True Employer Cost & Payroll Taxes in India
In India, mandatory employer on-costs add +19.8% on top of gross cash salary.
Mandatory Social Contributions & Tax Brackets in India
Full statutory schedule under official labor codes and ministry schedules.
| Fund / Contribution Name | Statutory Rate | Coverage & Purpose |
|---|---|---|
| Employees Provident Fund (EPF & EPS) | 12.00% | Official statutory reserve mandated under India labor code |
| Statutory Gratuity Accrual (Payment of Gratuity Act) | 4.81% | Official statutory reserve mandated under India labor code |
| Employees State Insurance (ESIC where applicable) | 3.25% | Official statutory reserve mandated under India labor code |
Hiring in India: EOR vs Setting Up a Local Legal Entity
Compare the upfront capital, timeline, and ongoing overhead for hiring in India.
- ✓ Upfront Setup Cost: $0 (No foreign capital registry required).
- ✓ Time-to-Hire: 2 to 4 business days.
- ✓ Typical Monthly Platform Fee: $299/month per employee (Deel / Remote).
- ✓ Severance & Legal Defense: Managed directly by local EOR employment lawyers.
- ✗ Upfront Setup Cost: $8,000 to $20,000 (Legal notarization, trade registry).
- ✗ Time-to-Hire: 3 to 6 months to complete local bank account and tax registration.
- ✗ Recurring Overhead: $1,500 to $2,500/month in mandatory corporate accounting and secretary fees.
- ✗ Permanent Establishment Risk: Full corporate tax nexus exposure in India.
Labor Law Compliance Notice: India Severance & Notice Protocol
India enforces strict statutory labor regulations under local labor courts. Severance risk rating: Moderate. Probationary and termination rules: Notice period typically 30-90 days under contract.
Frequently Answered Questions: Hiring in India
Q: What is the total employer burden rate in India for 2026?
The mandatory employer burden in India is 19.8% of the gross base salary, consisting of Employees Provident Fund (EPF 12%) + Gratuity Reserve (4.81%) + Statutory Insurance.
Q: Is an Employer of Record (EOR) legally recognized in India?
Yes. Tier-1 EOR platforms like Deel and Remote operate compliant locally registered entities in India. They handle all statutory social security filings, local tax withholdings, mandatory benefits, and IP assignment contracts compliant with India labor courts.
Q: When should an employer switch from an EOR to a direct legal entity in India?
For teams with 1 to 5 employees in India, an EOR ($299/month average fee) is significantly more cost-effective than registering a local subsidiary, which typically costs $8,000–$20,000 upfront plus $1,500/month in mandatory statutory accounting. The breakeven point to establish a direct local entity is typically around 12–18 full-time employees.
Q: What is the severance risk and probation protocol in India?
The severance liability rating for India is classified as "Moderate". Statutory probation and notice terms: Notice period typically 30-90 days under contract. EOR providers mitigate wrongful termination claims by structuring compliant probation contracts.