Hiring in India: a quick example
Imagine you identify a senior software engineer in Bangalore and want to bring them on fast. You treat them as a contractor to avoid EPF filings. Within months, the Employees' Provident Fund Organisation flags the arrangement and assesses back contributions plus interest, possible under the misclassification rules of India's Industrial Disputes Act 1947.
This is the trap foreign employers fall into. The good news: an EOR removes it entirely. Here's how.
What is an EOR?
An employer of record (EOR) is a company that becomes the legal employer of your team member in India, while you keep full operational control of their day-to-day work. The EOR runs payroll, files contributions, issues a compliant employment agreement, and manages benefits. You direct the work. They carry the legal employment.
A US or other foreign company can hire an Indian employee through an EOR without establishing a local entity. With Oyster as your EOR, your team member appears on Oyster's India payroll from Day 1, with no entity overhead for you.
Is it legal? Yes. Using an EOR to employ people in India is a well-established and compliant model. The EOR holds the local registrations (PAN, TAN, EPF, ESI, and state-level Shop and Establishment registration) and employs your team member under Indian law on your behalf.
Why use an EOR for India? Most HR leaders searching for "employer of record India" are asking one question: how do I hire this person compliantly without six months of legal setup? An EOR is the answer. It is the fastest compliant path to a single hire, and the simplest way to test the market before committing to a permanent structure.
India EOR vs. setting up an entity
Establishing a private limited company in India means registering with the Ministry of Corporate Affairs, obtaining PAN, TAN, EPF, and ESI registration, and meeting state-level compliance. The timeline runs to several months, and the compliance overhead does not go away once you are set up.
An EOR compresses that to days. For companies hiring their first Indian team member, or testing the market before committing to a permanent structure, the EOR path is the only one that makes operational sense.
India labor laws create compliance traps for foreign employers
India has some of the most layered employment law in the world. Union-level legislation, state-level acts, and a classification system that most foreign employers have never encountered combine to create real legal exposure for companies that move fast without local expertise.
Misclassifying workers in India triggers costly legal penalties
A foreign company can hire employees in India, but doing so without a compliant structure exposes you to serious financial and criminal liability under Indian law.
Indian employees are classified as either "workman" or "non-workman," and the distinction carries dramatically different statutory protections. Employers who get this wrong face criminal sanctions under the Payment of Wages Act 1936 and the EPF Act, in addition to civil penalties.
The contractor-versus-employee line is harder to draw in India than in most markets, because courts look at the substance of the relationship, not just the contract label. If you control how, when, and where the work is done, the relationship is employment regardless of what your agreement says.
India's four new labour codes reshape your employment obligations
The four new Labour Codes are the Code on Wages 2019, the Industrial Relations Code 2020, the Code on Social Security 2020, and the Occupational Safety, Health and Working Conditions Code 2020, all effective from November 2025.
These codes consolidate dozens of legacy laws into a single framework, but the practical impact on foreign employers is significant. CTC structuring changes because the definition of "wages" under the Code on Wages affects how basic pay is calculated relative to allowances, which in turn affects EPF contribution amounts.
Termination procedures are also affected, with new thresholds for retrenchment compensation and standing orders. If your employment agreements were drafted before 2025, they likely need to be reviewed against the new codes before you onboard another hire.
India's state-level rules mean a single national contract falls short
India's employment law operates at both Union and state levels, and the gap between them is where foreign employers get caught. Minimum wages vary by state, industry, and job category. Shops and Establishments Acts differ by state and govern everything from working hours to notice periods to overtime calculations.
Oyster is registered in Karnataka. The Karnataka Shops and Establishments Act governs all employees on Oyster's India payroll, regardless of where in India they physically work. Under the Karnataka SEA, maximum working hours are 9 hours per day and 48 hours per week, and the minimum notice period after 6 months of continuous service is 1 month. A generic national contract that ignores these state-specific rules isn't just incomplete. It's unenforceable in the ways that matter most.
Severance and end-of-employment costs in India
India does not have a single "severance" rule. End-of-employment costs come from a few statutory sources, and you need to budget for all of them.
- Notice period: A minimum of 1 month after 6 months of continuous service under the Karnataka SEA. Pay in lieu of notice is common.
- Retrenchment compensation: For eligible workmen, statutory retrenchment compensation applies, calculated as 15 days' average pay per completed year of service, alongside notice requirements under the Industrial Relations Code.
- Gratuity: Accrues at 15 days' wages per completed year of service, payable after the 5-year threshold under the Payment of Gratuity Act. This is not a monthly cash outflow, but it is a real liability that builds over time.
Oyster handles termination and offboarding with no extra fees, and our in-house specialists calculate every statutory amount so nothing is missed. You care for your team member through the exit. We handle the compliance.
The workforce in India
India has one of the largest and fastest-growing talent pools in the world, with particular depth in software engineering, IT services, data, finance, and customer operations. English is widely used in business, which makes India a natural fit for distributed teams that operate across time zones.
The major talent hubs are Bangalore, Hyderabad, Pune, Chennai, Mumbai, and the Delhi NCR region, each with established tech and professional services ecosystems. Time zone overlap with both Europe and parts of US working hours makes India a practical base for follow-the-sun coverage.
Compensation varies widely by role, seniority, and city, and is typically structured as a Cost to Company (CTC) figure that bundles base pay, allowances, and statutory contributions.
How to choose an EOR in India
Once you've decided an EOR is the right structure, four things separate a provider you can trust from one that creates risk: compliance depth, transparent pricing, onboarding speed, and the quality of human support. Here's how Oyster delivers on each.
Oyster handles your India payroll and compliance automatically
Getting India payroll right requires monthly filings, contribution splits, and payment deadlines that carry real penalties if missed. Oyster's in-house India compliance specialists manage every filing on your behalf, not outsourced vendors.
Oyster files your India TDS and EPF contributions monthly
Payroll compliance in India means deducting tax at source, remitting EPF contributions, and paying wages before the 7th of the following month, with penalties of INR 1,500 to INR 7,500 under the Payment of Wages Act 1936 for late payment.
That Bangalore engineer you were about to onboard? Oyster registers them for EPF, processes their TDS deduction, and files with the EPFO on your behalf every month.
The full employer payroll obligation breaks down as follows: EPF employer contribution of 12% of basic wage, split between 3.67% to the EPF account and 8.33% to the Employee Pension Scheme; ESI employer contribution of 3.25% for employees earning up to INR 21,000 per month; and TDS deducted at source based on the employee's applicable income tax slab. Miss the 7th-of-the-month deadline and you're in penalty territory before you've had a chance to fix it.
Oyster's in-house legal team reviews every India employment agreement
A compliant Indian employment agreement must include the employee's position and duties, CTC remuneration structure, working hours (maximum 9 hours per day and 48 hours per week per the Karnataka SEA), a probation period of 3 to 6 months, and IP and confidentiality obligations.
Oyster issues three separate documents for every India hire: the Employment Agreement, a Confidentiality and IP Agreement (CIPA), and a Remote Work Schedule. This three-document structure ensures IP rights are properly assigned under the Indian Copyright Act 1957 and Patent Act 1970, and that confidentiality obligations are clearly separated from the core employment terms.
Every agreement is drafted and reviewed by Oyster's in-house legal specialists specifically for India, not templated by outsourced vendors.
Your Indian team gets statutory benefits managed through one platform
Mandatory benefits for Indian employees include:
- EPF enrollment and contributions
- ESI coverage for eligible employees
- Statutory annual leave of 18 days (1 day per 20 days worked per the Karnataka SEA)
- 12 sick days per year
- Maternity leave of up to 26 weeks for the first two children, paid at the average daily wage rate by the employer
- Minimum of 10 public holidays
Oyster manages all of these through a single platform. For employees above the ESI wage threshold, Oyster also offers tiered healthcare packages including personal accident and disability cover. You don't need to track which employees qualify for ESI versus private health insurance. Oyster handles the eligibility logic and enrollment automatically.
Oyster offers flat India EOR pricing, with zero hidden fees
Budgeting for an India hire requires understanding both the EOR service fee and the statutory employer costs that sit on top of gross salary. These are two separate numbers, and conflating them is how finance teams end up with inaccurate headcount models.
The cost of an EOR in India depends on the provider, but the right question isn't just the headline fee. It's what's included and what gets billed separately.
Oyster charges a flat, predictable EOR fee with no hidden markups, no extra charges for HR advisory support, and no termination fees. Some providers bill separately for onboarding, compliance events, or offboarding. Oyster doesn't. For a custom quote, visit the Oyster pricing page or book a demo to talk through your specific hiring plan.
EPF and ESI add roughly 13 percent to India payroll costs
When budgeting your India hire, the statutory employer contributions above gross salary break down as follows. EPF employer contribution is 12% of basic wage, split between 3.67% to the employee's EPF account and 8.33% to the Employee Pension Scheme.
ESI employer contribution is 3.25% for employees earning up to INR 21,000 per month. For employees above the ESI wage threshold, employers typically provide a group health insurance plan instead.
Gratuity liability also accrues at 15 days' wages per completed year of service after the 5-year threshold. This isn't a monthly cash outflow, but it is a real liability that builds over time and needs to be factored into your total cost of employment. These are statutory pass-through costs, not Oyster fees.
Onboard your India hire in as fast as 48 hours
Setting up a legal entity in India requires registering with the Ministry of Corporate Affairs, the Income Tax Department, the EPFO, and the ESIC, plus state-level Shop and Establishment registration. The total timeline runs to several months. Oyster's onboarding capability compresses that to 48 hours.
Oyster's India onboarding workflow completes in days, not months
Here's how the Oyster India onboarding sequence works in practice. First, create the employment agreement in the Oyster platform. Second, configure EPF and ESI enrollment. Third, set up the India CTC structure and allowances via the onboarding form. Fourth, collect right-to-work confirmation. Fifth, the employee is active and payroll-ready. Oyster handles all EPFO and ESIC registration steps on your behalf. You don't need to interact with any Indian government portal directly.
The contrast with entity formation is stark. Entity setup in India involves multiple government registrations, a timeline measured in months, and ongoing compliance overhead that doesn't go away once you're set up. For companies hiring their first Indian team member, the 48-hour path is the only one that makes operational sense.
Compare Oyster with Deel, Rippling, and Remote
Not all EOR providers offer the same depth of India-specific compliance expertise. The differences matter most when something goes wrong, or when the regulatory environment changes, which in India it does frequently.
Oyster's in-house India compliance team prevents misclassification risk
Oyster's in-house HR and legal specialists review every India engagement to confirm correct worker classification before contracts are issued.
Deel is more product-led, with support often reliant on AI and chatbots. With Oyster, an in-house team of country specialists and HR experts who understand your context handles that review directly.
Oyster's in-house team also handles Karnataka-specific registration requirements that a non-specialist provider might miss. The workman versus non-workman classification that creates criminal exposure under the Payment of Wages Act is exactly the kind of nuanced determination that requires genuine India expertise, not a templated onboarding checklist.
Oyster tracks every Indian labour code change in real time
India's four new Labour Codes, effective November 2025, reshape CTC structuring, termination procedures, and EPF applicability. Oyster's in-house legal team monitors code implementation phases and updates employment agreements and payroll configurations without you needing to track regulatory timelines.
Rippling is a broader workforce platform with a newer EOR module among many HR and payroll modules, optimizing for one system across HR, IT, and finance. Oyster is an EOR-first platform, purpose-built for global employment, with focused depth in the country-specific compliance India demands. Oyster's B Corp certification also reflects a standard of accountability that extends to how the platform maintains compliance quality over time, not just at the point of sale.
Oyster's country-specific India contracts cover every state your team needs
Your India employees, regardless of which city they work from, are covered under Oyster's legally reviewed contracts that account for Karnataka SEA regulations as the governing standard. Oyster's dedicated point of contact is available to advise on state-specific nuances at any time.
Remote offers more self-serve support, often via email or chat, with access to experts priced as an add-on. So when an India-specific question comes up, you may be working through chat or email instead of with a specialist who knows your account. With Oyster, that India expertise is included, and the same point of contact stays with you as you hire in your next market.
Hire your Indian team through Oyster today
Your first Indian hire can be active on payroll, EPF-enrolled, and receiving a legally reviewed employment agreement within 48 hours of signing up with Oyster.
These are genuine product fits for different buyer situations. EOR is the right structure when you want to employ someone compliantly without entity overhead. Contractor management is the right structure when the relationship is truly project-based and non-exclusive. If you're not sure which applies to your situation, a demo conversation will help you self-select quickly.
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