An employer of record in India is a locally registered entity that becomes the legal employer of your hire, running payroll, statutory retirement contributions and compliance with state employment law, while you direct the person's actual work. Buyers searching for eor india often land on providers marketing an india peo model too, and the distinction matters: an EOR is the sole legal employer, while a PEO co-employs jointly with your own Indian entity, which most companies looking for an EOR in the first place do not have. India's statutory frame runs through the Employees' Provident Fund, the Employees' State Insurance scheme, the Payment of Gratuity Act, and a patchwork of state level shops and establishments acts that vary by jurisdiction.
EPF: the mandatory retirement contribution
India's Employees' Provident Fund requires a standard 12% employee contribution on basic wages, matched by a 12% employer contribution, of which 8.33% is routed to the Employees' Pension Scheme and 3.67% to the provident fund itself, with the employer typically also covering a further 1% in administrative and insurance charges. The mandatory coverage threshold sits at INR 15,000 per month in basic wages, above which continued EPF participation can become optional for the employee. This is a meaningful line item on an Indian payroll and should be broken out explicitly in any EOR quote rather than folded into a single all-in number.
ESI and gratuity
Employees' State Insurance provides medical, sickness and maternity benefits to lower and middle income employees, funded by contributions from both employer and employee, and runs alongside EPF as a separate statutory scheme rather than a substitute for it. Gratuity is different again: under the Payment of Gratuity Act, an employee becomes eligible after five years of continuous service (waived on death or disablement), calculated at 15 days' wages for each completed year of service, using the formula of last drawn wages divided by 26 and multiplied by 15, up to a statutory cap of INR 20,00,000. An EOR should be able to show how it accrues gratuity liability for a hire from day one, not just from year five, since the obligation builds continuously.
State shops and establishments acts
Unlike EPF, ESI and gratuity, which are national statutes, working hours, leave entitlement, holiday rules and termination notice for most commercial establishments in India are set at the state level under each state's own Shops and Establishments Act. This means the same role can carry different statutory leave or notice requirements depending on whether the hire is registered in, for example, Maharashtra, Karnataka or Delhi. An employer of record operating nationally in India needs registrations and compliance processes tuned to each state it hires into, so ask a prospective provider which states they are actually registered in rather than assuming national coverage.
Notice periods and what to check in a provider
Statutory notice periods in India are largely set by the applicable state Shops and Establishments Act and by the individual employment contract, and commonly range from thirty to ninety days depending on seniority and state, rather than a single national standard. Before choosing between an eor india provider and an india peo model, confirm three things directly: which states the provider holds active registrations in, how gratuity liability is accrued and disclosed for hires under five years' tenure, and whether EPF, ESI and professional tax are itemised separately on the payslip rather than bundled into one number.
Questions people ask about employer of record india
What is the difference between an india peo and an EOR in India?
An employer of record becomes the sole legal employer in India, which is what most companies without an Indian entity actually need. An india peo co-employs the worker alongside your own registered Indian entity, so it only applies if you already have one.
How much do employer and employee pay into EPF?
Both employee and employer contribute 12% of basic wages. Of the employer's share, 8.33% goes to the Employees' Pension Scheme and 3.67% to the provident fund, with mandatory coverage applying up to a basic wage threshold of INR 15,000 per month.
When does an employee become eligible for gratuity in India?
After five years of continuous service, under the Payment of Gratuity Act, unless the employment ends earlier due to death or disablement, in which case the requirement is waived. Gratuity is calculated at 15 days' wages per completed year of service.
Why do notice periods differ by Indian state?
Because working hours, leave and notice for most commercial establishments in India are set by each state's own Shops and Establishments Act rather than a single national law, so the same role can carry different statutory notice depending on which state it is registered in.