A Guide for US Companies Hiring Employees in India

As a U.S. company hiring employees in India, you’re one of the many corporations tapping into the country's highly skilled and English-proficient workforce. Of the 1,800 offshore corporate offices in India, most are owned by Americans, with up to 900,000 employees expected to work for foreign companies in the country by 2030.¹

When hiring workers in India, you have to comply with several employment and labor laws. In this guide, we discuss how U.S. businesses can hire employees in India without setting up a legal entity. We outline legal pathways, payroll compliance requirements and more below. We'll also talk about how BatchTransfer can help your team do international payroll.

Why Hire Employees in India?

India offers a pool of highly qualified professionals across fields like software engineering, finance, customer support, design and technology. Many hold advanced degrees and come with real-world experience. Indian workers are also known for their strong work ethic and adaptability.

Labor costs in India are also notably lower than in the U.S. without a sacrifice on talent quality. The cost-efficiency has made India a preferred destination for companies scaling operations.

India's digital infrastructure is also stronger than ever. Cities like Hyderabad and Bangalore are known for their tech hubs and talent prevalence. The presence of cloud platforms and collaboration tools further facilitates long-distance workflow.

Many Indian professionals also accommodate U.S. schedules, which allows companies to work around the clock. Communication also flows easily since English is widely spoken across India. The country ranks at 69 out of 116 countries on the English Proficiency Index, with proficiency even higher in tech-oriented cities.²

How to Hire Indian Workers?

A U.S. company hiring employees in India can either establish a legal entity in the country or work with an employer of record (EOR). Each option has a different level of complexity and serves different business types.

Hiring Through an Employer of Record (EOR)

An EOR is a third-party service that serves as the legal employer on your behalf. The hiring company has to manage the employees' day-to-day work while the EOR manages compliance, local contracts, payroll, tax withholdings and statutory benefits.

Companies that want to start quickly without managing too much of the administrative work can choose this option. It’s often the fastest route to hire in India and is suitable for companies planning to scale operations.

Setting Up Your Own Entity in India

The second option is to establish a legal entity in India, which means you'll have to register a business in the country. You can set up a branch office or a private limited company, depending on your needs. The option positions the company for deeper local engagement and allows for complete control over everything from employment contracts to compliance.

However, the setup process is more complex. You have to register with various Indian government agencies and comply with labor laws. Plus, you have to appoint directors, open local bank accounts and manage ongoing filings and audits. If you plan to select this option, be prepared for a longer lead time and a bigger compliance burden.

What Are the Key Components of Employment Contracts in India?

Here’s what to include in the employment contract when you hire employees in India.

• Job Description: Define the employee’s role within the company, such as their specific responsibilities and performance expectations.
• Salary and Benefits: Outline the compensation, including base salary and payment frequency. If you offer benefits, include them here, too.
• Working Hours and Overtime: India caps work hours at 48 hours, spread across six days.³ Your contract should specify daily and weekly work hours along with overtime policies.
• Termination Clause: In this section, explain how the employment relationship can be ended. Cover items like severance, procedure to be followed and notice periods.

Many Indian employment contracts also include confidentiality clauses that restrict employees from sharing sensitive company information. You can add these if your company has intellectual property you want to protect.

Pay Employees With BatchTransfer

BatchTransfer has an easy-to-use instant payments system that allows you to make multiple payments, for both domestic and international, in one go. Small businesses and enterprises can get access to BatchTransfer with no additional cost after getting a Wise Business account.

BatchTransfer’s core strengths for payroll:

What sets BatchTransfer apart is its commitment to providing the mid-market rate for currency conversions. This means that businesses get a fair and transparent deal when making international payments.

Another perk of using BatchTransfer for international payroll is its extensive coverage of over countries and currencies! With features like automatic payment scheduling and API integration, small businesses can streamline their payroll process, freeing up valuable time and resources for other important tasks.

• How can businesses use BatchTransfer for payroll?: Businesses can send up to 1000 payments with a single click with BatchTransfer. US-based business can access BatchTransfer at no extra charge.

• Connect to your accounting software: You can easily manage and reconcile your mass payments through accounting software integrations such as QuickBooks or Xero.

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How Do You Pay Employees in India?

The local employment laws and statutory obligations shape the employee payment process in India. Most companies operate on a monthly payroll schedule. Salaries are disbursed on a fixed date every month.

Start by calculating the employee’s gross earnings, which include the base pay, allowances and performance-linked incentives. Then, deduct the mandatory contributions from this amount.

These include:

• Provident Fund: It’s a social security scheme to which employers contribute 12% of the employee's salary.⁴
• Income Tax: The income tax ranges between 0% and 30% in India.⁵ You have to calculate the amount based on the tax brackets your employees fall into.
• Professional Tax: Some states impose a professional tax on workers. If your employees live there, you have to deduct this tax amount from their gross salary accordingly.

The national or regional laws govern these deductions, and the employer is responsible for accurate calculation. After deductions, transfer the net salary to the employee's bank account in Indian Rupees (INR). Most businesses use electronic transfers for convenience and traceability.

Frequently Asked Questions

Which employee benefits are mandatory in India?

A U.S. company hiring employees in India has to contribute to the Provident Fund and the State Insurance Scheme. Employees are also entitled to vacations, statutory holidays, sick leaves, maternity leaves and gratuity.

How much does it cost to hire employees in India?

The total cost of hiring an employee in India depends on the role, experience level and location. Salaries start from INR 25,000 to INR 50,000 for junior roles and INR 150,000 to INR 300,000 for specialized professionals. Employers should also budget for mandatory contributions and benefits. If you're using an EOR, you’ll have to pay an additional service fee, which is usually a percentage of the employee's monthly compensation.

Is it easy to hire employees in India?

If you understand the local requirements, it's quite simple to hire in India. The country has a large employee base, so it's not hard to find the required talent. However, the legal and administrative aspects may be complex. You can work with an EOR to simplify these steps if you don't have the resources to set up a legal entity

Save Time and Hassle With Wise Business

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. Wise makes it easy to send, hold, and manage business funds in currencies. You can get major currency account details for a one-off fee to receive overseas payments like a local. Simply add the local account details when billing international customers to receive international payments with no fees.

Account opening is 100% online, with no need to visit a branch or book appointments.

Once you’re set up, you can connect to software such as Wave, FreshBooks, and more. You can also withdraw funds from Stripe without currency conversion fees.

Open a Wise Business account online