India gives global companies access to a large and highly skilled workforce, particularly in software engineering, artificial intelligence, data, finance, customer support and other professional services. However, hiring employees in India also means complying with national employment requirements and rules that may vary by state.

For overseas businesses without an Indian legal entity, EOR services in India provide a practical way to employ local talent. The Employer of Record becomes the legal employer and manages employment contracts, payroll and statutory obligations, while the client company directs the employee’s everyday work.

India’s new labor-code framework makes it especially important to understand how salaries, benefits, working conditions and employment records are managed. This guide explains the major areas global employers should discuss with an EOR partner in 2026.

An Employer of Record in India legally employs workers on behalf of an overseas company. The EOR generally handles local employment contracts, payroll, statutory deductions, benefits administration and required filings. The client company selects the employees and manages their roles, performance and daily responsibilities.

What Changed Under India’s Labor Codes?

India consolidated 29 central labor laws into four main codes:

  1. The Code on Wages, 2019
  2. The Industrial Relations Code, 2020
  3. The Code on Social Security, 2020
  4. The Occupational Safety, Health and Working Conditions Code, 2020

According to guidance published by India’s Ministry of Labor and Employment, the labor codes took effect on Nov 21, 2025. The government subsequently published additional rules, employer guidance and clarifications during 2026.

The framework addresses issues such as the definition of wages, minimum wages, payment practices, social security, gratuity, employee classifications, workplace conditions, dispute resolution and employer records. The exact impact on a business depends on the employee’s location, compensation structure, job duties and the laws and rules applicable to the employing establishment.

For a foreign company using Employer of Record services in India, the EOR should interpret and apply these requirements to the employment relationship. Nevertheless, the client company should understand how its compensation decisions and management practices affect compliance.

Do the Labor Codes Apply to Employees Hired Through an EOR?

Yes. Employees do not lose statutory protections because they work through an Employer of Record. The EOR is the legal employer and must administer the employment relationship under applicable Indian law.

An EOR arrangement changes which legal entity employs the person. It does not eliminate employment-law responsibilities. The EOR must evaluate applicable central and state requirements, maintain compliant employment documentation and administer required payroll and benefit processes.

The overseas client still influences important inputs, including:

  • The employee’s role and responsibilities
  • Proposed salary and variable compensation
  • Working schedule and management expectations
  • Performance feedback
  • Access to company data, systems and intellectual property
  • Decisions that may lead to promotion, discipline or termination

For that reason, compliant employment requires coordination between the EOR partner and the client rather than treating payroll as an isolated monthly transaction.

How Does the Definition of Wages Affect Employers?

One of the most important features of the new framework is a more consistent definition of “wages” across the labor codes. Certain payments are included, while specified components may be excluded subject to the rules and limits established by law.

This matters because employers sometimes structure compensation with a relatively low basic wage and several allowances. If excluded components exceed the permitted proportion of total remuneration, part of the excess may need to be treated as wages for statutory purposes.

That calculation can affect:

  • Gratuity
  • Social-security contributions where applicable
  • Overtime or other wage-linked calculations
  • The design of salary structures
  • The employer’s total cost

An EOR partner should review each proposed compensation package before issuing an employment agreement. Global employers should avoid transferring a salary structure from another country or using a generic Indian template without checking its current compliance implications.

How Can the New Rules Affect Gratuity?

Gratuity is a statutory benefit paid when the relevant legal conditions are met. Ministry of Labor and Employment FAQs published in March 2026 state that gratuity calculations use the revised definition of wages from Nov 21, 2025.

The practical impact may depend on the employee’s compensation structure, employment category, length of service and reason for separation. Businesses should therefore ask their EOR how gratuity is accrued, reported and funded within the commercial arrangement.

Questions to ask include:

  • Which compensation components are used for gratuity calculations?
  • Is gratuity accrued monthly or charged when it becomes payable?
  • How is the liability shown in the client’s invoice or workforce report?
  • How are fixed-term employees treated?
  • What information will the company receive when an employee exits?

These questions help prevent an unexpected liability from appearing at the end of an assignment.

What Compliance Responsibilities Should an Employer of Record Handle?

A capable provider of Employer of Record services in India should manage the core legal and administrative responsibilities associated with being the local employer.

Compliance area Typical EOR responsibility
Employment contracts Prepare and execute locally compliant agreements through the Indian employing entity
Payroll Calculate salary, approved variable compensation, deductions and net pay
Income-tax withholding Deduct and remit tax as required and provide applicable employee documentation
Provident Fund Register, calculate and deposit contributions when applicable
Employee State Insurance Administer registration and contributions for eligible employees
Gratuity Calculate and administer obligations under applicable requirements
Professional Tax Withhold and remit the state-specific tax where applicable
Leave and holidays Apply statutory and company entitlements based on the employee’s location
POSH compliance Maintain required prevention, reporting and grievance processes
Onboarding and records Collect required documents and maintain employment and payroll records
Offboarding Manage notice, final settlement, statutory documentation and compliant separation procedures

The precise allocation should be written into the master services agreement. A provider should also explain any activity that remains the client’s responsibility.

How Do State-Level Requirements Affect EOR Services in India?

Indian employment compliance is not entirely uniform across the country. Employees may work from Maharashtra, Karnataka, Telangana, Delhi, Tamil Nadu or another state, and state-level requirements can affect professional tax, Shops and Establishments compliance, leave, holidays and other employment conditions.

A company hiring across India should confirm whether its EOR partner can support employees in every intended state. “Pan-India coverage” should mean more than the ability to run payroll. It should include a process for identifying the employee’s work location, applying relevant requirements and updating the record when the employee relocates.

Before hiring, provide the EOR with the employee’s actual working location rather than only the client’s headquarters or the EOR’s registered office.

2026 EOR Compliance Checklist

Before onboarding an employee in India, confirm that:

  • The employing Indian entity has been identified.
  • The employee’s actual state and work location are recorded.
  • The job description and reporting relationship are accurate.
  • The compensation structure has been reviewed under the current wage framework.
  • Applicable PF, ESI, gratuity and professional-tax treatment has been assessed.
  • Leave, holidays, working hours and payroll dates are documented.
  • Confidentiality and intellectual-property assignments are included.
  • The EOR and client responsibilities are defined in writing.
  • Payroll inputs, performance management and offboarding workflows are agreed.
  • The EOR has explained its reporting and regulatory-update process.

How 97 Tech Center Supports Employers in India

97 Tech Center provides Employer of Record services in India for overseas companies building and managing India-based teams without opening a local entity. Our registered Mumbai entity can employ talent across India, while the client retains control of employee selection, everyday work, training and business priorities.

We support employment contracts, payroll, statutory compliance, benefits administration, onboarding, offboarding, hiring and workforce reporting. Our approach also addresses two issues that are especially important for technical and product teams: a documented chain of intellectual-property assignment and clear restrictions around contract-signing authority.

If you are planning your first India hire or reviewing an existing employment model, speak with 97 Tech Center about your intended roles, locations and headcount.

Frequently Asked Questions

What are EOR services in India?

EOR services in India allow an overseas company to hire employees through a registered Indian entity. The EOR acts as the legal employer and handles employment contracts, payroll and applicable statutory requirements, while the client manages the employee’s daily work.

Can a foreign company hire employees in India without establishing an entity?

Yes. A foreign company can use an Employer of Record whose Indian entity legally employs the workers. The suitability of this model depends on the company’s activities, expected duration, headcount, tax position and long-term plans.

Does an EOR eliminate all compliance risk in India?

No. An EOR manages significant employment and payroll responsibilities, but it cannot eliminate every tax, operational or management risk. The client must provide accurate information, follow compliant management processes and obtain independent advice on its corporate tax and permanent establishment position.

Does an EOR manage PF, ESI and gratuity?

An EOR generally administers applicable statutory contributions and benefits, including PF, ESI and gratuity. Whether a particular requirement applies can depend on the establishment, employee eligibility, compensation and current law.

How should we choose an EOR partner in India?

Evaluate the provider’s local entity, state coverage, payroll controls, labor-law expertise, contract terms, IP protection, reporting, termination support and service responsiveness. Ask for a written explanation of responsibilities and all fees before onboarding employees.

Editorial and Legal Review Note

This article provides general information and should not be treated as legal, tax or accounting advice. Requirements may differ by establishment, state, employee and factual circumstances.