India does not have a single minimum wage. Rates vary by state, city zone, and skill level. US employers must comply with state-notified wages, the 50% wage structure rule, overtime laws, and statutory benefits from the first hire.
Hiring in India looks straightforward from the outside.
And while talent is abundant, salaries appear low, hiring in India is more complex than it appears, especially for US companies.
In India, minimum wage is not a single number, not even a national standard. It changes by state, city category, skill level, and job classification. It also depends on how wages are structured, not just how much you pay. A salary that looks generous by US standards can still fail a statutory audit.
Moreover, India’s Code on Wages, 2019, has tightened definitions, expanded enforcement powers, and reduced the margin for “good-faith mistakes” by foreign employers. Remote hiring and distributed teams make those risks harder to spot and easier to trigger.
In this guide, we explain how India’s minimum wage system works in 2026 and how it affects hiring costs, payroll compliance, and risk for US founders hiring employees in India.
TL;DR
- India does not have a minimum wage. The legal minimum depends on the state, city zone, and skill level of the employee, and it changes regularly.
- You cannot load most of the salary into allowances. Basic pay plus Dearness Allowance must be at least 50% of total pay, or payroll will be reclassified during audits.
- Minimum wage laws apply if the employee is working from India, even if your company is US-based and the role is remote.
- The wage you agree to pay is not your full cost. Employer provident fund and gratuity typically add 15–20% on top of salary.
- Overtime in India is paid at double the hourly rate, applies after 8 hours a day or 48 hours a week, and adds up fast.
- Wages must be paid by the 7th of the next month, with itemized wage slips. Missing the deadline or paperwork triggers penalties.
- US companies can avoid this risk by hiring through an Employer of Record like Husys, which handles state wages, payroll filings, and audits.
What are the Minimum Wages in India?
Minimum wages in India are governed by the Code on Wages, 2019, which sets the legal framework for how wages are defined, revised, and enforced. India does not apply a single nationwide rate. Instead, state governments set minimum wages based on the type of work and the skill level of the role.
These wages are updated periodically using the Consumer Price Index (CPI). Under the Code, employers must structure compensation so that the prescribed wage components, namely Basic Pay, Dearness Allowance (DA), and Retaining Allowance, where applicable, together meet or exceed the notified minimum wage.
Code on Wages Act, 2019: What US Employers Must Know
The Code on Wages, 2019, is the current law governing wages in India. It was passed by Parliament and received Presidential assent on August 8, 2019, but only came into force on November 21, 2025.
The Code consolidated four earlier statutes: the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976. Any company employing workers in India today is governed by this Code, including US/foreign employers hiring India-based employees.
Key provisions currently in force:
- Unified wage framework: All wage-related compliance is now governed under a single law instead of multiple overlapping statutes.
- Definition of wages (50% rule): Basic Pay, Dearness Allowance, and Retaining Allowance must together form at least 50% of total remuneration. If they fall below this threshold, the excess allowances are added back for statutory calculations.
- State-notified minimum wages: State governments continue to notify minimum wage rates by skill level and occupation within the central framework.
- National floor wage: The Central Government sets a national floor level minimum wage (NFLMW) based on minimum living standards. State governments cannot set minimum wages below this floor, though they can (and do) set higher rates.
- Payment timelines: Wages must be paid by the 7th day of the following month for establishments with less than 1,000 employees (stricter than the previous framework).
- Mode of payment: Wages must be paid in cash, by cheque, or through direct bank transfer/electronic payment (bank transfer strongly preferred for compliance documentation and may be mandated by government notification for certain industries).
- Gender neutrality: The Code explicitly prohibits discrimination based on gender in matters of wages, recruitment, and employment conditions for the same work or work of a similar nature.
- Bonus coverage: Eligible employees (earning wages up to ₹21,000 per month) are entitled to statutory annual bonus payments of a minimum 8.33% of wages.
- Universal applicability: Unlike the old Minimum Wages Act (which applied only to “scheduled employments”), the Code on Wages applies to all employees in all sectors (organized and unorganized, formal and informal).
- Applicability to foreign and remote hiring: Minimum wage compliance is determined by the employee’s work location in India, not the employer’s country of incorporation. If an employee works from India (even remotely for a US company), Indian minimum wage laws apply.
Minimum Wage Rates in India (2026): Cost Benchmarks for US Employers
Unlike the United States, with its single federal minimum wage, India operates a complex multi-tier system where rates vary dramatically by state, skill level, industry, and geographic zone.
National Overview of Daily and Monthly Rates
As of January 2026, India’s wage system operates on two levels:
Central Government Rates (Baseline): The Central Government has set the following minimum wages for workers under its jurisdiction (applicable to central sphere establishments):
- Unskilled workers: ₹783 per day (approximately $9.40 USD) or ₹20,358 per month (approximately $244 USD)
- Semi-skilled workers: ₹868($9.55 USD) per day or ₹22,568($248.36 USD) per month
- Skilled workers: ₹954($10.50 USD) per day or ₹24,804($272.96 USD) per month
- Highly skilled workers: ₹1,035 per day (approximately $12.40 USD) or ₹26,910 per month (approximately $323 USD)
National Floor Level Minimum Wage (NFLMW): The absolute baseline that no state can go below is ₹178 per day (approximately $2.13 USD) or ₹5,340 per month (approximately $64 USD). This floor wage has remained unchanged since 2017, though states universally set rates significantly higher than this baseline.
Important Note for US Employers: The daily rate calculation in India uses a 26-day working month (accounting for one weekly off), not 30 days. However, salaries are paid for the full calendar month. This affects how you convert daily rates to monthly budgets.
Skilled vs Unskilled Minimum Wages in India
India categorises workers into four distinct skill levels, with corresponding wage differentials. In practice, many employers also map these categories to NSQF-aligned job roles defined by Sector Skill Councils (SSC) under the Skill India ecosystem, which helps standardise what unskilled vs skilled looks like across industries.
Minimum wages are still notified by the central and state governments, but SSC role definitions often influence how companies classify roles and benchmark pay bands internally:
1. Unskilled Labour
Workers who perform basic tasks requiring no prior experience or specialized training. Examples include general laborers, cleaners, helpers, and peons. These workers may need initial on-the-job training to familiarize themselves with tools and processes.
- Central Government minimum: ₹783($9.40 USD)/day or ₹20,358($244 USD)/month
- State range: ₹7,410/month (Rajasthan) to ₹18,066/month (Delhi)
- Typical roles: Entry-level patient care attendants in healthcare, warehouse loaders and pickers in logistics, office assistants and helpers in most workplaces
2. Semi-Skilled Labour
Workers who can perform most job functions but require supervision and training for advanced tasks. They have some specialized knowledge but haven’t achieved full proficiency.
- Central Government minimum: ₹868 ($9.55 USD)/day or ₹22,568($248.36 USD)/month
- State range: Varies by 15-20% above unskilled rates
- Typical roles: Junior nursing assistants or ward assistants in hospitals, machine operators on the shop floor, data entry and back-office support roles in BPO operations, junior technicians working under supervision
3. Skilled Labour
Workers who can independently perform complex tasks with minimal supervision. They possess expertise gained through training, experience, or formal education.
- Central Government minimum: ₹954($10.50 USD)/day or ₹24,804($272.96 USD)/month
- State range: ₹8,034( $88.41 USD)/month (Rajasthan) to ₹22,411($246.63 USD)/month (Delhi)
- Typical roles: Certified staff such as electricians and mechanics in manufacturing, lab and imaging technicians in healthcare, experienced QA testers in tech, and accountants handling compliance and reporting
4. Highly Skilled Labour
Workers with advanced expertise, specialised training, or professional qualifications who handle the most complex operations.
- Central Government minimum: ₹1,035($11.39 USD)/day or ₹26,910($296.14 USD)/month
- State range: ₹9,334($102.72 USD)/month (Rajasthan) to ₹19,537($214.99 USD)/month (Karnataka Zone I)
- Typical roles: Senior engineers and solution architects in technology, project managers leading cross-functional delivery, specialised consultants, and senior clinical and hospital operations roles that require advanced credentials
Note on SSC updates: Sector Skill Councils periodically add and refresh job roles and qualifications as industries evolve, including in healthcare and the broader care economy.
Critical Insight for US Employers: While these are legal minimums, actual market salaries for skilled and highly skilled workers (especially in IT, engineering, and professional services) typically run 2 to 5 times higher than minimum wage. For example, a software developer in Bangalore earning the market rate of ₹60,000–80,000/month is well above the ₹19,537($214.99 USD) minimum. In most cases, this band aligns with early-career roles, typically around 1 to 3 years of experience. A developer in this range is often a graduate from a mainstream engineering college or a state-affiliated university, while candidates from elite institutions such as the IITs, NITs, or top private engineering colleges may command higher starting salaries and faster jumps even at similar experience levels. However, you must still ensure all salary components meet the structural requirements of the Code on Wages. |
Key Facts for US Employers Hiring in India:
- India legally classifies workers into four skill categories: unskilled, semi-skilled, skilled, and highly skilled.
- Minimum wages are notified by the central and state governments, while Sector Skill Councils (SSC) and the National Skills Qualifications Framework (NSQF) help employers standardise role classification internally.
- State minimum wages can vary significantly within the same skill category depending on location and zone.
- Skilled and highly skilled minimum wages represent compliance floors, not market benchmarks.
- Market salaries for skilled professionals typically range 2 to 5 times above statutory minimum wages.
- Regardless of pay level, salary structures must comply with the Code on Wages 50% rule.
State-Wise Minimum Wage (2026)
The table below provides current minimum wage rates across major Indian states as of January 2026. Rates are shown for unskilled, skilled, and highly skilled categories under the Shops and Establishments Act. Many states have multiple zones with different rates based on the cost of living.
Note: Effective dates vary by state. Most states revise wages semi-annually (April and October) to account for VDA adjustments.
| State | Unskilled (₹/month) | Skilled (₹/month) | Highly Skilled (₹/month) | Effective Date |
|---|---|---|---|---|
|
Delhi |
18,066 ($198.81) |
22,411 ($247) |
N/A |
April 1, 2025 |
|
Maharashtra (Zone I) |
16,867 ($185.62) |
19,392 ($213) |
N/A |
July 1, 2025 |
|
Maharashtra (Zone II) |
16,027 ($176.37) |
18,552 ($204) |
N/A |
July 1, 2025 |
|
Karnataka (Zone I) |
15,701 ($172.79) |
18,135 ($200) |
19,537 ($215.00) |
April 1, 2025 |
|
Karnataka (Zone II) |
15,150 ($166.72) |
17,467 ($192) |
18,803 ($206.92) |
April 1, 2025 |
|
Karnataka (Zone III) |
14,624 ($160.93) |
16,831 ($185) |
18,103 ($199.22) |
April 1, 2025 |
|
Karnataka (Zone IV) |
14,124 ($155.43) |
16,226 ($179) |
17,437 ($191.89) |
April 1, 2025
|
|
Chandigarh |
14,394 ($158.40) |
14,844-15,069 ($163-$166) |
15,469 ($170.21) |
October 1, 2025 |
|
Meghalaya |
13,650 ($150.21) |
15,730 ($173) |
16,770 ($184.54) |
April 1, 2025 |
|
Gujarat (Zone I) |
13,013 ($143.20) |
13,273 ($146) |
N/A |
October 1, 2025 |
|
Gujarat (Zone II) |
12,727 ($140.06) |
13,013 ($143)
|
N/A |
October 1, 2025 |
|
Jharkhand |
13,050 ($143.61) |
18,042 ($199) |
20,802 ($228.90) |
October 1, 2025 |
|
Uttarakhand |
12,391–12,539 ($136.36–$137.99) |
13,838-14,023 ($152-$154) |
N/A |
April 1, 2025 |
|
Madhya Pradesh |
12,150 ($133.71) |
14,869 ($164)
|
16,494 ($181.51) |
October 1, 2025 |
|
Andhra Pradesh |
11,701 ($128.77) |
8,438-14,488 ($93-$159) |
14,488 ($159.44) |
October 1, 2025 |
|
Punjab |
11,389 ($125.33) |
13,067 ($144) |
14,099 ($155.16) |
September 1, 2025 |
|
Chhattisgarh (Class A)
|
11,176 ($122.99) |
12,346 ($136) |
13,386 ($147.31) |
Oct 1, 2025 - Mar 31, 2026 |
|
Chhattisgarh (Class B) |
10,916 ($120.13) |
12,086 ($133) |
13,126 ($144.45) |
Oct 1, 2025 - Mar 31, 2026 |
|
Rajasthan |
7,410 ($81.55) |
8,034 ($88) |
9,334 ($102.72) |
December 13, 2025 |
*Many states split minimum wages into geographic zones based on cost of living and urbanisation. Zone I typically covers high-cost metro and major municipal areas, while Zone II (and sometimes Zone III/IV) covers smaller cities and semi-urban or rural regions.
The wage rates rise with the zone because housing, transport, and daily costs are higher in metro belts. In practice, the applicable zone is determined by the employee’s work location and the local area classification notified by the state.
**USD conversion based on exchange rate of ₹90.87 = $1 USD as of January 18, 2026. Exchange rates fluctuate, so make sure you check the current rates for precise budget planning.
Key Observations for US Employers:
- Location matters: There’s a 2.4x difference between the lowest (Rajasthan at ₹7,410) and highest (Delhi at ₹18,066) minimum wages for unskilled workers.
- Zone classifications: Large states like Karnataka and Maharashtra have internal zones reflecting metro vs tier-2 city cost differences.
- Revision frequency: States update at different times. Delhi, Karnataka, and Himachal were revised in April 2025, while most others were revised in October 2025.
- USD conversion: At current exchange rates (₹83.50 = $1 USD), even the highest state minimum wage (Delhi at ₹18,066) equals approximately $217/month for unskilled workers. This represents significant cost savings vs. the US minimum wage ($7.25/hour federal = approx. $1,257/month).
- Market reality: Remember that these are legal minimums. Competitive salaries for roles like software developers, digital marketers, customer support specialists, and other skilled positions will be substantially higher (typically ₹30,000-80,000/month or $360-960/month for mid-level roles) across various experience levels. India’s wage law has changed, and even minor mistakes can trigger fines. Hire in India through Husys and stay compliant with state wage laws. Even large employers feel the impact. Wipro disclosed a one-time ₹302.8 crore or $30 million labour-code related employee cost linked to gratuity recalibration. The premise is that Indian payroll laws are misinterpreted; a compliant EOR partner like Husys is very important to be safe from such penalties.
Special Wage Rules US Employers Must Comply With in India
Beyond baseline minimum wage requirements, India’s Code on Wages, 2019, introduces wage rules that differ materially from US employment practices. These rules affect overtime costs, salary calculations, payment timing, and benefit eligibility. Violations trigger statutory penalties regardless of intent.
1. Overtime Compensation Requirements
India mandates overtime pay at twice the regular wage rate for any work beyond standard hours. This requirement applies under the Code on Wages, 2019, and the Occupational Safety, Health and Working Conditions Code, 2020.
Standard working limits are capped at 8 hours per day and 48 hours per week. Any work beyond either threshold triggers the 2x overtime rate. This differs from the US Fair Labor Standards Act, where overtime applies after 40 hours per week at 1.5x pay.
Key rules US employers must account for:
- Overtime requires employee consent and cannot be imposed unilaterally (Occupational Safety, Health and Working Conditions Code, 2020, Act No. 37 of 2020, Section 27).
- The 2x rate applies to the employee’s regular wage, including applicable allowances
- States impose caps on total overtime hours, typically between 50 and 150 hours per quarter
- Factories face stricter limits, usually a maximum of 2 overtime hours per day
Cost impact example:
A software engineer earning ₹80,000 per month works 10 hours instead of 8 for five consecutive days. At an approximate hourly rate of ₹385 (about $4.19), the employer owes ₹3,850 (about $42) in overtime pay for that week alone. Sustained overtime can inflate monthly payroll costs by 15–25% (roughly ₹12,000–₹20,000, or about $131–$218 on an ₹80,000 base).
2. The 26-Day Working Month Calculation Standard
India calculates daily wages using a 26-day working month, not the 30-day calendar month commonly assumed by US employers. This assumes one weekly rest day per week.
When a state minimum wage is listed as ₹22,411 per month (about $244), the daily rate is ₹862 (₹22,411 ÷ 26, about $9.38), not ₹747 (about $8.13).
This standard affects:
- Pro-rated salaries for mid-month joiners
- Leave without pay deductions
- Overtime hourly calculations
- Piece-rate minimum guarantees
Employees are paid their full monthly salary regardless of whether the calendar month has 28, 30, or 31 days. The 26-day standard is used for minimum-wage compliance checks and for converting monthly notified minimum wages into day rates across skill categories, especially for pro-rata calculations (joins/exits, LOP).
Here’s a simple example using the same minimum wage number. Both salaries pay ₹22,411, but only one structure meets compliance.
3. Salary Timeline Mandates
Wage payments in India follow strict statutory deadlines. For establishments with fewer than 1,000 employees, wages must be paid by the 7th day of the following month. Larger establishments face earlier deadlines.
This creates operational friction for US companies accustomed to bi-weekly or semi-monthly payroll cycles. Payroll planning must account for:
- Indian public holidays near the month-end
- Bank settlement timelines
- Currency conversion delays
- Statutory deductions
Missing the deadline by even one day exposes the employer to statutory penalties. The burden of proving timely payment rests entirely on the employer.
4. Mandatory Wage Slip Requirements
Every wage payment must be accompanied by a detailed wage slip. This requirement applies regardless of whether wages are paid in cash, by check, or via bank transfer.
Wage slips must clearly itemize:
- Basic pay, dearness allowance, and retaining allowance
- All other allowances, such as HRA and special allowances
- Statutory deductions, including EPF, ESI, professional tax, and income tax
- Overtime payments
- Bonuses or incentives
- Net pay
Electronic wage slips are permitted if employees have access to them.
5. Equal Pay for Equal Work Provisions
The Code on Wages 2019 prohibits gender-based wage discrimination for the same work or work of a similar nature. Similar work is defined by skill, effort, experience, and responsibility.
US employers cannot justify pay differentials based on prior salary history, negotiation outcomes, or legacy market disparities. The law applies equally to male, female, and transgender employees across recruitment and compensation decisions. If an employer pays different wages for the same work or work of a similar nature, it can trigger
(1) a wage claim for the unpaid difference, where the authority may also award compensation up to 10x of the claim amount, and
(2) statutory penalties for paying less than the amount due, including fines up to ₹50,000 (and higher penalties for repeat offences).
6. Fixed-Term Employment Gratuity Eligibility
Under the Code on Social Security, 2020, fixed-term employees become eligible for gratuity after one year of continuous service, not five.
Gratuity is calculated as: (15 × Last Drawn Salary × Years of Service) ÷ 26
Last drawn salary includes Basic Pay and Dearness Allowance. The gratuity payout is capped at ₹20 lakh and is tax-free for employees.
An employee earning ₹50,000 per month, completing a one-year fixed-term contract, is entitled to ₹28,846 in gratuity. US employers must accrue this liability from day one.
How US Employers Can Calculate Minimum Wages in India
Every minimum wage in India comprises three elements:
- Basic Wage represents the fixed salary component. State governments set this based on occupation categories and skill levels. For example, India’s Capital New Delhi’s basic wage for skilled workers under the Shops and Establishments Act is approximately ₹17,000 per month as of January 2026.
- Variable Dearness Allowance (VDA) adjusts wages for inflation based on the Consumer Price Index (CPI) for Industrial Workers. VDA is revised semi-annually in April and October to reflect changes in the cost of living. As of October 2025, Delhi’s VDA for skilled workers is approximately ₹5,411 monthly.
- House Rent Allowance (HRA) or Special Allowance compensates for housing costs. In high-cost cities like Delhi, Mumbai, and Bangalore, HRA can range from 10-30% of basic wages depending on the zone classification.
The minimum wage = Basic Wage + VDA + applicable allowances, subject to the constraint that Basic + Dearness Allowance + Retaining Allowance must equal at least 50% of total remuneration under the Code on Wages.
Step-by-Step Calculation Example
Let’s calculate the compliant minimum wage for a skilled worker in Bangalore (Karnataka Zone I) as of January 2026:
Step | Explanation | INR | USD (approx.) |
1 | Identify the applicable state notification (Karnataka Zone I skilled minimum wage, effective Apr 1, 2025) | ₹18,135 / month | $197 |
2 | Verify the wage breakdown: Basic Wage | ₹13,500 | $147 |
2 | Verify the wage breakdown: VDA | ₹4,635 | $50 |
3 | Add mandatory allowances if applicable: HRA assumed at 40% of Basic | ₹5,400 | $59 |
4 | Wage components (Basic + VDA) | ₹18,135 | $197 |
4 | Total remuneration (Basic + VDA + HRA) | ₹23,535 | $256 |
4 | Percentage of total remuneration (₹18,135 ÷ ₹23,535) | 77% | 77% |
5 | PF applicable base cap | ₹15,000 | $163 |
5 | Employer PF contribution (12% of ₹15,000) | ₹1,800 / month | $20 |
5 | Employee PF contribution (12% of ₹15,000) | ₹1,800 / month | $20 |
5 | Gratuity accrual basis (4.81% of Basic + VDA) | 4.81% | 4.81% |
5 | Gratuity accrual (4.81% of ₹18,135) | ₹873 / month | $9.5 |
6 | Daily rate used for overtime calc (₹18,135 ÷ 26) | ₹698 / day | $7.6 |
6 | Overtime rate per hour (₹698 ÷ 8 × 2) | ₹175 / hour | $1.9 |
Final | Minimum wage (Basic + VDA) | ₹18,135 | $197 |
Final | Employer PF | ₹1,800 | $20 |
Final | Employee PF | ₹1,800 | $20 |
Final | Gratuity accrual | ₹873 | $9.5 |
Final | Total mandatory employer cost (as given) | ₹22,608 / month | $246 |
Final | HRA and other allowances | Optional, additional | Optional, additional |
US employers hiring in India must consider all these components to avoid compliance issues.
Minimum Wage vs. Market Wage: What’s the Reality in 2026
India has a large talent pool, but competition for employable talent is intense. Every major company is hiring from the same limited band of job-ready candidates.
Minimum wages define the legal floor. Market wages reflect what companies are actually paying to secure talent. For professional roles, these numbers are very different.
For example, a Software Engineer in India earns around ₹7,00,000 per year ($7737) based on market data. A Senior Software Engineer earns closer to ₹12,32,500 per year ($13,624). Both figures are several multiples above the applicable minimum wage.
In other words, companies compete on compensation to hire faster, retain talent, and scale execution. Minimum wage remains a compliance requirement, but it does not influence professional salary decisions.
Compliance Requirements for US Employers
Employers must meet registration, filing, documentation, and inspection obligations across multiple authorities.
Compliance area | US (typical expectation) | India (what changes) |
Employer registration | Register federal/state tax accounts; set up payroll provider | Multiple registrations across EPF, ESI, Professional Tax, Labour Welfare Fund, and Shops & Establishments based on state and eligibility |
Payroll deductions | Income tax withholding, Social Security/Medicare, state taxes | TDS withholding plus statutory EPF and ESI (where applicable), and state-specific deductions like Professional Tax |
Filing cadence | Regular payroll tax filings (federal/state), year-end forms (W-2/1099) | Monthly statutory returns plus periodic state labour filings; one entity can require dozens of filings annually |
Record keeping | Maintain payroll records and timekeeping for audits | Formal registers for wages, attendance, overtime, leave, and employee files are often required in prescribed formats |
Inspections | Audits typically occur through tax agencies and are usually process-driven | Labour inspections can include on-site record checks and employee interviews; documentation must be producible on demand |
Penalty exposure | Fines and interest for tax/noncompliance | Fines, interest, damages for EPF/ESI defaults, and higher penalties for repeat violations |
Location impact | Rules vary by state, but filing systems are relatively standardized | State-by-state differences are significant, including zones, wage schedules, and local compliance requirements |
Unlike the US, where state taxes are percentage-based, India’s Professional Tax is a fixed monthly amount (for example, ₹200 in Karnataka) that employers must deduct and file each month. Non-compliance results in automated penalties.
1. Mandatory Registrations
Within 30 days of hiring the first employee, employers must register under:
- Employees’ Provident Fund Organisation (EPF)
- Employees’ State Insurance Corporation (ESI)
- State Professional Tax Authority
- State Labour Welfare Fund (where applicable)
- State Shops and Establishments Act
Failure to complete registrations can result in operational shutdowns. In most cases, registration confirmations are issued within 7–15 working days, though timelines can extend to 3–4 weeks depending on the state portal, document readiness, and verification backlogs.
2. Monthly and Annual Filings
Ongoing compliance includes:
- Monthly EPF returns and payments
- Monthly ESI contributions, where applicable
- Monthly professional tax filings
- Quarterly income tax salary returns
- Multiple annual labour returns
A single Indian entity typically requires 45 or more filings annually. Missing these filings can trigger late fees and penalties, plus interest on delayed statutory payments. For EPF and ESI defaults, authorities can levy interest and damages, and repeated non-compliance can escalate into prosecution risk.
India has made measurable improvements in ease of doing business over the last decade.
For US founders, CFOs, and HR leaders exploring India for engineering, customer support, or shared services teams, that progress is worth paying attention to.
In 2014, India ranked 142nd on the World Bank’s Ease of Doing Business index. By 2020, it climbed to 63rd, driven by regulatory reforms, digital systems, and faster approvals.
And that’s not it. India also offers access to a deep pool of professionals across AI, technology, engineering, finance, operations, and emerging digital roles.
But rankings and talent availability tell only part of the story. For US employers looking to establish operations, hire teams, or engage contractors in India, the on-the-ground experience involves navigating a complex regulatory landscape that varies significantly from American business norms.
3. Record-Keeping Standards
Employers must maintain:
- Wage registers
- Attendance records
- Leave registers
- Overtime registers
- Individual employee files
Most records must be retained for at least three years and produced on demand during inspections.
4. Inspection Rights and Penalties
Labour authorities may conduct inspections, examine records, and interview employees without prior notice.
Penalties include:
- Underpayment or delayed wage payment: fines up to ₹50,000 (about $545)
- Non-maintenance / incorrect wage records: fines up to ₹10,000 (about $109)
- EPF and ESI defaults: interest and additional damages on late statutory deposits (amount varies by delay)
- Repeat violations: higher penalties, including fines up to ₹1,00,000 (about $1,087) and possible prosecution
Burden of Proof is on Employers: The burden of proof lies entirely with the employer. If an employee alleges underpayment or unpaid overtime, the employer must produce contemporaneous records. Absence of documentation is presumed in favor of the employee.
What Happens If You Miss Minimum Wage Compliance in India
Minimum wage compliance in India is strictly enforced. It is not treated as a paperwork lapse or an HR issue. Violations trigger inspections, financial recovery orders, and legal action.
Labour departments conduct routine and complaint-driven inspections. Inspectors examine wage registers, attendance records, bank transfer proofs, and salary structures. Even when employees are paid above minimum wage, incorrect structuring can still result in non-compliance findings.
Enforcement actions employers may face
- Fines and penalties: Employers can be fined for non-payment of minimum wages under the Code on Wages (penalties can run into tens of thousands of rupees per offence).
- Back wages: Authorities can order payment of all wage shortfalls going back to the period of non-compliance.
- Criminal liability: Severe or repeated violations may lead to prosecution, including fines and potential jail terms.
- Audits & filing halts: Non-compliance often triggers deeper labour audits and delays in registrations or statutory approvals.
In 2025, V-Mart Retail Ltd., a large listed retail chain, was issued a penalty of approximately ₹11.2 lakh ($12387) by the Uttar Pradesh labour authorities for alleged minimum wage and overtime violations. The order required corrective action and financial provisioning, highlighting that enforcement applies even to large, established employers.
Hiring Strategy for US Employers: Employment by Self-Owned Entity vs EOR
When hiring in India, US employers typically choose between direct employment or an Employer of Record (EOR) model. While both approaches allow access to Indian talent, the compliance, risk, and operational burden differ significantly.
For most US companies without an existing Indian entity, EOR is the lower-risk and faster path.
Here’s a table that highlights the core differences between direct employment and EOR services for a US-based company.
Factor | Direct Employment in India | Employer of Record (EOR) |
Legal employer | US company’s Indian entity | EOR is the legal employer |
Entity setup | Mandatory. Incorporation, bank accounts, and local directors | Not required |
Time to hire | 3–6 months | 8 hours (Husys EOR) |
Minimum wage compliance | Employer is responsible for tracking state and zone updates | Managed by EOR |
Payroll processing | In-house team or multiple vendors | Fully handled by EOR |
PF, gratuity, ESI | Employer must register, calculate, deposit, and file | Handled and filed by EOR |
Labour law registrations | Required across the central and state authorities | Covered under EOR’s registrations |
Termination rules | Employer bears notice, severance, and dispute risk | Managed compliantly by EOR |
Compliance risk | High. Errors trigger penalties and backdated liabilities | Significantly reduced |
Cost visibility | Fragmented across legal, payroll, and advisors | Single consolidated invoice |
Scalability | Slow. Each hire increases compliance overhead | Easy to scale up or down |
Exit complexity | Entity closure is costly and time-consuming | Simple contract termination |
Intellectual Property (IP) Protection (This is the #1 secret fear of US tech companies hiring in India.) | Managed by your own legal team. | IP is legally transferred to the US parent via the EOR contract. |
Note: Under an EOR model, the EOR remains the legal employer in India and stays responsible for tracking changes in labour laws, minimum wages, and statutory compliance. You retain full control over day-to-day work, performance, and delivery, while the EOR handles employment risk and regulatory obligations locally.
How to Select the Right EOR Partner for India Operations
When evaluating an EOR partner, US employers should assess:
- India operating history: How long the provider has been running payroll and compliance operations in India, not when they launched “EOR” as a product.
- Payroll scale: Number of active employees currently on payroll under Indian labour laws, not cumulative or historical figures.
- Contractor compliance: Ability to legally engage and manage contractors under Indian regulations, including audits and misclassification risk.
- Geographic coverage: Operational presence across Indian states and union territories where labour rules, minimum wages, and filings differ.
- Statutory execution: In-house handling of PF, gratuity, ESI, professional tax, and labour filings without third-party dependency.
- US employer exposure: Direct experience supporting US companies, including reporting expectations, compliance scrutiny, and termination standards.
- Industry familiarity: Prior handling of SaaS, IT services, product engineering, fintech, and India GCC teams with similar employment patterns.
EOR providers like Husys are built for this level of execution. Husys has operated continuously in India since 2001, runs payroll for 3,000+ active client employees at any given time, has supported 50,000+ contractor engagements under Indian labour laws, and works with 5,000+ US employers.
Husys’s operations span 28 states and 8 union territories, including Karnataka, Maharashtra, Telangana, Tamil Nadu, NCR, and West Bengal, with deep exposure to US startups and technology-led teams. This operating depth allows US employers to hire in India compliantly without setting up local infrastructure upfront.
Conclusion
Hiring in India requires clarity on wages, statutory costs, and labour law obligations that vary by state. Minimum wage compliance is only the starting point. Employers must also account for provident fund, gratuity, notice periods, and termination procedures that are enforced in practice, not just on paper. These requirements apply to the first hire and do not scale down for smaller teams.
For most US employers, the EOR model offers a stable way to operate within this framework. Partnering with an established India-based provider like Husys allows companies to hire in India while staying aligned with local employment laws and payroll regulations. Until there is a clear need to build a local entity, EOR provides a compliant and operationally efficient hiring path.
Frequently Asked Questions (FAQ's)
1. What is the actual minimum wage I need to budget for hiring in India?
You should budget for the state-notified minimum wage (Basic + VDA) plus mandatory employer costs. Statutory additions typically include employer PF and gratuity accrual, which together add roughly 15–20% over the minimum wage. Allowances like HRA are optional and sit above this floor.
2. Can I pay below minimum wage if offering equity compensation?
No. Equity, ESOPs, bonuses, or variable pay cannot replace or offset minimum wages. Indian labour law requires the cash wage paid each pay cycle to meet or exceed the notified minimum wage.
3. How do India’s minimum wages compare to those of other offshore markets?
India’s minimum wages are generally lower than those in Eastern Europe and Latin America, and comparable to or slightly higher than those in parts of Southeast Asia. However, India’s statutory structure and enforcement are more complex, which affects total cost and compliance planning.
5. Do minimum wage laws apply to foreign employees working remotely for my US company from India?
Yes. If the individual is physically working from India, Indian labour laws apply regardless of nationality or where the parent company is based.
6. How often will I need to increase salaries due to minimum wage revisions?
Most states revise VDA twice a year, usually in April and October. Base minimum wage revisions happen less frequently, but must be applied immediately when notified.
7. What is the National Floor Level Minimum Wage, and why does it matter?
The National Floor Level Minimum Wage sets a baseline guidance issued by the central government. States cannot set minimum wages below this level, but employers must always follow the higher state-specific rate, which is what applies in practice.
