Most US companies discover India hiring complexity only after making their first offer, when payroll, labour law, and compliance obligations suddenly appear.
Most founders we speak with come to us after the same moment. They’ve found someone great in Bangalore or Hyderabad, the role makes sense, the budget works, and then someone asks how do we actually hire in India without creating a legal mess back home.
How can a US company hire employees in India?
US companies can hire employees in India in five ways:
- Set up a local entity
- Use an Employer of Record (fastest option)
- Hire independent contractors (limited use case)
- Outsourcing (Good for big corporations)
- Offshoring (Often unreliable)
Hiring in India gives US companies access to one of the deepest and fastest-growing talent markets in the world. However, it also triggers employment law, payroll compliance, and tax obligations from the day you make an offer, and not from the day you feel ready.
We’ve helped over 5,000 global companies work through this. The decision isn’t just who to hire in India. It’s the model that protects your company and moves fast enough for your growth timeline, so it doesn’t quietly create risk you’ll only discover during an audit or a bad exit.
TL;DR
- There are three ways to hire employees in India as a US company. Entity setup, independent contractors, or an Employer of Record.
- Indian employment law is nothing like US at-will employment. Contracts, notice periods, statutory payouts, and termination processes are all legally defined and non-negotiable.
- Misclassifying a full-time worker as a contractor is the most common and most expensive mistake we see. Indian authorities look at how someone works, not what the contract calls them.
- Setting up your own Indian entity gives you full control, but takes months to incorporate and adds fixed compliance costs regardless of headcount.
- An Employer of Record lets you hire in India in days without incorporating and without building a local payroll and compliance function from scratch.
- Hiring employees in India correctly from day one costs less and takes less time than fixing a compliance gap six months in.
- Husys onboards India employees in 8 hours and manages payroll, statutory filings, and employment compliance for $99 per employee per month.
Who This Guide Is For?
- US startups hiring their first 1 to 10 employees in India
- Scaleups expanding engineering, support, or operations teams
- Founders choosing between EOR, contractors, or entity setup
- CFOs and operations leaders who need cost clarity before committing
If your company already has an India subsidiary with its own HR and payroll team, then most of this will be familiar ground. We wrote this primarily for US founders and operators who are figuring out how to hire in India for the first time and want to do it without building a compliance function from scratch.
Why US Companies Hire in India
When we talk to founders who’ve already built teams in India, almost none of them describe it as purely a cost decision anymore. That framing was true ten years ago. What we hear now is different. They often come for the savings and stay for the talent.
US companies often hire engineers in India, including Python developers, Java developers, Cloud engineers, and .Net developers. However, at the same experience level, hiring engineers in India costs up to 70% less than hiring the same engineers in the US.
Husys’ compliance experts, backed by over 250 years of combined experience, report that engineering and developer roles account for nearly 70% of the placements they manage for US companies.
Here’s what’s driving it:
- Deep Talent Pool: India produces over 1.5 million engineers annually, giving scaling US companies access to a large stream of skilled tech and software professionals.
- Global Capability Centre Growth: India hosts roughly 1,950 Global Capability Centres (GCCs) employing around 1.9 million professionals, showing a strong multinational commitment to building strategic teams locally.
- Cost Advantage: Operating costs in India, including salaries and infrastructure, can be significantly lower than in the United States, helping scaling companies stretch budgets without compromising quality.
- Government Tax Incentives: In the 2026 Union Budget, India introduced a tax holiday for foreign companies providing cloud services globally using data centre infrastructure based in India. This creates long-term fiscal clarity for global tech firms looking to base digital and cloud operations locally.
- India’s AI Mission: Launched in 2024, the IndiaAI Mission is backed by a ₹10,371 crore ($1.25 billion)outlay over five years, with AI expected to contribute an estimated $550 billion to India’s economy by 2035. For US companies, this signals a government-backed push to make India a serious AI and deep tech destination, not just a cost play.
- AI-Ready Talent Pipeline: At WEF Davos 2026, India was recognised as holding the third-largest pool of AI-native talent globally. The government’s IndiaAI FutureSkills programme is actively supporting over 13,500 scholars across AI-related undergraduate, postgraduate, and PhD programmes, building a workforce pipeline that directly benefits companies hiring technical teams in India.
- Strategic Digital Infrastructure Push: The Indian government is positioning the country as a global digital infrastructure hub by aligning tax policy with major investments in data centres and cloud computing. This is aimed at attracting sustained foreign direct investment and global cloud service presence.
- State-Level Incentives: Several Indian states now offer capital subsidies, recruitment and relocation support, power tariff concessions, and employment generation incentives to attract tech and innovation centres, which benefit companies setting up operations or expanding teams.
The average US-based software engineering hire costs three to four times more than an equivalent India-based hire at the same experience level, and that gap compounds when you add benefits, real estate, and employer taxes.
Indian Employment Laws That US Companies Must Know
Late 2025 brought the most significant overhaul to Indian employment law in decades. For any US company planning to hire in India, the Labour Codes 2025 point out the operating framework your contracts, payroll, and termination processes now have to be built on.
What we see with first-time India hires is that most founders don’t know these rules exist until something breaks. By then, they’re dealing with retrospective penalties and not preventable ones.
Here’s what actually applies from day one:
- Written employment terms: Employment must be documented with clear role details, compensation structure, working hours, notice periods, and termination terms. Clauses that conflict with Indian labor law are unenforceable even if signed.
- Compensation structure rules: Allowances cannot exceed 50% of total CTC. At least half of compensation must be treated as wages, defined as basic pay plus dearness allowance, which increases the base used for statutory employer contributions.
- Working hours and overtime: Standard limits are 8 hours per day and 48 hours per week. Overtime must be paid at twice the normal wage rate. Lack of proper attendance tracking creates retrospective liability.
- Minimum wage compliance: Minimum wages are set by the state and job category. Paying below the applicable local minimum wage is illegal regardless of employee consent or company headquarters location.
- Statutory benefits: Provident Fund, Employee State Insurance, gratuity, professional tax, and statutory leave apply once eligibility thresholds are met. These are non-optional and enforced through payroll records.
- Gratuity exposure: Fixed-term and contract employees qualify after one year of service. Permanent employees qualify after five years. Gratuity is a lump sum liability based on last drawn salary and qualifying service, not a monthly contribution.
- Termination and exits: Terminations must follow the documented process and notice requirements. Improper exits are one of the most common causes of labor disputes in India.
- Final settlement timelines: Employers must complete full and final settlement promptly after exit, including unpaid salary, leave encashment, and statutory dues. Delays frequently trigger employee claims.
- Workplace safety obligations: Employers are responsible for safe working conditions, including for remote employees where applicable. Health and safety compliance applies even without a traditional office.
- State-level enforcement: Central Labour Codes provide the framework, but states control execution. Hiring across multiple states increases compliance complexity significantly.
What happens if you miss compliance?
If an employer fails to comply with Indian employment laws, authorities may inspect payroll and workplace records, raise formal demands for unpaid dues, levy penalties, and pursue legal action where violations persist.
Haryana authorities prosecuted Amazon India (a subsidiary of US-based Amazon) in 2024 for warehouse labor violations, including inadequate safety equipment, failure to provide breaks, and missing worker ID cards.
In another case, the Delhi High Court in 2025 upheld EPFO demands against LG Electronics India Pvt. Ltd. (South Korean multinational subsidiary) and SpiceJet for unpaid provident fund contributions on international workers’ full salaries.
What do our experts say?
Most compliance penalties in India rarely stem from underpaying salaries. They typically arise from incorrect wage structures, missed statutory filings, and worker misclassification, even when total compensation is above market rates.
Classifying Indian Workers: Employees vs. Contractors
This is the mistake we see most often, and it’s almost always made in good faith.
A US founder needs to hire employees in India quickly. Someone suggests keeping it simple, so just pay them as a contractor and sort the formalities later. The arrangement feels low-risk because it mirrors how US startups engage freelancers all the time.
Here’s where India works differently.
Worker classification isn’t determined by what the contract says. It’s determined by how the person actually works. If you set their hours and assign ongoing tasks, and they show up in your Slack like any other team member, then Indian authorities treat them as an employee regardless of what the paperwork calls them.
Think of it as India’s version of the California AB5 problem, except the retrospective liability includes unpaid Provident Fund, ESI, gratuity, and back taxes from day one of the engagement.
Most founders don’t find out until an exit, an inspection, or the contractor themselves raises a claim. By that point, the cost of fixing it is always higher than the cost of doing it right the first time.
Below is a practical comparison of how employees and contractors are treated in India.
Pro Tip for US founders:
- Use contractors only for work with a clear end date, defined deliverables, and no fixed working hours.
- Use employees or an Employer of Record for roles that require regular hours, reporting to a manager, or long-term involvement in core business functions.
How Much Does It Cost to Hire in India?
Hiring employees in India involves multiple cost components beyond base salary, especially when you consider compliance, employer contributions, and the model you choose (EOR vs entity). Below is a thorough breakdown to help US founders budget realistically.
1. Base Salary Ranges in India
Base salaries in India vary widely by role, experience level, and city. A senior engineer in Bangalore or Gurgaon will cost materially more than the same role in a Tier-2 city like Jaipur or Coimbatore. US companies hiring remotely across India often see a 20 to 40 percent spread purely based on location.
For roles such as engineers, support staff, SDRs, product managers, and QA engineers, the ranges below represent total annual compensation reported on Glassdoor for India-based hires working with global companies.
Note: Salary data is sourced from Glassdoor India. All INR to USD conversions use an exchange rate of 1 USD = 90.5 INR. |
US companies hiring SDRs in India are increasingly building full outbound functions there, not just testing the model. India-based SDRs selling into North American markets bring strong English communication, solid familiarity with SaaS sales motions, and base salaries that are a fraction of US equivalents.
Read more on Minimum Wages in India in 2026 and see how much hiring employees in India costs.
2. Mandatory Employer Contributions and Social Benefits in India
When a US company hires employees in India, total employment cost includes mandatory statutory contributions and social benefits defined under Indian labor and tax laws.
India’s new Labour Codes, effective November 21, 2025, update how certain statutory benefits are triggered and calculated. These rules now apply to all employers hiring in India, whether through an EOR or a local entity.
- Employee Provident Fund (EPF): Employers contribute up to 12% of an employee’s basic salary toward retirement savings. This is mandatory for most full-time employees and represents one of the highest statutory costs.
- Employee State Insurance (ESI): Applicable for employees below the government-defined salary threshold. The employer contribution is 3.25% and covers medical, disability, and insurance benefits.
- Gratuity: A statutory lump sum benefit payable after eligibility. Fixed-term and contract employees qualify after one year of service, while permanent employees qualify after five years. Payment is based on the last drawn salary and qualifying service.
- Professional tax: A state-level tax that varies by location. The amount is modest, but registration, calculation, and remittance are mandatory.
- Statutory bonus and leave compliance: Certain roles and salary structures require bonus payouts and minimum paid leave tracking under Indian labor regulations.
EOR vs entity cost comparison for US companies hiring in India
Once salary and statutory contributions are clear, the real cost difference comes from how you hire. Below is a practical comparison that reflects what US founders and finance teams actually pay when hiring employees in india.
Let’s say you’re a US company building a 50-person engineering team in India. Salaries stay the same either way. Here’s what you’ll pay with an EOR like Husys vs. with your own entity in India.
| Cost Factor | EOR (Husys) | Own Entity |
|---|---|---|
| EOR / Compliance Fee | $99/employee/month | — |
| Accounting & Bookkeeping | Included | ~$2,000/month |
| Legal Retainer & Advisory | Included | ~$2,000/month |
| HR Admin / People Ops | Included | ~$2,500/month |
| Payroll Software & Vendor | Included | ~$800/month |
| Company Secretary & ROC Filings | Included | ~$700/month |
| Transfer Pricing / FEMA Advisory | Included | ~$800/month |
| Statutory Audit (Amortized) | Included | ~$700/month |
| Banking, FX & Miscellaneous | Included | ~$500/month |
| Total Monthly (50 Employees) | $4,950 | ~$10,000 |
| Total Annual (50 Employees) | $59,400 | ~$120,000 |
| Incorporation (One-Time) | $0 | ~$15,000–$25,000 |
With your own entity, you will pay almost 2x for the same resources. Plus, the entire compliance liability will lie with the company. Compare that to an EOR, you pay half and don’t even have to worry about compliance ever.
Five Ways to Hire in India: Which One Is Right for You?
For US founders and fast-growing US companies, hiring in India usually starts with one clear goal. Build a reliable team quickly without creating legal or compliance risk. However, the challenge is choosing the right hiring model early because each option affects speed, cost, control, and long-term flexibility.
However, before diving in, download the checklist below. It’ll help you identify the right hiring model for your situation before you read through each one.
Below is a practical breakdown of the most common ways US companies hire employees in India.
Option 1: Employer of Record (EOR)
The question we hear most from US founders is whether they can hire employees in India without incorporating there first. The answer is yes, and this is how.
“An Employer of Record becomes the legal employer in India, so your US company never has to. You manage the work and the relationship, and we handle the employment layer underneath.”
For most companies hiring employees in India for the first time, this means no entity setup, no compliance learning curve, and no waiting two to three months before you can make your first offer.
Benefits of using an EOR for US companies
- Speed to hire: Employees can be legally employed within days because the EOR already has labor registrations, payroll systems, and statutory accounts in place. There is no dependency on MCA approvals, bank account activation, or tax registrations that typically delay India hiring by 8 to 12 weeks.
- No entity requirement: You do not have to incorporate a Private Limited Company, appoint resident directors, open local bank accounts, or maintain ongoing ROC filings. Hiring stays operational rather than becoming a corporate setup project.
- Lower upfront and fixed costs: You won’t have to incur incorporation fees, legal retainers, accounting contracts, or statutory audit costs. Expenses remain directly tied to headcount instead of turning into fixed overhead.
- Predictable employment cost: Monthly pricing includes payroll processing, statutory deductions, filings, and compliance monitoring. This protects you from unplanned costs triggered by labor law changes or state-specific requirements.
- Compliance ownership sits outside the US entity: The EOR takes responsibility for employment contracts, payroll accuracy, tax withholding, terminations, notice periods, and severance calculations. Your US company is insulated from direct exposure to Indian labor law complexity.
- Pan India hiring without complexity: You can hire employees across multiple states while the EOR manages differences in professional tax, labor registrations, and state-level compliance.
- Cleaner exits and restructuring: If hiring plans change, you can scale down without dissolving an entity or carrying dormant compliance obligations.
Compliance and payroll handled by the EOR
- Employment contracts: The EOR issues India-compliant employment contracts that reflect local labor laws while aligning with your role structure, compensation, and termination terms.
- Payroll execution: The EOR runs monthly payroll, including salary calculations, payslip generation, and salary payments in INR. Currency conversion and payment timing are managed for you.
- Statutory deductions: The EOR calculates, deducts, and remits Provident Fund, Employee State Insurance, and professional tax, where applicable, based on employee location.
- Tax compliance: The EOR manages income tax withholding, deposits, and statutory filings. Employees receive the required tax documents without involvement from your US finance team.
- Employee benefits: Mandatory benefits are provided by default. Optional benefits such as health insurance can be added based on your hiring strategy and budget.
The cost structure that US companies should expect
- EOR service fee: A fixed monthly fee per employee covering employment contracts, payroll processing, statutory compliance, tax withholding, filings, and ongoing employee administration.
- Employee salary: The agreed salary paid in INR based on local market benchmarks. The EOR manages payroll execution and statutory reporting.
- Statutory employer costs: Mandatory employer contributions required under Indian law. These are calculated and remitted as part of payroll.
From a US leadership perspective, this results in a single monthly cost per employee while the EOR manages payroll, tax compliance, statutory filings, and regulatory accuracy in India.
Example for context
For example, EORs like Husys allow US companies to onboard Indian employees in as little as 8 hours. They manage contracts, payroll, taxes, and statutory benefits while charging around $99 per employee per month. This enables US teams to start hiring in India almost immediately without legal or compliance delays.
Option 2: Set Up Your Own Entity
At some point, as your India team grows, the question shifts from how do we hire in India fast to how do we own this properly for the long term. That’s when entity setup starts making sense.
Setting up your own Indian entity means incorporating a Private Limited Company that becomes the legal employer for your local team. You get full control over contracts and compensation and HR policy, and you take on full responsibility for payroll, audits, and compliance across every state you hire in.
What we see is that founders who move to an entity too early spend months on corporate setup instead of hiring. The ones who time it right have already proven that India works for their business and are ready to run it like a permanent operation.
What changes once you operate through your own entity
- You become the employer of record: Your Indian company is legally responsible for hiring, terminations, notice periods, severance, and adherence to Indian labor laws.
- Compliance becomes continuous: Monthly, quarterly, and annual filings are mandatory regardless of hiring pace or revenue activity.
- Employment decisions carry legal weight: Terminations, role changes, and compensation adjustments must follow documented processes under Indian law.
- Payroll accuracy sits with your company: Errors in deductions, filings, or payments create direct legal and financial exposure.
- Local advisors become essential: Accountants, payroll vendors, auditors, and legal counsel are required on an ongoing basis.
Benefits of setting up an Indian entity
- Full operational control: You design employment contracts, HR policies, compensation structures, and benefits without third-party constraints.
- Direct employer brand: You can hire employees in India directly under your company name, which can matter for senior or leadership roles.
- Lower marginal cost at scale: Per employee costs often decrease once headcount reaches a meaningful size.
- Local commercial flexibility: You can sign contracts, invoice Indian customers, and hold local assets if required.
Compliance and operational responsibilities
- Company incorporation and governance: Registration under the Companies Act, appointment of directors, board compliance, and annual ROC filings.
- Tax registrations and filings: PAN, TAN, GST where applicable, income tax returns, and withholding compliance.
- Payroll and labor compliance: Monthly payroll processing, statutory deductions, labor law filings, and state-level compliance.
- Accounting and audits: Bookkeeping, statutory audits, tax audits where applicable, and financial reporting.
- Banking and FX management: Opening and maintaining Indian bank accounts and complying with foreign exchange regulations.
The cost structure that US companies should expect
- Incorporation and setup costs: Legal, professional, and government fees incurred before the first employee is hired.
- Ongoing compliance costs: Accountants, payroll providers, auditors, legal retainers, and filing expenses.
- Fixed overhead: Costs continue regardless of headcount changes or hiring pauses.
- Management bandwidth: Internal time spent coordinating compliance, finance, HR, and advisors.
For many US companies, entity setup makes sense only after India hiring has been proven and stabilized. It is common to start with an EOR and transition to an entity later, once scale and certainty justify the commitment.
Option 3: Hire Independent Contractors
This is the model most US founders reach for first and the one we spend the most time talking people back from.
Engaging someone as an independent contractor feels familiar because it maps directly to how US startups work with freelancers. They invoice you and handle their own taxes, and there’s no payroll to set up.
The problem is that hiring in India through contractors only works cleanly when the engagement is genuinely project-based and time-limited. The moment it starts looking like a full-time role, Indian authorities stop caring what the contract says and start looking at how the person actually works.
What this model looks like in practice
- No employment relationship: Contractors are not employees under Indian law and should not be treated as such.
- Services-based engagement: Work is defined through a services agreement rather than an employment contract.
- Invoice-driven payments: Contractors submit invoices and are paid against them, usually monthly.
Compliance reality US founders need to understand
- Misclassification risk: If a contractor works full-time, reports to a manager, follows fixed hours, or performs core business functions, Indian authorities may treat them as an employee.
- Retrospective liability: Misclassification can trigger backdated taxes, penalties, interest, and employee benefit claims.
- No employment protection: Contractors are not covered under labor laws, which increases attrition risk and reduces loyalty.
- Tax withholding exposure: In many cases, US companies are still required to withhold tax on contractor payments.
The cost structure that US companies should expect
- Contractor fees: Typically, higher monthly payouts compared to employee salaries because contractors price at their own risk and taxes.
- Withholding obligations: Tax may need to be withheld at source depending on contract structure and residency.
- Legal review costs: Proper contracts are essential to reduce misclassification exposure.
- Hidden risk cost: Penalties and legal disputes can outweigh short-term savings if classification is challenged.
Option 4: Offshoring
Offshoring typically means partnering with an Indian service provider that hires and manages talent on its own payroll while delivering dedicated services to your US company. The offshore provider is the legal employer. Your company contracts for defined services, outcomes, or team capacity.
This model is often chosen by US companies that prioritize speed and minimal administrative involvement. It removes the need to set up an entity or run local payroll. At the same time, it creates structural distance between your company and the team performing the work.
What happens once you offshore
- The provider becomes the employer: The offshore company hires, manages payroll, sets employment terms, and handles compliance. You do not control the underlying employment framework.
- You manage through a contract: The relationship is governed by service agreements and SLAs rather than direct employment terms.
- Hiring and compensation move through a third party: Role changes, salary adjustments, performance actions, and replacements are executed through the vendor’s internal processes.
- Brand presence becomes indirect: Team members are legally employed by the provider. Your company name may not appear on their employment contracts.
- Continuity depends on the vendor: Attrition, backfills, and team stability are influenced by the provider’s culture, incentives, and management quality.
Benefits of offshoring
- Fast setup: No incorporation, no payroll registrations, and no direct HR infrastructure required.
- Administrative simplicity: The provider handles HR operations, statutory deductions, and local compliance.
- Bundled infrastructure: Office space, IT setup, and local operations can be included within the service model.
- Predictable service pricing: Monthly fees typically bundle salary, benefits, infrastructure, and vendor margin.
The cost structure that US companies should expect
- Service-based pricing: Charges are structured per resource or per team rather than as direct salary plus statutory cost.
- Embedded vendor margin: A markup is built into the monthly fee. Over time, this margin compounds as headcount grows.
- Limited cost transparency: Salary components, statutory contributions, and overhead allocations are often packaged together.
- Contractual constraints: Minimum terms, notice periods, and transition conditions may apply if you later decide to internalize the team.
Option 5: Outsourcing
Outsourcing means contracting an external company in India to deliver a defined scope of work. Unlike offshoring, you are not building a dedicated team that functions as an extension of your company. You are purchasing an outcome, project, or ongoing service.
The outsourcing partner decides how the work gets done, who performs it, and how resources are allocated. Your agreement defines deliverables, timelines, quality standards, and pricing.
This model is commonly used for discrete functions such as customer support, back-office processing, IT services, or project-based development.
What happens once you outsource:
- You do not manage individual contributors: The vendor assigns staff internally. You interact with account managers or project leads.
- Control shifts to deliverables: Oversight focuses on output quality and timelines rather than day-to-day team management.
- Team composition is fluid: The people working on your account may change without direct input from you.
- Cultural integration is limited: The outsourced team operates within the vendor’s organization, not yours.
- Knowledge retention sits externally: Institutional knowledge remains with the service provider.
Benefits of outsourcing:
- Clear scope and cost: Pricing is typically tied to defined deliverables, hours, or service volumes.
- Minimal HR involvement: No employment management, payroll processing, or statutory oversight.
- Operational simplicity: The vendor handles recruitment, training, supervision, and replacement.
- Short-term flexibility: Suitable for projects with defined timelines or variable workloads.
The cost structure that US companies should expect
- Project-based or retainer pricing: Fees are structured around milestones, monthly service volumes, or agreed capacity.
- Margin built into pricing: The vendor includes staffing costs, management overhead, and profit within the contract value.
- Change-order exposure: Scope expansion or shifting requirements can increase cost.
- Limited visibility into wage structure: Compensation, statutory contributions, and internal team allocation are not transparent.
For many US companies, outsourcing works when the goal is the execution of a defined function rather than building an internal capability in India. It is less aligned with companies seeking long-term team ownership, employer branding, or deep operational integration.
Comparison of Hiring Models for US Companies in India
| Factor | Employer of Record (EOR) | Set Up Your Own Entity | Independent Contractors | Offshoring | Outsourcing |
|---|---|---|---|---|---|
| Time to hire | Fastest. Employees onboarded in hours | Slow. Takes months before first hire | Fast for individuals, limited for scale | Fast. Vendor deploys team quickly | Fast for defined projects |
| Upfront commitment | Minimal. No incorporation required | High. Legal setup & registrations required | Low upfront, risky long term | Low setup, contractual commitment required | Low. Defined by project contract |
| Legal employer | EOR acts as legal employer | Your entity is legal employer | No employer relationship | Offshore provider is employer | Vendor employs staff |
| Compliance ownership | Fully owned by EOR | Fully owned by your company | Unclear & high risk | Owned by offshore provider | Owned by outsourcing vendor |
| Payroll & tax handling | Managed end-to-end by EOR | Managed internally | Partial. Withholding risk remains | Handled by offshore provider | Handled by vendor |
| Employment risk exposure | Low. Liability sits with EOR | High. Direct labor law exposure | High. Misclassification risk | Low direct risk, vendor dependency risk | Low employment risk, delivery risk |
| Cost predictability | High. Fixed monthly fee | Medium. Variable compliance costs | Low. Hidden penalties possible | Medium. Bundled pricing | Medium. Scope change risk |
| Ability to hire across India | Easy. State rules handled centrally | Complex. Multi-state compliance required | Difficult at scale | Limited by vendor structure | Limited to vendor scope |
| Scalability | High. Easy headcount adjustment | High but slow to adjust | Poor beyond few individuals | Medium. Vendor bandwidth dependent | Low–Medium. Contract-based scaling |
| Intellectual Property protection | Strong. Structured IP assignment | Strong. Direct enforceable contracts | Weak–Moderate | Moderate. Needs safeguards | Moderate. Contract governed |
| Long-term strategic control | Medium. Shared legal structure | High. Full control | Low. Fragile at scale | Low–Medium. Vendor filtered control | Low. Deliverable-focused |
| Best use case | First hires, fast expansion | Large long-term operations | Short-term specialist work | Cost-focused delivery teams | Defined projects |
| Founder time required | Minimal | High ongoing oversight | Medium legal oversight | Medium vendor governance | Low–Medium contract reviews |
| Overall risk profile | Low & controlled | Medium–High | High | Medium | Medium–High |
Most US founders hiring in India are not looking to place one person. They are building a remote team in India that functions as a real extension of their company. Engineers, developers, SDRs, support staff, all working inside the same tools, reporting to the same managers, and held to the same standards as the US team.
Stage 1: Market Testing (1–10 hires)
Most early-stage companies use an EOR for speed, low risk, and no fixed setup.
Stage 2: Early Scale (10–50 hires)
Growth-stage companies often continue with an EOR to maintain flexibility while scaling.
Stage 3: Structural Commitment (50–100+ hires)
At a sustained scale, companies evaluate setting up their own entity for long-term control and cost efficiency.
Contractors: Best suited for short-term or specialist work, not core team roles.
Bottom line: For most US startups and scaling companies, an EOR offers the best balance of speed, compliance, cost control, and flexibility. Entity setup makes sense only after long term commitment is clear. Contractors work only for limited, non-core use cases.
For instance, for US companies that need to hire developers in India, the entity setup timeline is one of the most common reasons a strong candidate is lost before the offer lands. Python developers, Java developers, Cloud engineers, and .Net developers in India are in active demand and do not wait for a two to three-month incorporation process.
Husys has placed developers across all of these stacks for over 5,000 global companies, with 89% of those hires fully contracted, payroll-registered, and onboarded within 8 working hours of confirmation.
New Hire Onboarding Checklist: Guide for US Founders
Most US founders think onboarding is the easy part. You’ve done the hard work of finding the right person, so now it’s just getting them set up and productive.
In India, onboarding has a compliance layer that runs parallel to the people layer, and the two have to happen together. Payroll registrations, tax setup, and statutory enrollments all have deadlines tied to the employee’s start date and not to when your HR team gets around to it.
What we see is that most first-90-day compliance failures don’t start with bad intentions. They start with an onboarding checklist built for a US hire applied to an Indian one.
Below is a practical onboarding checklist structured by stage:
Before the first day:
This stage sets the foundation. Most payroll and compliance issues originate here.
- Background verification: Run identity, education, and employment checks as required for the role. Many Indian employers treat this as mandatory for full-time hires, especially in tech and customer-facing roles.
- Offer letter and employment contract: Issue a signed offer letter that aligns with Indian labor law. Compensation structure, notice period, and job location should be clearly defined before onboarding begins.
- Tax setup: Collect the employee’s Permanent Account Number (PAN). Ensure your payroll setup is linked to your Tax Deduction and Collection Account Number (TAN) so income tax withholding starts correctly from month one.
- Statutory benefit enrollment: Register the employee for Provident Fund, Employee State Insurance, where applicable, gratuity tracking, and any mandatory state-level benefits.
- Payroll inclusion: Add the employee to payroll before their start date. Late additions often result in missed salary payments or incorrect deductions in the first month.
- System and access setup: Create work email, internal tool access, HRIS login, and security permissions. Delays here directly impact productivity in week one.
- Welcome communication: Send a welcome email outlining start time, reporting manager, first-day agenda, and required documents. This sets clarity and reduces first-day friction.
On Day 1
Day one is about orientation and clarity, not productivity.
- Workspace readiness: Ensure laptop, credentials, VPN access, and tools are ready. First-day downtime is a strong predictor of early disengagement.
- Structured agenda: Share a clear agenda for the day so the employee knows what to expect. This is especially important for remote hires.
- Manager introduction: Schedule a one-on-one with the reporting manager to set expectations, role scope, and near-term priorities.
- Onboarding mentor or buddy: Assign a point of contact for day-to-day questions. This reduces dependency on the manager and speeds up ramp-up.
- Team introductions: Introduce the employee to immediate teammates and cross-functional contacts they will work with regularly.
- Policy walkthrough: Cover working hours, leave process, communication norms, and escalation paths. Do not assume US norms apply automatically.
During the first 30 to 90 days
This phase determines whether the hire succeeds or quietly disengages.
- Role-specific training: Schedule technical or functional training tied directly to the employee’s responsibilities rather than generic company sessions.
- Clear goals and deliverables: Define 30, 60, and 90-day expectations. Ambiguity at this stage leads to performance issues later.
- Regular check-ins: Schedule weekly or bi-weekly check-ins with the manager. Early feedback prevents small issues from compounding.
- Performance alignment: Ensure the employee understands how performance is measured, including any variable pay or bonus structure.
- Compliance confirmation: Verify that payroll deductions, tax withholding, and statutory benefits are working correctly after the first salary cycle.
- Engagement and retention check: Ask direct questions about workload, clarity, and support. Early exits are expensive and often preventable.
Where US Companies Get Burned in the First 90 Days
After supporting thousands of companies as they hire employees in India for the first time, we can tell you that most onboarding failures aren’t random. They follow the same five or six patterns almost every time.
- Salary structure that fails the minimum wage or 50% basic wage test, which triggers payroll recomputation and back pay liability
- PF and ESI registrations are delayed past the first payroll cycle, resulting in penalties and arrears from day one of employment
- Incorrect tax withholding in month one because the TDS setup was treated as an afterthought rather than a pre-boarding requirement
- Offer letter terms that conflict with Indian labour law, particularly around notice periods, termination conditions, or compensation breakdowns
- Contractor arrangements that Indian labour courts reclassify as employment relationships, triggering retroactive PF, ESI, and leave entitlement obligations from the start of the engagement
- Applying at-will termination assumptions from the US context, which do not hold in India, and can expose the company to labour court disputes
- Missing mandatory leave entitlements in the employment contract, including earned leave, sick leave, and the 26 weeks of paid maternity leave required by law
- Triggering permanent establishment risk without realising it, where the employee’s activities in India create a taxable corporate presence that subjects the company to Indian income tax obligations
- Incomplete or missing background verification consent under the Digital Personal Data Protection Act, which requires explicit written consent before checks are initiated
- Payroll errors cascading across statutory deductions, where a miscalculation in EPF affects ESI, which then affects professional tax and income tax withholding, compounding the compliance gap across the entire first quarter
Terminating Employees in India
In the US, you can let someone go with little notice and minimal process. In India, termination follows a documented path with notice periods and settlement timelines, and statutory payouts that are non-negotiable regardless of what your employment contract says.
What we see when US companies get this wrong is rarely intentional. It’s usually a founder applying American instincts to an Indian employment relationship and not realizing that the two systems work nothing alike.
You can absolutely terminate employees in India. The process just needs to be followed correctly, and the moment you skip a step, you’re in labor dispute territory.
Notice Period: For employees who have completed at least three months of service, a 30-day notice period is generally required. In cases of proven misconduct, termination may be immediate and without notice.
Probationary Periods: Probation is not mandatory under Indian law. However, most employers follow a standard probation period of six months. This may be extended by up to three additional months at the employer’s discretion.
Severance: Severance entitlements in India vary based on the reason for termination and are governed primarily by the Payment of Gratuity Act, 1972.
Redundancy: Employees are entitled to severance pay equal to 15 days of average wages for every completed year of continuous service, including any part of a year exceeding six months.
Dismissal (Non-misconduct): Employers must settle all applicable termination dues, which may include:
- Accrued and unused paid time off
- Gratuity, for employees with more than five years of continuous service
- Payment in lieu of notice, if notice is not served
- Statutory bonus, where applicable
- Any additional amounts owed under the employment contract
Termination for Misconduct: Employees terminated for proven misconduct are not entitled to notice pay or severance benefits.
Payroll and Tax Compliance for US Companies
Running payroll in India means paying salaries, deducting taxes, depositing statutory contributions, and filing reports with the government every month.
Unlike the US, where gross salary is the starting point, Indian compensation is built around a CTC structure where basic pay, allowances, and statutory contributions all interact with each other. Getting one component wrong doesn’t just affect that line item. It cascades across tax withholding and Provident Fund, and ESI, and by the time you catch it, you’re looking at retrospective corrections across an entire quarter.
Here’s what US CFOs must know:
- Salary payments: Employees must be paid in INR. Payments must align with the agreed salary structure and be supported by compliant payslips.
- Payslips: Payslips must clearly show wages, allowances, employee deductions, and employer contributions. Missing or incorrect payslips are treated as payroll non-compliance.
- Income tax deduction: Employers must deduct income tax from salaries each month based on tax slabs and employee declarations. If tax is under-deducted or deposited late, the employer pays the shortfall and interest.
- Tax deposits and filings: Deducted taxes must be deposited within statutory timelines and reported through mandatory filings. Annual tax statements must be issued to employees.
- Provident Fund and social security: Employer and employee contributions to the Provident Fund and the Employee State Insurance must be calculated correctly and deposited every month. Late or incorrect deposits attract interest and penalties.
- State-specific payroll rules: Professional tax, minimum wage checks, and certain filings depend on the employee’s state. Hiring across multiple states increases payroll work and filing requirements.
- Payroll records: Employers must maintain payroll registers, tax filings, and statutory records. Authorities can ask for these during inspections.
- Corrections and penalties: Payroll errors are corrected retroactively. This usually involves revised filings, back-dated payments, interest, and penalties.
For US companies looking to hire in India, we give a simple framework as below
Team size | Best model |
1–10 | EOR |
10–50 | EOR |
50+ | Entity |
We always suggest starting small, learn the India compliance structure, building the team, and once there is enough confidence with the right people onboard start the paperwork for setting up an entity in parallel.
Common Compliance Risks for US Founders and How to Avoid Them
Indian regulations are execution-driven. Small gaps in setup or documentation compound over time and surface during audits, exits, or regulatory reviews.
- Misclassifying employees as contractors: Using contractors for full-time, ongoing roles can lead to demands for unpaid taxes, Provident Fund, gratuity, and penalties. Avoid this by using contractors only for short-term, deliverable-based work and treating long-term roles as employment through an EOR or entity.
- Incorrect salary and payroll structure: Poorly structured CTC, incorrect wage components, or missed statutory deductions result in back-dated corrections with interest and penalties. Avoid this by aligning salary structures with Labour Code wage rules from day one.
- Missed or late statutory filings: Delays in depositing income tax, Provident Fund, or other statutory payments trigger automatic interest and penalties. Avoid this by using a fixed monthly compliance calendar or outsourcing payroll execution.
- Ignoring state-level rules: Minimum wages, professional tax, and leave rules vary by state. Applying one standard across locations creates non-compliance. Avoid this by configuring payroll and policies based on the employee’s work location.
- Poor termination and exit handling: Incorrect notice periods, delayed final settlements, or missing documentation often lead to disputes. Avoid this by following documented exit processes and completing full and final settlements on time.
Hire Employees in India With Husys While Staying Compliant
By the time most US founders reach this point in the guide, they’ve realised that hiring employees in India compliantly isn’t just about finding the right person. It’s about building the employment layer underneath them correctly from day one.
That’s exactly what we do at Husys. We’ve spent 23 years helping global companies hire in India without setting up entities or building local compliance functions from scratch. We act as the legal employer for your India team, so you never have to.
What that means in practice is that we run payroll and handle statutory filings and manage state-specific labour rules and show up when there’s an inspection or an audit or a difficult exit. Your US team sees everything through one platform and doesn’t have to become experts in Indian employment law to keep your people paid and compliant.
Here’s why US companies choose Husys:
- Entity-free hiring in India: We legally hire employees in India, so you do not need to incorporate, appoint directors, open bank accounts, or register with Indian authorities.
- End-to-end compliance execution: We calculate and deposit PF, ESI, Professional Tax, and TDS, file all required returns, maintain statutory registers, and handle labour inspections and notices.
- Pan-India employment support: We employ and run payroll for employees across 28 states and 6 union territories, applying the correct state-level rules for wages, professional tax, and leave.
- Fast, predictable onboarding: Once compensation and role details are confirmed, we onboard employees within 8 working hours, including contract issuance, payroll setup, and statutory registrations.
- Single monthly cost: You pay a flat $99 per employee per month for employment administration, payroll processing, statutory filings, and compliance management.
- Operational scale and edge cases: We have supported 5,000+ global companies and managed 50,000+ workers, which means payroll audits, exits, inspections, and scale-up scenarios are already solved playbooks.
- Centralised HR system: ApHusys runs onboarding, payroll, payslips, tax documents, employee data, and self-service requests in one system that your US team can access without managing multiple tools.
- Compliance accountability: We own employment execution in India and work with an in-house legal and compliance team instead of outsourcing compliance to third parties.
Conclusion
India offers access to skilled talent at scale, but hiring there also involves strict employment, payroll, and labour law requirements that US companies must plan for upfront. US companies typically hire in India through three models, including setting up a local entity, hiring independent contractors, or using an Employer of Record (EOR).
An EOR allows US companies to hire full-time employees quickly without incorporating in India, while handling payroll, statutory compliance, and ongoing employment obligations from day one.
Husys supports this model by acting as the Employer of Record in India. We employ your team locally, run payroll, manage labour law compliance across all states, and onboard employees within hours, giving US companies a practical way to hire and scale in India without compliance risk.
Frequently Asked Questions (FAQ's)
1. How to hire an employee in India?
US companies can hire in India in three ways: by setting up a local entity, by using an Employer of Record, or by engaging contractors for limited project-based work. For most first-time hires and early scaling, using an EOR is the fastest and lowest-risk option.
2. Can a US company hire employees in India without setting up a local entity?
Yes. US companies can legally hire full-time employees in India through an Employer of Record. The EOR becomes the legal employer in India and handles payroll, taxes, and labour law compliance, while the US company manages day-to-day work.
3. How does Husys help US companies hire in India?
Husys acts as the Employer of Record in India. We employ your team locally, run payroll, manage statutory filings, and handle state-level labour law compliance so you can hire without incorporating in India.
4. How quickly can Husys onboard an employee in India?
Once role details and compensation are finalised, Husys can onboard employees within 8 working hours, including employment contracts, payroll setup, and statutory registrations.
5. What does Husys handle as part of payroll and compliance?
Husys manages salary processing, income tax withholding, Provident Fund, Employee State Insurance, Professional Tax, statutory filings, and compliance with employment-related labour laws across Indian states.
6. What is the cost per hire in India?
The cost depends on the role, experience level, location, and hiring model. In addition to salary, employers must budget for statutory contributions and payroll compliance. When hiring through Husys, companies also pay a flat $99 per employee per month for employment and compliance management.
7. What is the minimum wage in India?
India does not have a single national minimum wage. Each state sets its own minimum wage, and it varies by job category and skill level. Employers must follow the minimum wage applicable to the employee’s work location.
8. What are the 4 Labour Codes in India?
India’s labour framework is organised under four Labour Codes: the Code on Wages, the Industrial Relations Code, the Code on Social Security, and the Occupational Safety, Health and Working Conditions Code.
9. When should a US company move from Husys to its own Indian entity?
Companies typically consider setting up an entity only after headcount grows significantly and they are ready to manage payroll, audits, and labour compliance internally.
