India is a country in south Asia with the 2nd-largest population in the world. It is bordered by Pakistan, China, Nepal, Bhutan, Bangladesh, and Myanmar. India is a multilingual and multi-ethnic country with a fast-growing major economy, and has a growing hub for IT services, with many companies choosing to find great talent in India.

Types of Contracts

• Fixed term (3 months minimum)
• Indefinite‍
• Part-time Contracts

(In India, there are very few laws governing part-time employment, leaving the terms of engagement and working hours to be negotiated between the employee and the client. Typically, part-time employees in India work between 20-30 hours per week. The agreed-upon hours must be documented on the employment agreement).

Working Hours

The standard working hours in India are 45 hours per week. There are no statutory rules governing overtime; this should be agreed upon in the employment contract

Employees should be given time off instead if they work more than the agreed number of hours per week in their contract.

Minimum Wage

The minimum wage varies for each state in India, but cannot be lower than INR 751 per day.

Probation Period

The typical probation period in India is between 3 and 6 months. Probation periods can be extended based on employee performance. There is no maximum time for probation specifically for indefinite contracts written into statutory employment rules. However, the employer must provide reasons for the extension of probation.

Taxes & Local Employment Costs

Employee Taxes & Contributions

Employees pay the following contributions from their salary:

• Income Tax
• Employee Provident Fund
• Professional tax

Income Tax

Employees can be taxed according to the “old” and “new” tax regimes, which the employee can choose between. Below are the income tax slabs (bands) for India that were updated in 2025:

• INR 0 - 4,00,000 = Nil
• INR 4,00,000 to 8,00,000 = 5%
• INR 8,00,000 to 12,00,000 = 10%
• INR 12,00,000 to 16,00,000 = 15%
• INR 16,00,000 to 20,00,000 = 20%
• INR 20,00,000 to 24,00,000= 25%
• Above INR 24,00,000 = 30%

Employee Provident Fund

Employees can choose to have their monthly contributions based on one of the following:

• Full wage contribution (12% of basic salary)
• Restricted contribution (Fixed at INR 1800)

Employees choose one of the above contribution amounts into the Employee Provident Fund, which the employer has to match. Employees with a monthly salary above INR 15,000 can opt out of the Provident Fund contribution by formally writing to their employer.

Employer Taxes & Contributions

Employers match the contribution paid by employees into the Employee Provident Fund, which is 12% of either their basic salary, or INR 18,00.

Additionally, employers must pay an administration fee of around 1% (which is paid to the government department administering the fund), resulting in an approximate total cost of 13%. This entire contribution is based only on the basic salary of the employee, which is always 50% of the gross salary.

Annual Leave

Annual leave accrues at a rate of 1 day for every 20 days worked, while agreements between employer and employee sometimes set a lower threshold. Up to a statutory maximum of 45 days can be accumulated and carried over to the next year. The annual leave period runs from January 1st to December 31st.

Sick Leave

Sick leave is accrued at the rate of 1 day per completed month of service. These leaves can not be accumulated or carried over to next year. Fresh accrual starts every January.

Employees are entitled to 100% of their average gross salary when taking sick leave, which the employer pays.

Maternity Leave

Employees who have completed at least 80 calendar days of service with the same employer are entitled to a minimum of 26 weeks of paid maternity leave, 8 of which must be taken before the birth of the child. For any children born after the first 2, maternity leave decreases to 12 weeks.

The employer is responsible for paying the employee 100% of their average gross salary. The employee is entitled to take additional unpaid leave beyond 26 weeks.

The employer cannot terminate the contract while the employee is on maternity leave.

Paternity Leave

Government workers are entitled to 15 days of paid paternity leave, but there is no statutory paternity leave for other sectors.

Public Holidays

Public holidays in India vary by region, with 10-15 public holidays each year. Most employers offer some extra days of paid time off in their contracts. Additional holidays vary by state; however, it is up to the employer whether to give them this time off (employee or employer state).

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Benefits

Summary

Employers in India can typically offer the following benefits as part of the benefits structure in India. (This applies to full-time employees, not contractors).

• Health Insurance
• Private Pension
• Dental & Vision Plan
• Life Insurance

Notice Period

During probation, no statutory minimum notice period applies. After completion of probation, employees are entitled to a minimum of 1 month of notice. Payment can be made in lieu of notice.

Statutory Payments

If an employee has completed 4.8 years of service with the same employer, they are entitled to a payment at termination called “gratuity”. Gratuity is calculated as 15 days’ wages per completed year of service.

Any rules governing the payout of leave at the end of employment must be defined in the employment contract, as there are no statutory rules governing this.

India introduced a new tax regime in recent years that eliminated many tax exemptions, but also offered lower tax rates. Employees can decide which system they want to follow. Any ad hoc payments made to the employees, such as year-end bonuses, commissions, shift allowances, and incentives, do not increase any statutory employer contributions. All expenses and reimbursements are tax-exempt when supported with actual receipts.

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There is no mandatory bonus or 13th-month salary in India. Employers generally provide a discretionary bonus based on employee/company performance, paid quarterly/semi-annually/annually.

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