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

The components below are based on the statutory rates set out in this guide 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 and updated for the Labour Codes' 50% basic-pay rule. The mandatory EPF line is 12% of the INR 25,000 monthly wage ceiling, because the employee's basic salary and dearness allowance (INR 600,000 a year, modelled at the 50% statutory floor rather than the lower shares common before the Codes) is above it. The optional line shows 12% of the full INR 600,000, which applies only if employer and employee jointly opt in writing to contribute above the ceiling. Under the Code on Wages 2019, Section 2(y), allowances and other listed exclusions above 50% of total remuneration count as wages, which is why the model uses that floor. This has applied nationally since 21 November 2025. See the India Labour Codes guide for how the rule works. Below the ceiling, the actual EPF cost still depends on the basic/DA split agreed in the employment contract; for lower-salary hires where ESI applies, add the employer ESI contribution of 3.25% of wages.

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 INR 25,000 wage ceiling in force since 17 September 2026.

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 Chapter III of the Code on Social Security 2020, which replaced the Employees Provident Funds and Miscellaneous Provisions Act 1952. Both employer and employee contribute at 12% each.

The EPF wage ceiling is now INR 25,000

EPF contributions are mandatory on the first INR 25,000 per month of wages. The Labour Ministry set that ceiling from 17 September 2026 (S.O. 5109(E)); it was INR 15,000 before. Contributions on earnings above the ceiling are voluntary. The 12% rate did not change.

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, up to the wage ceiling. 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 3.25% of wages and the employee pays 0.75%, under rule 19 of the Social Security (Central) Rules 2026.

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 Code on Social Security 2020 (Chapter IV). That Code replaced 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 one day of paid leave for every 20 days worked under the Occupational Safety, Health and Working Conditions Code 2020, once they have worked 180 days in the calendar year. State-level Shops and Establishments Acts may set different rates for commercial establishments. Budget earned leave as part of the gross cost: every leave day is a day 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 156 rebate (formerly section 87A) 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: Income-tax Act 2025, section 202 (tax year 2026-27).

Employee social deductions

The employee also contributes 12% EPF on basic salary and DA, up to the INR 25,000 monthly ceiling, 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 Code on Wages 2019 lets the central government fix a national floor wage (section 9), but none has been fixed yet. The binding figure is the minimum wage notified for the job, which varies by category of work and geography. No hire may be made below the applicable 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.