How to hire and pay employees in India

Looking to hire remote workers to join your team? No matter where in the world your employees work, Oyster makes it easy for you to hire, pay, and take care of employees hassle and worry-free.

Sign Up for a Free Account

Before hiring


Before hiring employees in India, there are a few things you need to know. India recently introduced a new tax regime that eliminated 70 tax exemptions, but offers lower tax rates. It’s up to employees to decide which system they want to follow. In India, employees that make below a certain income threshold are exempt from income tax entirely.

It’s also important to know that there is a social security system in India which is administered by the Employees’ Provident Fund Organization (EPFO). Both employers and employees are required to contribute to a retirement savings scheme called the Employees Provident Fund (EPF). It’s important for employers to understand the intricacies of these programs before making a hire. 

In India, severance payments are given to workers who have been continuously employed for two years and are terminated for redundancy. Severance payment depends on the duration of employment, performance, and salary.

We know this might sound overwhelming—but it doesn’t have to be. A solution like Oyster eliminates the barriers for you. With Oyster, you can automate compliance across 180+ countries, easily managing HR and payroll—all in one, easy-to-use platform. 

Get an overview of what you need to know when hiring in India below.

At a glance









(based on region;
see here



of gross salary

13th / 14th SALARY


Good to know

  • Employees in India living in self-arranged, rented accommodation can claim a house rent allowance (HRA) as a salary tax deduction. Other deductions from income include contributions made to the provident fund, payment of life insurance premiums, and transport allowances.
  • Employees leaving their jobs are entitled to a "gratuity payment" from their employers if they’ve been working for more than five years. This is equal to 15 days' wages for every completed year of service, subject to a cap. Statutory gratuity is usually always payable, unless the employee is terminated for misconduct or gross negligence.
  • Post-employment non-compete clauses are legally unenforceable in India. Employees must provide one month’s notice if they've worked for an employer for one year or more.

Labor laws in


Working hours and overtime

Employees in India work eight or nine hours per day, totaling 48 hours a week. Overtime is paid double the rate of an employee’s normal pay.

Minimum wage

Minimum wage regulations differ from state to state and vary based on the industry and the job. For example, the daily minimum wage for an office manager in a commercial enterprise in Karnataka is INR 716.89/day.

Employment contracts

There is no mandate under Indian labor law that employment agreements have to be in writing but it is a market practice to have a written employment contract in order to ensure certainty and enforceability. Electronic signatures and wet signatures are acceptable. Fixed-term contracts are allowed and can be terminated simply by failing to renew them or for a reason specified in the fixed-term contract.

Probationary period

In India, the typical probationary period is between three and six months. The probation period must be contained in the employment agreement in order to make it enforceable. In general, probation periods are considered to be trial periods during which it is relatively easy to terminate the employee’s employment.


Non-compete agreements

Post-employment non-compete clauses are legally unenforceable in India. 

Calculate costs to hire internationally

Benefits and leave in


Vacation time

Holiday entitlement in India typically ranges from 12 to 21 days in a year, varying by industry and state. This is generally covered in the employment contract. Employees can also be given 10-15 days of "casual leave" for unplanned and urgent matters.

Sick leave

Sick leave entitlement varies by industry, and can be 10-12 days in a year. Some employers provide unpaid leave for long term medical issues, but this isn’t mandatory.

Maternity and paternity leave

In India, female employees who have worked for at least 80 days in the last 12 months are entitled to between 12 and 26 weeks of maternity leave, depending on the number of children they have. Maternity leave is paid by the employer for the full period of leave at the rate of the employee's average daily wages. If a mother experiences pregnancy-related illness (e.g., premature birth, illness related to delivery of the child, miscarriage, etc.), the employer must provide an additional month of paid leave.

Paternity leave is not required by law, but it is customary for employees working in private sector companies to receive this leave in accordance with company policy (typically 2 weeks).

Parental leave

Adopting parents are entitled to 12 weeks of leave starting from the date the child is welcomed into the family. This leave can be taken if the adopted child is less than three months old.

In case of surrogacy, commissioning mothers are entitled to 12 weeks of leave starting from the date the child is welcomed into the family.


View a list of recognized public holidays in India here.

Employer tax

Employers are required to contribute 12% of each employee’s salary to the Employee Provident Fund (EPF).

Depending on the employee’s job type, employers may also have to pay into the Employees’ Deposit Linked Insurance Scheme (EDLI). The wages on which this amount is calculated is capped at INR15,000 per month for all employees.

Individual tax

Employees in India are taxed 0% to 30% depending on their income bracket. Employees also have to contribute 12% of their monthly salary towards the Provident Fund Scheme and 1.75% to the national insurance scheme.

Termination in


Termination requirements

During the probationary period, an employee can be terminated at the discretion of the employer, as long as the reason is nondiscriminatory.

After the probationary period, an employee may be terminated for misconduct or reasonable cause, such as theft, fraud, or willful insubordination.

An employee's services can also be terminated by redundancy. Employers that carry out redundancy terminations must ensure that the last person to join the organization in the same role is first made redundant.

Notice period

The notice period for employees with at least one year of service is one month (or equivalent wages in lieu thereof). No notice is required for employees terminated for misconduct.

Severance pay

‍Severance payment is given to workers who have been continuously employed for two years and are terminated for redundancy. Severance payment depends on the duration of employment, performance, and salary.

In addition, employers must make "retrenchment compensation" that is equal to 15 days' wages for every completed year of service.

Start hiring employees in


Setting up a business entity everywhere you want to hire a new employee isn’t scalable—it takes too long and the legal fees are high. At the same time, understanding and adhering to the local labor laws and employee expectations can be complex and time consuming. And it’s hard to find reliable information on up-to-date employment information for all the countries where you’re considering hiring. Not to mention tracking down invoices and managing employee contracts over email and spreadsheets—that gets messy fast. 

We can’t afford to take risks when it comes to compliance—we need to make sure we follow the local guidelines, especially when it comes to taxes and legalities. 

With Oyster, you can manage HR and payroll, and automate compliance across 180+ countries—all in one, easy-to-use platform.

Disclaimer: The information provided in this resource is for general educational purposes only and shall not be construed as legal advice. While Oyster strives to provide current and accurate information, Oyster makes no warranties or representations as to the correctness of the content provided and accepts no liability or responsibility for any errors or omissions in the content provided. By using this resource you acknowledge and agree that you do so at your own risk. The content of this resource is subject to change without notice.

Guide: How to get started with hiring global talent

Hiring globally remote talent is easier than ever — learn how to get started.

Access Guide
Animated background pattern

Find and hire talent anywhere with Oyster

Explore for Free