Hire in India
with Confidence

Our employment guide to India covers everything you need to compliantly hire, onboard, manage and pay workers in India’s rapidly growing job market. With business-friendly laws, low operational costs and skilled workforces, India remains a global powerhouse of outsourcing operations and expanding your global talent.

India
Capital City
New Delhi
Local Time
IST (UTC/GMT +5:30 hours)
Currency
Indian Rupee (INR)
Official Language(s)
Hindi
Population
1360 Million (2021)
GDP
2622 Billion USD (2020)
GDP Growth rate
8.9% (2021)

To help you navigate India’s employment, tax, and compliance laws, Worksuite acts as your global employment partner, making it easy to hire employees or independent contractors—all without needing to set up your business entity.

– Quickly find, hire, and onboard talent in India without setting up your entity
Prevent expensive legal, contractual, or tax mistakes in India
– Manage contracts, payroll, and global tax forms all in one Worksuite

We simplify hiring in India by acting as the Employer of Record (EOR) or Global Agent of Record (AOR) on your behalf, handling everything from contracts, onboarding, documentation, payroll, benefits, and workforce management. Reduce your time-to-hire by 90%, slash your overheads, and remain fully compliant. Hiring workers in India has never been so easy.

Insights Into India

With a population of more than 1.38 billion, India’s employment market is a fiercely competitive landscape. Navigating employment laws and bureaucracy in the country almost always requires professional legal and tax guidance to be successful and hire under full compliance. Despite these challenges, India remains a great location for growing your workforce abroad due to lower cost of operations and a rapidly rising level of educated professionals. Our data insights are based on statistical averages, but note that India’s large geographic and demographic sizes can make these figures vary to a wide degree. 

Worksuite Insights

Ease of Hiring Employees Normal
Ease of Hiring Independent Contractors Easy
Average Time-to-Hire Up to 4 Weeks
Labor Laws Medium
Regulatory Risk Medium

Employment stats

  • Employee Dismissal Periods

    30 to 90 day notice period

  • Popular Contractor Agreements

    Contract FOR Service

  • Popular Employment Contracts

    Contract of Service
    Fixed Term Employment
    Indefinite Term Employment (Permanent)

  • Popular Work Permit Types

    Employment Visa (E-Visa)

  • Payroll frequency

    Monthly

  • Cost of Employment

    Employer Tax: 16.75%

  • Tax Rates

    Corporate Tax Rate: 25.17% (Dec 2021)
    Personal Income Tax Rate: 42.74 (Dec 2021)
    Net Wealth Tax: 1% ​​on the net wealth in excess of Rs. 30,000,000. (30M)
    GST: standard rate: 18.00% and 12%, higher rate: 28%, reduced rate: 5% and 0% (Dec 2021)

  • Retirement Age (Average)

    (Men/Women): 60/60

  • Unemployment Rate

    6.6% (Feb 2022)

Average Salary vs Cost of Living (Per month)

In Indian Rupee (INR)

India compared to other countries in the region

Country

Ease of Hiring Employees

Ease of Hiring Independent Contractors

Average Time-to-Hire

Labor Laws

Regulatory Risk

Country

Ease of Hiring Employees

Normal

Ease of Hiring Independent Contractors

Easy

Average Time-to-Hire

Up to 4 Weeks

Labor Laws

Medium

Regulatory Risk

Medium

Minimum wage (per month)

3 Highest countries

70
india
India

3 Lowest countries

70
india
India

Employment In India

The Ministry of Labour & Employment governs most labor laws in India. The average working week in India is 48 hours, with the working hours often from 10am-6pm, Monday through Saturday. There are 15-20 paid public holidays in the country, but varying slightly based on region. Current labor laws do not explicitly require that an employment contract be entered into by writing. Still, it is nearly always a good practice to have all terms and conditions of employment be signed in writing by both parties for an employer-employee relationship. 

  • The Code of Wages (2019) codifies most labor laws involving minimum wages, payment of wages, applicable deductions, statutory bonuses,and fair remuneration to employees.
  • The IESO Act requires employers in industrial establishments to formally define conditions of employment, such as classification of workmen, manner of intimating wage rates, working hours, leave periods, recruitment, shift working, attendance, procedure for availing leave, transfer of workmen, termination of workmen.

Types of Employment Contracts

While an employer and employee relationship in India can legally exist without a written contract, contracts made in writing are the best way to go about hiring. There are three main contract types: Trial Period, Fixed and Indefinite.

Both fixed-term employment contracts and indefinite contracts are popular choices in India, but fixed-term contracts are increasingly gaining in popularity and acceptance—as new laws have granted fixed-term contracts the same workers’ rights as indefinite ones. In a nutshell, the main difference today for employers will come down to long-term employee bonuses such as gratuities, accommodations, and pay raise obligations.

Contract Requirements

It is a good practice to include the following information within employee contracts in India: 

  • Name of the business and representative 
  • Address of the business 
  • Place of work of a representative 
  • Designation 
  • Date of beginning of work 

Salary and Bonuses

  • Salary or wage
  • Overtime
  • Method of installment 
  • Calculation of wages 
  • Additional benefits 
  • Pension conspire 

Contract Type

  • Fixed 
  • Duration of a fixed-term contract 
  • The prior notice period for the end.

Working Hours / Leave

  • Period of work every day
  • Work routine
  • Defining time spent
  • Staffing 
  • Meal and rest period 
  • Timekeeping method
  • Annual leave days
  • Conditions identified with wiped out leave 
  • Sick leave and other paid leaves 

The contract may also specify, which will vary widely depending on the industry. Consult your legal and employment advisors if you are unsure of the following details:

  • Company disciplinary activities 
  • Termination handling
  • Complaint handling
  • Well-being and safety requirements from the employer
  • Secrecy or NDAs
  • Probation period
  • Uniforms and provisions

Working Hours

Every adult person aged 18 or over may not work more than 48 hours in a week, and daily work limits are capped at 10.5 hours per day. No work on Sunday can be performed without prior agreement, and no employee can work for more than 10 days without a rest day of 24 hours. If an employer requires work on Sundays or Public Holidays, those days off must be given back to the employee within the following 2 months.

In contrast to most countries where the common standard is set at 40 working hours per week, a normal working week in India comprises 48 hours with a regular nine-hour day. Note that exemptions are granted for many of the above requirements and major capital cities may have introduced local laws that vary from these figures.

Overtime

Any hours over the 48 hour work week must be paid as overtime which is often 200% of the regular pay rate. Overtime laws may or may not apply to management roles. Some regions also regulate hard limits on overtime hours, typically capped at 50 hours per quarter, extendable up to 75 hours based on the region.

Remuneration

The wage structure in India heavily focuses on allowances and benefits rather than net sum amounts. Compensation and Allowances are some of the most negotiated aspects of employment contracts in India, as employees have come to expect supplemental benefits of value over base salary and wages. Without benefits such as rent, leave, travel allowance, phone, and role-related benefits, employers may find it difficult to hire top talent. The reason for this is that pre-tax allowances highly benefit employees, often comprising 40% or more of the total compensation package. Employers can expect to negotiate the following items for remuneration, which includes, but is certainly not limited to:

  • Base monthly take-home wage or salary
  • Taxable incentives and bonuses (based on employee performance)
  • Vehicle Allowance
  • Mobile, Telephone and Data Allowance
  • Pre-taxable incentives
    • Children Education – exempt tax up to 100 INR per month
    • Children Hostel – exempt up to 300 INR per child per month
    • House Rent – partial or full compensation for housing, exempt values are based on tax calculations provided by Worksuite
    • Leave Travel Allowance of Concession (LTA/LTC)—Once-a-year vacation payment funds are tax-exempt on alternative years, beginning in the 2nd year of employment.

Bonuses

Employees who earn less than INR 21,000 per month must receive a bonus ranging from 8.33% to 20% of the eligible amount. Due to the Payment of Bonus Act, employers must pay their workers a minimum annual bonus equal to 8.33% of the full year’s wages, capped at 20% of the employee’s annual salary. This mandatory condition ensures that employees receive bonuses based on the performance of the entire organization.

 

Probation Period

India’s labor laws do not stipulate mandatory minimum or maximum probation periods. However, for most global employers a probation period usually averages three to six months, especially in the technology and services sectors. During the probation period, the employer will usually have the right to terminate the employment without providing any notice.

Termination and Severance

The termination process in India is straightforward and common across all industries, employee types, and roles. Labor laws in India typically require one month’s written notice for termination if an employee wishes to resign, or they can choose to request equivalent payment. Employers who wish to terminate employees must entitle them to a warning and a fair hearing.

Just cause for dismissal includes the following:

  • Breach of contract
  • Criminal offense, theft or bribery
  • Inability to fulfill obligations of the job
  • Misconduct
  • Inefficiency, poor performance, or underperforming after
  • Loss of confidence by management
  • Abandonment of employment

The length of the notice period depends on the type of contract and the position held by the employee. In general, employers should also follow a 30-day notice period when terminating an employee.  It is possible for employers to replace the notice period with an equivalent payment.

Employees who have worked continuously for at least one year are entitled to severance pay equal to 15 days’ wages for every year of service.

After five consecutive years of employment, the severance payment recalculates (maximum INR 1,000,000) as shown below:

Gratuity = Last Drawn Salary × 15/26 × No. of Years of Service

The 15/26 ratio represents 15 days out of 26 working days in a month. The last drawn salary = includes the base salary and value of allowances. Years of Service are rounded down to the nearest full year. For example, if the employee has a total service of 15 years, 11 months, and 1 day, the number of years factored will be 16.

Paid Leave

The Factories Act governs most paid leave laws in India. Employees earn one day of paid leave for every 20 working days (annually this comes out to about 12 days for 240 working days). Employees earn the same daily amount on paid days off as they would for normal salaried working days. Annual paid leave may be carried over to the next year, but cannot exceed 30 days.

Sick leave: Personal and sick leave are governed by the Shops and Establishments Act. Each state in India separately defines sick leave and employee entitlements vary from seven to 12 days. 

  • Employees exiting their trial period, or after 3 months, are entitled to 15 days paid sick leave per year, provided that they deliver a medical certificate within 48 hours of the first day of sickness.
  • In the manufacturing sector, sick leave is governed by the Industrial Employment Act and employees are entitled to up to 10 days of leave. 
  • Sick pay is calculated at 70% of the regular daily salary rate.

A medical certificate from a registered medical practitioner may be required for any extended sick periods.

Maternity Leave: is governed by the Maternity Benefit Act. Under this law, employees are entitled to 26 weeks of maternity leave. Maternity leave is paid in full after completing a minimum of 80 days working for the same company in the 12 months prior to the expected date of birth.

  • Eligible expectant mothers are entitled to 100% of their regular salary rate for 26 weeks for their first two children, decreasing to 12 weeks for any subsequent children.
  • The expecting mother must have been employed for at least 80 days of the preceding 12 months before the expected due date.
  • Paid maternity leave is 12-26 weeks and this can be further extended with 16 months of unpaid leave. No deductions can be made from the leave account of the female employee.

Paternity leave: There is no universal Paternity Leave law In India. However, The Central Civil Services (Leave) Rules,1972, give a provision to male government employees to take paternity leaves 15 days before the birth or within six months of the birth of the baby.

Health Coverage & Insurance

As per an April 1, 2020 circular issued by the Insurance Regulatory and Development Authority of India (IRDAI), medical insurance is to be made mandatory.

Healthcare insurance in India is a mix of public and private sectors. Free public healthcare is provided to all residents in India, but most employees rely on private healthcare providers through their employer. Most employers will opt for private group coverage for workforces larger than 20 employees. For less, it is common practice for employees to acquire their own private health insurance coverage.

Employers are further required to pay compensation in cases of death or disability of employees due to injuries sustained at the workplace. Note that most employers in the private sector opt to provide medical insurance benefits to their employees and their immediate family dependents.

Pension

The Employees’ Provident Fund Organisation (EPF/EPFO) is the statutory body under the Government of India’s Ministry of Labour and Employment, which is responsible for regulation and management of provident funds in India. Companies are expected to register themselves with the EPF Organization within one month of attaining a strength of 20 or more full-time and contract employees. Employment rules in India make it mandatory for employers to contribute 12% of an employee’s salary. No employer is liable to contribute towards a freelancer’s EPF. 

Payroll & Taxes

Employers

Taxes

Corporate Tax and Goods and Services Tax

  • 30% Corporate Tax
  • 0%, 5%, 12%, 18% and 28% VAT

Social Security

  • 12% Employee salary
  • 4.75% Contribution to National Insurance Scheme

Employees

Taxes

Individual income rates

  • 0% up to INR 250,000
  • 5% up to 500,000
  • 20% up to INR 1,000,000
  • 30% More than INR 1,000,000

Social Security

  • 12% of employee salary go to Employee salary go to Employees Provident Fund (EPF)

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Hiring Contractors in India

The most important step of structuring a contractor relationship in India is to document the working relationship properly, as to not establish an employee relationship. The risks of reclassification (from contractor to employee) will lead to legal and financial disputes that may harm business. The key considerations to make when differentiating an Employee vs. an Independent Contractor:

  • A contract for service should establish no control or supervision from the employer. It is essential to not confuse this term with ‘contract of service,’ which is essentially the opposite type of contract.
  • India labor laws greatly weigh the degree of authority over a worker to be the key indicator of Employee vs. Independent Contractor. The contract should not establish how the work is performed, when it is performed, or any day-to-day management requirements.
  • Employers may list qualifications or skills required by the contractor, or conduct regular quality control inspections without being classified as an employer.
  • Benefits provided to permanent employees should not be provided to independent contractors or consultants, as this could be construed as employment.
  • The termination clause should allow termination without cause, in order to prevent any stipulations or requirements that might show a degree of control, and thus employment.
  • Independent contractors should be paid via invoices or directly. Payment with a recurring salary may indicate that the relationship is one for employment. 

Employment vs. Independent Contractors and Freelancers

In India, there is a distinction between a contract of service and a contract for service. An independent contractor in India works under a contract for service, which must explicitly lack any degree of control or supervision from the employer. Be careful to not confuse this term with ‘contract of service’ which is essentially an employment contract.

A contract of service implies a relationship of boss and employee, which establishes a hierarchical degree of power and authority. Note that this type of contract excludes those employed as manager or administrative roles.

A contract for services implies an agreement where one party simply provides for another, using their own resources, skill and knowledge to deliver the service. Consultants, freelancers and agencies fall under this category.

Contractor Payments

Payment to independent contractors is extremely flexible and can simply be determined by both parties within the contract. When working with independent contractors, freelancers or agencies, you’ll need to have an established process for paying them correctly and on time within the service contract. The most common payment methods include:

Direct deposits: Direct deposit in India is popular, safe, and convenient. The downsides may include transfer fees or exchange rates depending on the financial institution.

Paper check: While not the safest or most convenient method of payment, less developed regions of India may only offer this option

Money orders: Money orders are similar to paper checks in that they are a good option in less developed regions, and they give you and the contractor a strong paper trail for recordkeeping and taxes.

Virtual wallets:
Global providers of digital wallets may provide a direct way to pay contractors, which they can then move themselves to their bank accounts or debit cards. Keep in mind that not all residents of India may have access to the same payment gateways, so it’s important to establish the payment relationship beforehand.

Contractor Taxes

Independent contractors are responsible for paying income tax if their annual total net income exceeds INR 2.5 lakh. Any income earned from foreign employing entities will be taxed like local income, but there. India’s government offers an easy online e-Filing portal to make the process easy, quick and secure for independent contractors to file tax forms. Independent contractors, freelancers, and consultants are primarily concerned with two tax filings:

  • Income Tax Return
    A contractor is required to file an income tax return (ITR)  for every financial year as outlined by the Income Tax Act. The e-Filing portal has a convenient calculator to help contractors file automatically.
  • Goods & Services Tax
    Contractors are liable to pay GST if their annual income exceeds INR 20 lakh. Service-based contractors may charge up to 18% GST from clients to be deposited with the government. Contractors can claim any additional taxation automatically after filing on the online portal. However, they must ensure that their invoices are GST-compliant so that the invoices are able to be claimed on tax filings

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Payment processing to India

A global employment organization like Worksuite can help you navigate the complex payroll and tax challenges in India, as well as guide you through payroll activities in each region.

Employers should obtain basic information from employees or independent contractors in India before initiating payment procedures, most of which should be detailed in the contract or service agreement beforehand. Other required data fields will depend upon the employee or contractor working agreement, but the most common fields include:

Required Data

  • Full Name
  • Date of Birth
  • Residential Address
  • Telephone
  • PAN (Personal Account Number) for taxes
  • Bank account number
  • Purpose of Payment (POP)
  • Bank account for receiving payments & branch phone number

There are also many other factors to consider during payroll activities, which may be required to file as a legal business entity in India:

Optional Data

  • Cost to company (CTC)
  • Gross Salary
  • Net Salary
  • Allowances
  • Prerequisites
  • Deductions
  • Payslip
  • Form-16
  • Reimbursements
  • Bonus/Incentives/Expenses/One-time payments
  • Company PAN, TAN, PF, ESI, PT, LWF (if applicable) details
  • Signatory Details
  • Company Bank Details
  • Employee Financial Details
  • Employee Investment Declarations
  • Previous Salary Details
  • Annual CTC / Gross of all the employees

Visas & Work Permits in India

India issues visas and work permits to foreign staff commonly referred to as “e-Visa” (Employment Visa). E-visas are only available to employees who are hired by legal entities registered in India who can help process the visa. Worksuite acts as your Employer of Record in India, expediting this crucial requirement of the process.

There are several qualifications to receive an e-Visa in India:

India issues visas and work permits to foreign staff commonly referred to as “e-Visa” (Employment Visa). E-visas are only available to employees who are hired by legal entities registered in India who can help process the visa. Worksuite acts as your Employer of Record in India, expediting this crucial requirement of the process.

  • Employed by either an Indian company or a company with multinational operation including and a branch office in India
  • Employed by a foreign company in India as a specialist on a specific project
  • Involved in a non-government organization (NGO)
  • In a senior management role at an international company
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