How to hire in India through an EOR

Most companies in India use open-ended contracts. They're the standard for a reason: they offer stronger employee protections and match how Indian labor law is structured. Fixed-term contracts exist but come with renewal limits to stop employers from using them as a workaround for permanent status.

Contract types

Unless you have a specific short-term need, open-ended contracts are the default. They're simpler to manage long-term and less likely to create legal headaches down the line.

Employees on open-ended contracts get stronger protections: notice periods, social security contributions, and more. Fixed-term contracts carry real risk if you keep renewing them. Courts can reclassify chained fixed-term contracts as permanent employment, which brings full entitlements with it.

What has to be in the contract

Written contracts aren't legally required everywhere in India, but they're standard practice and mandatory in some states like Karnataka and Telangana through appointment orders. Put it in writing. It protects you if there's ever a dispute.

There's no language requirement, but English or local languages like Hindi tend to work well for clarity. At minimum, your contract should cover: job title, start date, contract type and duration, probation terms, pay and benefits, leave entitlements, termination conditions, and governing law.

Probation periods are typically 3 to 6 months. You can terminate during probation with minimal notice, often around one week, but you need to spell that out clearly in the contract. There's no legal cap on probation length, but keep it reasonable. Courts have pushed back on probation periods that stretch too long.

Contractor vs. employee

Misclassification is one of the more common and costly mistakes companies make when hiring in India. Courts look at three things: how much control you have over the person's work, how central their role is to your business, and whether they're economically dependent on you.

If you're setting their hours, tools, and methods, they'll likely be treated as an employee. That means they're entitled to provident fund (PF) contributions, employee state insurance (ESI), paid leave, gratuity after 5 years, and retrenchment pay. Contractors handle their own taxes and don't receive those benefits.

Getting classification wrong is expensive. You could owe back payments for benefits and taxes, face fines under acts like the Employees' Provident Funds Act or the Industrial Disputes Act, and be liable for missed employer contributions plus interest. Penalties can run into thousands of rupees per month.

Non-compete clauses are hard to enforce in India once employment ends. Courts regularly strike down broad ones. If you need them, keep them narrow and tie them to senior roles with genuine trade secrets. On IP: employees own their inventions by default unless you explicitly assign ownership in the contract, so don't leave that out.

Chaining fixed-term contracts is risky. Do it too often and those contracts can convert to permanent employment, with all the rights that come with it. Rules also vary by state, so what applies in Maharashtra may not apply in Tamil Nadu. If you're hiring in India for the first time, working with an EOR can help you avoid these issues while you get familiar with the market.

India's leave laws vary by state and industry, but most competitive employers offer 20-24 days of annual leave, well above the legal minimum of 12-18 days.

Employees accrue leave pro-rata based on days worked. For factories, it's 1 day per 20 days worked after 240 days of service, which works out to roughly 12-15 days a year. Shops and offices typically get 18 earned leave days plus 7 casual days under most state acts, building at around 1.25-2 days per month.

Public holidays add another layer. National holidays like Republic Day close most businesses across the country, and states add their own on top, totalling 10-20 days depending on where your employee is based. Here's a table of common ones:

All leave types

Here's what the law requires across the main leave categories. Pay is full unless noted, and most leave comes with job protection. The details shift depending on your employee's state and sector.

Carryover is common, up to 30-60 days. Unused annual leave is typically paid out at the basic pay rate when an employee exits.

Mandatory benefits

The law requires social security through EPF, ESI, and gratuity for most employees. Employers cover the larger share of contributions.

There's no mandatory meal voucher or transport benefit. That said, many states require minimum wage to include a house rent allowance of 8-10% of basic pay. Beyond ESI for lower earners, there's no national health insurance requirement.

What people actually expect

If you're hiring in tech or in cities like Bangalore or Mumbai, the legal minimums won't get you far. Most candidates expect 20-25 annual leave days, accrued monthly at around 1.5-2 days, plus 10-15 sick days at full pay.

Private health insurance is standard practice. ESI is basic public coverage, and stronger candidates will want a company plan that covers their family with access to cashless hospitals. Budget for premiums on Rs 5-10 lakh coverage.

Other things people expect: 15+ public holidays observed, flexible casual leave, paternity leave of 10-15 paid days, and a work-from-home stipend in the range of Rs 1,000-5,000 per month. Allowing encashment of 5-10 unused leave days per year also goes a long way.

Sticking to the bare minimum puts you at a disadvantage against startups offering wellness days or flexible PTO. Bumping annual leave to 24 days and adding a top-up health plan puts you in a much more competitive position. Just make sure you're checking the state-specific rules for wherever your hires are located.

Firing someone in India can lead to court battles, reinstatement orders, or fines if you don't follow the right process. The system leans employee-friendly, especially for "workmen" (manual, clerical, or supervisory roles earning under about INR 18,000/month), where government approval is often required for layoffs in larger firms.

Firing someone

Valid reasons for termination include misconduct (dishonesty, theft, insubordination, prolonged absence), poor performance, contract expiry, redundancy, or mutual agreement. Misconduct cases require a specific process: issue a charge sheet, send a show-cause notice, hold a domestic inquiry, get an inquiry report, then issue a termination order. Skip any of those steps and a court may order reinstatement.

Unfair dismissal means terminating without just cause or due process, like letting someone go for illness without a hearing or medical review. Protected categories include women during maternity leave, employees on probation without a written extension, and workmen in firms with 300+ employees (the new threshold under the 2025 Labour Codes), where retrenchment needs government approval. Labour courts handle disputes, and judges tend to side with workers when procedures aren't followed correctly.

For non-workmen (managers, tech roles), contracts carry more weight, but state Shops and Establishments Acts still apply. Document everything in writing, every time.

Notice periods

Notice periods depend on state law, the employment contract, and how long someone has worked there. Common ranges are 1-3 months, and employers and employees typically mirror each other in contracts. You don't need to give notice for gross misconduct, but you'll need to prove it.

Severance

For layoffs and redundancies involving workmen, retrenchment compensation is required at 15 days' average pay per year served. It doesn't apply to misconduct, resignation, or contract expiry. Gratuity kicks in after 5 years at half a month's salary per year, capped at INR 20 lakh. The 2025 Labour Codes raised the layoff approval threshold to 300+ employees.

Calculate average pay from the prior 3 months. Under the new Labour Codes (effective 2025), full and final settlement must be paid within 48 hours of exit. Make sure your payroll process can actually hit that deadline.

Work permits and visas

You can hire foreign nationals through an EOR, which sponsors them as the legal employer. The main visa categories are: Employment Visa (E-Visa for skilled workers, up to 5 years and renewable), Project Visa (short-term), and Business Visa (not valid for working). Requirements typically include a job offer, an annual salary of INR 16 lakh or more in some cases, a degree relevant to the role, and the firm's registration documents.

Processing usually takes 1-3 months. The EOR handles the documentation, but the employee applies online through the FRRO. There's no digital nomad visa in India yet. Intra-company transfer visas exist for multinationals. Check state-level rules, and make sure renewals include proof of continued need.

A few other things worth knowing

Employee data falls under the DPDP Act 2023. You'll need consent to collect and process it, it needs to be stored securely, and breaches must be reported within 72 hours. Fines can reach INR 250 crore. Trade unions carry real weight in manufacturing. If 15% or more of your workers join one, you'll need to recognise it, and certified collective agreements are binding.

Key changes between 2024 and 2026: the four Labour Codes rolled out in November 2025. At least 50% of CTC must be basic wage, which affects PF and gratuity costs by roughly 5-15%. Full and final settlement is now mandatory within 48 hours. The layoff threshold has moved to 300 employees. Fixed-term workers now qualify for gratuity after just one year. Review your contracts and payroll setup before April 2026.