Hiring in India involves navigating local labor laws, tax structures, and compliance protocols. For foreign companies, it’s essential to understand how to employ talent in India both with and without establishing a legal entity.

India is one of the world’s fastest-growing economies, known for its young workforce, expanding tech sector, and improving ease of doing business. This guide outlines everything foreign employers need to know when hiring in India in 2025—from legal requirements and hiring models to recent labor reforms and costs.

Why Companies Choose India for Hiring

India has become a global hub for talent, especially in IT, engineering, finance, and business services. Key reasons companies hire in India include:

• Skilled, English-speaking workforce: India produces millions of graduates each year, including a significant number with STEM backgrounds.
  
• Cost efficiency: Competitive salary levels make India attractive for outsourcing and global staffing.
  
• Time zone advantage: Ideal for companies operating in Europe and Asia-Pacific for nearshore or offshore support.
  
• Government support: India offers tax benefits and incentives in SEZs, Start-up India initiatives, and for R&D investment.
  

India’s legal and regulatory environment continues to evolve, with recent labor reforms aiming to unify and simplify employment laws under four labor codes (yet to be fully implemented nationwide).

Who Can Hire in India Without a Local Entity?

Foreign companies can legally hire workers in India without establishing a legal subsidiary by partnering with an Employer of Record (EOR).

An EOR in India employs staff on behalf of the foreign company, manages compliance, payroll, taxes, and benefits, while the employee works under the foreign company’s direction.

Visa and Work Authorization for Foreign Nationals in India

If a company wants to relocate foreign talent to India, work authorization is required. Key visa categories include:

• Employment Visa (E Visa): For skilled professionals with a minimum annual salary of $25,000 (~₹20.5 lakh).
  
• Business Visa: For short-term visits, not for direct employment.
  
• OCI Cardholders: Overseas Citizens of India (of Indian origin) can work freely in India without a visa.
  

All visa applications are submitted through Indian missions abroad and require supporting documentation like employment contracts, company details, and proof of qualifications.

Step-by-Step Process to Hire a Worker in India

1. Choose the Hiring Model

• With a local entity: Register as a Private Limited Company, LLP, or Branch Office.
  
• Without a local entity: Use an EOR provider to handle legal employment.
  

2. Draft a Compliant Employment Contract

A written contract must include:

• Job title and duties
  
• Compensation breakdown
  
• Probation period (typically 3–6 months)
  
• Notice period (30–90 days)
  
• Leave entitlements and benefits
  
• Non-compete or confidentiality clauses, if applicable
  

3. Onboard the Employee

Employers must:

• Register with ESIC and EPFO (for eligible employees)
  
• Deduct and deposit TDS (Tax Deducted at Source)
  
• Offer statutory benefits (like paid leave, health coverage, etc.)
  
• Issue a salary slip monthly and Form 16 annually
  

Key Employment Laws and Compliance in India

India’s labor law framework is governed by central and state-specific regulations. In 2025, many laws are expected to be subsumed under four labor codes:

1. Code on Wages: Covers minimum wages, payment timelines, and bonuses
   
2. Industrial Relations Code: Regulates contracts, layoffs, and trade unions
   
3. Social Security Code: Deals with PF, ESIC, maternity benefits, and gratuity
   
4. Occupational Safety, Health & Working Conditions Code: Sets workplace safety and working hours
   

While full nationwide implementation is pending, companies must continue to comply with legacy laws until transition notices are published.

Statutory Benefits Include:

• Provident Fund (PF): 12% employer and 12% employee contribution
  
• Employee State Insurance (ESI): Applicable if salary < ₹21,000/month
  
• Gratuity: Payable after 5 years of service
  
• Paid Leaves: Annual leave (12–15 days), sick leave, and public holidays
  
• Maternity Leave: 26 weeks for the first two children
  
• Paternity Leave: Not yet mandated by law (subject to company policy)
  

Payroll, Taxes, and Cost of Hiring in India

Components of Employee Compensation:

• Base salary
  
• HRA (House Rent Allowance)
  
• Special allowances
  
• Performance bonuses
  
• Provident Fund contribution
  

Employer Costs:

TDS (Tax Deducted at Source) must be calculated and deposited monthly. Employers must file Form 24Q and issue Form 16 annually.

Using an Employer of Record (EOR) in India

An EOR in India enables global companies to:

• Hire quickly: Start within days without incorporating
  
• Ensure compliance: EOR handles contracts, taxes, PF, labor law compliance
  
• Reduce costs: No need for local directors, office leases, or registration fees
  
• Scale flexibly: Ideal for market testing, pilot projects, or hiring remote teams
  

EOR partners in India typically include onboarding support, leave tracking, HR documentation, and payroll management.

Building a Human-Centered Hiring Strategy

Cultural Awareness:

India is culturally diverse, with significant variation across regions in language, customs, and work practices. English is the language of business, but sensitivity to local customs and holidays is important for smooth operations.

Competitive Benefits:

To attract top talent, companies often offer:

• Remote or hybrid work options
  
• Performance-linked bonuses
  
• Learning and development budgets
  
• Mental health and wellness programs
  
• Private health insurance
  

Smooth Onboarding:

A strong onboarding plan—virtual or in-person—boosts employee retention. Key elements include:

• Role-specific training
  
• Introduction to team and tools
  
• Clear documentation of company policies
  

Moving Forward with Simplified Hiring

Hiring in India requires adherence to local labor laws, payroll compliance, and cultural understanding. Companies can choose between setting up a legal entity or working with an Employer of Record for a faster, lower-risk approach.

With proper planning, documentation, and the right hiring model, foreign businesses can access India’s deep talent pool while maintaining full legal compliance.

FAQs About Hiring in India

Can I hire Indian employees without opening a company in India?
Yes, through an Employer of Record (EOR) which legally employs workers on your behalf.

What are the main employer taxes in India?
Key contributions include Provident Fund (12%), ESI (3.25%), and TDS withholding.

Do I need to offer health insurance?
Yes, for Workmen Compensation compliance and employee well-being, health coverage is recommended. Some plans are required under ESI.

How long does it take to set up a company in India?
Setting up a legal entity typically takes 2–4 months, including obtaining a PAN, GST, and registration with EPFO/ESIC.

What are the alternatives to full-time hiring?
You can hire freelancers, independent contractors, or use staff augmentation services.