We get calls from founders and HR managers who have been running India remote teams for 12, 18, 24 months paying people as contractors or through international wire transfers, and they've just discovered there's a compliance problem. Sometimes it comes up in due diligence for a funding round. Sometimes it's a disgruntled employee who files a complaint. Sometimes it's just a conversation with a lawyer that opens a can of worms they weren't ready for.
This guide is for anyone who has a remote team in India — or is building one — and wants to understand what the legal reality actually looks like, not the wishful thinking version.
The Remote Work Illusion
There's a common mental model that goes like this: if my employee is sitting in Bangalore working on their own laptop from their own home, and I'm paying them from my UK bank account into their Indian bank account, then they're basically an independent contractor and I don't have employment obligations.
This is wrong. Indian labour law doesn't care where the employee sits or how they're paid. It cares about the nature of the relationship. If someone works exclusively for you, takes direction from you, has been doing so for an extended period, and depends on you as their sole source of income — they are an employee. The employment obligations that come with that status don't disappear because you called them a consultant or because you're overseas.
What Indian Employment Law Actually Requires
Employment contract: Every employee in India must have a formal written employment contract. This should specify the role, compensation, working hours, leave entitlement, notice period, and termination conditions. A simple offer letter is not sufficient.
Provident Fund (PF): Employees earning a basic salary below ₹15,000 per month must be enrolled in PF. Even above this threshold, most employers enrol all employees as a standard practice. The employer contributes 12% of basic salary every month. This must be deposited with the EPFO by the 15th of the following month.
Tax Deducted at Source (TDS): Indian employers must calculate each employee's income tax liability and deduct it from their monthly salary, depositing it with the Income Tax Department. At the end of the financial year, Form 16 must be issued to every employee.
Shops and Establishments registration: The company employing staff in India must be registered under the relevant state's Shops and Establishments Act. For a remote team spread across multiple states, this can mean multiple registrations.
Payslips: Every employee must receive a detailed payslip every month showing gross salary, all deductions, and net pay. A simple bank transfer notification is not a payslip.
Leave entitlement: Indian employees are entitled to earned leave, casual leave, and sick leave as specified under applicable labour laws. These must be tracked and managed, not just informally agreed.
The Notice Period Reality
One thing that catches international companies completely off guard — Indian professionals typically have notice periods of 30 to 90 days. At senior levels, 90 days is standard. Some large company contracts specify three months with a buyout option.
This is not negotiable cultural quirk. It is contractual and legally binding. If you want someone to start in two weeks, you either need to find someone who is currently unemployed or serving their notice period, or you need to negotiate a buyout with their current employer — which typically costs one to three months of their current salary paid by the candidate or the new employer.
For international companies used to two-week notice periods, this requires a fundamental shift in how you plan hiring timelines. Start the process 12 weeks before you actually need someone in the seat.
When Things Go Wrong — Termination in India
Indian employment law provides significant protections for employees. Terminating someone without following the proper process creates real legal risk. In practice, this means:
- Performance issues must be documented with warnings and improvement plans before termination
- The contractual notice period must be honoured or paid in lieu
- Employees with over five years of service are entitled to gratuity
- In certain categories, particularly for workers covered under the Industrial Disputes Act, termination requires additional process
For most technology and professional roles in Bangalore, the practical reality is that a well-documented performance process followed by a mutual separation agreement is the cleanest way to handle exits. It requires more process than many international founders expect, but it is entirely manageable when done correctly from the start.
How an EOR Makes All of This Manageable
The reason most international companies with India remote teams use an Employer of Record is not complexity avoidance — it's risk management and speed. Setting up a Private Limited company in India to employ five remote engineers takes four to six months and requires ongoing ROC filings, GST registration, and a local director. An EOR gets you to compliant employment in five working days.
With XMS as your EOR for your India remote team, here is what changes: we are the legal employer. We issue employment contracts, manage PF and TDS, process payroll every month, provide payslips, handle leave tracking, and manage exits when they happen. You tell us what the person's role is, what their salary is, and when you want them to start. We handle everything else.
Your remote team in India doesn't feel any different in their day-to-day. They report to you, work on your product, use your tools, attend your meetings. The only change is that their payslip comes from XMS and their PF account is properly funded every month.
A Singapore startup had four remote engineers in Bangalore who had been paid as contractors for 18 months. Before a Series A round, their lawyers flagged the misclassification risk. We onboarded all four through EOR in ten days, backdated PF contributions were regularised, and the due diligence sailed through. The investor never saw it as an issue.
Have a remote team in India you need to structure properly?
Whether you're starting fresh or regularising an existing arrangement, we can get your India team on compliant employment in 5 working days.