India’s employment compliance is state-by-state, scheme-by-scheme, and unforgiving when you get it wrong. Miss a Professional Tax registration in one state and you’re personally liable. Fail to register employees with EPFO within the required window and interest starts accruing at 12% per annum. An EOR absorbs all of this — but you need to understand what you’re delegating and why it matters.

India Employment at a Glance

PF, ESIC, PT, and TDS: What Each Costs You

Provident Fund (PF / EPF)

PF adds 12% on top of every basic salary up to ₹15,000/month — you pay 12%, the employee pays 12%. Kicks in once you have 20+ employees nationally.

• Employer contribution: 12% of basic salary (8.33% to EPS pension fund, 3.67% to EPF)
• Employee contribution: 12% to EPF

Your EOR registers employees with the EPFO and files monthly ECR (Electronic Challan cum Return) submissions. Late filings attract 12% p.a. interest plus damages of 5–25% of arrears.

ESIC (Employee State Insurance Corporation)

For employees earning up to ₹21,000/month gross, ESIC provides health, maternity, and disability cover.

• Employer contribution: 3.25% of gross wages
• Employee contribution: 0.75% of gross wages
• Applies to: Organisations with 10+ employees in notified areas

Professional Tax (PT)

PT is a state-level tax — and every state where you have employees requires a separate registration. The amounts are modest, but the registration requirement is real.

A good EOR registers in every Indian state where your employees are based. A weak one misses a state and leaves you exposed to state labour authority penalties.

TDS (Tax Deducted at Source)

Employers must deduct income tax at source under Section 192 of the Income Tax Act and file quarterly TDS returns (Form 24Q). Your EOR handles deductions, filings, and issues Form 16 annually to each employee.

Gratuity: The Long-Term Liability You Need to Budget From Day One

Employees who complete 5+ years of continuous service are entitled to gratuity. You cannot avoid it.

Gratuity = (Last drawn salary × 15 / 26) × Number of years of service

At 5 years, that’s approximately 2.9 months of last-drawn salary. On a senior engineer at ₹20 lakh/year, that’s ₹58,000+. Budget it upfront on any long-term hire.

How Long Does EOR Onboarding Take in India?

• Standard employee onboarding: 2–4 business days
• PF registration (new employees): Same day in most cases
• ESIC registration: 2–3 business days
• PT registration (new state): 3–7 business days

India’s Labour Codes (2020)

India is consolidating 29 central labour laws into 4 Labour Codes:

1. Code on Wages — Minimum wages, equal remuneration, bonus
2. Industrial Relations Code — Trade unions, industrial disputes
3. Social Security Code — PF, ESIC, gratuity, maternity benefit
4. Occupational Safety Code — Workplace safety

Parliament passed all four Codes, but state-by-state implementation is still pending. Until states publish their own rules, legacy acts continue to apply. Your EOR monitors this and updates employment agreements as states adopt the Codes.

Top EOR Providers for India

1. Deel — Owned entity, full PF/ESIC/PT/TDS coverage, 2–3 day onboarding
2. Multiplier — Strong India team, competitive pricing, multi-state PT coverage
3. Remote — Good IP protections, suitable for tech companies
4. Rippling — Solid India coverage, but onboarding is slower (3–5 days)
5. Papaya Global — Best for enterprise teams needing India analytics

Frequently Asked Questions About EOR in India

Can I terminate an Indian employee without cause? No. India requires documented grounds — poor performance, redundancy, or misconduct — backed by a proper procedure. Companies with 100+ workers need government approval for certain terminations. Attempting unilateral dismissal without process exposes you to reinstatement orders and back-pay liability. Your EOR must manage the procedure from the start.

Can I structure the salary to minimise PF contributions? PF is calculated on basic salary only. If the employee’s basic is above ₹15,000/month, contributions are capped at ₹15,000 unless the employee opted into higher contributions. Structure salary components with your EOR at the offer stage — restructuring later is administratively complex and raises employee relations risk.

What is Form 16 and why does my employee need it? Form 16 is the annual TDS certificate your EOR issues to each employee, showing salary paid and tax deducted during the financial year. Employees need it to file their personal income tax returns. Missing or incorrect Form 16 creates friction at tax time and erodes employee trust.

What happens to an employee’s PF balance when they leave? The balance sits in their personal UAN (Universal Account Number). They can withdraw it after 2 months of unemployment or transfer it to a new employer. Neither action requires your involvement, but your EOR should issue a proper exit clearance to facilitate the transfer.

Are the 2020 Labour Codes in force yet? Not nationally. States must publish their own subordinate rules before the Codes apply locally. Most major states have not fully implemented them. Your EOR operates under existing legislation until state implementation catches up.

Is India at-will employment? No. Notice periods for professional roles typically run 30–90 days by contract. Severance, documentation, and in some cases government notification requirements all apply. India is not a market where someone is terminated by end-of-day Friday without consequences.

AK Anchal Katyal Published January 1, 2026