IndiaIndia is usually the first place a US startup hires internationally, and for good reason: deep engineering talent, strong English, and a timezone that overlaps your morning standup. It's also a market with real employment law, statutory benefits, and a currency rule most founders don't know about until it bites them.
Here's what you actually need to know, without the 6,000-word encyclopedia treatment.
Quick facts
| India | |
|---|---|
| Currency | Indian Rupee (INR) |
| Standard work week | 48 hours, 6 days |
| Payroll frequency | Monthly |
| Employer statutory cost | ~20-25% on top of gross salary |
| Probation | Up to 6 months (6 is the default) |
| Notice period | 30 days |
| 13th month pay | Not mandatory |
| Employees paid in | INR, required by law |
First decision: contractor or employee?
Most US startups start with contractors in India, and for an independent worker with their own equipment and schedule, that's the right call. Onboarding is same-day, there are no statutory benefits to fund, and you pay per invoice or on a monthly retainer.
The line you can't cross is misclassification. If you set their hours, they work only for you, and you manage them like an employee, Indian authorities (and eventually your own diligence process during a fundraise) will treat them as one. That creates back-tax and benefits liability. The rough test: if you'd be uncomfortable with them taking a second client, they're probably an employee.
When someone becomes core to the team, long tenure, equity conversations, full-time hours, you convert them to a proper employee through an employer of record (EOR) or your own Indian entity.
Paying contractors in India
The mechanics are simpler than most founders expect:
- Collect a W-8BEN before the first payment. It certifies the contractor is a non-US person, and it means you generally don't issue them a 1099. Have your accountant confirm your setup.
- Sign a real contract. Scope, rate, IP assignment, termination terms. India enforces IP assignment clauses; use a contract written for Indian law rather than a copy of your US template.
- Pay in USD or INR, their choice. Unlike employees, contractors can invoice in USD. Many prefer it. The expensive mistake is paying via bank wire: $25-45 per wire plus an FX spread buried in the exchange rate, arriving 2-5 days later.
Shor pays Indian contractors over local rails, same-day, with a flat disclosed 2% FX margin and a $19/month per-contractor fee. Contracts, W-8BEN collection, and invoicing are built in.
Hiring full-time employees
Once you're employing someone in India, you take on statutory contributions on top of their gross salary:
| Contribution | Rate (employer side) | Notes |
|---|---|---|
| EPF (Provident Fund) | 12% | Of basic wages; employee contributes 12% too |
| ESI (State Insurance) | 3.25% | Applies below a wage threshold |
| Gratuity provision | 4.81% | Statutory separation benefit, payable after 5 years of service |
Headline employer load: roughly 20-25% on top of gross salary. So a ₹2,00,000/month engineer costs you around ₹2,40,000-2,50,000/month before any platform fees.
One change to have on your radar: India consolidated 29 central labour laws into four Labour Codes, which began taking effect in November 2025. The biggest practical shift is a standardized definition of "wages" that raises the base salary component PF and gratuity are calculated on, so expect total employment cost to creep up as states roll out the codes. A good EOR reprices this for you as it lands.
Employees must be paid in INR. That one is law, not preference. This is why "we'll just wire them USD like a contractor" stops working the day you convert someone.
Leave and benefits
- Annual leave: 15 days
- Sick leave: 12 days at full pay
- Maternity leave: 26 weeks at full pay (state-funded)
- Paternity leave: 15 days, paid
- Public holidays: ~14 days, varying by state
Beyond statute, competitive offers in India commonly add private health insurance, meal cards, leave travel allowance (LTA), and a remote-work allowance.
Ending employment
India is not at-will. Expect:
- 30 days' notice (or pay in lieu)
- Severance of 15 days' wages per completed year of service
- Gratuity payable if they've served 5+ continuous years (15 days' wages per year of service, capped at ₹20 lakh)
- A final settlement covering accrued salary, leave encashment, PF settlement, and ESIC exit
Termination needs due process. Done carelessly, it's the most expensive mistake in Indian employment. This is exactly the situation where an EOR earns its fee.
Documents we'll collect from your employee at onboarding
PAN (tax ID), Aadhaar (national ID), UAN (provident fund number, if they have one), ESIC number where applicable, and an Indian bank account for salary.
What it costs through Shor
- Contractors: $19/month each
- Full-time employees (EOR): $299/month each, statutory contributions and filings handled
- Your own Indian entity: we run payroll on top of it for less than EOR, in the same dashboard
No setup fees, no annual lock-in, and the FX margin is a flat disclosed 2%. The pricing calculator shows the full India math including every statutory line.
Next steps, depending on where you are: the EOR pricing comparison puts published provider prices side by side, and EOR vs. your own entity has the breakeven math for when a local entity starts to win. To see India against the rest of our coverage, the reference tables compare employer costs, notice periods, and public holidays across every country here. Already with another provider? Switching EOR providers covers the traps worth planning around.
FAQ
Can I pay Indian employees in USD? No. Salary must be paid in INR. Contractors, however, can invoice in USD.
How fast can someone start? Contractors: same day, once the contract is signed and the W-8BEN is in. Employees via EOR: typically 7-14 business days, driven by statutory registration timelines.
Do I need an Indian entity? Not to start. Contractors and EOR employees need no entity at all. An entity starts making sense at meaningful headcount, and when you get there, you can bring it and keep running payroll through the same dashboard.
What does an employer of record in India cost? With Shor, $299/month per employee, plus the statutory employer contributions (roughly 20-25% of gross salary) that any employer pays. Deel and Remote charge around $599/month for the same coverage.
Is 13th month pay required in India? No. Some employers pay a statutory bonus under the Payment of Bonus Act depending on wage levels, but there's no mandatory 13th month like the Philippines.