picture for the specific Indian city they actually plan to hire in, not a generic Indian average. The CTC split (basic versus allowances), the state professional-tax line, and the state Shops & Establishments leave ladder all flex by location. That one piece of work removes around 80% of the budget surprises that show up three months later.

Recommended India EOR providers

These four providers operate verifiable Indian Private Limited entities and either publish India-specific pricing or carry the deepest Indian compliance teams in our coverage. Anything described as "Indian coverage via a partner network" should be treated as an extra layer of counterparty risk, not as the same thing as the four below.

Recommended India EOR providers

Provider	India structure	Pricing	Best for	View provider
Gusto	India EOR via owned entity	~USD 399/mo (India rate)	Best fee-to-CTC ratio for mid-level Indian hires	View Gusto →
Velocity Global	Owned Indian entity	~USD 399/mo (India rate)	Managerial-grade hires, India rate plus strong enterprise reporting	View Velocity Global →
Deel	Deel India Technologies Pvt Ltd	~USD 599/mo	Broadest 150+ country coverage with a directly-owned Indian entity	View Deel →
Remote	Remote Technology Services India Pvt Ltd	~USD 599/mo	Direct compliance chain, owned entity rather than a partner network	View Remote →
Multiplier	Owned APAC entities including India	~USD 400/mo	Best value, APAC strength, sound Indian payroll handling	View Multiplier →

Frequently asked questions about hiring in India

Our verdict for People Ops leads

If your Indian headcount is 1 to 3 hires (or 1 to 5 at the USD 399 rate), use an EOR and push hard for India-specific pricing. The fee-to-CTC ratio is the line item that drives total cost, not statutory contribution rates, and USD 399 versus USD 599 is a 33% saving on the largest single cost line. If you are at 5 or more hires with an 18-month-plus horizon, the Indian Private Limited setup is the cheapest one in our coverage and pays back inside the first six months on direct cost alone. The resident Indian director requirement is the gating constraint, not the registration cost itself. If you are leaning towards contractors, run the control-and-supervision test against Contract Labour Act exposure before signing anything. Long engagements with employee-pattern work get reclassified, and the back EPF, gratuity, and TDS exposure runs years deep. The first practical step is to work out the full cost for the specific Indian city you plan to hire in, with the basic-versus-allowance CTC split modelled at the Labour Codes target of at least 50% basic, and the gratuity provision booked from month one. That one piece of work removes around 80% of the budget and compliance surprises that show up three months later, and it is the figure that holds up across every finance and legal review on the way to an offer letter.

Running payroll for India employees? See our guide to payroll in India.