Employer of Record India: Complete 2026 Guide for Global Companies

Employer of Record India enables international companies to access the world's most populous nation and one of its fastest-growing economies — compliantly, and without the complexity of establishing a local entity. India underwent its most significant labour law reform in decades in November 2025, with four consolidated Labour Codes replacing 29 legacy laws. This guide covers the new regulatory framework, state-based minimum wages, EPF and ESI contributions, income tax, leave entitlements, work visa requirements, and termination procedures as of 2026.

Why Choose Employer of Record India in 2026

India is the world's fastest-growing major economy, with GDP growth projected at 7.3–7.4% for FY2025–26, consistently outpacing China and other major emerging markets. Growth is underpinned by strong private consumption, record infrastructure investment, and a services sector attracting global demand for engineering, technology, and business process talent. For international companies, an Employer of Record India solution provides immediate access to this talent pool without the complexity of local entity setup.

Why the EOR India Model is Critical in 2026

• The Four Labour Codes India consolidated 29 central labour laws into four comprehensive codes covering wages, industrial relations, social security, and occupational safety, effective November 2025. During the transition period, employers must maintain compliance with both legacy acts and new codes — a dual-compliance burden that requires active monitoring. An EOR India partner absorbs this entirely.
• 50% Basic Pay Rule Under the Code on Wages, basic wages must constitute at least 50% of total remuneration, directly increasing EPF and gratuity calculation bases and raising effective employer costs. Employer of Record India services restructure payroll compliantly, avoiding underpayment exposure.
• Gratuity and Gig Worker Coverage The Social Security Code reduces gratuity eligibility from five years to one year for fixed-term employees. Simultaneously, platform and gig workers are now brought under social security provisions for the first time, requiring companies to review all contract and freelance engagement structures.
• State-Level Complexity Remains Despite central consolidation, minimum wages, public holidays, and leave entitlements continue to vary by state. A hire in Delhi carries different cost and compliance obligations than an equivalent hire in Tamil Nadu. An EOR India provider with direct local presence ensures accurate, state-specific compliance across every hire.

The Four Labour Codes (Effective November 2025)

India consolidated 29 existing central labour laws into four comprehensive Labour Codes — the most significant labour law reform in decades. Employers must currently comply with both legacy acts and new codes until all states notify their implementation rules.

Key Changes Under the New Codes

• 50% Basic Pay Rule - Wages must constitute at least 50% of total remuneration, affecting EPF and gratuity calculations. Companies with allowance-heavy pay structures will need to remodel their payroll.
• Gratuity Eligibility - Fixed-term employees are now eligible for gratuity after 1 year of service (previously 5 years under the Gratuity Act).
• Universal Coverage - Minimum wage protections now apply to all employees across all sectors — not just scheduled employments as under the legacy framework.
• Gig Worker Coverage - Platform and gig workers are covered under social security provisions for the first time, requiring companies to review their contractor engagement structures.

Minimum Wage (2026)

India operates a complex multi-tier minimum wage system where rates vary by state, skill level, industry, and geographic zone. The Code on Wages, 2019 introduced universal applicability, meaning minimum wage compliance now extends to all employees in all sectors.

Central Government Rates (2026)

Key State Minimum Wages (2026)

_{Note: State minimum wages are revised periodically (typically April and October) with Variable Dearness Allowance (VDA) adjustments based on the Consumer Price Index. Market salaries for skilled professionals typically range 2–5x above statutory minimums.}

Social Security Contributions

Employees' Provident Fund (EPF)

EPF is India's primary retirement savings scheme, managed by the Employees' Provident Fund Organisation (EPFO). It is mandatory for establishments with 20 or more employees under the Social Security Code, 2020.

Employees' State Insurance (ESI)

ESI provides comprehensive health insurance and social security benefits. It is mandatory for establishments with 10 or more employees where employee wages are up to INR 21,000 per month.

Total Employer Cost Summary

Working Hours Regulations

Statutory Leave Types

Maternity Leave

Paternity Leave

Paternity leave is not mandated by central law for private sector employees. Central government employees receive 15 days of paid paternity leave. Many progressive private companies voluntarily offer 1–4 weeks as a benefit — this is increasingly used as a talent attraction tool in competitive hiring markets such as Bangalore and Hyderabad.

All foreign nationals require an appropriate visa to work legally in India. India does not operate a separate work permit system — employment authorisation is granted through the visa category itself. The Employment Visa is the primary route for skilled professionals and senior executives.

Employment Visa Categories

Employment Visa Requirements

_{Note: Exemptions from the salary threshold apply to: ethnic cooks, language teachers/translators, foreign artistes, sports coaches, and certain NGO workers. Teaching faculty at premier institutions (IITs, IIMs) have a reduced threshold of INR 9.10 lakh per annum.}

India does not recognise at-will employment. Every termination requires a valid legal reason and proper procedure. Protections vary between 'workmen' (covered by the Industrial Relations Code) and managerial employees (governed by their employment contract). Government approval is required for mass layoffs in establishments with 300 or more employees.

Notice Period Requirements

Severance Pay (Retrenchment Compensation)

Gratuity

Final Settlement Requirements

All final settlements — including earned leave encashment, bonus, gratuity, and pending dues — must be paid within 2 working days of exit. Employers must provide: a relieving letter, experience certificate, Form 16, and EPF transfer or withdrawal documents.

AYP Group provides comprehensive EOR services in India, combining deep expertise in the new Labour Code framework, state-level compliance, and EPF/ESI administration with technology-driven payroll solutions. Our direct entity model means your employees are hired and managed under our licensed Indian entity — not through an aggregator network.

India's combination of scale, talent depth, and economic momentum makes it one of the most compelling hiring markets in the world. The 2025 Labour Code reforms have added a new layer of complexity, with dual-compliance obligations, restructured payroll calculations, and extended social security coverage requiring expert, on-the-ground management from a trusted Employer of Record India provider.

AYP Group removes that complexity. Our Employer of Record India solution is backed by a local entity, multi-state compliance expertise, and transparent pricing, giving you a reliable foundation to hire, manage, and pay talent across India, without establishing your own entity or navigating the transition period alone.

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Get Started with EOR India

Ready to hire with Employer of Record (EOR) India? Contact AYP Group today to find out how our EOR services can accelerate your expansion into the world's fastest-growing major economy.

_{Legal Disclaimer: This guide provides general information about India employment regulations and EOR services. Specific legal advice should be obtained from qualified professionals. India's labour laws vary significantly by state and industry. The new Labour Codes are still being implemented with state-level rules being notified progressively. Information is current as of February 2026.}