An Employer of Record manages payroll in India by acting as the legal employer and taking responsibility for all salary calculations, tax withholdings, statutory deductions, monthly deposits, and government filings. The foreign company manages the employee’s work, but the EOR becomes fully accountable for running accurate and compliant payroll under Indian law.
Based on our experience supporting US companies hiring in India, the biggest challenge is navigating India’s layered payroll system, where federal income tax withholding (TDS), state-level taxes, and mandatory social security programs all operate simultaneously. An EOR removes that complexity by ensuring every calculation, deposit, and filing is done correctly each month.
Payroll and statutory deductions under an EOR
Payroll Processing: The EOR runs the full monthly payroll cycle, calculating gross salary, allowances, reimbursements, bonuses, variable pay, and any leave adjustments. Once validated, salaries are disbursed in INR and employees receive compliant, detailed pay slips every month.
Tax Withholding (TDS):The EOR determines monthly income tax based on India’s tax slabs, factors in exemptions and declarations, applies Professional Tax (state-level), and withholds the correct amounts. The EOR then deposits TDS with the government and files quarterly returns on time.
Provident Fund (PF) Contributions: The EOR calculates PF for eligible employees, contributes both employer and employee portions, and files monthly PF returns. PF functions similarly to Social Security in the US, and mistakes in contribution math often expose foreign companies to penalties, something the EOR fully absorbs.
Employee State Insurance (ESI): For employees who fall under the ESI salary threshold, the EOR calculates contributions, deposits them with ESIC, and submits regular returns. This ensures employees receive mandated health and social protection benefits without delays.
Professional Tax (PT): Since PT varies by state, the EOR determines the correct rate based on the employee’s location, withholds the applicable amount, and pays it to the state authority within statutory timelines.
Statutory Benefits Administration: The EOR handles benefits that tie directly into payroll, insurance deductions, bonus payouts, leave encashments, and reimbursements, ensuring employees receive accurate and timely remuneration each cycle.
Government Compliance: The EOR manages all monthly statutory filings, uploads required registers, and ensures that PF, ESI, TDS, and PT deposits meet government deadlines. This creates a strong compliance trail and shields the foreign company from administrative or legal exposure.
Year-End Filings: The EOR issues Form 16, completes annual PF and ESI filings, updates gratuity records, and handles state-level annual returns. Employees receive all documents required for their tax filing, while the company remains fully compliant under Indian labor and tax laws.
Liability and Accuracy: The EOR takes full responsibility for payroll accuracy, correct tax withholding, and compliance adherence. This eliminates the risk of penalties from miscalculations or late deposits, which is one of the most common mistakes foreign teams make when trying to manage Indian payroll themselves.
From our experience running payroll for global companies expanding into India, the biggest challenge US teams face is understanding the mix of federal, state, and statutory deductions. An EOR removes this complexity entirely and ensures compliant payroll every month.
Why companies choose Wisemonk?
Wisemonk is an India specialist EOR that manages payroll, tax withholdings, PF, ESI, Professional Tax, and all statutory filings for global companies. We help US teams hire in two to four days and run accurate, compliant payroll every month. Need help with your global expansion in India? Contact our team to learn how we can support your global operations.