How does an EOR ensure compliance with Indian labor laws and regulations?

An Employer of Record in India ensures compliance by taking full responsibility for all employer obligations under Indian labor law. The EOR becomes the legal employer of the worker, manages payroll, files taxes, contributes to statutory funds, issues compliant employment contracts, and ensures every employment action follows Indian regulations.

Based on our extensive experience supporting US companies hiring in India, we consistently see that an EOR removes the highest-risk compliance issues foreign companies face. This includes incorrect PF and TDS calculations, state-level Shops and Establishments violations, and noncompliant terminations.

Issuing fully compliant employment contracts[toc=Compliant Contracts]

From our experience in helping 500+ companies expand in India, contract noncompliance is one of the most common mistakes foreign companies make when hiring directly in India.

An EOR creates legally valid contracts aligned with:
• The Indian Shops and Establishments Act for the employee’s state
• Mandatory clauses on notice periods, working hours, and leave
• IP assignment and confidentiality, similar to US employment agreements
• Gratuity eligibility requirements
• Statutory benefits and holidays

These contracts reflect Indian labor statutes and remove ambiguity around rights and obligations.

Running payroll with correct statutory deductions[toc=Accurate Payrolls]

Our payroll compliance checks show that PF, ESI, TDS, and Professional Tax errors are the most frequent issues companies face without a local partner.

An EOR ensures accurate monthly payroll by managing:
• PF contributions which function similarly to US Social Security
• ESI registration for eligible employees
• TDS which parallels US federal income tax withholding
• Professional Tax based on the employee’s state
• Paid leave calculations
• Overtime rules when applicable

Every deduction and payment is submitted to the correct government agencies on time. This prevents penalties and creates a defensible audit trail.

Read more: Payroll in India: A Complete Guide for US Companies & Payroll Compliance in India 2025: Everything You Must Know

Administering statutory benefits required by Indian law[toc=Statutory Benefits]

We often observe that foreign companies miss mandatory benefit structures, especially PF, ESI, health insurance, and maternity benefits.

The EOR enrolls employees in all required statutory programs and manages:
• PF and ESI registration
• Mandatory health insurance where required
• Leave entitlements
• Maternity and paternity benefits
• Gratuity tracking (mandatory after five years)

This ensures that every employee receives the protections and benefits mandated by Indian labor law.

Maintaining compliance with state and central labor regulations[toc=Maintaining Compliance]

Our analysis shows that state level variations in India create compliance gaps for teams that do not track regional rules.

The EOR ensures compliance with:
• State Shops and Establishments Acts
• Minimum wage notifications
• Local holiday rules
• State specific Professional Tax
• Working hour restrictions
• Overtime compensation rules
• Local safety requirements

India’s labor system is multi layered. Companies hiring without a local expert often fail to meet regional requirements, which is why EORs provide critical protection.

“Working with the Wisemonk team in India has been a genuinely positive experience from day one. They've been consistently accessible and are building fantastic relationships with our local team. I value the quality of compliance Wisemonk brings. I have full confidence when it comes to financial, legal, and HR matters. They've ensured our team is managed in line with local employment law and have also been flexible when we've wanted to go beyond statutory requirements.”
- Lisa Jones, Chief People Officer at Couch Health

Managing compliant onboarding, HR support, and terminations[toc=HR Lifecycle]

We often observe that terminations are one of the highest compliance risks without an EOR due to notice period, documentation, and statutory payout rules.

An EOR manages the HR lifecycle in accordance with Indian labor regulations:
• Background verification
• Joining documentation
• Leave and attendance management
• Performance documentation
• Correct notice period handling
• Final settlement payroll calculations
• Gratuity and statutory payouts

This ensures that every HR action has proper legal documentation in case of future disputes.

Ensuring correct tax filings and employer documentation[toc=Tax Filings & Documentation]

The EOR handles all employer filings including:
• TDS deposits
• Quarterly TDS returns
• PF and ESI filings
• Annual labor law returns
• Form 16 issuance
• State registers and compliance records

This removes the need for the foreign company to interact with Indian tax authorities or maintain statutory registers.

Why do foreign companies rely on Employer of Record (EORs) to stay compliant?[toc=EOR Compliance Benefits]

Based on our work with hundreds of US companies, compliance is the number one reason firms choose an EOR when entering India.

An EOR protects companies from:
• Misclassification
• Incorrect payroll filings
• Labor law disputes
• Permanent Establishment exposure
• Regulatory audits
• Employee claims due to noncompliance

This model allows foreign teams to hire confidently while focusing on operations rather than navigating India’s multi layer compliance system.

Client experience:

“I highly recommend them. Wisemonk helped us tap into the vibrant and top-notch Indian talent market and hire our first couple of founding engineers in record time. We've been able to accelerate our roadmap and deliver terrific value to our customers thanks to Wisemonk's efforts.”
- Krishna Ramachandran, Co-founder at Onform

“The Wisemonk team played a key role in helping us hire for specialized B2B SaaS marketing skills. We were able to build the team within four months, and hire experienced professionals from Tier 1 and major B2B SaaS brands. They are a great partner providing integrated services for EOR and recruitment.”
- Saurabh Sharma, Chief Marketing Officer at Onereach

Why companies trust Wisemonk for compliance in India?[toc=How Wisemonk Helps]

Wisemonk is an India specialist Employer of Record trusted by global companies for accurate payroll, compliant hiring, and end to end statutory management. We help US companies hire in two to four days while meeting all PF, ESI, TDS, and state labor requirements without exception. Need help with your global expansion in India? Contact our team to learn how we can support your global operations.