Hiring someone in India is legal and common. The question is who holds the contract, who runs payroll and who keeps up with Indian law. Here's a plain overview.
Not legal advice. This guide is general information as of October 2026. Rules change, and your own country's laws also apply. Check your situation with a qualified adviser.
The four routes
1. Contract with the person directly
You sign a consultancy agreement and pay invoices. It's quick and simple. The risk is misclassification: if someone works full-time, fixed hours, only for you and under your direction, the relationship can look like employment rather than consulting. You also handle payments, contracts and records yourself.
2. Set up your own entity in India
You register a company and employ people directly. You get full control, but you also take on company registration, accounting, payroll, tax filings and employment law. It usually makes sense only at a larger team size.
3. Use an employer of record (EOR)
An EOR becomes the legal employer of someone you've chosen and runs their payroll and compliance. You still find and vet the person yourself. See Countbird vs an employer of record.
4. Use a staffing partner like Countbird
We find and test the person, engage them in India, run pay and compliance, and stay involved after they start. You pay one monthly fee.
India's Labour Codes
India replaced 29 older labour laws with four Labour Codes, which came into force on 21 November 2025. The central rules were notified on 8 May 2026. Points that matter for remote hiring:
- Fixed-term employment is recognised. Fixed-term employees get the same pay and benefits as comparable permanent staff, and qualify for gratuity pro rata after one year of service. The Labour Ministry's FAQs say the year counts from the start of the contract.
- The 50% wage rule. Wages must make up at least half of total pay, which raises the base for provident fund and gratuity.
- Faster exits. Final settlements must generally be completed within two working days of resignation, dismissal or retrenchment.
Provident fund and gratuity
- Provident fund (EPF). Employers contribute 12% of wages. The wage ceiling for mandatory contributions rose to ₹25,000 a month from 17 September 2026.
- Gratuity. Permanent employees qualify after five years; fixed-term employees qualify pro rata after one year.
These apply to employees. Genuine independent contractors don't receive them, which is one reason misclassification matters.
GST and foreign exchange
- GST. Services provided from India to a client abroad can qualify as an export, which is zero-rated under Section 16 of the IGST Act. Providers usually export under a Letter of Undertaking without charging GST.
- Foreign exchange. Indian exporters must realise and repatriate export proceeds within the period set by the Reserve Bank of India. For exports of goods and services this is nine months from 1 October 2026.
These obligations sit with the Indian business that invoices you. As a client, you pay in your own currency.
Your side of the border
- Check whether your country treats long-term contractors abroad as employees for tax or employment purposes.
- Ask your adviser whether a remote team abroad creates any tax presence for your company there.
- Use written agreements that cover confidentiality, data protection and who owns the work.
What Countbird handles
- Contracts with the talent, monthly pay and Indian tax and statutory compliance.
- Confidentiality agreements with everyone we place.
- A client agreement that confirms the work they do for you belongs to you.
- Ongoing check-ins, and a replacement at no extra cost if it isn't working.
Questions about your situation? Book a call.