Foo Falcon Technologies Pvt Ltd · Bengaluru · CIN U72900KA2022PTC163007
63 plain-English definitions across employment models, salary structure, statutory deductions, tax paperwork, labour law and exits. Written for US, UK, EU and AU teams reading Indian offer letters, payslips and compliance filings for the first time. Current for FY 2025-26.
63 plain-English definitions of India hiring, payroll and compliance terms, grouped in six categories. Current for FY 2025-26.
4.8 / 5 on G2, from companies employing teams in India through us.
Teams building in India. First hire to full team.
Tap a category to open it. Each definition states the governing statute and the FY 2025-26 numbers.
The routes a foreign company can take to put someone to work in India, and the tax presence question behind all of them.
A licensed local company that legally employs staff on behalf of a foreign business. The EOR's Indian entity signs the employment contract, runs payroll, and carries statutory liability; the client directs the day-to-day work. Versatile is an India-native EOR operating on its own Bengaluru Private Limited.
A provider that formally engages and pays independent contractors on a client's behalf, holding the contractor agreements and handling invoicing, TDS under Section 194 and documentation. Reduces misclassification exposure versus paying contractors directly from abroad.
A lighter engagement model where the provider administers contractor payments and paperwork but the classification risk largely stays with the client. Cheaper than EOR; suitable only where the worker is a genuine independent contractor.
A taxable business presence in India under the Income Tax Act and tax treaties. If a foreign company's India activity crosses the PE threshold (fixed place of business, dependent agent concluding contracts), Indian corporate tax applies to attributable profits. A properly structured EOR arrangement keeps employment with the Indian entity and helps contain PE risk.
Employment for a defined period with statutory benefits on par with permanent staff, including pro-rated gratuity under the labour codes. Ends automatically at term without retrenchment formalities; renewals in series attract scrutiny.
Contract Labour (Regulation & Abolition) Act 1970. Governs engagement of contract labour through contractors, with registration and licensing duties for principal employers above headcount thresholds. Relevant when staffing vendors, not EOR employees, are used.
A co-employment model where the provider and the client share employer responsibilities. In India the label is often used loosely as a synonym for EOR, but true co-employment requires the client to hold its own Indian entity; without one, the correct model is EOR, where the provider's entity is the sole legal employer.
Treating someone who works like an employee as an independent contractor. Indian authorities and courts apply control, supervision and integration tests, not the label on the agreement. Consequences run to PF and ESI arrears with interest and damages, gratuity claims and, in disputes, reinstatement demands.
A phased route to an owned India operation: a provider builds the team and runs it on its own entity, then transfers people and operations to the client's new entity at an agreed trigger. Sits between staying on EOR indefinitely and setting up a GCC from day one.
A company-owned India center running engineering, finance or operations for the global parent, on the parent's own entity. The common graduation path from EOR: start on EOR, move to a GCC or subsidiary past roughly 20 to 30 heads. Versatile supports the transition contractually.
How an Indian offer is quoted, what the employee actually receives, and the components that decide both.
The all-in annual figure Indian offers are quoted in: basic, HRA, allowances, employer PF, gratuity accrual and any variable pay. CTC is not take-home; a ₹30 lakh CTC typically yields a materially lower monthly in-hand after PF, TDS and professional tax.
The employee-facing salary before employee-side deductions: basic, DA, HRA and allowances, but excluding employer contributions like employer PF and gratuity accrual. Sits between CTC (larger) and in-hand (smaller) in every Indian salary conversation.
The net amount credited to the employee monthly after employee PF, TDS, professional tax and other deductions. The gap between CTC and in-hand is the single most common source of offer-stage confusion for foreign employers.
The residual, fully taxable component that balances a CTC structure once basic, HRA and other heads are set. Historically kept out of PF wages, but the Supreme Court has held that generic allowances paid universally can count toward PF, so oversized special allowance is not a reliable PF shield.
Performance-linked compensation paid quarterly or annually on top of fixed pay, common at 10 to 30% of CTC in senior Indian offers. Taxed as salary in the year of payout; whether it counts toward PF or gratuity depends on how the plan is worded, so the scheme document matters.
A salary component exempt for domestic travel fare, under the Old Regime only. Exemption covers two journeys in a block of four calendar years (2026 to 2029 is the current block) and requires actual travel with proof; unclaimed LTA is simply taxed.
A one-time signing payment, taxed as salary in the month paid. Usually carries a clawback if the employee leaves within 12 months, recovered through the full and final settlement; recovering the gross amount when tax was already deducted is a recurring dispute point.
Structuring a payment so the employer bears the tax: the amount is increased until the employee receives the agreed net after TDS. Used for one-time payments, perquisites and relocation support where the offer promised a take-home figure.
Basic salary plus Dearness Allowance: the wage base on which PF, gratuity and statutory bonus are computed. Structuring basic too low to shrink PF has limits; the Supreme Court has held that generic allowances can be treated as part of PF wages.
A salary component that is partly income-tax exempt for employees paying rent, under the Old Regime. Exemption is the least of actual HRA, rent paid minus 10% of basic, and 50% of basic in metro cities (40% elsewhere).
Under the Payment of Bonus Act 1965, employees earning basic+DA up to ₹21,000/month in covered establishments are entitled to an annual bonus of 8.33% to 20% of wages. Most senior tech salaries sit above the threshold, but eligibility must be checked, not assumed.
Set state-by-state and by skill category and scheduled employment, revised via periodic dearness allowance notifications. The Code on Wages 2019 introduces a national floor wage concept. Practically irrelevant for tech salaries but a hard compliance line for support roles.
Employee stock options are taxed twice in India: as salary perquisite on the spread at exercise (TDS applies), then capital gains on sale. Eligible DPIIT-registered startups can defer the perquisite tax. Foreign-parent ESOPs for India EOR employees need FEMA-compliant documentation.
Voluntary defined-contribution retirement scheme regulated by PFRDA. Employee contributions attract Section 80CCD(1B) benefits; employer contributions up to 10% of basic+DA are deductible under 80CCD(2) in both tax regimes.
The contributions that come off every compliant Indian payslip, and the registrations behind them.
Provident Fund / Employees' Provident Fund Organisation. Statutory retirement savings scheme. 12% from employee + 12% from employer on basic + DA. Versatile runs an exempt PF Trust under Section 17 of the EPF Act.
Employees' State Insurance Corporation. Statutory health insurance scheme for employees with gross under ₹21K/month. 0.75% employee + 3.25% employer. Most senior bands sit above the threshold so ESIC does not apply, but eligibility is re-checked on every salary revision.
Statutory severance payout under the Payment of Gratuity Act 1972. Accrued at 4.81% of basic per month. Payable on exit after 4 years + 240 days of continuous service. Capped tax-exempt at ₹20 lakh.
State-level tax on employment income. Karnataka ₹200/mo. Maharashtra slab-based up to ₹2,500/year. Each state has its own portal and acknowledgement IDs. Versatile holds registrations in nine states.
Universal Account Number. Lifelong PF identity for every Indian employee. Survives employer changes if transfers are filed correctly. Versatile preserves UAN continuity on every EOR-to-EOR migration.
The pension leg inside PF. 8.33% of the employer's 12% contribution is diverted to EPS, computed on a wage ceiling of ₹15,000, so the diversion caps at ₹1,250 a month; the balance flows to the EPF account. Funds a monthly pension after 10 years of contributory service.
Small statutory contribution to state-run welfare boards, deducted with a matching employer share in roughly 16 states including Karnataka, Maharashtra and Tamil Nadu. Amounts and frequency (monthly, half-yearly or annual) vary by state, which is why LWF lines differ between payslips of colleagues in different cities.
The certificates, declarations and returns that Indian payroll produces every month, quarter and year.
Tax Deducted at Source. Income tax withheld monthly by the employer against the employee's annualised income. Quarterly e-TDS return (Form 24Q) filed by the employer. Annual reconciliation against Form 26AS.
Annual TDS certificate issued by employer to employee by 31 May each year for the prior financial year. Generated via the TRACES portal. Includes the salary breakdown, deductions, and TDS paid.
Quarterly TDS certificate for non-salary payments (e.g., contractor payments). Issued by the payer to the recipient via TRACES.
Investment declaration form submitted by employees to their employer for the financial year. Captures Section 80C, 80D, 80CCD(1B), HRA, and other deductions for accurate TDS computation.
Permanent Account Number: the ten-character income-tax identity required for salary TDS, investments and filings. Without a valid PAN, TDS applies at penal rates. Collected and verified at onboarding.
The employee's consolidated tax statement (26AS) and Annual Information Statement (AIS) on the income-tax portal, showing TDS deposited against their PAN. Employees reconcile these against Form 16 before filing returns.
India runs two parallel income-tax regimes. The New Regime (default) has lower slab rates, a ₹75,000 standard deduction and effectively no tax up to ₹12 lakh from FY 2025-26, but drops most exemptions. The Old Regime keeps 80C, HRA and other deductions. Employees elect a regime for TDS each year.
Income Tax Act deduction for specified investments. ₹1.5 lakh annual ceiling. Includes PF, ELSS, PPF, NSC, life insurance premiums, home loan principal. Old Regime only.
Additional NPS deduction. ₹50,000 annual, on top of Section 80C. Old Regime only. Saves ₹15,600 per year at the 31.2% slab.
Employer NPS contribution exemption. Up to 10% of basic+DA. Available in both Old and New Regimes.
Goods and Services Tax. Indirect tax on goods and services. GSTR-1 is monthly outward supplies return; GSTR-3B is consolidated monthly summary. Versatile files both for every applicable invoice.
Letter of Undertaking. GST registration that allows zero-rated services exports. Renewed annually. Versatile holds an active LUT for cross-border invoicing.
The statutes and consolidated codes that govern working conditions, benefits, workplace conduct and employee data.
State-level legislation governing working hours, leave, employment terms. Every state has its own variant. Versatile holds Shops & Establishments licences in nine states.
Consolidated labour code that replaces four older wage statutes. Defines minimum wage, equal remuneration. Notified partially.
Consolidated labour code that replaces three older statutes (Trade Unions Act, Industrial Employment Act, Industrial Disputes Act). Tightens contractor classification tests. Notified partially.
Consolidated labour code that replaces nine older social security statutes (PF, ESI, gratuity, maternity, etc.). Notified partially.
Occupational Safety, Health and Working Conditions Code: the fourth consolidated labour code, replacing 13 statutes covering working conditions, welfare and safety. Like the other three codes, notified partially, with states issuing draft rules.
Mandates 26 weeks paid maternity leave. Versatile absorbs full backfill cost during leave; no adjustment to customer invoice.
Prevention of Sexual Harassment at the Workplace Act 2013. Requires Internal Committee constitution, annual returns, mandatory training. Versatile handles all POSH compliance.
Digital Personal Data Protection Act, India's data protection law. Requires lawful consent-based processing of employee personal data, breach notification and reasonable safeguards, with rules operationalised from 2025. Employers and EORs act as data fiduciaries for employee data.
Work beyond statutory hours, generally 48 a week, is payable at twice the ordinary rate under the Factories Act and most state Shops & Establishments Acts. Rarely triggered for salaried tech roles in practice, but a hard line for support, operations and shift-based teams.
No central statute mandates paternity leave for private-sector employees; central government employees get 15 days. Market practice among tech employers runs 5 to 15 days by policy. Under EOR, the leave policy in the appointment letter is what governs, so the entitlement should be set deliberately.
Termination of a workman for redundancy under the Industrial Disputes Act requires one month's notice or pay in lieu, plus severance of 15 days' average pay per completed year, once the employee has 240 days of service. Managerial roles fall outside the workman definition, but contracts and courts still expect reasonable process.
The paperwork and timelines that bracket an Indian employment: joining documents, probation, notice and the closing settlement.
The formal employment contract in India, issued by the employing entity (under EOR, the provider's Indian company). States compensation, notice, probation, place of work and governing policies. Distinct from the offer letter, which precedes it.
Pre-employment checks standard in Indian hiring: identity, address, education, prior employment, and where relevant criminal record and credit. Consent-driven under the DPDP Act. Versatile runs BGV before every EOR onboarding.
Initial employment phase, typically 3 to 6 months, with a shorter notice period and simpler exit terms. Confirmation should be documented in writing; treating someone as “permanent probation” invites dispute.
Contractual period between resignation and last working day, commonly 30 to 90 days in India, longer than US/UK norms. Enforceable; buyout in lieu of notice is common and is typically recovered or paid through the full and final settlement.
The closing payroll run on exit: pending salary, leave encashment, gratuity if eligible, bonus, recoveries and notice buyout, plus the final TDS true-up. The Code on Wages prescribes payment within two days of exit once fully notified; 30 to 45 days remains common market practice.
Payment for unused earned leave, typically on exit as part of F&F. For non-government employees, exemption on retirement encashment is capped at ₹25 lakh lifetime. Leave accrual rules come from the state Shops & Establishments Act.
Formal letter confirming the employee has been released from employment after serving notice. Indian employers demand it at the next job's onboarding alongside the experience letter; withholding it is a frequent dispute point.
The monthly statement of earnings and deductions every Indian employee expects: basic, HRA, allowances, employee PF, TDS, professional tax and net pay, with PF and PAN identifiers. Wage rules require one for every pay period; employees rely on it for loans, visas and tax filing.
Indian leave splits into earned or privilege leave (roughly 15 to 21 days a year depending on the state Act, usually carried forward and encashable), casual leave for short unplanned absences, and sick leave. Entitlements, carry-forward caps and encashment rules all come from the state Shops & Establishments Act.
The routes a foreign company can take to put someone to work in India, and the tax presence question behind all of them.
A licensed local company that legally employs staff on behalf of a foreign business. The EOR's Indian entity signs the employment contract, runs payroll, and carries statutory liability; the client directs the day-to-day work. Versatile is an India-native EOR operating on its own Bengaluru Private Limited.
A provider that formally engages and pays independent contractors on a client's behalf, holding the contractor agreements and handling invoicing, TDS under Section 194 and documentation. Reduces misclassification exposure versus paying contractors directly from abroad.
A lighter engagement model where the provider administers contractor payments and paperwork but the classification risk largely stays with the client. Cheaper than EOR; suitable only where the worker is a genuine independent contractor.
A taxable business presence in India under the Income Tax Act and tax treaties. If a foreign company's India activity crosses the PE threshold (fixed place of business, dependent agent concluding contracts), Indian corporate tax applies to attributable profits. A properly structured EOR arrangement keeps employment with the Indian entity and helps contain PE risk.
Employment for a defined period with statutory benefits on par with permanent staff, including pro-rated gratuity under the labour codes. Ends automatically at term without retrenchment formalities; renewals in series attract scrutiny.
Contract Labour (Regulation & Abolition) Act 1970. Governs engagement of contract labour through contractors, with registration and licensing duties for principal employers above headcount thresholds. Relevant when staffing vendors, not EOR employees, are used.
A co-employment model where the provider and the client share employer responsibilities. In India the label is often used loosely as a synonym for EOR, but true co-employment requires the client to hold its own Indian entity; without one, the correct model is EOR, where the provider's entity is the sole legal employer.
Treating someone who works like an employee as an independent contractor. Indian authorities and courts apply control, supervision and integration tests, not the label on the agreement. Consequences run to PF and ESI arrears with interest and damages, gratuity claims and, in disputes, reinstatement demands.
A phased route to an owned India operation: a provider builds the team and runs it on its own entity, then transfers people and operations to the client's new entity at an agreed trigger. Sits between staying on EOR indefinitely and setting up a GCC from day one.
A company-owned India center running engineering, finance or operations for the global parent, on the parent's own entity. The common graduation path from EOR: start on EOR, move to a GCC or subsidiary past roughly 20 to 30 heads. Versatile supports the transition contractually.
How an Indian offer is quoted, what the employee actually receives, and the components that decide both.
The all-in annual figure Indian offers are quoted in: basic, HRA, allowances, employer PF, gratuity accrual and any variable pay. CTC is not take-home; a ₹30 lakh CTC typically yields a materially lower monthly in-hand after PF, TDS and professional tax.
The employee-facing salary before employee-side deductions: basic, DA, HRA and allowances, but excluding employer contributions like employer PF and gratuity accrual. Sits between CTC (larger) and in-hand (smaller) in every Indian salary conversation.
The net amount credited to the employee monthly after employee PF, TDS, professional tax and other deductions. The gap between CTC and in-hand is the single most common source of offer-stage confusion for foreign employers.
The residual, fully taxable component that balances a CTC structure once basic, HRA and other heads are set. Historically kept out of PF wages, but the Supreme Court has held that generic allowances paid universally can count toward PF, so oversized special allowance is not a reliable PF shield.
Performance-linked compensation paid quarterly or annually on top of fixed pay, common at 10 to 30% of CTC in senior Indian offers. Taxed as salary in the year of payout; whether it counts toward PF or gratuity depends on how the plan is worded, so the scheme document matters.
A salary component exempt for domestic travel fare, under the Old Regime only. Exemption covers two journeys in a block of four calendar years (2026 to 2029 is the current block) and requires actual travel with proof; unclaimed LTA is simply taxed.
A one-time signing payment, taxed as salary in the month paid. Usually carries a clawback if the employee leaves within 12 months, recovered through the full and final settlement; recovering the gross amount when tax was already deducted is a recurring dispute point.
Structuring a payment so the employer bears the tax: the amount is increased until the employee receives the agreed net after TDS. Used for one-time payments, perquisites and relocation support where the offer promised a take-home figure.
Basic salary plus Dearness Allowance: the wage base on which PF, gratuity and statutory bonus are computed. Structuring basic too low to shrink PF has limits; the Supreme Court has held that generic allowances can be treated as part of PF wages.
A salary component that is partly income-tax exempt for employees paying rent, under the Old Regime. Exemption is the least of actual HRA, rent paid minus 10% of basic, and 50% of basic in metro cities (40% elsewhere).
Under the Payment of Bonus Act 1965, employees earning basic+DA up to ₹21,000/month in covered establishments are entitled to an annual bonus of 8.33% to 20% of wages. Most senior tech salaries sit above the threshold, but eligibility must be checked, not assumed.
Set state-by-state and by skill category and scheduled employment, revised via periodic dearness allowance notifications. The Code on Wages 2019 introduces a national floor wage concept. Practically irrelevant for tech salaries but a hard compliance line for support roles.
Employee stock options are taxed twice in India: as salary perquisite on the spread at exercise (TDS applies), then capital gains on sale. Eligible DPIIT-registered startups can defer the perquisite tax. Foreign-parent ESOPs for India EOR employees need FEMA-compliant documentation.
Voluntary defined-contribution retirement scheme regulated by PFRDA. Employee contributions attract Section 80CCD(1B) benefits; employer contributions up to 10% of basic+DA are deductible under 80CCD(2) in both tax regimes.
The contributions that come off every compliant Indian payslip, and the registrations behind them.
Provident Fund / Employees' Provident Fund Organisation. Statutory retirement savings scheme. 12% from employee + 12% from employer on basic + DA. Versatile runs an exempt PF Trust under Section 17 of the EPF Act.
Employees' State Insurance Corporation. Statutory health insurance scheme for employees with gross under ₹21K/month. 0.75% employee + 3.25% employer. Most senior bands sit above the threshold so ESIC does not apply, but eligibility is re-checked on every salary revision.
Statutory severance payout under the Payment of Gratuity Act 1972. Accrued at 4.81% of basic per month. Payable on exit after 4 years + 240 days of continuous service. Capped tax-exempt at ₹20 lakh.
State-level tax on employment income. Karnataka ₹200/mo. Maharashtra slab-based up to ₹2,500/year. Each state has its own portal and acknowledgement IDs. Versatile holds registrations in nine states.
Universal Account Number. Lifelong PF identity for every Indian employee. Survives employer changes if transfers are filed correctly. Versatile preserves UAN continuity on every EOR-to-EOR migration.
The pension leg inside PF. 8.33% of the employer's 12% contribution is diverted to EPS, computed on a wage ceiling of ₹15,000, so the diversion caps at ₹1,250 a month; the balance flows to the EPF account. Funds a monthly pension after 10 years of contributory service.
Small statutory contribution to state-run welfare boards, deducted with a matching employer share in roughly 16 states including Karnataka, Maharashtra and Tamil Nadu. Amounts and frequency (monthly, half-yearly or annual) vary by state, which is why LWF lines differ between payslips of colleagues in different cities.
The certificates, declarations and returns that Indian payroll produces every month, quarter and year.
Tax Deducted at Source. Income tax withheld monthly by the employer against the employee's annualised income. Quarterly e-TDS return (Form 24Q) filed by the employer. Annual reconciliation against Form 26AS.
Annual TDS certificate issued by employer to employee by 31 May each year for the prior financial year. Generated via the TRACES portal. Includes the salary breakdown, deductions, and TDS paid.
Quarterly TDS certificate for non-salary payments (e.g., contractor payments). Issued by the payer to the recipient via TRACES.
Investment declaration form submitted by employees to their employer for the financial year. Captures Section 80C, 80D, 80CCD(1B), HRA, and other deductions for accurate TDS computation.
Permanent Account Number: the ten-character income-tax identity required for salary TDS, investments and filings. Without a valid PAN, TDS applies at penal rates. Collected and verified at onboarding.
The employee's consolidated tax statement (26AS) and Annual Information Statement (AIS) on the income-tax portal, showing TDS deposited against their PAN. Employees reconcile these against Form 16 before filing returns.
India runs two parallel income-tax regimes. The New Regime (default) has lower slab rates, a ₹75,000 standard deduction and effectively no tax up to ₹12 lakh from FY 2025-26, but drops most exemptions. The Old Regime keeps 80C, HRA and other deductions. Employees elect a regime for TDS each year.
Income Tax Act deduction for specified investments. ₹1.5 lakh annual ceiling. Includes PF, ELSS, PPF, NSC, life insurance premiums, home loan principal. Old Regime only.
Additional NPS deduction. ₹50,000 annual, on top of Section 80C. Old Regime only. Saves ₹15,600 per year at the 31.2% slab.
Employer NPS contribution exemption. Up to 10% of basic+DA. Available in both Old and New Regimes.
Goods and Services Tax. Indirect tax on goods and services. GSTR-1 is monthly outward supplies return; GSTR-3B is consolidated monthly summary. Versatile files both for every applicable invoice.
Letter of Undertaking. GST registration that allows zero-rated services exports. Renewed annually. Versatile holds an active LUT for cross-border invoicing.
The statutes and consolidated codes that govern working conditions, benefits, workplace conduct and employee data.
State-level legislation governing working hours, leave, employment terms. Every state has its own variant. Versatile holds Shops & Establishments licences in nine states.
Consolidated labour code that replaces four older wage statutes. Defines minimum wage, equal remuneration. Notified partially.
Consolidated labour code that replaces three older statutes (Trade Unions Act, Industrial Employment Act, Industrial Disputes Act). Tightens contractor classification tests. Notified partially.
Consolidated labour code that replaces nine older social security statutes (PF, ESI, gratuity, maternity, etc.). Notified partially.
Occupational Safety, Health and Working Conditions Code: the fourth consolidated labour code, replacing 13 statutes covering working conditions, welfare and safety. Like the other three codes, notified partially, with states issuing draft rules.
Mandates 26 weeks paid maternity leave. Versatile absorbs full backfill cost during leave; no adjustment to customer invoice.
Prevention of Sexual Harassment at the Workplace Act 2013. Requires Internal Committee constitution, annual returns, mandatory training. Versatile handles all POSH compliance.
Digital Personal Data Protection Act, India's data protection law. Requires lawful consent-based processing of employee personal data, breach notification and reasonable safeguards, with rules operationalised from 2025. Employers and EORs act as data fiduciaries for employee data.
Work beyond statutory hours, generally 48 a week, is payable at twice the ordinary rate under the Factories Act and most state Shops & Establishments Acts. Rarely triggered for salaried tech roles in practice, but a hard line for support, operations and shift-based teams.
No central statute mandates paternity leave for private-sector employees; central government employees get 15 days. Market practice among tech employers runs 5 to 15 days by policy. Under EOR, the leave policy in the appointment letter is what governs, so the entitlement should be set deliberately.
Termination of a workman for redundancy under the Industrial Disputes Act requires one month's notice or pay in lieu, plus severance of 15 days' average pay per completed year, once the employee has 240 days of service. Managerial roles fall outside the workman definition, but contracts and courts still expect reasonable process.
The paperwork and timelines that bracket an Indian employment: joining documents, probation, notice and the closing settlement.
The formal employment contract in India, issued by the employing entity (under EOR, the provider's Indian company). States compensation, notice, probation, place of work and governing policies. Distinct from the offer letter, which precedes it.
Pre-employment checks standard in Indian hiring: identity, address, education, prior employment, and where relevant criminal record and credit. Consent-driven under the DPDP Act. Versatile runs BGV before every EOR onboarding.
Initial employment phase, typically 3 to 6 months, with a shorter notice period and simpler exit terms. Confirmation should be documented in writing; treating someone as “permanent probation” invites dispute.
Contractual period between resignation and last working day, commonly 30 to 90 days in India, longer than US/UK norms. Enforceable; buyout in lieu of notice is common and is typically recovered or paid through the full and final settlement.
The closing payroll run on exit: pending salary, leave encashment, gratuity if eligible, bonus, recoveries and notice buyout, plus the final TDS true-up. The Code on Wages prescribes payment within two days of exit once fully notified; 30 to 45 days remains common market practice.
Payment for unused earned leave, typically on exit as part of F&F. For non-government employees, exemption on retirement encashment is capped at ₹25 lakh lifetime. Leave accrual rules come from the state Shops & Establishments Act.
Formal letter confirming the employee has been released from employment after serving notice. Indian employers demand it at the next job's onboarding alongside the experience letter; withholding it is a frequent dispute point.
The monthly statement of earnings and deductions every Indian employee expects: basic, HRA, allowances, employee PF, TDS, professional tax and net pay, with PF and PAN identifiers. Wage rules require one for every pay period; employees rely on it for loans, visas and tax filing.
Indian leave splits into earned or privilege leave (roughly 15 to 21 days a year depending on the state Act, usually carried forward and encashable), casual leave for short unplanned absences, and sick leave. Entitlements, carry-forward caps and encashment rules all come from the state Shops & Establishments Act.
Operators who moved their India employment onto our entity and stopped translating payslips alone.
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Verified client “They moved fast and took the whole compliance side off my plate. For a founder making an early India hire, that is exactly what you want.”Founder and CEO, Sensibull
“Every option was either 'set up your own entity' or a platform that quotes a great price then hits you with add-ons. Versatile was the one that actually made it simple. First payroll ran on time. No scramble.”Co-Founder, Moonshot
“Contracts, PF, ESI, TDS and payroll all in one place. Invoicing in USD meant zero exchange rate surprises. The compliance rigour is genuinely reassuring.”Founder, Digital Marketing Agency
“Setting up in a new country can get messy fast, but their India EOR made onboarding feel easy. The team is responsive, clear, and great to work with.”Studio Owner, Design Studio
“We used Versatile to hire our first employee in India after months of putting it off because the compliance side seemed like a mess. They walked us through it and now we don't think about it.”First-time Founder, US Startup
“Versatile consistently delivered work that was both strategically sharp and execution-ready. Their turnaround times are impressive, and they think about problems the way an in-house team would.”Senior Manager, Tech TA
“Their team was highly responsive, professional, and easy to work with. They made a complex process feel simple.”Core Team, Growth-stage Startup
Six questions foreign employers ask once the first Indian offer letter or payslip lands on their desk.
CTC is the annual all-in number an Indian offer quotes: basic, HRA, allowances, employer PF and gratuity accrual all rolled together. In-hand is what actually reaches the bank each month once employee PF, TDS and professional tax come off. Candidates negotiate on CTC, budgets should be built on CTC, but the monthly credit is always smaller, and explaining that gap early avoids most offer-stage friction.
PF at 12% of basic plus DA from each side is the constant. TDS follows the employee’s chosen tax regime and annualised income. Professional tax applies in most states at a small monthly amount. ESIC only enters below the ₹21,000 gross threshold, so it rarely shows up on tech payslips, but eligibility gets re-checked whenever salary changes.
Partially. The Code on Wages, the Industrial Relations Code, the Social Security Code and the OSH Code have all been passed by Parliament, but they take effect through central and state notifications, and those have landed piecemeal. In practice the older statutes still govern day to day while employers track the codes’ stricter classification tests and F&F timelines as the direction of travel.
Monthly: payslips and PF, ESIC and PT challans. Quarterly: the Form 24Q e-TDS return, and Form 16A where contractor payments run through TDS. Annually: Form 16 for every employee by 31 May, which the employee reconciles against their own Form 26AS and AIS before filing returns. If any of these are missing, filings are being skipped somewhere.
Yes, that is the point of the model. Under EOR the Indian entity on the appointment letter is the provider’s, so PF, ESIC, TDS, professional tax, POSH and Shops and Establishments duties sit with it, along with the penalties when something is filed late. The client directs the work; the statutory relationships listed in this glossary belong to the employer of record.
Every figure reflects FY 2025-26: the ₹75,000 standard deduction and the effective nil-tax band to ₹12 lakh under the New Regime, the ₹21,000 ESIC gross threshold, gratuity accrual at 4.81% with the ₹20 lakh exemption cap, and the ₹25 lakh lifetime cap on leave-encashment exemption. We revise the set when a Budget or notification moves any of them.
Longer reading: Pay employees in India · India EOR contracts and leave · Cost of hiring in India · Related tool: severance and exit cost calculator · Related tool: holiday and leave policy tool · Related tool: India offboarding planner
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