If you want to hire talent in India without setting up a local entity, EOR India services can make it happen in just days. Expanding internationally often means navigating complex payroll, tax, and labor laws in a new country — a process that can be both time-consuming and risky if not handled correctly. Partnering with an Employer of Record service in India ensures your hiring is compliant with local regulations, from Provident Fund contributions to professional tax. With the right EOR partner, you can onboard employees quickly, reduce overhead costs, and avoid compliance pitfalls. According to global payroll compliance research, local compliance remains one of the most challenging aspects of global payroll — making expert EOR support essential. Keep reading to learn how EOR India can streamline your expansion, manage payroll seamlessly, and cut costs as you grow.
Table of Contents
- Overview about India
- What is an Employer of Record?
- Legal Entity vs EOR India: Which Is Right for You?
- How to Hire & Onboard Employees in India Through an EOR Partner
- EOR Payroll in India: How It Works and Why It Matters
- Taxes in India
- CTC Calculator for Hiring Employees in India
- Legal & HR Compliance Essentials for Hiring Through an EOR in India
- Leave Policies in India: What Employers Must Know in 2025
- List of General Public Holidays in India 2025
- Termination Policies in India
- Bonus Payments in India
- Health Insurance in India
- Employee Benefits in India
- Terminations in India
- How to Choose the Right EOR India Services?
- Benefits of Working With an Employer of Records Service Provider in India
- Visa Types in India
- Risks or Drawbacks of EOR India
- EOR vs. HR Software – Key Differences
- How much does it cost to avail Services Under EOR India?
- Conclusion: EOR India
- FAQs
Overview about India
India’s fast-growing economy and large, skilled workforce make it one of the most attractive destinations for global expansion. From a booming technology sector to diverse manufacturing and service industries, the country offers abundant opportunities for foreign businesses. Supportive government policies and steady foreign investment further enhance its appeal, as shown in the India economic overview.
However, navigating Indian labor laws, payroll taxes, and statutory benefits can be complex. This is where Employer of Record in India solutions provide immense value — enabling companies to hire quickly, ensure compliance, and focus on scaling their operations.
What is an Employer of Record?
An Employer of Record (EOR) in India is a service provider that legally employs your team in India on your behalf, allowing you to start hiring within 1–2 business days without setting up a local entity. In an EOR India arrangement, the provider becomes the official employer for compliance purposes, while you retain full control over daily work and performance.
Typical responsibilities of an EOR in India include:
- Drafting compliant employment contracts in English or bilingual formats
- Managing monthly payroll in INR and salary disbursements
- Handling statutory contributions like Provident Fund (12%), Gratuity (4.81%), ESI (3.25%), and Professional Tax (varies by state)
- Ensuring compliance with Indian labor laws and government regulations
- Managing tax withholding (TDS) and filings
By outsourcing these administrative and legal tasks, companies can reduce expansion costs, eliminate compliance risks, and focus on growing their operations in India’s thriving economy.
Legal Entity vs EOR India: Which Is Right for You?
When entering the Indian market, businesses typically choose between setting up a local legal entity or partnering with an Employer of Record (EOR) in India. The comparison below covers the key differences, pros, and cons to help you make the right decision.
| Criteria | Legal Entity in India | Employer of Record (EOR) in India |
|---|---|---|
| Definition | A business legally registered in India to hire employees directly. | A third-party provider that legally employs workers for you, managing compliance, payroll, and HR tasks. |
| Ownership | Owned by the company or shareholders. | EOR is the legal employer, but you retain operational control. |
| Employment Contracts | Issued directly by the legal entity. | EOR signs contracts, ensuring compliance with local labor laws. |
| Compliance Responsibility | Full responsibility for labor law compliance, tax filings, and benefits. | EOR handles all compliance, including PF, Gratuity, ESI, and Professional Tax. |
| Payroll & Benefits | Managed internally with dedicated HR infrastructure. | EOR manages payroll in INR, benefits, and insurance. |
| Tax Liabilities | Company assumes all local tax obligations. | EOR ensures TDS deductions and timely filings. |
| Time to Hire | Entity setup can take weeks or months. | Hire in 1–2 business days (onboarding checklist). |
| Onboarding Process | Managed internally with HR processes and paperwork. | EOR creates contracts, manages compliance checks, and facilitates onboarding. |
| Legal Expertise | Requires in-house HR/legal team or external consultants. | EOR provides expert knowledge of India’s labor laws. |
| Risk & Liability | Company bears all legal and employment risks. | EOR assumes employment-related legal risks. |
| Flexibility | Less flexible for rapid global scaling. | Highly flexible—hire in India without a local entity. |
| Cost & Investment | High setup and operational costs. | Lower cost—no entity setup or HR infrastructure needed. |
| Global Expansion | Requires setting up entities in every new market. | EOR enables quick, compliant entry into multiple countries. |
If speed, compliance, and cost efficiency are top priorities, partnering with an EOR India provider like Asanify allows you to start hiring in days while avoiding the complexities and costs of entity setup.
Pros & Cons at a Glance
Employer of Record (EOR) in India
Pros
- Hire quickly without opening a local entity
- Full compliance with Indian labor laws
- Simplified payroll, benefits, and tax management
- Reduced admin burden and faster market entry
- Access to local HR expertise
Cons
- Less direct control over employment branding
- May not suit very large-scale, long-term operations
Legal Entity in India
Pros
- Full operational and branding control
- Better for long-term presence and scalability
- Direct employee relationships
Cons
- Long and complex registration process (Ministry of Corporate Affairs)
- Higher costs and more administrative work
- Resource-intensive compliance and tax management
Suggested Read: EOR- A Detailed Guide on Employer of Record 2024
Making the Right Choice
If you value speed, compliance, and cost efficiency, an EOR India partner allows you to start hiring in days, manage payroll in INR, and stay compliant — without the complexities of setting up a legal entity.
For businesses seeking complete operational control and a permanent base in India, investing in a local legal entity may be worth the time and cost.
How to Hire & Onboard Employees in India Through an EOR Partner
Hiring employees through an EOR India partner allows you to enter the Indian market quickly, compliantly, and without the need to set up a local legal entity. By outsourcing payroll, compliance, and statutory benefits management to an Employer of Record, your business can focus on strategic growth and talent development while reducing administrative burdens.
Step 1: Determine Your Hiring Options
Before you begin hiring in India, the first decision is to clearly define how you want to build your team. This involves two key choices:
- Whether to hire full-time employees or independent contractors
- Whether to set up a local legal entity or partner with an Employer of Record (EOR) in India
Both decisions will influence your costs, compliance obligations, hiring timeline, and level of operational control.
Decide Between Full-time Employees and Contractors
Before starting the hiring process, decide whether you need full-time employees or independent contractors in India.
- Full-time employees are ideal for long-term, core roles. They provide stability, are easier to integrate into company culture, and can be trained for specific processes. However, they require statutory benefits such as Provident Fund (12%), Gratuity (4.81%), and Employee State Insurance (3.25%), which increase overall employment costs.
- Contractors are better suited for short-term projects or specialized tasks. They offer flexibility and cost advantages since benefits are not mandatory. However, Indian labor laws impose strict rules on contractor classification, and misclassification can result in penalties. Partnering with an EOR can help ensure correct classification and compliance.
Choose Between Setting Up a Legal Entity or Using an Employer of Record (EOR)
Once you know your staffing type, decide how to structure your presence in India:
- Setting up a legal entity requires registering your business with the Ministry of Corporate Affairs, obtaining licenses, and managing payroll and compliance in-house. This option provides complete operational control but can take months to complete and involves significant upfront and ongoing costs.
- Partnering with an EOR in India allows you to start hiring in 1–2 business days. The EOR becomes the legal employer, handling payroll in INR, tax withholding, and statutory benefits, while you retain full control over daily operations.
Step 2: Choose the Best EOR Service Provider in India
Selecting the right EOR partner is crucial to ensure smooth operations. Look for:
- Compliance expertise – Knowledge of state-specific labor laws, PF, Gratuity, and ESI regulations.
- Payroll accuracy – Ability to process salaries on time in INR, manage deductions, and generate payslips.
- Service flexibility – Options for full HR outsourcing or payroll-only packages.
- Local presence – On-the-ground support for employees and HR processes.
- Track record – Proven experience with companies of your size and industry.
Step 3: Hire and Onboard Your Indian Employees
Once you have chosen your EOR partner, the hiring process typically involves:
- Defining the role and sourcing candidates – You provide role requirements; your EOR may assist in candidate search.
- Issuing job offers – You issue the offer letter; the EOR prepares a compliant employment contract in English or bilingual format.
- Conducting background checks – Managed by the EOR with candidate consent.
- Onboarding day – The EOR handles employment paperwork, PF/ESI registration, payroll setup, and benefits enrollment, while you focus on cultural integration and job training.
For a detailed breakdown, see our Remote Employees Onboarding Checklist for India.
Step 4: Running Payroll in India
Payroll in India involves multiple statutory requirements, and your EOR will manage them end-to-end:
- Monthly salary processing in INR
- Statutory deductions: PF (12%), Gratuity (4.81%), ESI (3.25%), and Professional Tax (state-specific)
- TDS calculation, withholding, and filing
- Issuing payslips and annual tax forms
- Monitoring compliance with Indian labor regulations to avoid penalties
By delegating payroll to an EOR, you ensure accurate, compliant, and timely payments, freeing up your internal team to focus on core business activities.
EOR Payroll in India: How It Works and Why It Matters
Managing payroll in India involves navigating complex labor laws, frequent regulatory updates, and state-specific rules. An Employer of Record (EOR) in India simplifies this process by taking full responsibility for salary calculations, tax deductions, statutory contributions, and compliance filings — ensuring your employees are paid accurately, on time, and in full legal compliance.
Key Components of EOR Payroll in India
1. Statutory Deductions and Contributions
In India, payroll compliance requires several mandatory deductions and contributions:
- Provident Fund (PF): 12% of basic salary paid by the employer and 12% by the employee, as per the Employees’ Provident Fund Act.
- Gratuity: 4.81% of basic salary, payable after five years of continuous service under the Payment of Gratuity Act.
- Employee State Insurance (ESI): 3.25% employer contribution and 0.75% employee contribution, applicable to employees earning below the wage threshold.
- Professional Tax (PT): Levied monthly in certain states, with rates varying based on salary slabs.
- Tax Deducted at Source (TDS): Withheld from salaries according to individual income tax slabs under the Income Tax Act.
💡Your EOR partner ensures all these contributions are calculated accurately and submitted within the deadlines to the respective government departments.
3. Payroll Processing and Disbursement
- Monthly Cycle: Salaries are processed in INR based on attendance, leave data, bonuses, and reimbursements.
- Payslips: Digital payslips with a detailed breakdown of earnings and deductions are issued each month.
- Direct Bank Transfers: Salaries are deposited into employees’ accounts, ensuring on-time payment.
4. Reporting and Recordkeeping
Employers in India are required to maintain detailed payroll records for at least three years, including:
- Salary structures
- Attendance and leave data
- Statutory filings and challans
- Employee tax declarations and Form 16
EOR providers maintain these records in compliance with labour audit requirements and make them easily accessible via HRMS portals.
Suggested Read: Hire Employees in India Through EOR
Why EOR Payroll Matters for Global Companies
- Time Savings: No need to learn or manage India’s complex payroll systems.
- 100% Compliance: Avoid fines from the Labour Ministry or Income Tax Department.
- Scalable: Works for both small remote teams and large-scale hiring in India.
- Employee Satisfaction: Timely, accurate pay builds trust and reduces attrition.
Partnering with an EOR India provider like Asanify means payroll is handled seamlessly while you focus on business growth.
Taxes in India
When hiring in India through an Employer of Record or setting up a local entity, understanding the country’s tax system is crucial for compliance and financial planning. Below is a complete overview of the taxes, statutory deductions, and contributions that apply to Indian employees and employers in the financial year 2025–26.
New Tax Regime (without most deductions)
India follows a progressive income tax system with two regimes—New Regime (default from FY 2025–26) and Old Regime (with deductions).New Tax Regime (FY 2025–26) – No major deductions, lower rates:
| Income Slab | Tax Rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 to ₹7,00,000 | 5% |
| ₹7,00,001 to ₹10,00,000 | 10% |
| ₹10,00,001 to ₹12,00,000 | 15% |
| ₹12,00,001 to ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Old Tax Regime (with deductions)
Old Tax Regime (FY 2025–26) – Higher rates, but allows deductions (Section 80C investments, health insurance deductions under 80D, HRA, etc.):
| Income Slab | Tax Rate |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 to ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Additional Points:
- 4% Health & Education Cess on total tax.
- Surcharge for high incomes (10–37% depending on slab).
Section 87A rebate for taxable incomes up to ₹12 lakh under the new regime.
Authoritative Source: Income Tax Department – India
Tax Due Dates in India
Tax due dates in India are important to ensure timely payments and avoid penalties. The Income Tax due dates for individuals and businesses typically include quarterly advance tax payments, with deadlines in June, September, December, and March. Companies must file annual tax returns, typically by July 31st of the assessment year. Additionally, employers must ensure timely submission of tax deductions, such as Tax Deducted at Source (TDS), to the government by the 7th of each month. Adherence to these deadlines is crucial to avoid late fees and fines.
Tax Thresholds in India
India has progressive tax rates based on the income level of individuals. For individual income tax, there are different tax slabs based on income thresholds, which change periodically through the annual budget. For instance, individuals earning up to INR 2.5 lakh annually are exempt from income tax, while those earning above this threshold are taxed at rates ranging from 5% to 30%, based on their income bracket. Additionally, businesses must comply with corporate tax rates, which generally range from 25% to 30%, depending on the company’s turnover and other factors. It’s important to understand these thresholds to determine the amount of tax to be paid.
Tax Deducted at Source (TDS)
Employers must calculate and deduct TDS on salaries monthly as per applicable slabs and remit it to the government by the 7th of the following month.
TDS applies to:
- Salaries
- Professional fees
- Certain allowances and bonuses
Non-compliance can result in penalties and interest charges.
Professional Tax
Levied by state governments (see state-wise PT rates in India).
- Deducted monthly from employees’ salaries.
- Varies by state — e.g., Maharashtra: ₹200/month; Tamil Nadu: ₹1,250/half-year.
- Employers are responsible for timely deduction and remittance.
Deductions and Exemptions
India’s income tax system provides a range of deductions and exemptions that can help reduce an individual’s taxable income. Some common deductions include:
- Section 80C: Deductions for investments in specified savings schemes, such as Public Provident Fund (PPF), National Savings Certificates (NSC), and life insurance premiums.
- Section 80D: Deductions for premiums paid on health insurance policies for self and dependents.
- Section 10(13A): Exemption for house rent allowance (HRA) paid to employees, provided they meet specific criteria.
Employers can help employees optimize their tax liability by advising on eligible deductions and exemptions. Ensuring employees are aware of these can lead to significant savings in their annual tax liabilities.
Provident Fund (PF):
- Employer Contribution: 12% of basic salary + dearness allowance.
- Employee Contribution: 12% of basic salary + DA.
- Contributions are tax-exempt under Section 80C of the Income Tax Act (up to ₹1.5 lakh/year).
- Managed by the Employees’ Provident Fund Organisation (EPFO).
Employee State Insurance (ESI):
- Applicable to employees earning ≤ ₹21,000/month.
- Employer Contribution: 3.25% of gross salary.
- Employee Contribution: 0.75% of gross salary.
- Covers employee healthcare benefits in India, maternity, disability, and other social security benefits.
Gratuity
- Applicable after 5 years of continuous service.
- Calculated as 4.81% of basic salary per year of service.
- Tax-free up to ₹20 lakh upon retirement/resignation.
Labour Welfare Fund (LWF)
- Applicable in select states (e.g., Karnataka, Maharashtra).
- Small monthly/annual contribution shared by employer and employee.
- Used for employee welfare programs in India.
Key Corporate Tax Notes
- Domestic companies: 25–30% depending on turnover.
- Foreign companies: 40% on income earned in India.
- GST (0–28%) applies to goods/services, not employment relationships.
Asanify’s Support For Employee Tax Optimization
With Asanify’s Employer of Record services in India, you get:
- Automated payroll with accurate statutory deductions.
- TDS, EPF, ESI, and Professional Tax filings handled end-to-end.
- Real-time compliance tracking.
Expert tax optimization advice for employees.
Suggested Read: Register a Company in India: Everything You Need to Know
CTC Calculator for Hiring Employees in India
When hiring employees in India—whether through your own legal entity or an Employer of Record (EOR)—understanding the Cost to Company (CTC) is essential. CTC represents the total annual expenditure a company incurs for an employee, including fixed salary, bonuses, statutory contributions, and benefits.
However, many employers and candidates focus only on the gross salary, overlooking deductions like Provident Fund (EPF), Employee State Insurance (ESI), and Professional Tax, which affect the final take-home pay.
Our interactive CTC Calculator helps you:
- Break down salary components into basic pay, allowances, and employer contributions.
- Understand statutory deductions like TDS, EPF, and ESI.
- Compare gross salary vs. in-hand pay instantly.
Get accurate cost estimates for hiring in different Indian states.
Pro Tip: When hiring via an EOR in India, you can align the calculator results with local payroll compliance to avoid surprises in your monthly costs.
Legal & HR Compliance Essentials for Hiring Through an EOR in India
When hiring through an Employer of Record in India, ensuring full legal and HR compliance is essential to avoid disputes, penalties, and onboarding delays. While your EOR partner manages most of these processes, it’s important for employers to understand the core elements.
Employee Agreements & Contracts
An EOR ensures that employment contracts in India are fully compliant with local labor laws and tailored to the role. These agreements typically include:
- Job responsibilities and reporting structure
- Compensation breakdown, including fixed pay, variable pay, and benefits
- Confidentiality & non-compete clauses
- Termination terms and notice periods
Clear contracts protect both employer and employee, ensuring mutual understanding from the start.
Work Hours and Probation
Under the Factories Act and Shops and Establishments Acts, the standard workweek in India is 48 hours, with a maximum of 9 hours per day. An EOR ensures your policies comply with these laws, including overtime pay and annual leave entitlements.
Probation Periods
Most Indian employment contracts include a probation period—commonly 3 to 6 months—during which either party can terminate with shorter notice. Clearly defining this period helps manage expectations and assess employee performance before permanent confirmation.
Statutory Compliance Integration
Your EOR handles mandatory contributions, such as:
- Provident Fund (EPF) – 12% employer contribution
- Employee State Insurance (ESI) – applicable if monthly salary ≤ ₹21,000
- Professional Tax (PT) – varies by state
Local Policy Alignment
Beyond statutory compliance, many companies align their employment terms with local best practices—offering flexible hours, health benefits, and competitive leave policies. An EOR can guide you on how to attract top talent in India with market-relevant perks.
Leave Policies in India: What Employers Must Know in 2025
When hiring employees in India—whether directly or through an Employer of Record in India—it’s essential to comply with statutory leave entitlements under Indian labour laws. Leave policies must be clearly documented in employment contracts and communicated to employees from day one.
Standard Leave Policy in India
While leave rules can vary slightly by state, the following types of leave are common under Indian employment law:
| Leave Type | Description | Duration |
|---|---|---|
| Earned Leave | Paid leave for vacation, personal time off, etc. | 15 working days per year |
| Sick Leave | Paid leave for illness or medical reasons | 12 calendar days per year |
| Casual Leave | Paid leave for general purposes | 12 calendar days per year |
| Maternity Leave | Paid leave for childbirth and recovery | 14-26 weeks (depending on service) |
| Bereavement Leave | Paid leave for grieving a family member | 2 days |
The standard leave policy in India includes various types of leave, and it is important to ensure that employees are aware of their entitlements. Indian labor laws mandate the provision of paid leave, sick leave, and other statutory leaves for employees, and these must be incorporated into employee agreements. Many businesses also offer additional leave benefits to attract and retain talent.
Suggested Read: Types of Leaves in India
Types of Leaves in Indian employment laws:
Earned Leave (EL) or Privilege Leave
Employers grant Earned Leave (EL), also known as Privilege Leave (PL), to employees for personal time off. Employees typically accrue this leave over time based on the number of days they work, using it mainly for vacations or personal reasons. Employees earn one day of leave for every 20 days of work, or as per their company policy.
Casual Leave (CL)
Casual Leave (CL) is provided to employees for short-term absences due to unforeseen events, personal matters, or emergencies. This leave accommodates immediate or short-notice situations, such as family emergencies or minor illnesses. It is typically non-cumulative and cannot be carried forward to the next year.
Sick Leave (SL)
Sick Leave (SL) is provided to employees who are unable to perform their duties due to illness, injury, or medical conditions. This leave ensures that employees are not financially impacted when they are unwell, allowing them to take time off to recover without losing their income.
Maternity Leave
Maternity Leave is a statutory benefit for female employees, granted for childbirth. The Maternity Benefit Act of 1961 ensures that female employees receive paid leave to care for their newborn and recover from childbirth. Employers in India must provide female employees with 26 weeks of paid maternity leave for the first two children and 12 weeks for subsequent children.
Paternity Leave
Paternity Leave is a type of leave granted to male employees following the birth of their child. This leave allows new fathers to support their partners during childbirth and spend time with their newborn. While paternity leave is not as widely mandated as maternity leave, many companies offer it to male employees as part of their employee benefits package.
Bereavement Leave
Bereavement Leave is provided to employees who experience the death of a close family member, offering them time off to mourn and attend to funeral arrangements. This leave is crucial for ensuring that employees can take the necessary time to grieve without worrying about their professional obligations.
Marriage Leave
Employers provide Marriage Leave to employees who are getting married. This leave allows employees time to focus on wedding arrangements, ceremonies, and celebrations. It is typically offered as a special leave benefit, separate from regular annual or casual leave.
Sabbatical Leave
Sabbatical Leave is a longer-term leave option provided to employees for personal reasons, study, travel, or rest. It is typically an unpaid leave, though some organizations may offer partial compensation during the sabbatical period. Organizations commonly offer sabbaticals in academic, research, or nonprofit sectors. However, some companies across various industries also provide this option to foster long-term employee engagement and creativity.
List of General Public Holidays in India 2025
In addition to earned and casual leave, employees are entitled to public holidays, which vary by state but typically include national celebrations and major religious festivals.
| Date | Occasion | Category |
|---|---|---|
| 26 January 2025 | Republic Day | General Public Holiday |
| 14 March 2025 | Holi | General Public Holiday |
| 18 April 2025 | Good Friday | General Public Holiday |
| 30 March 2025 | Id-ul-Fitr | General Public Holiday |
| 15 August 2025 | Independence Day | General Public Holiday |
| 16 August 2025 | Janmashtami | General Public Holiday |
| 2 October 2025 | Gandhi Jayanti | General Public Holiday |
| 2 October 2025 | Dussehra | General Public Holiday |
| 20 October 2025 | Diwali | General Public Holiday |
| 25 December 2025 | Christmas Day | General Public Holiday |
| 12 May 2025 | Buddha Purnima | Optional Holiday |
| 7 June 2025 | Bakrid | Optional Holiday |
| 27 July 2025 | Muharram | Optional Holiday |
| 5 September 2025 | Id-e-Milad | Optional Holiday |
| 5 November 2025 | Guru Nanak Jayanti | Optional Holiday |
| 24 December 2025 | Christmas Eve | Optional Holiday |
Why EORs Make Leave Compliance Easier
Managing multiple leave types—while also accounting for state-specific laws and industry agreements—can be complex. An EOR partner like Asanify:
- Creates compliant leave policies for your Indian workforce.
- Tracks and accrues leave balances.
- Integrates leave policies into payroll calculations for accurate payouts.
- Updates policies automatically when regulations change.
Gratuity Payment
Under the Payment of Gratuity Act, 1972, employers must pay a lump sum to employees who have completed at least five years of continuous service. This benefit is designed to reward long-term commitment and provide financial security during employment transitions such as resignation, retirement, or termination.
How gratuity is calculated:
- Formula: (Last drawn basic salary + Dearness Allowance) × 15 / 26 × Number of completed years of service
- Tax Exemption: Up to ₹20 lakh is exempt under Indian Income Tax laws.
For businesses hiring through an Employer of Record in India, the EOR takes full responsibility for:
- Tracking eligibility
- Calculating gratuity payouts
- Disbursing payments in compliance with Indian labour laws
Termination Policies in India
Termination policies must comply with Indian labour laws to ensure fairness and avoid disputes. Valid grounds for termination can include misconduct, performance issues, redundancy, or organisational restructuring.
Key legal considerations:
- Notice period: Typically 1–3 months depending on seniority and contract terms.
- Severance pay: May be required for certain types of terminations.
- Wrongful termination: Employees may challenge dismissals that violate contract terms or labour laws.
When using an EOR India partner, the provider handles:
- Drafting compliant termination clauses
- Managing notices and severance payouts
- Ensuring lawful offboarding and documentation
Bonus Payments in India
The Payment of Bonus Act, 1965 mandates that employers in establishments with 20+ employees pay an annual bonus to eligible staff.
Bonus rules in 2025:
- Minimum: 8.33% of annual salary
- Maximum: 20% of annual salary
- Eligibility: Employees earning up to ₹21,000/month
- Calculation: Based on salary and company profits
With an EOR partner, bonus management is automated—ensuring:
- Correct eligibility checks
- Accurate calculation within statutory limits
- Timely disbursement as per Indian law
Health Insurance in India
While private health insurance is optional, the Employees’ State Insurance (ESI) Act mandates medical coverage for employees earning up to ₹21,000/month in certain sectors.
Two main approaches to health coverage:
- ESI Scheme – Employer contributes 3.25% and employee 0.75% of gross salary; covers hospitalisation, maternity, and disability.
- Private Group Health Insurance – Offered by many companies to attract and retain talent; covers a broader network and higher limits than ESI.
An EOR in India can:
- Enroll employees in ESI where applicable
- Manage contributions and filings
- Facilitate private health insurance partnerships
Suggested Read: PEO vs EOR Differences- All That You Need to Know
Employee Benefits in India
Employee benefits are a crucial aspect of the compensation package offered by companies in India. These benefits not only help attract and retain top talent but also contribute to employee well-being and job satisfaction. In India, employee benefits can be broadly categorized into statutory and supplementary benefits.
Statutory Benefits in India
Statutory Benefits are benefits that are mandated by Indian labor laws and regulations. These benefits ensure that employees are given their legal entitlements, and employers are compliant with national employment standards. Some of the key statutory benefits in India include:
- Provident Fund (PF): Employees contribute a portion of their salary to a retirement fund, and the employer matches the contribution. PF is mandatory for establishments with 20 or more employees.
- Employees’ State Insurance (ESI): ESI provides medical benefits, disability compensation, and maternity benefits to employees earning below a certain threshold (currently ₹21,000 per month).
- Gratuity: As mentioned, gratuity is a statutory benefit payable to employees who have worked for five or more continuous years with the company.
Supplementary Benefits in India
Employers offer supplementary benefits to enhance the overall compensation package and boost employee satisfaction. These benefits go beyond statutory requirements and aim to improve employees’ quality of life. Some of the common supplementary benefits in India include:
- Health Insurance: Employer-provided health insurance covers medical expenses, hospital stays, and treatments. This benefit is increasingly common among Indian employers.
- Performance Bonuses: In addition to statutory bonuses, employers often provide performance-based bonuses to reward employees for meeting or exceeding targets.
- Company Stock Options: Some companies offer stock options or equity as part of their long-term incentive plans.
Asanify’s Flexible Benefits Plan for EOR Employees
Asanify offers a Flexible Benefits Plan (FBP) that lets employees structure their salary for maximum tax savings while remaining fully compliant with Indian tax laws. This plan includes:
| Flexible Benefits Components | IT Section | Old Tax Regime | New Tax Regime | Annual Maximum Amount (₹) |
|---|---|---|---|---|
| Meal or Food Allowance | Section 10 | Applicable | Not Applicable | 39,600 |
| Fuel Allowance | Section 17 | Applicable | Not Applicable | 28,800 |
| Mobile and Internet | Section 17 | Applicable | Not Applicable | 24,000 |
| Gift Wallet | Section 17 | Applicable | Not Applicable | 5,000 |
| Attire/Apparel | Section 10 | Applicable | Not Applicable | 36,000 |
| Books and Periodicals | Section 10 | Applicable | Not Applicable | 36,000 |
| **Total** | 1,69,400 | |||
Terminations in India
Termination laws in India are designed to protect both employers and employees. The process differs for contractors and full-time staff, but in all cases, compliance is essential.
Types of Termination:
- For Cause – Misconduct or policy violation; no notice period required but due process is mandatory.
- Without Cause – Downsizing or restructuring; requires notice (1–3 months) or severance pay.
- Collective Termination – Mass layoffs require government approval for companies with 100+ employees.
- Voluntary (Resignation) – Employee-initiated; must serve contractual notice.
Key Steps for Employers:
- Serve the Notice Period as per contract or applicable law.
- Full & Final Settlement – Clear all dues including salary, unused leave, gratuity, and bonuses.
- Maintain Documentation – Keep termination letters, payment proofs, and exit interview records.
When using an Employer of Record in India, the EOR manages all termination procedures, ensuring compliance with the Industrial Disputes Act, notice rules, and severance requirements.
Notice Periods in India
In India, the notice period refers to the time an employee or employer must give before ending the employment contract. Under the Industrial Employment (Standing Orders) Act, notice periods are mandatory for both parties and depend on the employment contract. Typically, the notice period for an employee ranges from one to three months, based on the agreement.
Severance Pay in India
In India, employers typically provide severance pay when terminating an employee’s employment, whether voluntarily or involuntarily. Under the Industrial Disputes Act of 1947, employers are required to pay severance to employees with at least one year of continuous service. Specifically, severance pay is calculated as 15 days of salary for each completed year, based on the employee’s last drawn wages, including basic salary and dearness allowance. Severance pay is a statutory benefit that ensures employees receive financial support as they transition to new employment.
Key points:
- Legal Compliance: Termination policies in India must adhere to statutory requirements such as notice periods, severance pay, and procedural fairness.
- Documentation: Employers must maintain thorough documentation of the reasons for termination, communications, and any supporting evidence.
- Employment Contracts: Clear employment contracts are crucial for outlining termination procedures, including the notice period and severance entitlement.
- Employee Rights: Employers must honor employee rights, such as severance pay and compensation for unused leave, during the termination process.
What are the key steps involved in terminating employees in India?
1. Serve Notice Period
The notice period is a mandatory time that both the employee and employer must provide before the termination of the employment contract. As per the Industrial Employment (Standing Orders) Act, employees must give a notice period, which can vary between one to three months, depending on the employment agreement. Employers must also honor this notice period unless the termination is for a cause.
2. Termination for Cause
Employers terminate an employee for cause when the employee breaches company policies or engages in misconduct. In these cases, employers generally do not need to provide the standard notice period but must allow the employee to present their defense. Typical grounds for termination for cause include theft, insubordination, dishonesty, or violation of company rules.
3. Full and Final Settlement
After the notice period is served or the termination is completed, a full and final settlement is carried out. This settlement includes:
- Outstanding salary
- Leave encashment for unused leaves
- Gratuity (if applicable)
- Bonus payments (if due)
- Any other pending financial obligations
Employers must promptly pay employees and make proper statutory deductions, such as taxes and provident fund contributions.
4. Documentation
Proper documentation is essential when terminating an employee to ensure legal compliance and avoid future disputes. This includes:
- A formal termination letter outlining the reason for termination, notice period, and other details.
- Exit interview reports (if applicable).
- Acknowledgment of receipt of all due payments and benefits by the employee.
- Legal documentation, such as severance pay records, which confirm that the employee’s rights have been honored.
Recommended Read: How to Hire in India Easily- 10 Key Considerations
How to Choose the Right EOR India Services?
When hiring employees in India through an Employer of Record, choosing the right partner can make or break your market entry strategy. Here’s what to look for:
1. Expertise and Local Knowledge
Your EOR must have deep knowledge of Indian labor laws, tax regulations, and employee benefits. This ensures smooth compliance and reduces the risk of legal issues.
2. Comprehensive Service Offerings
A strong EOR handles payroll, tax filings, compliance management, onboarding, and benefits administration under one roof, so you don’t need multiple vendors.
3. Scalability and Flexibility
Your workforce needs will evolve—your EOR should be able to scale from 1 hire to 100+ employees and adapt to changing market demands.
4. Technology and Data Security
Given India’s Digital Personal Data Protection Act, choose an EOR that uses secure payroll/HR platforms and complies with all data privacy rules.
5. Compliance and Risk Management
An experienced EOR keeps you compliant with labor laws, handles audits, and updates you on regulation changes—reducing your exposure to employment-related legal risks.
6. Reputation and Client References
Ask for case studies, testimonials, and client references. A proven track record with global companies is a strong trust signal.
7. Transparent Pricing and Clear Contracts
Ensure no hidden costs. Contracts should clearly define scope, deliverables, timelines, and service-level agreements.
8. Strong Local Network
A well-connected EOR has relationships with Indian tax, legal, and HR professionals, ensuring faster problem resolution.
Compliance and Risk Management
A key benefit of working with an EOR India partner is minimizing the risk of non-compliance with Indian labor laws. Ensure that the EOR has a strong track record in managing compliance and can assist with audits, statutory filings, and updates on changing regulations. This reduces the legal risks your business faces when hiring employees in India.
Reputation and Client References
Check the reputation of the EOR provider by looking at client references and online reviews. A reputable EOR partner will have proven experience in delivering quality services to global companies and will be able to provide testimonials or case studies that demonstrate their ability to meet client expectations.
Expertise in Indian Employment Regulations
An EOR provider must have in-depth knowledge of Indian employment regulations, including labor laws, statutory benefits, tax regulations, and employee insurance requirements. This ensures that employers hire, manage, and terminate employees in a legally compliant manner while meeting all legal obligations.
Service Offerings and Scalability
Make sure the EOR India service provider offers all the services your business requires, from payroll management to employee benefits. Additionally, they should be able to scale these services as your business expands, offering a long-term solution for managing your employees in India.
Reputation and Client References
Review the EOR provider’s reputation by seeking client feedback, reading case studies, or looking for reviews from other businesses that have worked with them. A strong reputation indicates reliability, effective communication, and the ability to handle your workforce needs efficiently.
Data Security and Privacy Compliance
Given the sensitive nature of employee data, the EOR India partner must ensure that employee information is securely stored and compliant with data protection regulations. This includes safeguarding personal, financial, and health-related data in line with Indian Data Protection Laws.
Transparent Pricing and Contractual Agreements
Before finalizing your EOR partner, ensure that their pricing structure is transparent and competitive. Clear contractual agreements should define the scope of services, terms of engagement, and payment structures. This helps avoid any hidden costs or misunderstandings later on.
Local Network and Support
A good EOR India partner should have a strong local network and support system, including relationships with legal and tax professionals who can assist with compliance, dispute resolution, and other requirements. This ensures that all your business needs are met locally without relying on external consultants.
Benefits of Working With an Employer of Records Service Provider in India
Partnering with an EOR isn’t just about compliance—it’s about enabling faster, smoother expansion.
- Compliance and Legal Expertise – Stay up to date with Indian labor, tax, and employment laws without building an internal HR compliance team.
- Time & Cost Savings – No need to set up a legal entity, hire local HR staff, or manage multiple vendors.
- Swift Market Entry – Start hiring within days instead of months.
- Local HR Support – Onboarding, grievance handling, and cultural alignment managed locally.
- Flexibility and Scalability – Easily grow or reduce headcount without the headaches of direct employment.
- Risk Mitigation – Reduce exposure to wrongful termination claims or labor disputes.
- Cultural & Language Bridge – Local experts navigate business etiquette and communication styles.
Focus on Core Business – You handle growth; your EOR handles HR, payroll, and compliance.
Visa Types in India
When hiring foreign talent in India—whether directly or through an Employer of Record (EOR) India partner—understanding the visa and work permit process is essential for legal compliance and a smooth onboarding experience.
Asanify offers end-to-end visa support, including:
- Document collection & verification
- Liaising with Indian authorities
- Tracking approvals & renewals
- Ensuring compliance with the Ministry of Home Affairs (MHA) and Foreigners Regional Registration Office (FRRO) requirements
If you choose to handle the process independently, here’s what you need to know.
Employment Visa (Work Permit) in India
The Employment Visa is mandatory for foreign nationals hired in India for a role that requires specialized skills, knowledge, or senior management expertise.
Eligibility Requirements (2025):
- Valid passport (minimum 6 months validity)
- Confirmed job offer from a registered Indian company
- Salary must generally exceed USD 25,000 per year (exceptions for teaching roles, NGOs, or certain specialists)
- Qualifications and experience relevant to the position
- Employment contract detailing job role, duration, and compensation
Validity: Usually issued for 1 year; renewable in-country for the duration of the employment contract.
Processing Time: Typically 2–8 weeks depending on the applicant’s country of origin.
Application Documents:
- Passport + copies
- Recent photographs (per Indian Embassy specs)
- Job offer letter & employment contract
- Proof of employer registration in India (e.g., Certificate of Incorporation)
- Letter of recommendation from employer
Useful Websites:
- Indian Visa Online: https://indianvisaonline.gov.in/visa/
- e-FRRO Portal: https://indianfrro.gov.in/eservices/home.jsp
- Ministry of Home Affairs (Visa Division): https://www.mha.gov.in/division_of_mha/visa-division
Visa Application Process for Working in India
Step 1 – Job Offer & Contract
Secure a formal job offer from your Indian employer or EOR India provider.
Step 2 – Embassy/Consulate Submission
Apply at the Indian Embassy/Consulate in your home country. Submit all required forms and fees.
Step 3 – Verification
Indian authorities verify your employer’s credentials, job role, and compliance with salary thresholds.
Step 4 – Visa Issuance
Receive your Employment Visa in your passport.Step 5 – Travel & Registration
Enter India and complete FRRO registration within 14 days if your stay exceeds 180 days.
FRRO Registration in India
Long-term Employment Visa holders must register with the Foreigners Regional Registration Office (FRRO) within 14 days of arrival.
Required Documents:
- Passport & visa copy
- Residential proof in India (rental agreement, utility bill)
- Employer’s letter confirming employment
- Recent photographs
- Completed registration form
Why It Matters:
Failure to register can result in penalties, visa cancellation, or even deportation.
Other Common Visa Categories for Business in India
While the Employment Visa is the most common for hiring, other visa types may apply:
- Business Visa – For foreign nationals engaging in business meetings, setting up joint ventures, or exploring investment opportunities in India. Not valid for employment.
- Project Visa – Issued to foreign workers employed in specific projects in the power and steel sectors.
Intern Visa – For foreign nationals interning in India at companies, NGOs, or educational institutions.
Risks or Drawbacks of EOR India
While EOR services streamline hiring and compliance, businesses should be aware of potential challenges:
| Risk Factor | Description | Mitigation |
|---|---|---|
| Limited Operational Control | EOR is the legal employer, reducing your direct authority over daily operations. | Set clear performance management KPIs with EOR. |
| Cultural Differences | Misalignment with Indian work culture or communication norms. | Leverage EOR’s local HR expertise to bridge gaps. |
| Service Costs | Monthly per-employee fees can be higher than direct hiring for small teams. | Compare costs vs. setting up a local entity. |
| Data Security Concerns | Third-party handling of sensitive employee data. | Work only with EORs compliant with Indian Data Protection Bill & GDPR. |
| Scalability Constraints | Some EORs may struggle with rapid expansion. | Choose a provider with proven high-volume onboarding capacity. |
EOR vs. HR Software – Key Differences
Employer of Record (EOR):
- Legal employer in India
- Manages payroll, taxes, and statutory benefits
- Ensures compliance with Indian labor laws
- Handles onboarding, contracts, and terminations
HR Software:
- Automates HR workflows (leave tracking, performance reviews, recruitment)
- Does not act as a legal employer or manage compliance
- Requires your own legal entity in India to employ staff
How much does it cost to avail Services Under EOR India?
The cost of using an Employer of Record (EOR) in India depends on several factors, such as the scope of services, the size of your workforce, and any additional benefits you choose to provide. On average, EOR pricing in India starts at $199 per employee per month, as per Asanify’s service rates.
Key Factors That Influence EOR India Pricing
1. Scope of Services
EOR providers in India offer a wide range of services, from basic payroll management and compliance to full HR outsourcing, including benefits administration, employee onboarding, and visa support. The more comprehensive the service package, the higher the monthly cost.
2. Number of Employees
Pricing is usually on a per-employee-per-month basis. Hiring more employees may increase your total cost, but large teams may qualify for volume discounts from some providers.
3. Employer Contributions & Taxes
Employers in India are required to make statutory contributions, including:
- Provident Fund (12%)
- Gratuity (4.81%)
- ESI (3.25%) – if applicable
- Professional Tax – state-specific rates
Overall, employer taxes range from 17%–20% of the employee’s gross salary. This cost is separate from the EOR service fee.
4. Additional Services & Customization
Some EOR India providers offer add-ons such as health insurance, flexible benefits plans, or expatriate support. These optional services can increase the overall price but also improve employee satisfaction.
5. Technology & HRMS Access
If the EOR provides advanced HRMS (Human Resource Management System) tools for self-service payroll, leave tracking, and compliance reporting, the monthly fee might be slightly higher due to technology costs.
6. Contract Terms & Pricing Models
EOR pricing in India is typically structured as:
- Per-employee-per-month fee (most common)
- Flat-rate package for small teams
- Custom pricing for enterprise clients
Long-term contracts often come with discounted rates, while short-term agreements may be priced higher.
Example: Estimated Monthly EOR Cost for One Employee in India
| Cost Component | Estimated Value |
|---|---|
| EOR Service Fee | $199 / month |
| Employer Taxes (17–20%) | Based on salary |
| Additional Benefits (optional) | Variable |
| Total | $199 + employer tax & benefits |
Pro Tip:
If you want to quickly estimate your total hiring cost, try Asanify’s CTC Calculator for Hiring in India. This tool breaks down salary components, employer contributions, and employee take-home pay.
Conclusion: EOR India
The Employer of Record (EOR) India model is an invaluable tool for businesses seeking to hire and manage employees in India without the complexities of setting up a local entity. By partnering with an EOR India provider, businesses can ensure compliance with India’s complex labor laws, streamline HR functions, and mitigate risks associated with payroll, taxation, and employee benefits administration. With benefits such as swift market entry, risk management, and scalability, the EOR model offers businesses a cost-effective, flexible, and efficient solution for workforce management in India.
For companies looking to enter the Indian market or expand their global workforce, partnering with an EOR India provides both strategic and operational support. The EOR service handles the legal and administrative complexities of hiring in India, from legal and regulatory compliance to employee benefits and payroll, allowing businesses to focus on their core activities and growth.
FAQs
EOR fee: Typically USD 199 per employee per month for comprehensive services like payroll, benefits, and statutory compliance.
Employer contributions: Around 17–20% of an employee’s salary goes toward statutory contributions (PF, gratuity, ESI, etc.), which are not part of the EOR fee.
Your total Cost to Company (CTC) includes both these elements, along with optional items like health insurance or flexible perks.
With an EOR, you can legally begin hiring within 1–2 business days.
By contrast, forming a legal entity in India often takes 3–6 months, plus the administrative burden.
The EOR gives you speed and local compliance in one package.
An EOR becomes the legal employer by handling all employment-related responsibilities, including payroll, benefits, compliance, and taxation, while the company manages the employee’s day-to-day tasks.
Absolutely! Asanify’s Flexible Benefits Plan lets you tailor benefits like meal cards, apparel allowances, and phone reimbursements. Employees can save up to ₹40,000 annually in taxes, and you gain improved retention—all without increasing your CTC.
The EOR manages payroll, statutory filings, and adheres to state-specific laws (like professional tax or leave requirements).
You only provide assignment details; the EOR adapts calculations per region—including overtime rules and notice requirements under the Shops & Establishments Act.
Yes—it’s fully feasible. Many businesses start with EOR services to get going quickly, then switch to their own entity setup once they scale or establish a local infrastructure.
No. As your EOR partner, we continuously monitor regulatory updates (like changes to gratuity, provident fund rates, tax adjustments, or leave entitlements) and implement them immediately—keeping your operations compliant and worry-free.
Yes. The EOR model is legally valid in India and recognized by authorities. It enables legal employment for foreign companies without having to establish a local office, while ensuring adherence to labor, tax, and payroll regulations.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.
