India Employer Compliance Scorecard
Five areas decide whether employing people in India is a clean operation or a liability that compounds quietly: worker classification, permanent establishment, payroll registration, POSH, and IP & data. Answer what applies to you and get a scored read on each, with the exposure priced where it can honestly be priced.
A weighted score
Five areas, 23 questions, scored 0–100 with the weighting adjusted to your setup
Exposure, priced honestly
Reclassification costed in two separate buckets — and PE and DPDP deliberately left unpriced
A priority list
Drawn from your answers, ordered by severity, with the statutory reference on each
What an EOR can't fix
Two of the five areas don't transfer to any provider. We say which.
Your India Compliance, Area by Area
Answer what you know. Anything you skip is excluded from the score rather than counted as a pass.
Your India setup
These answers decide which sections apply to you. Nothing here is scored.
Indian authorities read the relationship as it actually works, not as the contract describes it. Control, integration, exclusivity and who supplies the tools are what decide it.
PE turns on authority and conduct in India more than on headcount. The exposure is corporate tax on attributed profit, not a payroll penalty, which is why it is the item finance teams care about most.
India runs employment law at central and state level at once. Registration gaps compound monthly and surface during inspection, not before.
The threshold is 10 or more employees at a workplace, counting contract staff and interns, and it is assessed per workplace rather than per company. Enforcement sharpened through 2026, including a statewide audit in Maharashtra.
India’s defaults surprise foreign employers: copyright in employee work generally vests in the employer, patents do not, and contractors keep what they make absent a written assignment. Separately, DPDP obligations phase in to a full compliance date of 13 May 2027.
Weakest area
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High-severity items
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Areas assessed
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Weighted penalty
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Exhibit 1
Where you stand, area by area
Weighting is not fixed. Classification counts for more when more of your team is on contracts, POSH counts for less below the ten-person workplace threshold, and anything genuinely carried by an EOR is excluded rather than scored as a pass.
Exhibit 2
What reclassification would cost you
Read against
Likelihood-weighted penalty
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Compliant employment, same period
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Service fee only, from $99 per employee a month. Salary and statutory contributions are left out because you owed those either way.
Why permanent establishment is not given a number here
PE exposure is corporate tax on profit attributed to the Indian activity, and attribution depends on functions, assets and risks that no questionnaire can establish. Any calculator that hands you a PE figure is guessing. What can be stated is the shape of it, and the look-back is the part that surprises people.
Rate on attributed profit
~35% + surcharge
Assessment look-back
6–10 years
Interest
1% a month
Penalty ceiling
200% of tax
And why DPDP is not given one either
The statutory ceiling is ₹250 crore per violation. That is a ceiling for the worst case the legislature could imagine, not an expected value for an employer with a payroll data set, and putting it in a calculator would be scaremongering rather than planning. The real DPDP risk on your timeline is a deadline, not a fine: 13 November 2026 for Consent Manager registration and 13 May 2027 for full substantive compliance, with no grace period signalled.
Exhibit 3
What to fix, in order
Ordered by severity, not by effort, and drawn only from the answers you actually gave. Each item also says who can carry it — including the ones that stay with you no matter which provider you use.
Exhibit 4
Where this points
Exhibit 5
What an EOR actually removes — and what it does not
Worth reading before you assume a provider switch closes all five areas. Two of them do not transfer, and one only partly does.
| Area | Moves to the EOR | What stays with you |
|---|---|---|
| Worker classification | Yes, prospectively People employed through the EOR’s entity are employees from day one. | Everything already accrued Conversion stops the clock, it does not rewind it. |
| Permanent establishment | Partly Fixed-place and employment-law exposure drop because you are the EOR’s client, not an employer in India. | Authority and conduct If your India staff close deals in your name, no employment structure fixes that. |
| Payroll & registration | Yes EPF, ESI, TDS, professional tax, Labour Welfare Fund and Labour Code filings run on the provider’s entity. | Nothing much Provided the contract says included rather than billable. Ask explicitly. |
| POSH | No A provider can help you constitute a committee and supply an external member. | The obligation itself It attaches to the workplace, and the workplace is yours. |
| IP assignment | Yes Assignment and confidentiality are drafted into every contract the EOR issues. | Anything signed before the switch Legacy contractor agreements need papering separately. |
| DPDP | Partly Payroll and HR data handled by the provider sits under its own obligations. | Your systems, your CRM, your recruiting stack You are the data fiduciary there, and 13 May 2027 is your deadline. |
Exhibit 6
The dates that are already set
Four of these have passed, which is the point. The compliance position you are assessing today is being judged against rules that changed while most foreign employers were not watching.
What this is built on
- Labour Codes. The Code on Wages 2019, Industrial Relations Code 2020, Code on Social Security 2020 and OSH Code 2020 came into force on 21 November 2025. Central Rules and Model Standing Orders were notified on 8 May 2026. Many state rules are still pending, so existing state rules continue to apply where consistent with the Codes.
- EPF recovery. Arrears carry 12% simple interest a year under s.7Q of the EPF & MP Act 1952, plus damages under s.14B at 1% a month, capped at 100% of arrears, following EPFO’s June 2024 amendment. The Employees’ Enrolment Campaign amnesty closed on 30 April 2026, so back-claims now run on the full statutory baseline.
- ESI. 3.25% employer and 0.75% employee on gross wages up to ₹21,000 a month.
- Gratuity. 15 days’ pay per completed year, roughly a 4.81% monthly accrual, capped at ₹20 lakh. Fixed-term staff earn it pro-rata after one year under the Code on Social Security.
- Wage definition. “Wages” must be at least 50% of total remuneration across all four Codes, so allowance-heavy structures no longer suppress PF, gratuity and bonus. Exposure above assumes basic = 50% of gross on this basis.
- Permanent establishment. A PE lets India tax profits attributable to the Indian activity. Foreign-company rates run about 35% plus surcharge and cess. Assessments can reach back six years, or ten where the amount exceeds ₹50 lakh, with 1% a month interest and penalties of up to 200% of tax evaded. The OECD’s November 2025 Model Convention update added a 50% working-time safe harbour and a commercial-reason test for employee-driven remote work.
- POSH. An Internal Committee is mandatory at any workplace with 10 or more employees, counting contract staff and interns; the threshold is assessed per workplace, not per company. Composition needs a senior woman as presiding officer, two or more internal members and one external member, with at least half women. Annual report goes to the District Officer by 31 January. Section 26 penalties run to ₹50,000 per violation, doubled on repeat, with licence cancellation possible.
- DPDP. The DPDP Rules 2025 were notified on 13 November 2025 and phase in: Consent Manager registration from 13 November 2026, full substantive obligations from 13 May 2027. The statutory ceiling is ₹250 crore per violation. This tool does not project a DPDP penalty figure, because a ceiling is not an expected value.
- Currency. INR figures convert at ₹96 to the dollar, spot July 2026. The Wisemonk EOR fee is from $99 per employee per month, flat.
This is a planning aid, not legal or tax advice. Classification and permanent-establishment outcomes turn on the facts of a specific arrangement and on treaty wording, and Indian tribunals have moved the PE line repeatedly over the past two years. Have a material finding reviewed by Indian employment counsel and, for anything PE-related, by a cross-border tax adviser before you act on it.
Have a material finding checked properly
Twenty minutes with someone who has taken an India team through this. We will tell you where an EOR helps, where it does not, and where you need counsel instead of a provider.
