What does it really cost to hire an employee in India in 2026?

The components below are based on the statutory rates in the India compliance cache and an illustrative gross salary of INR 1,200,000 per year (INR 100,000 per month). This is a mid-market professional salary in India for 2026. All totals marked "illustrative" are computed from the rates shown. They vary with the actual basic/DA split, the ESI applicability, and any additional benefits provided.

These figures are illustrative. The EPF line is computed as 12% of INR 480,000 (the assumed basic salary and dearness allowance component at 40% of gross). The actual EPF cost depends on the basic/DA structure in the employment contract. For lower-salary hires where ESI applies, add the employer ESI contribution rate confirmed by your payroll provider.

Add Teamed from $599 per employee per month and the total rises further. Use the Employer Cost Calculator to run your own figures.

1. Fix the gross salary

   Agree the total gross salary and confirm the basic salary and DA component. The EPF contribution is calculated on basic plus DA, not on the total gross, so the split matters for your cost model.

2. Add employer EPF

   Apply the employer EPF rate to the basic salary and dearness allowance. Confirm whether the salary is above or below the notified wage ceiling and whether the revised ceiling applies.

3. Check ESI applicability

   Determine whether the employee's gross monthly salary falls at or below the ESI wage ceiling. If it does, add the employer ESI contribution using the current rate from your payroll provider.

4. Provision for maternity leave

   For each eligible female employee, plan for the cost of paid maternity leave. The employer funds the full salary for the statutory period for employees above the ESI ceiling.

5. Run the full cost model

   Use the Teamed Employer Cost Calculator for a complete, currency-converted breakdown before confirming the offer. Include EPF, ESI if applicable, and any contractual benefits.

EPF is the mandatory retirement savings scheme under the Employees Provident Funds and Miscellaneous Provisions Act 1952, now consolidated into the Code on Social Security 2020. Both employer and employee contribute at 12% each.

The wage ceiling under Supreme Court review

EPF contributions are mandatory on the first INR 15,000 per month of basic salary and DA. Contributions on earnings above that ceiling are voluntary. A January 2026 Supreme Court direction is expected to lead to a revision of the INR 15,000 wage ceiling, potentially to INR 21,000 or INR 25,000. The 12% rate itself is not under review, only the ceiling. Monitor the EPFO site and your payroll provider for a notification once the revised threshold is confirmed.

Employer pension sub-allocation (EPS)

Within the employer's 12% EPF contribution, a sub-allocation of 8.33% goes to the Employees Pension Scheme (EPS). The remaining 3.67% goes to the employee's individual EPF account. From the employer's perspective, the total outflow is 12% of basic salary and DA. The internal EPS and EPF split is managed by EPFO automatically.

India's ESIC scheme provides medical and sickness benefits to employees earning at or below the notified wage ceiling. The employer pays an ESI contribution as a percentage of total gross wages. The specific employer ESI rate is not a single figure in the India compliance cache; verify the current rate with your payroll provider or on the ESIC portal before modelling costs.

ESIC sickness benefit

Once an employee qualifies for ESIC, the scheme (not the employer) pays a sickness benefit at 70% of average daily wages for up to 91 days in a year under the Employees State Insurance Act 1948. The employer's direct sick pay obligation beyond the statutory minimum notice period is limited; the ESIC fund absorbs the income replacement cost. For employees above the ESI ceiling, there is no statutory employer sick pay obligation beyond the employment contract.

Earned leave

Employees earn 18 days of paid leave per year under the Occupational Safety, Health and Working Conditions Code 2020. This is the central government minimum for establishments covered by the Factories Act. State-level Shops and Establishments Acts may set different rates for commercial establishments. Budget earned leave as part of the gross cost: a working year includes 18 days days when the employee is paid but not producing output.

Public holidays

The central government notifies 17 gazetted public holidays per year. Many state governments add their own regional holidays. The total number of paid public holidays an employee is entitled to depends on the state and sector; budget for regional variation when hiring across multiple Indian cities.

Maternity leave is the most material family leave cost for India employers. The obligation under the Code on Social Security 2020 (consolidating the Maternity Benefit Act 1961 as amended in 2017) is 26 weeks of fully paid leave for the first or second child. The employer funds this directly. ESIC provides a maternity benefit for covered employees, but employees above the ESI ceiling are funded entirely by the employer for the duration.

Maternity leave: the key rules

Full pay for 26 weeks applies for the first two children. The employee must have worked for at least 80 days in the twelve months before the expected delivery date. A third or subsequent child attracts a shorter paid period under the Act. Establishments with 50 or more employees must also provide a creche facility. The creche requirement is a real operational cost beyond the salary continuation obligation.

No statutory paternity leave in the private sector

India has no central law requiring private sector employers to give paternity leave. The 0 days statutory entitlement means any paternity leave you offer is a company policy decision. Central government employees have their own entitlement under separate rules. If paternity leave is part of your hiring offer, document it as a contractual benefit in the employment agreement.

What to budget for maternity

The cost of a maternity leave cycle is roughly 26 weeks of the employee's gross salary plus the employer EPF contribution on that salary, payable during the absence. If the employee is above the ESI ceiling, the employer funds 100% of this. Plan for cover costs and any creche facility obligation separately.

Understanding the employee's income tax position helps you make competitive salary offers. The new default regime under the Income-tax Act 2025 (recodification of the Income Tax Act 1961) has seven bands. The Section 87A rebate means employees earning up to INR 12 lakh effectively pay no tax, though this is a separate mechanism from the zero-rate band.

Income tax bands FY 2026-27 (new default regime)

Source: ClearTax: Income Tax Slabs FY 2025-26 (AY 2026-27).

Employee social deductions

The employee also contributes 12% EPF on basic salary and DA each month. For employees covered by ESI, a further employee contribution applies on gross wages. Both reduce take-home pay on top of income tax. Confirm the employee's tax regime preference (old or new), their EPF applicability, and their ESI status at onboarding to model net pay accurately.

The minimum wage floor

The national floor level minimum wage is ₹4,628/month (calculated as INR 178 per day across 26 working days). This is the national floor; state minimum wages are typically higher and vary by category of work and geography. No hire may be made below the applicable state minimum wage.

Real HR and legal experts handle your India hires from the first offer letter through every PF challan, ESI return, and TDS deposit. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Every employer contribution passes through at cost, itemised on every invoice. You see the EPF line, the ESI line, and the gratuity provision separately. Nothing is hidden inside the management fee.

EOR payroll, contractor onboarding, and entity setup all live on one platform. An India contractor who converts to payroll keeps their record. That same employee can graduate from EOR to your own India entity without switching systems. EOR is the right structure for a first India hire, until it isn’t. Teamed does not lock you in. Start from the India hiring overview or run the Employer Cost Calculator to see the full picture.