Guide to hiring in India

Key takeaways

• India’s booming talent market: Tap into India's vast, young, and tech-focused talent pool, which is a global powerhouse in AI, machine learning, and cybersecurity, to meet your expansion and upskilling needs.

• Compliance & complex compensation: Navigate India's labor laws, state-specific benefits, and complex salary structures, which often include multiple allowances making up a large portion of total compensation, to ensure full compliance.

• Strategic expansion options: Accelerate your entry into the Indian market and manage compliance risk by leveraging Employer of Record (EOR) services like G-P to hire full-time employees quickly, or use independent contractors for flexible market testing.

India passed China and is now the world’s most populous country. Nearly 1.4 billion people live in India. This, coupled with a young demographic and a growing middle class, offers a big talent pool and consumer market to tap into. India has one of the world's fastest-growing economies and is projected to become the fourth-largest globally by the end of 2025.

Before expanding into India, you’ll need to understand contracts, taxes, wages, benefits, and other employment laws. Our guide will tell you everything you need to know about hiring in India.

What to know before hiring in India

If you’re expanding your business into India for the first time, there are legal requirements to be aware of. These norms and laws influence hiring practices in India and many aspects of the employer-employee relationship, including compensation and benefits. 

G-P Gia™, our AI-powered global HR agent, can answer your toughest compliance questions across 50 countries — including India — and all 50 U.S. states. Reduce your reliance on outside counsel and cut the time and cost of compliance by up to 95% with Gia.

Here are five things to know about hiring in India.

1. India’s workforce

India's talent pool is focused on technology and human-centric skills. The country aims to become a global talent powerhouse in AI, machine learning, cybersecurity, cloud computing, and data analytics. 

2. Job hopping in India

An Aon study from April 2025 found that 82% of India-based employees are actively seeking a new job or considering a switch in the next 12 months. The trend is strong amongst younger generations. Another survey found that 47% of Gen Z employees in India plan to leave their current job within two years. The main reason is the desire for career progression and upskilling. India-based professionals see job hopping as a way to broaden skills and gain cross-functional exposure.

3. Salary packages in India

Negotiating compensation packages is a complex process in India due to the many allowances employees receive on top of basic pay. These allowances can make up  60% of an employee’s total compensation. Allowances can include:

• Performance-based bonuses

• Children education allowance

• Children hostel allowance

• House rent allowance (HRA)

• Car allowance

• Phone allowance

• Leave travel allowance or concession (LTA/LTC)

• Special allowance

Some allowances are taxable. Others are tax-exempt up to a certain point. 

4. Taxes and social security contributions in India

India has two tax systems. Employees can choose annually which one to follow. Both systems are progressive, meaning tax rates increase with income. Employers deduct tax at source. Employees below certain incomes (e.g., INR 3,00,000 under the new regime or INR 2,50,000 under the old regime for those under 60) don’t pay income tax.

Employers and employees contribute to a retirement savings scheme called the Employees Provident Fund (EPF). Employees and employers pay an equal 12% contribution. Employers cover most contributions to other types of social insurance, such as Employees’ Deposit Linked Insurance (EDLI).

5. Guaranteed benefits in India

India doesn’t have a single, universal list of statutory benefits that applies to all workers. Instead, statutory benefits are determined by central (federal) laws and state-specific legislation. The rules depend on the sector (e.g., factory, commercial establishment, IT, etc.) and the state where the employee works. For example:

• Factories are governed by the Factories Act, 1948.

• Commercial establishments (offices, retail, etc.) are governed by the relevant state’s Shops and Establishments Act.

Working hours, rest breaks, and paid leave are set by the relevant central or state law. There’s no national minimum for sick leave, and annual leave entitlements can range from 12–21 days.

National holidays vary regionally in India. All employers have to observe three national holidays (Republic Day, Independence Day, and Gandhi Jayanti), but the rest are determined by state governments.

Maternity leave is governed by the Maternity Benefit Act, 1961 (amended 2017). This provides 26 weeks of paid leave for the first two children and 12 weeks for additional children.

Health insurance isn’t a statutory requirement. However, employees covered under the ESI Act (generally those earning up to INR 21,000/month in eligible establishments) get statutory health benefits. Many employers offer private group health insurance to supplement statutory benefits.

Top hiring hubs in India

Some cities in India are known for particular industries. Knowing what each city has to offer allows you to focus your hiring efforts in the right place and fill roles faster. 

The top talent hubs in India are:

• Bengaluru (Bangalore) is known as the Silicon Valley of India. Bengaluru is the top hiring center for technology, IT services, startups, and R&D centers. It has a strong presence in biotechnology, aerospace, and fintech.

• Hyderabad is a major IT and business process outsourcing (BPO) center. Hyderabad is home to many global tech companies, pharmaceutical firms, and a growing startup ecosystem.

• Delhi NCR (National Capital Region) includes Delhi, Gurgaon (Gurugram), and Noida. The NCR is a hiring hub for IT, finance, consulting, e-commerce, manufacturing, and media.

• Mumbai is the financial capital of India. Mumbai is a center for banking, finance, insurance, media, entertainment, and multinational corporate headquarters.

• Pune is known for its strong IT, automotive, and manufacturing sectors. Pune has a big education and research community.

Key industries in India

Understanding India’s top industries allows you to benchmark salaries and benefits. You can use this insight to make smart choices about where to invest and grow your talent pool.

The main industries in India include:

• IT and IT-enabled services: India is a global leader in software development, IT services, business process outsourcing (BPO), and digital transformation.

• Manufacturing: This sector includes automotive, electronics, textiles, chemicals, machinery, and consumer goods. The "Make in India" initiative has boosted this sector in recent years.

• Pharmaceuticals and biotechnology: India is one of the world’s largest producers of generic medicines and has a strong biotechnology and life sciences sector.

• Financial services: This sector includes banking, insurance, fintech, and capital markets, with Mumbai as the financial capital.

• Telecommunications: India has one of the largest telecom markets globally, especially with the fast mobile and internet penetration.

Cost of hiring an employee in India

Whether you’re hiring one employee or an entire team in India, expenses are inevitable. Budget for the following:

• Entity setup (unless you partner with an employer of record)

• Job advertisements

• Labor costs for applicant review

• Payroll

• Taxes

• Salaries

• Benefits

• Bonuses

• Allowances

• Insurance

• Travel

• Translator (if applicable)

According to G-P Verified Sources fromGia, the employer burden rate in India, which includes costs triggered on top of salaries, is approximately 4.5%. 

What does a company need to hire employees in India?

Make sure you cover these essentials before expanding your team in India:

• Establish a legal entity.

• File your official company name with the Ministry of Corporate Affairs (MCA) via the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) portal.

• Get a certificate of incorporation.

• Get a permanent account number (PAN).

• Get a collection account number (TAN) to deduct and remit taxes from employee salaries.

• Register for statutory social security schemes, such as the Employees’ Provident Fund Organisation (EPFO).

• Prepare compliant employment contracts, offer letters, and HR policies in line with India’s labor laws and state-specific requirements.

• Set up a payroll system to calculate salaries, deduct taxes, and remit statutory contributions (EPF, ESI, professional tax, TDS).

Setting up an India subsidiary can take weeks or months. Use G-P EOR to hire full-time employees in India without setting up your own entity. Build your team in India at a lower cost and with peace of mind that you’re doing so compliantly.

Steps to hiring in India

The hiring process in India is similar to the one you’re likely familiar with in your own country. The hiring process follows five basic steps: advertising the job, evaluating applications, interviewing candidates, sending job offers, and onboarding new employees.

1. Advertise job vacancies in India

Create a detailed job description and define the role based on responsibilities and qualifications. If your company has 25 or more employees, you must notify job vacancies to the relevant government Employment Exchange before filling the position.

Naukri, LinkedIn, Indeed, and Monster are popular job sites in India.

2. Evaluating job applications in India

Collect applications and review resumes. Screen candidates based on their qualifications, experience, and fit for the role. If you do an initial screening, avoid asking candidates about their age, marital status, or health.

3. Interviewing candidates in India

Interview candidates who made it onto your shortlist. You can do these interviews in-person or virtually. Use structured interview questions. Gia can help you create questions that follow anti-discrimination laws in India, so you can find the best fit for the role while complying with local regulations. 

4. Making job offers in India

Contact your chosen candidate to offer them a position with your company. Draft a compliant employment contract, including statutory clauses as per Indian labor law and state-specific requirements.

5. Onboarding new employees in India

Now you can onboard new employees. Register your employee for statutory benefits (EPF, ESI, professional tax, as applicable) and provide induction, company policies, and initial training.

If you’re working with an EOR like G-P™, you won’t have to worry about the administrative burden of onboarding. We’ll streamline the process, so you can focus on training your new hire and integrating them into your company culture. 

Hiring contractors in India

Working with independent contractors in India can be a cost-effective way to test the market and build a presence, without the commitment of full-time employees. Contractors based in India understand local consumer behavior, rules, and business practices. They’ll be ready to start working quickly with their own equipment and established work processes. 

Hiring contractors allows you to easily adjust your workforce based on your business needs, without the complexities and costs of employment. 

Before you enter an agreement with an independent contractor in India, consider the following:

1. Employees vs. independent contractors in India

It’s important to understand the difference between employees and independent contractors. In India, employers hire employees to do work and, in return, pay them a regular salary and benefits. Independent contractors provide services. Unlike employees, contractors set their schedules, use their own equipment, and work on specific projects rather than having an ongoing role.

2. How to pay contractors in India

G-P Contractor™ takes away the messy, time-consuming process of hiring and paying international contractors. You can create and issue contracts and pay contractors with just a few clicks, all while ensuring a compliant process.

Hire employees and contractors in India with G-P

Our SaaS and AI-powered products – EOR, Contractor, and Gia – support companies as they build and manage global teams. 

G-P is the recognized leader in global employment with more than a decade of experience, the largest team of HR, legal, and compliance experts, and a global proprietary knowledge base.

Make your expansion to India easier with G-P. Contact us or book a demo today.

Frequently asked questions (FAQs)