Guide to Hiring in India

Employment trends and job market analysis

 India remains one of the world’s most attractive hiring markets, driven by strong demand for digital, engineering, and business talent.

White-collar hiring grew 6% year-over-year, with growth led by sectors such as insurance, FMCG, telecom, real estate, BPO/ITES, healthcare, and pharma, while AI and machine learning roles continue to expand rapidly.

Demand is increasingly focused on high-value skills in AI, cloud computing, cybersecurity, and data, with specialists commanding salary premiums of 30–40%.

Major hiring hubs include Bengaluru, Hyderabad, Chennai, Pune, Delhi NCR, and Mumbai, while emerging cities such as Coimbatore, Indore, and Bhubaneswar are gaining traction.

Salary growth remains stable, with employers projecting average increases of around 9.1% in 2026, although higher increments are common in GCCs, financial services, e-commerce, and technology-driven industries.

Payroll and taxes

 India’s payroll system involves several mandatory statutory obligations.

The Employees’ Provident Fund Organisation (EPFO) oversees the country’s compulsory retirement savings program, while the Employees’ State Insurance Corporation (ESIC) manages health and social security benefits for employees earning up to ₹21,000 per month.

Employers are also responsible for deducting and remitting Tax Deducted at Source (TDS) to the Income Tax Department and issuing Form 16 annually.  Form 16 includes Part A for tax deducted and Part B for salary, allowances, deductions, rebates, and related details. 

In states where it applies, professional tax is collected by the relevant State Commercial Tax Department, while Labour Welfare Fund contributions are administered by State Labour Welfare Boards.

Employer Contributions

EPF (Employees’ Provident Fund)

Requires both employers and employees to contribute 12% of an employee’s basic wages. The statutory contribution is capped at wages of ₹15,000 per month, although many employers choose to calculate contributions on the employee’s full basic salary. Of the employer’s contribution, 8.33% is allocated to the Employees’ Pension Scheme (EPS), with the remainder going to the Employees’ Provident Fund.  

EDLI (Employees’ Deposit Linked Insurance)

EDLI (Employees’ Deposit Linked Insurance) is funded solely by the employer at a contribution rate of 0.5% of wages. The contribution is calculated on wages capped at ₹15,000 per month and provides life insurance benefits to employees covered under the Employees’ Provident Fund scheme.  

ESI (Employees’ State Insurance)

The ESI Act applies to non-seasonal factories with 10 or more employees and many other notified establishments. Coverage generally applies to employees earning up to ₹21,000 per month, or ₹25,000 per month for employees with disabilities.

Eligible employees receive medical, disability, maternity, and other social security benefits through the ESI scheme. Contributions are typically shared between employers (3.25%) and employees (0.75%).

Professional Tax

Professional tax is a state-level levy that employers must deduct and remit where applicable. The maximum amount payable by an individual is capped at ₹2,500 per year.

Employees are subject to professional tax deductions only in states that impose the tax. The amount varies by state and income level.

Gratuity Accrual

This is a statutory retirement benefit that is mandated for companies with 10 or more employees under the Payment of Gratuity Act 1972. A lump-sum loyalty payout for employees completing a minimum of 5 continuous years of service. It is calculated as 15 days of wages for every completed year of employment.

LWF (Labour Welfare Fund)

The LWF is a state-regulated statutory contribution that supports welfare programs for lower-income and unorganised workers. Employers and employees make small mandatory contributions - typically ranging from ₹5 to ₹60 per employee - either monthly, half-yearly, or annually, depending on the state. Contribution rates vary by location, with employers often matching or contributing more than the employee amount.  

PIT (Personal Income Tax) In India

 Personal income tax in India is collected via a progressive, multi-tiered slab system administered centrally by the Income Tax Department. India operates on a financial year running from 1st April to 31st March. Individuals are taxed based on their residential status and they are automatically placed into the simplified New Tax Regime.

2026 new tax regime bands

Minimum wage

India’s minimum wage system is not a single national salary floor for all employees. Wages vary by state or central sphere, industry, scheduled employment, skill category, occupation, and sometimes zone or region.

Practical employer implications:

• Map the employee to the correct legal regime: work location, establishment type, industry, and role. Determine whether central-sphere or state-sphere rates apply.
• Classify the role correctly: minimum wage rates often differ for unskilled, semi-skilled, skilled, highly skilled, clerical, supervisory, or occupation-specific categories.
• Update payroll after wage revisions: State labour departments can revise dearness allowance or wage orders periodically; employers with multi-state teams should maintain state-level wage calendars.
• Do not rely on CTC alone: Ensure the wage components counted for minimum wage compliance meet applicable rules; benefits or reimbursements may not always satisfy minimum wage obligations.

Hours of work

For factories, the Factories Act remains a key benchmark: no adult worker may be required or allowed to work more than 48 hours per week, more than 9 hours per day, or more than 5 hours without at least a half-hour rest interval; the spread-over, including rest intervals, generally cannot exceed 10.5 hours unless permitted. 

For offices, IT/ITES, retail, and commercial establishments, working hours and overtime are usually governed by the applicable state Shops & Establishments Act, which means the exact rules can differ across Karnataka, Maharashtra, Delhi, Tamil Nadu, Telangana, and other states.

India's Shops & Establishments laws govern corporate offices, IT companies, retail, and non-manufacturing businesses, and that leave entitlements, working hours, and holiday rules differ from state to state. 

Employer practice: Most professional employers use 5-day or 5.5-day workweeks, maintain attendance records, and set explicit overtime approval rules. For distributed teams, the safest approach is to design the global policy around the stricter applicable state rule, then document state-specific exceptions.

Overtime

Overtime in India is governed by the Factories Act 1948. Overtime in factories is payable at twice the ordinary rate of wages when a worker works more than 9 hours in a day or 48 hours in a week.

Types of leave available

Annual leave

For factories, Section 79 of the Factories Act provides that workers who worked 240 days or more in a calendar year receive annual leave with wages in the next calendar year at 1 day for every 20 days worked for adults, with carry-forward limits generally up to 30 days for adults. For offices and commercial establishments, earned leave, casual leave, sick leave, carry-forward, encashment, and approval rules are primarily state-specific under Shops & Establishments laws.  

Sick leave

Usually 10 to 12 days per year. Used for medical recovery, often requiring a doctor's certificate if an employee is absent for more than 2 or 3 consecutive days.

Casual leave

Usually 6 to 12 days per year. Used for short-term, unexpected personal matters. These days cannot be carried forward and expire at the end of the calendar year.

Maternity leave

Employees are eligible for 26 weeks of paid leave for their first and second child, with up to eight weeks taken before delivery and the remainder after childbirth.

For a third child and beyond, the entitlement is 12 weeks of paid leave. Adoptive and commissioning mothers are also entitled to 12 weeks of paid leave for a child under three months.

Employees who experience a miscarriage or medical termination of pregnancy are entitled to 6 weeks of paid leave, with an additional month available for pregnancy-related medical complications.

Employers with 50 or more employees must also provide crèche facilities.

Paternity leave

While there are currently no statutory entitlements, some employers offer between five to 15 days of paternity leave in India.

Public holidays

There are three gazetted national holidays in India

• Republic Day on January 26

• Independence Day on August 15

• Gandhi Jayanti on October 2

Beyond this, holiday entitlements are subject to different federal and state laws. 

Attracting and retaining talent in India

Lead with competitive, skills-based pay

Salary in India is projected to increase around 9.1%, but India’s market is increasingly differentiated by skill scarcity, sector, and performance. For AI, ML, cloud, cybersecurity, and other critical digital capabilities, employers should budget beyond median increments.

Design for career growth, not only compensation

Deloitte’s 2026 Talent Outlook says companies are adopting a calibrated approach to compensation while focusing on critical talent, productivity, performance differentiation, skilling, and competency frameworks. 

Employer branding matters in India

Localising the hiring approach, offering competitive salary and benefits, and building online presence and reputation through platforms such as LinkedIn and employer-review sites. In practice, strong offers for Indian talent should include clarity on role ownership, growth path, manager quality, flexibility, benefits, bonus/variable pay mechanics, and fast selection cycles.

Prioritise growth

Offer structured learning, internal mobility, manager capability, pay transparency, performance-linked upside, and benefits that support family wellbeing. EY notes employees are looking beyond increment size toward clarity, fairness, and consistency in pay decisions, while variable pay and ESOPs are increasingly used for retention and differentiation.

Termination of employment

India does not have at-will employment, meaning employers must have a valid reason and follow the appropriate legal process before terminating an employee.

Notice periods are not set by a single national law and instead depend on employment contracts, job type, industry practices, and state-specific regulations.

Employees may be dismissed for reasons such as misconduct, poor performance, redundancy, contract expiry, or mutual separation, but employers must avoid discriminatory grounds and comply with due process requirements.

Severance obligations vary based on factors such as length of service, employee classification, and employer size, with retrenchment compensation typically calculated at 15 days’ average pay for each completed year of service in eligible cases.

To reduce legal risks, employers should maintain clear employment contracts, documented performance and disciplinary records, proper probation terms, and compliant final settlement procedures.

How can I hire?

If you're looking for ways to hire people in India, Airswift has a range of employment solutions that make hiring staff easier than ever before. We're experts at finding qualified candidates for your job openings, so we take care of everything else. You can just focus on growing your business!

Businesses can look into staff hiring options including:

Talent acquisition

Work with in-country talent acquisition specialists who can help you source top-quality candidates and hire locally in a competitive market.

Our contract hire service is designed to help you fill short-term roles and give your company the flexibility to respond to changes in need and market demand.

If you need to hire local talent for longer than a few months, our professional search service can help you find highly-skilled talent in Singapore for permanent roles within your company.

Employer of Record

If you're looking for ways to hire remote workers without having to set up a physical office, an Employer of Record in India makes it easier than ever to hire.

As an EOR, we help our clients avoid the hassles of setting up their own HR department by handling everything from compliance to employee onboarding and statutory benefits.

If you'd like to know more about how we can help you hire employees in India, please get in touch with us today!

Although the information provided has been produced from sources believed to be reliable, Airswift makes no warranties, whether express or implied, regarding the accuracy, adequacy, completeness, legality, or reliability of any information herein. Accordingly, there shall be no liability attached to the use of the information herein, howsoever arising. For the latest information and specific queries regarding particular cases, please contact our team.