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Global Payroll Team
Written by Global Payroll Team
Last updated May 7, 2026
Expert Reviewed
Payroll in India
Tax in India
Immigration in India

India map

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Employer of Record/PEO and Payroll Services in India

The world’s largest democracy, India is diverse with distinct regions. Ranked among the world’s largest economies, India recorded GDP growth of 6.5% in 2024 and continues to attract foreign investment, supported by digitalisation, infrastructure development and ongoing business reforms.

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Doing Business in India

An attractive consumer market, India presents major opportunities for manufactured goods and services. That said, businesses still need to navigate a large, diverse and state-driven regulatory environment. India continues to perform strongly in technology and innovation, particularly in telecommunications, IT, pharmaceuticals, textiles, engineering and manufacturing.

Entity Registration and Incorporation Requirements

Setting up a business or expanding into India requires selecting the appropriate legal structure, completing incorporation and tax registrations, and assessing sector-specific and state-level compliance requirements. The most suitable structure depends on the company’s business model, investment plans and hiring strategy.

Banking

Bank branch timings vary by institution and location. Under RBI guidance, branches should normally remain open for public transactions for at least 4 hours on weekdays and 2 hours on Saturdays.

Working Week

The standard full-time schedule is commonly 40 to 48 hours per week, depending on the establishment, state law and industry. Under the labour framework, the general maximum is 8 hours per day and 48 hours per week.

Labor Law

India’s employment framework is shaped by the four labour codes, legacy legislation and state-specific rules covering wages, industrial relations, social security, occupational safety, working conditions and employee benefits. Employers must also account for state-level requirements on working time, leave, holidays and establishment registrations.

Limited State VAT applies

Main Industries

Information Technology, Manufacturing, Pharmaceuticals, Textiles, Automotive, Chemicals and Engineering

GDP Growth

6.50%

Dates & Numbers

dd/mm/yyyy

Official State Name

Republic of India

Population

1.45 billion

Capital

New Delhi

Major Languages

Hindi and English for Union official purposes, alongside many regional languages

Currency

Indian Rupee ₹

Internet Domain

.in

International Dialing Code

+91

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India
New Delhi, IN
1:20 pm, May 15, 2026
38°C
clear sky
23 %
Wind Gust: 0 mph
Clouds: 4%
Sunrise: 5:30 am
Sunset: 7:04 pm

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Payroll

India’s payroll landscape is governed by central and state employment laws, tax rules and social security requirements. Employers should consider the Code on Wages, the Code on Social Security, the Industrial Relations Code, the Occupational Safety, Health and Working Conditions Code, along with applicable rules, notifications and state-level legislation. These requirements apply to employees in India regardless of nationality.

It is acceptable to provide employees with online payslips

Payslip

Record retention requirements vary by record type and applicable law

Reports

Annual leave entitlement varies by state, sector and employee category

Annual Leave

Paid sick leave is not uniform nationwide and usually depends on state law or company policy

Sick Leave

26 weeks of paid maternity leave for eligible employees; no general statutory paternity leave in the private sector

Maternity & Paternity Leave

Notice requirements depend on contract terms, employee category, state law and the reason for termination

Employee Termination

There is no statutory 13th month salary requirement

13th month salary

Minimum wages vary by occupation, skill level, sector and location, and are revised through notifications

Minimum Wage

Paid at not less than twice the normal rate of wages

Overtime

Gratuity is generally payable at 15 days’ wages for each completed year of service, subject to eligibility rules

Severance Pay

PEO India

Mercans PEO (Professional Employer Organization) services in India provide a comprehensive HR outsourcing solution for foreign companies to establish a local presence, compliantly hire and manage employees, handle HR, payroll, benefits, tax compliance, and other administrative tasks, while reducing costs and administrative burden.

Through our India PEO, we provide services that are flexible and cost-effective for companies seeking to outsource their HR and payroll processes. As a Professional Employer Organization, Mercans offers a range of services including employee benefits, payroll administration, and compliance with India employment laws. By entrusting their HR and payroll needs to Mercans, companies can focus on their core business activities and ensure a smooth and efficient HR operation.

Partnering with our India PEO presents the fastest and most efficient way to enter the India market.

Contact us to explore how PEO India solutions from Mercans can support your seamless expansion!

Benefits of Hiring an Employee through a PEO in India

Looking to expand into one of the world’s largest and most dynamic economies? Partnering with a PEO in India provides a smooth and compliant way to hire and manage employees while focusing on your core business activities. Here’s how a PEO India can help your business grow:

Quick and Efficient Market Entry

A PEO India enables your business to hire employees and start operations without the lengthy process of establishing a local legal entity. This allows you to quickly enter the Indian market, minimizing delays and helping you focus on your business objectives.

Compliance with Local Employment Laws

India has a complex and evolving regulatory framework for labor laws, taxation, and employee benefits. A India PEO ensures that your business complies with local regulations, from employment contracts to tax filings and social security contributions, reducing the risk of legal issues and penalties.

Cost-Effective Operations

Establishing a business presence in India can be expensive and time-consuming. A PEO in India helps you reduce these costs by managing payroll, benefits, and other HR functions, allowing you to focus your resources on expanding your operations and growing your workforce.

Minimized Risk of Legal Complications

India’s labor laws are subject to frequent changes, and non-compliance can result in costly fines or legal disputes. A PEO India ensures that your business stays informed and compliant with the latest legal requirements, minimizing the risk of potential legal complications.

Access to a Large, Skilled Workforce

India offers a vast pool of talented professionals across various industries, including IT, finance, engineering, manufacturing, and healthcare. A PEO in India connects you with skilled local talent, giving your business access to qualified employees who understand the local market and can contribute to your success.

Simplified HR and Payroll Management

Managing HR and payroll in India can be complicated due to diverse regional laws and tax structures. A PEO India takes care of all employee-related functions, including salary payments, benefits, and compliance, ensuring everything is handled efficiently and accurately.

Scalable Hiring Solutions

Whether you’re hiring a small team or looking to expand rapidly, a PEO India offers flexible solutions that can grow with your business. You can easily scale your workforce up or down to meet changing business demands without the burden of establishing additional infrastructure or dealing with legal complexities.

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Tax and Social Security

An individual’s income tax position depends on residential status under Indian tax law. India’s social security framework includes the Employees’ Provident Fund Scheme, the Employees’ Pension Scheme and the Employees’ Deposit Linked Insurance Scheme, with additional benefits potentially arising under ESIC and other laws depending on eligibility and coverage.

Tax

Individuals are taxed on a progressive basis. For AY 2026-27, the headline personal income tax rate reaches 30% under both the old and new regimes, with surcharge and cess potentially increasing the effective burden.

15%-30%

Corporate Income Tax

0%-30%

Personal Income Tax

5%-28%

Sales Tax

Limited

VAT

Social Security

For covered employees under EPF, both employer and employee generally contribute 12% of basic wages plus dearness allowance, with the employer share allocated across EPF, EPS and EDLI.

24%

Social Security Rate

12%

Social Security Rate for Employers

12%

Social Security Rate for Employees

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Employment Law

Employment law in India is governed by central legislation, labour codes and state-specific laws. Collective bargaining may apply in unionised settings, and employers must ensure their employment practices, workplace policies and termination procedures comply with applicable statutory and contractual standards.

Employment agreement

Written employment contracts or offer letters are standard practice and should clearly set out key terms such as role, pay, benefits, working hours, leave, confidentiality, notice and termination provisions.

Working condition

Working conditions are regulated through central and state laws. Minimum wages are set through notifications, and the general framework provides for a normal working day of up to 8 hours and a working week of up to 48 hours, subject to sectoral and state rules.

Leaves

Leave entitlements depend on the applicable law, establishment type and state. Annual leave, sick leave, casual leave, maternity leave and public holidays are not fully uniform across India, so employers should review the rules relevant to the employee’s location and category.

Employment termination

Termination requirements depend on contract terms, employee classification, applicable law and the reason for termination. In some cases, notice, retrenchment procedure, gratuity and final settlement obligations may apply.

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Typically 30 days+

Minimum notice period for terminating an employee

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Varies by state

Total number of public holidays

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48

Working hours per week

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No rule

Total number of days for Compassionate & Bereavement Leave

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Immigration

Foreign employees generally require an Employment Visa to work in India. Employment Visas are intended for highly skilled or qualified foreign nationals engaged by an entity in India, subject to applicable immigration rules and documentary requirements.


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Residency permits

Foreign nationals holding an Employment Visa valid for more than 180 days must register with the FRRO/FRO within 14 days of arrival in India. If the Employment Visa is issued for 180 days or less, FRRO/FRO registration is generally not required.

Work Permit validity

Up to 2 years or the term of assignment, whichever is less, subject to category-specific rules

Required Documents

Completed and signed online visa application form

Valid passport with the required minimum validity and blank pages

Recent passport-size photographs

Employment contract or employment letter from the Indian employer

Invitation or support letter from the Indian host entity, where required

Additional supporting documents requested by the Indian Mission/Post or FRRO/FRO based on the case

Compliant, reliable, error-free and touchless payroll in India

Build the be
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t team and hire top talent compliantly in India. Get in touch with India payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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    FAQs

    What is an Employer of Record (EOR) in India and how does it support foreign companies?

    An Employer of Record in India serves as the legal employer of your workforce in the country. It handles employment contracts, payroll, tax and social security contributions, and ensures local labour law compliance, allowing your business to hire in India without forming a local entity.

    Why should businesses use an EOR instead of setting up a legal entity in India?

    Using an EOR lets companies avoid the time, cost and complexity of establishing a legal entity in India. It offers quick access to the workforce, reduces administrative burden, and ensures compliance with employment and tax regulations from day one.

    How does payroll outsourcing in India ensure compliance with labour laws and tax regulations?

    Payroll outsourcing in India means all salaries, tax withholdings, provident fund contributions, and statutory filings are handled in line with Indian regulations. This reduces the risk of penalties, eliminates compliance gaps, and ensures accurate reporting.

    Can an Employer of Record in India hire employees and manage work permits for international companies?

    Yes, an EOR in India can recruit employees on behalf of foreign companies and manage any necessary local registrations or work permits required for non-resident staff. It oversees HR, payroll and compliance to support seamless operations.

    What are the key benefits of using EOR and payroll services in India for global expansion?

    Key benefits include fast market entry, full legal and tax compliance, significant reduction in administrative overhead, access to local expertise, and the flexibility to scale operations in India while your business stays focused on its core objectives.

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