India has rapidly become a global hotspot for sourcing remote talent across sectors such as technology, finance, operations, and customer support. With a large, educated, English-speaking workforce and cost-effective salary expectations, India is a strategic location for international expansion. However, one of the biggest barriers global companies face is the complex process of establishing a legal entity in the country.
Setting up a local business entity in India involves multiple layers of registration, compliance with evolving Indian labor laws, and consistent payroll administration. For companies looking to test the market, onboard talent quickly, or operate lean, this can be time-consuming and resource-draining. Fortunately, there’s a faster, fully compliant alternative available today: Employer of Record (EOR) services.
This article is a comprehensive guide for companies that want to hire employees in India without setting up a local entity. We will explore the benefits, challenges, legal framework, and how EOR services in India can help you build your remote team seamlessly.
Table of Contents
- India Hiring Overview: What Global Employers Should Know
- Worker Status & Employment Structures
- Comparison: EOR vs Entity Setup in India
- Work Authorization in India
- Employment Agreements & Hiring Documents
- Onboarding New Hires in India
- Pre-Employment Checks
- Labor Laws & Employment Compliance
- Paying Employees in India
- Benefits & Perks in India
- Equipment & Software
- IP & Data Security
- Unions and Worker Representation
- Separation and Exit
- Social Security & Upskilling
- How Asanify Helps You Hire in India Without an Entity
- FAQs
Why Hire Employees in India?
India is one of the top destinations for global hiring, offering a large, skilled, and cost-effective workforce. Many Indian professionals hold advanced degrees and international certifications, making them highly suited for remote work. With strong English proficiency and overlapping time zones with Europe, APAC, and U.S. evenings, communication with global teams is seamless.
The biggest advantage of hiring employees in India is cost efficiency. Salaries are far lower than in the U.S. or Europe, allowing companies to scale teams without compromising quality. Whether you want to hire one Indian employee or build an offshore team, India offers unmatched value and flexibility.
Skilled and Affordable Workforce
India’s talent pool covers IT, finance, engineering, customer support, marketing, and HR. The combination of international certifications and affordable salaries makes hiring in India highly attractive for global employers.
Booming Tech and Service Sectors
India hosts over 75% of the world’s digital talent and a thriving SaaS, BPO, and startup ecosystem. Cities like Bangalore, Hyderabad, Pune, and Gurgaon serve as global hubs for R&D and offshore delivery centers—making it easier than ever to hire employees in India.
Time Zone and Language Advantage
The Indian Standard Time (IST) zone complements U.S. evening shifts and overlaps effectively with European work hours, facilitating cross-border collaboration. English is widely spoken, and most professionals are comfortable working in international environments.
Suggested Read: 10 Best Employer of Record Service Providers in India
Challenges of Hiring Without a Legal Entity in India
At first glance, it may seem easy to hire employees in India without setting up a local entity, but the process involves multiple legal and compliance hurdles. Without a registered presence, foreign companies face restrictions around payroll, contracts, and benefits, increasing the risk of penalties or tax exposure.
Key challenges include:
- Inability to issue legally compliant offer letters or employment contracts
- No authority to process payroll in India or pay salaries in INR
- Cannot contribute to mandatory benefits such as Provident Fund (PF), Employee State Insurance (ESI), or gratuity
- Difficulty managing tax deductions, statutory filings, and labor law compliance
- Risk of triggering Permanent Establishment (PE) status, leading to corporate tax liability
Navigating Indian Labor Laws for Foreign Companies
India’s labor system is governed by both state and central codes, making compliance difficult for foreign employers. Regulations cover wages, benefits, and termination, and errors can lead to penalties.
Key compliance areas:
- Minimum wage requirements
- Provident Fund (PF) and Employee State Insurance (ESI)
- Maternity leave and benefits
- Gratuity after five years of service
- Proper notice and termination procedures
Worker Status & Employment Structures
Understanding how Indian labor law categorizes workers is foundational for any global company planning to hire in India. The distinction between employees and contractors isn’t just semantic it carries major legal, financial, and compliance implications.
Indian law recognizes several types of work arrangements, but for most global employers hiring remotely, two primary categories apply:
Employees vs. Independent Contractors
In India, the distinction between an employee and an independent contractor is crucial. Employees are entitled to benefits such as paid leave, social security contributions, and statutory protections. Contractors, however, are not entitled to these and are typically responsible for their own taxes and insurance.
Misclassifying an employee as a contractor to avoid legal obligations can lead to:
- Backdated social security payments
- Penalties for non-compliance
- Lawsuits and reputational damage
Understanding this classification is key to hiring compliantly.
Fixed-Term Employment Rules
Fixed-term employment contracts are legal in India but must be drafted carefully. They must specify:
- The exact duration of employment
- Salary structure
- Notice and termination clauses
These employees are entitled to the same statutory benefits as permanent employees, on a pro-rated basis.
Three Ways to Employ Workers in India
| Hiring Model | Setup Required | Compliance Responsibility | Cost | Speed |
| Local Entity | Yes | Employer | High | Slow |
| Employer of Record (EOR) | No | EOR | Medium | Fast |
| Independent Contractors | No | Contractor | Low | Fast |
Each model comes with pros and cons. EOR offers a perfect balance between speed, compliance, and cost.
Comparison: EOR vs Entity Setup in India
Setting up a legal entity requires local incorporation, bank accounts, tax registrations, and local HR and legal support. On the other hand, an EOR acts as the legal employer and handles all of this for you.
| Feature | Employer of Record (EOR) | Setting Up a Local Entity |
| Setup Time | 1–2 weeks | 2–6 months |
| Legal Incorporation Needed | No | Yes |
| Payroll Management | By EOR | By employer or vendor |
| Tax Compliance | Handled by EOR | On employer |
| Local HR Staff Needed | No | Yes |
| PE Risk | Very Low | High |
| Ideal For | Remote/early expansion | In-market operational scale |
Verdict: EOR is the ideal option for global companies looking to hire employees in India without setting up a local entity.
Work Authorization in India
Work authorization is a critical aspect when hiring internationally, but when it comes to India, the rules are relatively straightforward—especially if you’re hiring Indian citizens for remote roles. Whether you’re a startup looking to scale fast or an enterprise expanding globally, understanding work authorization will ensure you’re on the right side of Indian law.
Do You Need a Local Entity to Hire in India?
The short answer is no.
Foreign companies can legally hire employees in India without setting up a local entity by partnering with an Employer of Record (EOR). The EOR becomes the legal employer on paper and handles all country-specific compliance such as:
- Labor contracts
- Social security contributions
- Tax withholdings
- Payroll filings
- Statutory benefits
This means you can onboard Indian talent quickly without undergoing the lengthy and expensive process of forming a subsidiary or branch office. You retain control over the employee’s tasks, working hours, and day-to-day responsibilities, while the EOR ensures full legal compliance on your behalf.
Hiring Indian Citizens
If you’re hiring Indian nationals residing in India, no additional work permits or visas are required. These workers are legally allowed to work for foreign companies, even if the employer does not have a physical or legal presence in India. What matters is:
- The employment contract follows Indian labor law
- Payroll is processed compliantly
- Statutory contributions (like Provident Fund and ESI) are fulfilled
An EOR simplifies all of this by acting as the employer of record while you manage the work output.
Hiring Foreign Nationals in India
If you plan to hire foreign citizens to work physically in India, the rules change. These workers will require:
- An Employment Visa, which is granted by Indian authorities to foreign nationals with specialized skills
- Proof that the role could not easily be filled by an Indian worker
- Documentation such as offer letters, passport copies, and background verification
However, this scenario is rare for remote-first companies. Most global employers hiring in India are engaging Indian citizens who already reside and work remotely within the country.
Remote Work & Compliance
Even for remote roles, labor laws and tax obligations apply. Indian employees working from home or coworking spaces still require compliant payroll, benefits, and leave structures. The absence of a physical office doesn’t exempt companies from these obligations.
That’s why an EOR solution is ideal it offers a fully compliant pathway to hire in India, ensuring you don’t trigger permanent establishment risk, violate tax laws, or accidentally misclassify employees.
Employment Agreements & Hiring Documents
When you hire employees in India—especially without setting up a local entity—it’s essential to put the right documentation in place. Indian labor laws emphasize transparency, structure, and statutory protection, so having clear, compliant employment agreements and related documents is not just good practice—it’s a legal necessity.
Whether you’re hiring directly or through an Employer of Record (EOR), these documents lay the foundation for a secure and lawful employer-employee relationship.
Offer Letters
An offer letter is typically the first official document an employee receives. It sets expectations and affirms the intent to hire. While not legally binding like a contract, it plays an important role in setting out key terms and can be used as a reference in disputes.
Standard components include:
- Job title and designation
- Proposed start date
- Location (typically remote, if hiring internationally)
- Compensation package (including base salary, bonus, benefits)
- Probation period (commonly 3–6 months)
- Acceptance deadline
Offer letters are usually followed by a formal employment agreement, but they form the first touchpoint of the employee experience.
NDAs and IP Agreements
India has a strong legal framework for protecting intellectual property (IP), but enforcement hinges on clear contractual clauses.
That’s why it’s standard practice to have new hires sign a Non-Disclosure Agreement (NDA) and, where applicable, an Intellectual Property Assignment Agreement often included as annexures to the employment contract.
These documents should:
- Clearly define what constitutes confidential information
- Prohibit sharing of proprietary data during and after employment
- Ensure that all work products, inventions, and code created during employment are the property of the employer
- Specify the applicable legal jurisdiction (preferably Indian courts for enforceability)
For global companies hiring remote Indian workers, this is especially critical for safeguarding data, source code, and internal systems.
Employment Contracts in India
A comprehensive, locally compliant employment contract is the backbone of lawful hiring in India. While Indian law does not mandate a written contract for every employee, having one in place is highly recommended and expected, especially for full-time roles.
An Indian employment contract typically includes:
- Employee’s full name and job designation
- Reporting structure and department
- Location of work (remote, hybrid, or office)
- Total Compensation (Cost to Company – CTC) structure
- Working hours and leave policy
- Probation and confirmation clause
- Statutory deductions (Provident Fund, ESI, taxes)
- Termination and notice period terms
- Non-compete, non-solicitation, and IP clauses
- Governing law and dispute resolution clause
Important tip: Indian law generally favors the employee in labor disputes. So, contracts must be balanced, clearly worded, and defensible in court.
EOR Support for Documentation
When hiring through an Employer of Record (EOR) in India, the EOR:
- Issues the employment contract on your behalf
- Ensures it complies with national and state labor laws
- Customizes clauses to reflect your business needs while staying within legal limits
- Handles document collection (e.g., PAN card, address proof, previous employer letters)
This streamlines the onboarding process and gives you peace of mind that every legal box is ticked.
Onboarding New Hires in India
Successfully onboarding employees is about more than sending a welcome email and setting up software access. In India, onboarding is a crucial phase where compliance, employee engagement, and cultural integration intersect.
Whether you’re hiring through an Employer of Record (EOR) or managing onboarding remotely as a global company, you need a structured approach that aligns with Indian employment norms and enhances retention from day one.
Before the First Day
- Collect PAN card, Aadhaar, and bank details
- Verify educational and employment history
- Complete contract and NDA documentation
The First Day
- Provide access to tools, systems, and equipment
- Conduct orientation on company culture and policies
- Explain payroll cycle and benefits
The First Week
- Assign manager or buddy
- Set OKRs or probation goals
- Start compliance training (e.g., POSH)
Beyond the First Week
- Regular check-ins and feedback sessions
- Begin performance appraisals
- Offer skill development opportunities
Pre-Employment Checks
While not mandatory under Indian law, conducting pre-employment checks is considered best practice—especially when hiring remotely. Background verification helps confirm a candidate’s qualifications, employment history, and criminal record, reducing the risk of fraud or misrepresentation. Most employers in India use third-party agencies for these checks during the onboarding phase.
Background Verifications
In India, background checks are not legally required but highly recommended. Common checks include:
- Education verification
- Criminal background check
- Past employment references
These help mitigate risk and ensure quality hires.
Labor Laws & Employment Compliance
India’s labor framework is governed by a mix of central and state-specific laws, covering everything from wages and working hours to termination and social security. Employers must comply with acts like the Shops and Establishments Act, the Payment of Gratuity Act, and the Employees’ Provident Fund Act. Hiring through an EOR ensures that these complex legal obligations are handled accurately and consistently.
Indian Labor Law Essentials
Labor law in India is governed by:
- Central laws like EPF Act, ESI Act, Payment of Wages Act
- State-specific Shops and Establishments Acts
You must comply with both, depending on employee location.
Working Hours and Rest Periods
- Standard: 9 hours/day or 48 hours/week
- One rest day per 7-day period is mandatory
- Overtime must be paid if applicable
Minimum Wage Rules
Each state publishes its own minimum wages for skilled, semi-skilled, and unskilled roles. These vary by industry and must be strictly followed.
Leave Entitlements
| Leave Type | Typical Days per Year |
| Paid Leave | 12–15 |
| Sick Leave | 7–12 |
| Public Holidays | 10–14 |
| Maternity Leave | Up to 26 weeks |
Paying Employees in India
Employers in India must follow strict payroll and tax regulations, including timely salary payments, tax deductions at source (TDS), and statutory contributions like Provident Fund and ESI. Salaries are typically paid monthly, with detailed payslips and compliance filings. Using an EOR simplifies this process by managing payroll, taxes, and statutory reporting on your behalf.
Payroll and Withholding Obligations
Payroll in India is processed monthly, and employers carry several compliance duties. Missing these can lead to penalties or audits.
- Withholding income tax under the Tax Deducted at Source (TDS) system
- Deducting and depositing Provident Fund (PF) contributions
- Contributing to Employees’ State Insurance (ESI) where applicable
- Ensuring all payments and filings are made on time to avoid fines and legal action
How Employers Pay Taxes in India
Employers in India must handle payroll tax filings regularly to stay compliant. Accurate reporting ensures employees receive the documents they need for their own tax returns.
- File payroll-related tax returns monthly with the government, including TDS details
- Issue Form 16 at the end of the financial year to every employee
- Form 16 must summarize total earnings, tax withheld, and taxable income
- Employees use this certificate when filing their personal income tax returns
Employer Payroll Contributions
| Contribution | Rate |
| Provident Fund (EPF) | 12% of basic salary |
| Employee State Insurance | 3.25% of gross salary |
| Gratuity | 4.81% (after 5 years) |
How Much Does It Cost to Hire an Employee in India?
The cost of hiring employees in India goes beyond base salary. Employers must include statutory contributions and, if using an Employer of Record (EOR) in India, service fees.
- Statutory contributions: Provident Fund (PF), Employees’ State Insurance (ESI), gratuity, and professional tax (location-based). Adds about 15–20% to gross salary.
- EOR service fee: Covers payroll, compliance, benefits, and HR support. Typically 10–15% of monthly compensation.
- Total estimated cost: Around 25–35% above gross salary, depending on benefits and hiring model.
Accurate budgeting ensures compliance with Indian labor laws and prevents unexpected costs when you hire Indian employees.
What Are The Benefits & Perks in India?
Employees in India are entitled to several mandatory benefits, including Provident Fund (PF), gratuity, Employees’ State Insurance (ESI), and paid leave. In addition, many employers offer supplementary perks such as private health insurance, internet reimbursements, wellness allowances, and learning & development budgets to stay competitive and attract top talent. These benefits enhance employee satisfaction and retention, especially in remote work setups.
Mandatory Employee Benefits
- Provident Fund
- Gratuity
- Statutory Bonus
- Paid Time Off
- Insurance (via ESI or private)
Supplementary Perks
- Health insurance top-ups
- Meal cards or coupons
- Internet reimbursements
- Learning & Development allowances
What Equipment & Software Do Remote Employees Need in India?
When you hire remote employees in India, it’s important to provide the right hardware and digital tools to ensure productivity from day one. Most global companies ship laptops pre-configured with security settings and essential applications. Access to collaboration and project management software helps teams work efficiently and stay connected.
Laptops and Applications
When hiring remote employees in India, providing the right tools ensures productivity and security from day one.
- Shipping pre-configured laptops with required software and security settings
- Providing access to collaboration tools such as Slack, Microsoft Teams, Google Workspace, Zoom
- Using project management platforms like Jira or Asana for smooth workflows
- Setting up custom VPNs, endpoint protection, and enforcing two-factor authentication (2FA) for sensitive data access
IP & Data Security
Protecting company information is critical while managing remote teams. Employers must combine legal agreements with secure systems.
- Adding IP assignment and confidentiality clauses in employment contracts
- Using enterprise-grade software and VPNs to prevent unauthorized access
- Ensuring all work produced remains company-owned and protected under contract
Protecting Intellectual Property
Ensure all work produced during employment is owned by the company. Clearly define this in contracts and ensure all tools are accessed securely through enterprise-grade software.
Compliance Pitfalls in India
| Risk | Consequence |
| Permanent Establishment Risk | Tax liability and penalties |
| Employee Misclassification | Fines, back pay, reclassification |
| Non-compliance with PF/ESI | Government audits, fines, blacklisting |
| Ignoring state-specific laws | Legal action or shutdowns |
Unions and Worker Representation
India has a long-standing history of labor unions, especially in sectors like manufacturing, logistics, and public services. While union influence is limited in white-collar and remote roles, employers should still be aware of Central Trade Union Organizations (CTUOs) and state-level labor groups. Staying informed helps ensure compliance with collective bargaining rights if your workforce grows in certain industries.
What Are Central Trade Union Organizations (CTUOs) in India?
- India has over a dozen registered Central Trade Union Organizations (CTUOs).
- These unions are most active in public sector and manufacturing industries.
- Even in white-collar sectors, it is important for employers to stay aware of worker rights movements.
Separation and Exit
Employee offboarding in India involves adhering to notice periods, processing final settlements, and issuing formal documents like relieving and experience letters. Most contracts include a 30 to 90-day notice period, depending on the role and seniority. Employers must also ensure that all dues, such as unpaid salary, leave encashment, and gratuity (if applicable), are settled promptly to remain compliant with labor laws.
How Offboarding Works in India
- Serve statutory or contractual notice (usually 30–90 days)
- Settle final dues: salary, leave encashment, gratuity
- Issue relieving letter and Form 16 for taxes
How Is Employee Separation and Exit Managed in India?
India’s social security framework includes mandatory schemes like Provident Fund (PF), Employees’ State Insurance (ESI), and gratuity, which provide retirement savings, health coverage, and financial protection. Employers must contribute to these schemes as per statutory requirements. Additionally, upskilling is a key focus in the Indian workforce, with employees valuing learning opportunities. Offering training, certifications, or L&D budgets can boost engagement and bridge skill gaps, especially in fast-evolving roles.
India’s Social Security Framework
India’s social security system mandates monthly contributions from employers toward key employee welfare schemes EPF for retirement savings, ESI for medical coverage, and gratuity as a severance benefit after five years of continuous service. These contributions are legally required and form the backbone of employee financial security, ensuring long-term protection and support beyond active employment.
Skill Gaps and Training Challenges
Indian workers are highly educated but may require upskilling in communication, business tools, or global project workflows. Offering onboarding training ensures better retention.
Hire in India and Grow Your Business
India offers the perfect environment for international hiring. With a massive talent base, cost advantage, and digital readiness, it’s no surprise that global companies are turning to India for remote expansion.
By using an EOR solution, you can hire employees in India without setting up a local entity, giving you speed, legal protection, and operational flexibility all without overhead or hassle.
How Asanify Helps You Hire in India Without an Entity
Asanify is your trusted partner for hiring remote employees in India without setting up a local entity or dealing with complex labor laws. Our Employer of Record (EOR) services let you hire and manage Indian talent legally, quickly, and with full compliance.
All-in-One EOR Platform
Our platform simplifies the entire employee lifecycle in India compliant contracts, payroll, tax filings, statutory benefits, and offboarding. Employers get real-time visibility into pay slips, leave balances, and compliance reports through a single dashboard.
Local HR and Payroll Expertise
Unlike generic providers, Asanify’s in-country team understands India’s diverse labor laws, PF, ESI, gratuity, and state-specific compliance. We ensure:
- Accurate payroll and tax processing
- Shops & Establishments Act compliance
- Employee registration for PF and taxes
- Updates on regulatory changes
Fast Onboarding and Ongoing Support
Employees can be onboarded in 3–5 business days, covering contracts, background checks, and statutory enrollments. Our HR helpdesk acts as your local HR team, assisting with leave, benefits, and grievances.
We also manage:
- Exit formalities and full-and-final settlements
- Experience and relieving letters
- Compliance-driven offboarding
With Asanify, you can hire employees in India quickly, stay compliant, and scale your global team without forming a local company.
Suggested Read: Labour Laws in India: A 2025 Compliance Guide
Final Thoughts
If you want to hire employees in India but are deterred by the complexity of entity formation and compliance, an EOR solution offers the best alternative. Through EOR services in India, you gain access to top talent, remain compliant with Indian labor laws for foreign companies, and build a reliable offshore team without permanent establishment.
Partnering with experts like Asanify not only removes operational friction but also ensures you meet the expectations of Indian employees through proper benefits, timely payroll, and local legal protections. Expand globally with confidence—without setting up a local entity.
FAQs
Yes, foreign companies can legally hire employees in India without setting up a local entity by partnering with an Employer of Record India provider. The EOR acts as the legal employer, ensuring full compliance with Indian labor laws.
An EOR in India is a third-party organization that employs talent on your behalf. While you manage the employee’s day-to-day tasks, the EOR handles payroll, contracts, tax deductions, and statutory compliance—making it ideal for remote hiring in India.
EOR services in India enable quick onboarding, eliminate the need for entity setup, reduce compliance risks, and ensure your employees receive all statutory benefits like PF, ESI, and paid leave.
While hiring freelancers may seem simpler, it carries misclassification risks under Indian labor laws for foreign companies. An EOR provides a compliant way to hire full-time or long-term employees legally.
You can use EOR to hire remote employees in India across functions like software engineering, product design, marketing, sales, customer support, HR, and finance either as individuals or entire teams.
With a reliable EOR like Asanify, you can typically onboard Indian employees in 5–7 business days. This includes employment contract preparation, benefits enrollment, and payroll setup.
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.
