Employer of Record in India: A Step-by-Step Guide for UK Companies

A UK company can hire employees in India without setting up an Indian entity by using an Employer of Record (EOR). The EOR becomes the legal employer. It issues an Indian employment contract, runs payroll, deducts tax and pays statutory contributions, while you manage the person’s work day to day. The steps below take you from deciding on the role to the day someone leaves.

This is a practical guide to how the process runs. If you’re still weighing up whether an EOR is the right model at all, start with our comparisons of EOR vs setting up an Indian entity and EOR vs outsourcing. You can also review statutory compliance models and cost breakdowns directly on EOR Services UK. It is general information, not legal or tax advice. Employment law in India varies by state and is changing as the four labour codes, in force since November 2025, bed in.

Step 1: Is an EOR the right model for this hire?

Be careful with long-term “contractors” who work only for you, on your hours, with your equipment. Under Indian law, that relationship can be treated as employment, with back-dated statutory contributions and benefits. An EOR avoids that ambiguity.

Step 2: Define the role and where the person will be based

The state the employee works in matters more than UK companies expect. It decides:

• which Shops and Establishments Act applies (working hours, leave, holidays)
• whether professional tax is deducted, and at what rate
• the public holiday calendar your employee will follow

Write down the role, the seniority, the hours of overlap you need with the UK, and whether the person will be remote or work from a co-working space. India is 5 hours 30 minutes ahead of GMT (4 hours 30 minutes ahead during British Summer Time), so a morning overlap with the UK is usually easy to arrange.

Step 3: Structure the salary the Indian way

Indian salaries are quoted as CTC (cost to company): the total annual cost, including the employer’s statutory contributions. Candidates compare offers on CTC and on monthly “in-hand” pay, so your EOR will turn your budget into a salary structure. A typical structure includes:

Two things to know under the labour codes:

• The definition of “wages” changed. Under the Code on Social Security, 2020, allowances above half of total pay are added back into wages for contributions and gratuity. That means structures built on a very low basic salary no longer reduce statutory costs the way they used to.
• Employees’ State Insurance (ESI) applies only below a wage ceiling, so most experienced software engineers fall outside it, and private health insurance matters more to them.

Agree the CTC, the in-hand pay the candidate will see, and any bonus or variable pay in writing before the offer goes out.

Step 4: Issue the offer and the employment contract

The EOR issues the offer letter and contract under Indian law. Check that it covers:

• Probation period and notice period. Notice of one to three months is common in Indian tech roles, and your candidate will usually be serving one with their current employer.
• Intellectual property assignment. The EOR’s contract should assign IP to the EOR, and your agreement with the EOR should pass it on to you. Read both.
• Confidentiality and data protection.
• Non-solicitation of clients and staff.

Don’t rely on a non-compete. Section 27 of the Indian Contract Act, 1872 makes agreements in restraint of trade void, so post-employment non-competes are rarely enforceable. Protect yourself with confidentiality, IP assignment and good access control instead.

Step 5: Onboard the employee

The EOR handles the statutory side: identity and tax documents (PAN, and Aadhaar for provident fund linking), the employee’s Universal Account Number (UAN) for EPF, bank details and background checks if you ask for them.

Your side of onboarding matters just as much:

• Equipment: will the EOR supply a laptop, or will you ship one? Shipping hardware into India involves customs, so many companies buy locally through the EOR.
• Access: create accounts with least-privilege access from day one, and record what personal data the person will see.
• A real first week: a named buddy, a working development environment and a first small task. Remote hires in another country need more structure, not less.

Step 6: Run monthly payroll and compliance

Each month the EOR:

• pays the salary in rupees, usually by the end of the month or the first working day of the next
• deducts income tax at source (TDS) and professional tax where it applies
• pays EPF and other statutory contributions, and files the returns
• invoices you for the employment cost plus its fee, in pounds or rupees depending on the provider

Ask your EOR for a monthly payroll report you can reconcile against its invoice. Changes such as a pay rise, a bonus or unpaid leave need to reach the EOR before its monthly cut-off.

Step 7: Handle your UK-side obligations

Using an EOR moves Indian employment risk away from you, but some obligations stay with your UK company:

• UK GDPR. If the employee accesses personal data your UK organisation controls, that is a restricted transfer. The UK has no adequacy regulations for India, so put an appropriate safeguard in place, such as the International Data Transfer Agreement or the UK Addendum to the EU standard contractual clauses, with a transfer risk assessment.
• Permanent establishment. If someone in India habitually negotiates or signs contracts on behalf of your UK company, that can create a taxable presence in India. Engineers building software don’t normally raise this, but sales roles can. Take tax advice for commercial roles.
• IR35 is aimed at UK-based workers supplying services through intermediaries. It isn’t normally the concern for someone employed in India by an EOR, but check with your adviser if the person will spend significant time working in the UK.

Step 8: Manage leave, holidays and performance

Leave follows Indian law and the EOR’s policy, not UK rules. Expect earned (annual) leave, casual leave and sick leave, plus national holidays and state festival holidays. Put the Indian holiday calendar in your team calendar at the start of the year.

Manage performance the same way you would in the UK: clear goals, regular one-to-ones and written feedback. If there’s a problem, involve the EOR early, because dismissal in India needs a documented, fair process.

Step 9: When someone leaves

When an employee resigns or is let go:

1. They serve the notice period in the contract, or the notice is bought out by agreement.
2. The EOR prepares the full and final settlement: final salary, payment for unused earned leave where the policy or law requires it, and gratuity if the employee is eligible.
3. You recover equipment and access, and confirm company data has been removed from personal devices.
4. The employee receives a relieving letter and an experience letter. Indian employers routinely ask for these, so issue them promptly.

Common mistakes to avoid

• Budgeting from the candidate’s salary expectation without the employer’s statutory costs on top.
• Treating a long-term full-time “contractor” as a supplier.
• Assuming a UK-style non-compete will protect you.
• Forgetting the UK GDPR transfer safeguard.
• Leaving onboarding to the EOR and giving the new hire no first-week plan.

Getting started

If you are planning your first hires in India, write down the roles, the start dates you need and the hours of overlap with your UK team. That’s enough for a useful first conversation.

We help UK technology companies build teams in India, including through our Employer of Record service and our specialised EOR Services UK portal, and our SparkTalent platform can run the technical assessments before you make an offer. Talk to us about the roles you’re planning.