Hiring in India: Four Ways to Build a Team

Your Four Options for Hiring in India

Indian law requires that whoever employs a worker in India is a legal entity registered in India. That single rule drives every option below. You can become that entity by incorporating, you can borrow one by using an employer of record, or you can avoid the employment relationship entirely by contracting. The four routes are ordered by commitment, lowest first.

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The dividing line is headcount and horizon. Below roughly fifty employees, or under a two-year commitment, the incorporation cost and the multi-state registration overhead of your own Private Limited rarely pays back. Above it, an entity usually does, particularly for a GCC at scale, and the EOR becomes the more expensive option per head. If you want the detail on that route, see how an employer of record works in India.

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Can You Hire in India Without an Entity?

Yes. Hiring in India without setting up an entity is legal and common, and there are two ways to do it. The first is an employer of record, which employs the person on your behalf through its own licensed Indian Private Limited, runs payroll, and carries the statutory obligations. The second is an independent contractor arrangement, which avoids employment but only works where the relationship is genuinely one of contract for services. Neither requires you to incorporate with the Ministry of Corporate Affairs or register separately with EPFO, ESIC and each state you hire in.

• Hire remote employees in India in five to seven working days rather than the weeks an incorporation takes, with a compliant offer letter and appointment letter from day one.
• Foreign nationals can still be sponsored for an Employment Visa, because the employer of record is an Indian entity and can sponsor through the Bureau of Immigration.
• EPF, ESI, professional tax, monthly TDS to the Income Tax Department and Form 16 issuance are handled for you as part of India payroll, so you are not registering with EPFO, ESIC and multiple state authorities yourself.
• You avoid creating a permanent establishment in India for your foreign parent company, which is the tax exposure most companies miss.

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Contractor or Employee in India?

Employee misclassification in India is decided by the working relationship, not by what the contract says. Indian authorities and tribunals apply a control and integration test: do you direct how the work is performed, is the person integrated into your organisation, and do they depend economically on your business? A well-drafted consultancy agreement carries very little weight against the facts of the day-to-day arrangement.

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Hiring Contractors in India Without Getting It Wrong

You can hire a contractor if the engagement is genuinely project-based. In that case,

• Write the scope around deliverables rather than hours
• Let the contractor decide method and schedule
• Avoid issuing company equipment or an internal email address
• Do not renew the contractor agreement indefinitely

The moment the arrangement starts to look like a full-time role, convert it immediately. Reclassification is retrospective, so the exposure grows with every month the engagement continues. If you decide to bring them in-house, see our guide to converting contractors to employees. India adds a second cost at the point of conversion: gratuity accrues from the start of continuous service under the Payment of Gratuity Act, and a reclassified contractor may be treated as having accrued it from the original engagement date.

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Hiring a Foreign National in India

Hiring a foreigner in India requires an Employment Visa, sponsored by an Indian entity and applied for through the Indian Mission in the applicant's home country, with registration at the Foreigners Regional Registration Office on arrival. The contractor route is therefore closed: a contractor cannot be sponsored, because sponsorship presupposes an employment relationship. That leaves two routes: your own Private Limited or an employer of record, and only one of them is fast. For the wider APAC picture, see our work pass and visa guide.

• The Employment Visa is granted against a named sponsoring employer, so it does not transfer if the employment relationship changes.
• Registration with the Foreigners Regional Registration Office is required on arrival and again on any change of address or employer.
• Salary thresholds apply to most Employment Visa categories, and the role must be one an Indian national could not readily fill.
• Foreign employees are enrolled in EPF as International Workers, without the INR 15,000 wage ceiling that applies to local employees.

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Which Route Fits Your Situation

Five situations cover most companies hiring into India for the first time. Find the one closest to yours, then read the recommended route. If you already hold an entity and only need the admin lifted, that is a Professional Employer Organisation rather than an employer of record.

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Switching Routes Later

Most companies change route within two years of their first Indian hire, and both common transitions are routine. Knowing the mechanics up front removes the main objection to starting with a lighter-weight option.

Converting a Contractor to an Employee

Conversion means issuing a compliant offer and appointment letter under the applicable state Shops and Establishments Act, enrolling the person in EPF and ESI, registering for professional tax in their state, and starting monthly TDS. Continuous service usually restarts from the employment date unless you agree otherwise, which matters because gratuity vests at five years of continuous service.

Moving From an Employer of Record to Your Own Private Limited

Once your Private Limited is incorporated with the Ministry of Corporate Affairs and your EPFO, ESIC and state registrations are live, employees transfer by resignation and rehire, or by a tripartite transfer agreement. EPF balances move by UAN transfer rather than withdrawal. Accrued leave, tenure and gratuity continuity are negotiated as part of the transfer rather than carried across automatically. Agree the treatment before the transfer date, not after. AYP’s employer of record is a predictable monthly fee per employee, see our pricing page.

Before You Hire in India

These apply to every employment route. They are the floor, not the whole picture, and they are the numbers most often out of date in a foreign employer's payroll.

For contribution rates, leave entitlements, filing deadlines, termination law and the full 2026 regulatory timeline, see how an employer of record works in India.

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Questions? We're Here to Help  ‍

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