Insights
How to Hire Employees in India Under the New Labour Codes
Insights · By Chen ChunJie · Published 8 November 2026
India’s four Labour Codes took effect on 21 November 2025 and changed how employers write contracts and structure pay. A foreign company can hire through its own Indian company, through an employer of record, or by engaging independent contractors for defined projects. This guide covers the routes, contracts, pay, leave and how employment ends.
Last reviewed in November 2026 against the four Labour Codes in force since 21 November 2025, current EPF and ESI rates and the Income-tax Act, 2025. State rules and rates change, so we confirm them for each engagement.
Three ways to hire
| Route | Who employs the person | Best for |
|---|---|---|
| Your own Indian company | Your private limited company or branch | Long-term teams and GCCs |
| Employer of record | An Indian employer such as our Local Team | First hires before your entity is ready |
| Independent contractor | No employer; a services contract | Projects by genuinely independent professionals |
Appointment letters and the 50% rule
Every employee must receive a written appointment letter setting out the role, wages, hours, leave and social security. Under the Code on Wages, if allowances excluded from “wages” exceed half of total pay, the excess counts as wages, which raises EPF, gratuity and severance. Probation is set by the contract, and post-employment non-competes are generally unenforceable.
No Indian company yet? Our Local Team can be the legal employer while you manage the work. See Employer of Record in India.
Pay and payroll
Minimum wages are set by each state. The employer pays 12% EPF on PF wages plus charges, ESI for staff earning up to INR 21,000 a month, deducts TDS and professional tax, and provides for gratuity. See our India payroll guide.
Working time and leave
| Rule | What applies |
|---|---|
| Hours | 48 a week, normally 8 a day, with a weekly rest day |
| Overtime | Twice the ordinary rate, with consent |
| Annual leave | One day per 20 days worked after 180 days; state law may give more |
| Maternity | 26 weeks for the first two children |
Ending employment
After a year’s service, retrenchment needs one month’s notice or pay in lieu, compensation of 15 days’ average pay per completed year and 15 days’ wages to the re-skilling fund. Gratuity of 15 days’ wages per year is due after five years, or one year for fixed-term staff, capped at INR 20 lakh.
Hiring a foreign national
Foreign staff need an Employment Visa, generally for skilled roles paying more than USD 25,000 a year. See Expat Employment in India.
FAQ: hiring employees in India
Is a written contract required?
Yes, an appointment letter is mandatory under the Labour Codes.
Is there a national minimum wage?
No single rate; states set minimum wages above the national floor wage.
Are non-compete clauses enforceable?
Post-employment non-competes generally are not.
When is gratuity due?
After five years, or one year for fixed-term staff.
Hiring your first employee in India?
Our Local Team employs the person, runs payroll with EPF, ESI and TDS, and handles the paperwork, while you manage the day-to-day work.
Related
How we employ your team in India.
Contracts, leave, termination and more.