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What Is an Employer of Record in India?

An Employer of Record in India is an Indian company that legally employs your workforce here, holding the appointment letter and the statutory obligations, while you set the objectives for the work. It lets companies based anywhere hire people in Bengaluru, Hyderabad, Gurugram, or anywhere else in the country without incorporating, obtaining tax registrations, or opening establishment codes with the provident-fund and state-insurance authorities.

India has no statute that defines or authorizes this model. It is lawful by the absence of prohibition rather than by permission, and it operates as a principal-to-principal services contract between you and an Indian company that is the employer in its own right. The Contract Labor Act is the statute most often raised in this context, but it is directed at contract labor engaged for the work of an establishment, it applies above headcount thresholds, and it keys off the definition of a workman, which excludes employees in managerial and administrative roles. For a professional hire placed with a foreign company that has no Indian establishment, it is usually not the operative law.

What does require attention is the substance of the arrangement. Indian advisers are consistent on this point: where a foreign client selects, directs, supervises, disciplines, and effectively dismisses the individual, the arrangement can be characterized as a sham, with consequences across employment law, tax, and exchange control. Section 8.5 covers the tax limb, which is the one most likely to cost money.

This Model Works Especially Well When

• You want one to twenty people in India, and the cost and timeline of incorporating a subsidiary would exceed what that team justifies
• You are testing the Indian market before committing to a capability center
• You are building an engineering, product, support, or research function and want the depth of talent concentrated in the major hubs
• You need to hire before the end of a quarter and cannot wait on incorporation and four separate registrations
• You have people in India invoicing you as independent professionals whose arrangement would not survive a provident-fund inspection

Komp delivers this as part of a single workforce platform, so your Indian employees sit alongside contractors, EOR workers, and direct employees in other countries, governed by the same data, workflows, and controls.

How Komp’s Employer of Record Works in India

Komp becomes the legal employer for your Indian team members and takes on their statutory liabilities, while you run the work. Here is what that looks like in practice.

Market entry without entity setup

Skip incorporation under the Companies Act, the permanent account number and tax deduction account number, Shops and Establishments registration in each state, and the provident-fund and state-insurance establishment codes. Komp already holds all of it, in every state where you are likely to hire.

Hire-to-retire lifecycle management

Komp Activate runs onboarding, including the appointment letter the Code on Wages now requires and a restrictive-covenant package drafted to what India will enforce. Komp PayOps carries payroll, tax withholding, and the monthly provident-fund and state-insurance returns. Komp TimeOps records hours against the applicable state rules, which differ by state and have not yet been replaced everywhere by rules under the new Codes. Compliant offboarding, with notice, gratuity, and full and final settlement handled correctly, closes the loop.

One view across every country

Komp Workforce gives HR, Finance, and Legal a single source of truth covering your Indian headcount, accrued gratuity, fully loaded employer costs on a CTC basis, and compliance alerts, with audit trails built in.

What Komp Handles Under EOR in India

Komp manages every part of the Indian employment relationship so your team can focus on the work, not the paperwork.

Provident fund, at the new ceiling

Employer and employee each contribute 12 percent of wages to the provident fund. Of the employer share, 8.33 percent goes to the pension scheme and the balance to the provident fund itself, with a further one percent in aggregate for the insurance scheme and administrative charges. The wage ceiling rose from ₹15,000 to ₹25,000 on 17 September 2026, the first increase since 2014. Contribution above the ceiling is possible but not compulsory, and an employer may restrict its liability to the ceiling.

State insurance and the threshold that governs it

The employees’ state insurance scheme applies to establishments with ten or more employees in notified areas and covers employees earning up to ₹21,000 a month. The employer contributes 3.25 percent and the employee 0.75 percent of gross wages. Above that wage threshold the obligation falls away, which is why state insurance appears in junior-level cost models and disappears from senior ones.

Gratuity, which accrues from day one even though it vests later

Gratuity is payable at 15 days of wages for each completed year, calculated on a divisor of 26, subject to a statutory cap of ₹20 lakh. Permanent employees qualify after five years of continuous service, and the Code on Social Security reduced that to one year, pro-rated, for fixed-term employees. The conventional accrual rate is 4.81 percent of basic pay, and Komp provisions it monthly rather than recognizing a liability on exit.

The uniform wage definition and the 50 percent rule

The Codes introduced a single definition of wages across all four statutes, covering basic pay, dearness allowance, and retaining allowance, and excluding house rent allowance, conveyance, and employer contributions. Where the excluded components exceed one half of total remuneration, the excess is added back into wages. This is frequently misstated as a requirement that basic pay be at least half of CTC, which is not what the provision says. The practical effect is a higher wage base for gratuity, bonus, and leave encashment.

Payroll, withholding, and the state levies

Komp PayOps runs payroll on your chosen cycle, withholds tax at source under the applicable regime, and files the monthly and quarterly returns. Professional tax is a state levy capped at ₹2,500 per person a year and is not levied at all in Delhi, Haryana, or Uttar Pradesh, which is a genuine and rarely mentioned cost advantage for hiring in the National Capital Region. Labor welfare fund contributions are small but are a real filing obligation and vary by state.

Termination, where at-will employment does not exist

India does not recognize at-will employment. Termination requires a lawful reason, which in practice means documented redundancy, documented non-performance, or proven misconduct established through an enquiry meeting the requirements of natural justice. For employees who qualify as workmen, retrenchment carries notice, compensation of 15 days of average pay for each completed year, and a contribution to the reskilling fund. Mutual separation is the standard practical route, and Komp manages the process.

Employer of Record vs Entity Setup in India

Permanent Establishment, and Why India Is Different

Every country page in this series addresses the residual risk a client carries. In India that risk is principally a tax risk rather than an employment risk, and it is more pointed here than in any other market we cover. The reason is a treaty concept that most foreign companies have never encountered.

SERVICE PE, THE LIMB THAT CATCHES PEOPLE

Many Indian tax treaties contain a Service PE article under which a foreign enterprise is treated as having a permanent establishment in India if it furnishes services through employees or other personnel present in India beyond a day threshold. Under the treaties with the United States, the United Kingdom, and Singapore, that threshold is more than 90 days, with a lower threshold where the services are provided to an associated enterprise. Two features make it dangerous. The days aggregate across all personnel rather than counting per individual, so three people present for 35 days each exceed a 90-day threshold. And the trigger is the furnishing of services rather than the conclusion of contracts, so a team doing delivery work can create exposure without anyone signing anything. A Delhi ruling in December 2025 confirmed that physical presence in India is required, which means purely remote provision from outside India does not trigger it.

FIXED PLACE AND AGENCY PE

Alongside Service PE, the conventional limbs apply. A fixed place of business can arise without ownership or a lease, on a disposal test that Indian courts have applied broadly, and a home office used habitually for the enterprise’s core business is a live argument here in a way it is not everywhere. An agency PE arises where a person habitually concludes contracts in your name or plays the principal role leading to their conclusion. An employee engaged through an Employer of Record can be your dependent agent if that is what they in substance do.

WHAT AN EMPLOYER OF RECORD DOES AND DOES NOT SOLVE

The arrangement solves employment law and payroll completely. It does not determine your tax position, because permanent establishment turns on function rather than on whose payroll processes the salary. Indian advisers state this plainly, and any provider claiming that an Employer of Record eliminates permanent establishment risk in India is describing something it cannot do. What the arrangement does usefully is make the position manageable, because roles can be defined so that commercial authority stays offshore and the documentation supports it.

HOW TO KEEP THE EXPOSURE WHERE YOU WANT IT

• Define the role by function: engineering, research, support, and back-office roles carry materially lower exposure than roles that negotiate or close commercial contracts
• Keep contracting authority outside India: and make sure the documentation and the practice match, because the test looks at what happens in practice
• Watch the day count on visitors: Service PE aggregates across people, so a sequence of short visits by head-office staff can combine with local personnel to cross a threshold
• Keep direction at the level of objectives: the deeper your day-to-day supervision runs, the stronger the argument that the arrangement is something other than what the contract says
• Take advice before a revenue-generating hire: this is inexpensive to structure in advance and expensive to unwind after two years of sales activity

If a permanent establishment is established, the consequence is Indian tax on the profits attributable to it at the applicable foreign-company rate, plus surcharge and cess, along with registration, filing, audit, and transfer-pricing obligations. Komp will help you understand where a role sits on this spectrum before you hire. If you want to compare providers, ask how each provider assesses Service PE for the role you are filling, and whether its assessment distinguishes Service PE from agency PE.

Employer of Record Cost in India

EOR pricing in India varies by provider, service scope, and team size. The comparison worth running is not the fee alone. It is the fee against incorporation, a company secretary, an accountant, registrations in each state where you hire, and the annual filings that follow a subsidiary for as long as it exists.

Statutory employer loading in India is moderate, at about 12 to 18 percent of wages, and it falls as a proportion of total cost at senior levels because the provident fund is ceiling-capped and state insurance drops away above its wage threshold. The figure that matters more is how compensation is quoted, which is covered in the callout below and is the single most common source of budgeting error for a company hiring here for the first time.

WHAT SHAPES YOUR PRICE

• Salary relative to the statutory thresholds: the provident fund is capped and state insurance falls away above ₹21,000 a month, so statutory loading is proportionally heaviest on junior roles
• State of employment: professional tax, labor welfare fund, leave entitlements, and notice requirements all vary, and the National Capital Region carries no professional tax
• Salary review cycle: annual increments in India have been running near nine percent, so a multi-year budget built on a three or four percent assumption will drift badly
• Notice periods: 60 to 90 days is standard for mid and senior roles and affect when a hire can start rather than what they cost
• Integrations and reporting: HRIS, ERP, and finance system connections

WHY EOR DELIVERS STRONG ROI

• Faster revenue: your Indian hire starts without waiting on incorporation and four separate registrations
• Lower overhead: no company secretary, no statutory auditor, no annual corporate filings, no in-country HR staff
• Lower risk: contributions calculated on the new uniform wage definition and the current ceiling from the first payroll
• Less admin: one platform, one invoice, one partner for Indian employment

Who Should Use an EOR in India?

Companies building engineering and product functions

India hosts more than 2,100 global capability centers, and the fastest-growing segment is no longer the largest multinationals but mid-market and investor-backed companies. Bengaluru, Hyderabad, and Pune hold the deepest product-engineering and platform talent available anywhere at the cost level, and the model lets you access it before committing to an entity.

Companies testing before building a capability center

The sequence that works is to prove the function with a small team, understand the hiring market and the attrition profile, and incorporate once the headcount, the intellectual property, or an equity plan justifies it. Moving the other way around is considerably more expensive.

Companies that need European and Middle East coverage

Indian Standard Time gives a full working-day overlap with Europe and the Gulf and a usable morning overlap with the United States East Coast. For follow-the-sun support and operations coverage, that positioning is difficult to replicate elsewhere at the same cost.

Companies with people invoicing them as independent professionals

Engaging Indian professionals on invoices is widespread and works where the person is genuinely autonomous with several clients. Where the facts show control, exclusivity, company systems, and an open-ended full-time engagement, the arrangement is exposed, and provident-fund and state-insurance inspections are the most common trigger. Converting through an Employer of Record closes the exposure on a timeline you choose.

HR and finance leaders who want the real number

Costs modeled on the current ceiling rather than the superseded one, compensation quoted on the basis Indian candidates expect, attrition and increment assumptions grounded in current survey data, and audit-ready records for every employee.

Why Komp Is Different from Generic EOR Providers

Many providers can put Indian employees on payroll. Komp is built as workforce infrastructure, combining AI intelligence, payment infrastructure it owns outright, and human governance, so you can grow in India with confidence.

AI Agent Swarms with human control

Autonomous agents continuously check payroll, contribution ceilings, state-level obligations, gratuity accrual, and regulatory change. Recommendations are surfaced for review before anything is executed: autonomous intelligence, human control.

Dated to the current position, including what is still pending

The Codes came into force in November 2025, the Central Rules followed in May 2026, and most state rules have not been notified. We will tell you which instrument governs any rule we state, and where a state has not yet moved. In a transition this wide, that distinction is the difference between advice and guesswork.

We separate employment from tax

An Employer of Record solves employment completely and does not determine your permanent establishment position. Service PE is specific to India and is absent from almost every provider page. We explain which roles raise it and when to take advice.

Contracts drafted to what India enforces

Post-employment non-compete covenants are void under Indian contract law, so we draft confidentiality, non-solicitation, and garden leave instead of importing a template that fails on signature.

Owned infrastructure, not a reseller chain

Komp runs its own entity network and owned payment rails rather than subcontracting to local partners, so your employees are paid on time, and your data stays in one system.

One platform, four modules

Komp Activate, Komp Workforce, Komp TimeOps, and Komp PayOps connect hiring, workforce records, time, and pay across India and 150+ countries.

Indian Employment Compliance: What Global Employers Must Manage

Employers in India answer to the Ministry of Labor and Employment and its state counterparts, the provident-fund and state-insurance organizations, the income-tax department, and the labor courts and tribunals. These are the areas that matter most, and how Komp covers them.

Which law is in force, and where it is not

The four Labor Codes came into force on 21 November 2025, consolidating 29 central Acts, and the Central Rules were notified on 8 May 2026. Those Central Rules bind the central sphere, covering railways, mines, major ports, banking, insurance, telecommunications, air transport, and central public undertakings. Most private employers sit in the state sphere, and the major hiring states have not yet notified their own rules. The government has confirmed that relevant provisions of the existing Acts continue in force during the transition. The honest operating position is that substantive entitlements run off the Codes while procedure runs off legacy state law in most of the country.

The uniform wage definition and what it moved

The Codes apply a single definition of wages covering basic pay, dearness allowance, and retaining allowance, with house rent allowance, conveyance, and employer contributions excluded. Where the excluded components exceed one half of total remuneration, the excess is added back. This is widely and incorrectly described as a rule that basic pay must be at least half of CTC. The effect is a higher base for gratuity, bonus, leave encashment, and retrenchment compensation, and it rewards a compensation structure that was not built to minimize the wage base.

Provident fund and the September 2026 ceiling

The wage ceiling rose from ₹15,000 to ₹25,000 with effect from 17 September 2026, under a notification issued through the Code on Social Security. Employer and employee each contribute 12 percent, with 8.33 percent of the employer share going to the pension scheme subject to the ceiling. A Supreme Court ruling in 2019 established that allowances paid universally and ordinarily to all employees cannot be excluded from the wage base, so structuring salary into allowances to suppress the contribution does not work, and the Codes now reinforce that statutorily.

Shops and establishments law, which is state law

Leave entitlements, working hours, and notice requirements are set by each state’s Shops and Establishments Act. Karnataka accrues earned leave at one day for every twenty worked. Maharashtra operates a similar accrual with a separate quarterly casual-leave pool that lapses annually. Delhi provides fifteen days of earned leave after twelve months with a combined casual and sick pool. Tamil Nadu operates a different structure again. A company hiring across Bengaluru, Gurugram, and Pune is administering three sets of rules, and this is the practical reason multi-city hiring in India is harder than headcount alone suggests.

Termination, where there is no at-will employment

Indian law does not permit termination at will. A lawful termination requires documented redundancy, documented non-performance, or misconduct proven through an enquiry that satisfies natural justice, meaning a charge sheet, an impartial enquiry officer, and a genuine opportunity to respond. Employees who qualify as workmen attract retrenchment protections including notice, compensation of fifteen days of average pay for each completed year, and a reskilling fund contribution. Government permission for retrenchment now applies at 300 workers rather than 100. Mutual separation agreements are the standard practical route, and courts are generally protective of employees.

Restrictive covenants, where imported templates fail

Section 27 of the Indian Contract Act 1872 renders void any agreement that restrains a person from exercising a lawful profession or trade, and India applies no reasonableness test. Post-employment non-competes are therefore unenforceable regardless of duration or geography. What does work is confidentiality, employee non-solicitation, client non-solicitation limited to clients of material contact, garden leave where the employee remains employed and paid, and exclusivity during employment. Negative covenants operating during the term of employment are valid; they fall away on termination.

Maternity, and the absence of statutory paternity leave

Maternity leave runs 26 weeks for the first two surviving children and 12 weeks thereafter, funded by the employer rather than by state insurance for employees outside that scheme, with eligibility after 80 days of work in the preceding year. A creche facility is required at 50 or more employees, counted across the whole workforce rather than only women. There is no statutory paternity leave entitlement in the private sector. Central government employees receive it under service rules, and private employers provide it contractually or not at all, which is a point worth settling in your offer rather than assuming.

Workplace harassment and the internal committee

An internal committee is mandatory at every workplace with ten or more employees, counted per location rather than per company, and the headcount includes contractual, temporary, and part-time staff. The committee requires a senior woman as presiding officer, at least one external member, and women forming at least half the membership. An annual report is required even in a year with no complaints, and penalties for non-compliance escalate on repetition and can extend to licensing consequences. Enforcement has tightened since a 2023 Supreme Court judgment that criticized widespread non-compliance.

Income tax and the new statute

A new Income-tax Act replaced the 1961 statute with effect from 1 April 2026. It is a restructuring and renumbering exercise rather than a change of policy, so rates, regimes, and withholding mechanics are unchanged, but section references in contracts and payroll documentation need updating. Employees elect between the default regime and the old regime. Under the default regime, a standard deduction and a rebate leave a salaried employee effectively untaxed to around ₹12.75 lakh.

The notice-period reality

This is not a statutory obligation so much as a market convention, but it determines when your hire can start. Notice periods of 60 to 90 days are standard for mid and senior roles in India and are contractually enforced, so realistic time from offer to start is two to four months rather than two weeks. Buyouts are sometimes negotiable and are not guaranteed. For a first-time hirer this is consistently the largest planning surprise, and it should shape your requisition timeline rather than your cost model.

Employer of Record Coverage Across India

Central labor law, provident fund, state insurance, and income tax apply nationally, so the core obligations do not change from one city to another. What changes is the state layer, covering shops and establishments registration, leave entitlements, professional tax, and welfare-fund contributions, together with the talent market, the salary base, and the attrition profile.

Employer of Record in Bengaluru

The deepest product-engineering, platform, and artificial-intelligence talent pool in the country, with the highest density of capability centers. It also carries the highest salary base and the highest attrition, so retention planning matters more here than anywhere else in India.

Employer of Record in Hyderabad

Enterprise software, cloud, and life sciences, anchored by the major global platform companies and supported by a notably pro-business state administration and a lower real-estate cost base than Bengaluru.

Employer of Record in Pune

Automotive and embedded engineering, engineering research and development, and financial services operations, with a large student population and a cost base below Bengaluru.

Employer of Record in Delhi NCR

Consulting, financial services, captive finance and shared services, legal and knowledge process work, and commercial functions. Gurugram and Noida sit in different states with different regimes, and notably neither Delhi, Haryana, nor Uttar Pradesh levies professional tax.

Employer of Record in Chennai, Mumbai, and tier-2 cities

Chennai for financial services operations, automotive engineering, and a strong software product ecosystem; Mumbai for financial services and media at the highest cost base in the country; and Coimbatore, Ahmedabad, Indore, Jaipur, and Kochi for lower cost and materially lower attrition, with thinner senior talent.

Wherever in India your team sits, Komp issues the appointment letter, registers under the applicable state legislation, runs payroll with the correct withholding, remits provident fund and state insurance on the current ceilings, provisions gratuity, and handles professional tax and welfare-fund obligations for that state, so adding a new location never adds new compliance work for you.