EOR India: Complete 2026 Guide for Global Companies
Navigate the world's most populous market and hire top talent compliantly — without establishing a local entity.
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Introduction
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.
India is the world's fastest-growing major economy, with GDP growth projected at 7.3–7.4% for FY2025–26 and 6.4% for FY2026–27 — consistently outpacing China and other major emerging markets. Growth is underpinned by strong private consumption, record infrastructure investment, and a services sector that continues to attract global demand for engineering, technology, and business process talent.
For international companies, India offers an exceptional combination: a large, highly educated English-speaking workforce, competitive salary benchmarks relative to developed markets, and a rapidly maturing regulatory environment following the 2025 Labour Code reforms. The country's talent pool spans software engineering, finance, legal services, life sciences, and manufacturing — making it one of the most versatile hiring markets in the world.
What Makes India's Regulatory Environment Distinct in 2026
- The Four Labour Codes (Effective November 2025) - India consolidated 29 central labour laws into four comprehensive codes covering wages, industrial relations, social security, and occupational safety. During the transition period, employers must maintain compliance with both legacy acts and new codes until all states notify their implementation rules — a dual-compliance burden that requires active monitoring.
- 50% Basic Pay Rule -Under the Code on Wages, basic wages must constitute at least 50% of total remuneration. This directly increases EPF and gratuity calculation bases for many employees, raising effective employer costs and requiring payroll restructuring for companies with allowance-heavy compensation models.
- Gratuity Eligibility for Fixed-Term Employees -The Social Security Code, 2020 reduces gratuity eligibility from five years to one year of service for fixed-term employees — a significant change for companies using project-based or contractual hiring structures.
- Gig and Platform Worker Coverage - For the first time, platform and gig workers are brought under social security provisions. Companies engaging contract or freelance talent in India need to review their engagement structures against the new definitions.
- State-Level Complexity Remains - Despite central consolidation, minimum wages, public holidays, and certain leave entitlements continue to vary by state. A hire in Delhi carries different cost and compliance obligations than an equivalent hire in Tamil Nadu — local expertise remains essential.
For international companies, navigating India's multi-layered regulatory environment — across central codes, state-level rules, and EPF/ESI administration — is not a one-time exercise. An EOR partner with direct local presence and compliance infrastructure removes this complexity entirely.
Employment landscape
India remains the fastest-growing major economy globally, outpacing China and other emerging markets. The IMF upgraded India's FY2025–26 growth forecast to 7.3% in January 2026, reflecting better-than-expected performance driven by strong private consumption — particularly in rural areas — infrastructure investment, and a robust services sector.
Market Overview (2026 Projections)
Market overview (2026 projections)
Laws & compliance
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
Payroll & tax
India operates two parallel income tax regimes. The New Tax Regime (default from FY 2023–24) offers lower rates with minimal deductions. The Old Tax Regime provides higher rates but allows various exemptions and deductions. Employees choose which regime applies to them; employers withhold Tax Deducted at Source (TDS) accordingly.
New Tax Regime FY 2025–26 (Default)
Key Tax Features FY 2025–26
Old Tax Regime (Optional)
Note: The Old Regime allows deductions under Section 80C (up to INR 1.5 lakh), 80D (medical insurance), HRA exemption, and home loan interest. Employees should choose based on their individual deduction profile.
Working hours & Leave entitlements
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.
Work permits & Visas
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.
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Termination & Employee exit
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.
Why AYP
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.
Get Started
India's combination of scale, talent depth, and economic momentum makes it one of the most compelling hiring markets in the world. But the 2025 Labour Code reforms have added a new layer of complexity — dual-compliance obligations, restructured payroll calculations, and extended social security coverage require expert, on-the-ground management that cannot be replicated from a distance.
AYP Group removes that complexity. Our local entity, multi-state compliance expertise, and transparent pricing give you a reliable foundation to hire, manage, and pay talent across India — without establishing your own entity or navigating the transition period alone.
Ready to hire in 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.
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AYP’s pricing covers the end-to-end employment lifecycle for your employees in each country.
This includes payroll processing, statutory filings, compliance monitoring, local employment administration, and ongoing HR support. Our goal is to ensure your workforce is managed compliantly and smoothly, without you having to coordinate multiple vendors.
Before you start, we provide a clear breakdown of what is covered, so you know exactly what to expect.
We believe regional workforce management should be predictable, not full of surprises.
That’s why we walk you through a detailed cost breakdown before onboarding begins. This includes employer costs, statutory contributions, and service fees. If any scope changes arise, they are discussed with you in advance, so you stay in control of your budget.
In some countries, a security deposit is required as part of responsible employment and payroll risk management.
This deposit is typically aligned with local notice period obligations and helps ensure that final salary, statutory payments, and any end of employment costs are properly covered. The deposit remains in your company’s funds and is returned according to the agreed terms when employment ends.
Your AYP advisor will explain clearly if this applies in your chosen countries.
AYP charges a fixed monthly service fee per employee, rather than a percentage of salary.
This makes your costs more predictable and easier to plan across countries. Pricing is structured based on country requirements, workforce size, and the level of support needed. There is no long term lock in. We work with you based on your current workforce needs.
AYP combines in-country expertise with structured support across Asia.
Instead of routing requests through a general support system, you work with teams who understand local regulations and your workforce setup. We focus not only on payroll processing, but also on proactive compliance updates and practical HR advisory, so you can make informed decisions with confidence.
More questions?
We're here to help. Whether it's pricing details, country-specific compliance, or how we compare to other EORs, let's talk.
