An overseas company can employ and manage people working remotely from India. But it cannot assume that its home-country employment policies will automatically satisfy Indian requirements.
Certainly, an employer based outside of India is required to adhere to the employment laws of India while managing the employees working in India. It depends on the location of the employee, the employing company or organisation, and the employment arrangement.
This issue is especially relevant in 2026. India's four Labour Codes took effect from 21 November 2025, consolidating 29 central labour laws. The Ministry of Labour and Employment has since issued 2026 Central Rules and additional FAQs addressing the operation of the Codes.
For an overseas employer, therefore, remote hiring is not merely an HR decision. It requires a legal assessment of the relationship, the workforce location and the structure through which the employee is engaged.
Does Indian Labour Law Apply to Overseas Employers?
The answer can be yes.
An employer's incorporation outside India does not, by itself, place an employee working in India outside the scope of applicable Indian employment protections.
The legal assessment should consider:
- Where the employee actually works;
- Which entity employs the individual;
- Whether the individual is an employee or genuine independent contractor;
- Whether the business has an Indian establishment;
- The employee's state of work;
- Applicable statutory thresholds;
- Whether an Employer of Record (EOR) is involved;
- The degree of control exercised by the overseas business.
This is why a foreign company's standard employment agreement should not be the starting and ending point of the analysis.
The safer approach is to examine the substance of the employment arrangement, identify the mandatory Indian requirements and then structure the contract and HR processes around them.
Why Does the Employee's State Matter?
India's employment framework is not entirely uniform across all jurisdictions.
The four Labour Codes provide the central legislative framework, but their implementation involves both Central and State Governments. State-level employment legislation and rules can therefore remain important to the practical compliance analysis. The Ministry's own Labour Code materials distinguish the Central and State rule-making roles.
This matters greatly for remote teams.
Employees of a foreign organisation might be operating out of Bengaluru, Mumbai, Kolkata, Hyderabad and Chennai. The organisation may have one single HR policy across the world, but it must realise that there can never be a single compliance checklist for all the states.
Shops & Establishments Requirements
State Shops and Establishments legislation may regulate matters such as:
- Working hours;
- Weekly holidays;
- Leave;
- Overtime;
- Employment records;
- Notices;
- Opening and closing hours;
- Registration;
- Conditions of employment.
The exact requirements depend on the applicable state legislation, rules, exemptions and facts.
A remote employee's home address should therefore not be treated as the sole test of applicability. The employer should examine the relevant statutory definitions, the nature of the business and the manner in which the employee is engaged.
Labour Codes vs. Shops & Establishments Laws
This distinction is important for overseas employers.
|
Labour Codes |
Shops & Establishments framework |
|
Central legislative framework |
Primarily state-specific framework |
|
Covers wages, social security, industrial relations and occupational safety and working conditions |
May regulate working hours, leave, holidays, records and establishment-related matters |
|
Four Codes consolidate 29 central labour laws |
Requirements vary according to the relevant State law |
|
Central and State rules may be relevant to implementation |
State legislation, rules and notifications require separate examination |
The implementation of the Labour Codes should therefore not be interpreted as meaning that every state-level employment requirement has disappeared.
A proper compliance review should examine both layers.
That distinction is particularly valuable for a remote workforce because the overseas employer may have no traditional office in the employee's state, yet still need to assess whether state-specific employment requirements are triggered.
What Changed Under the Four Labour Codes?
India's central employment framework is now organised around four principal Codes:
- Code on Wages, 2019
- Industrial Relations Code, 2020
- Code on Social Security, 2020
- Occupational Safety, Health and Working Conditions Code, 2020
The official India Code records these four enactments, while the Government has confirmed that they were brought into effect from 21 November 2025.
For overseas employers, each Code raises different compliance questions.
Code on Wages
The Code on Wages addresses minimum wages, payment of wages, bonus and related matters.
An overseas employer should therefore review its Indian salary structure rather than assume that timely salary payment is sufficient.
The review should consider:
- Applicable minimum wages;
- The statutory definition of wages;
- Salary components;
- Permitted deductions;
- Overtime;
- Bonus obligations, where applicable.
The Ministry's 2026 FAQs also provide clarifications on the revised wage framework. This makes a review of compensation structures particularly relevant for employers whose Indian workforce was engaged under arrangements designed before the Codes became operational.
Code on Social Security
The Code on Social Security addresses areas including provident fund, Employees' State Insurance, gratuity, maternity benefit and employees' compensation.
Whether a particular contribution or benefit applies depends on the relevant statutory provisions, thresholds, establishment and employee circumstances.
An overseas employer should therefore not assume that international health insurance, private retirement benefits or contractual severance automatically replace Indian statutory entitlements.
Private benefits and statutory benefits serve different legal purposes.
Occupational Safety and Working Conditions
Remote work does not automatically eliminate workplace-related obligations.
The employer should assess the nature of the work, working arrangements and applicable statutory requirements. Internal policies should also address working hours, equipment, workplace conduct and reporting procedures where relevant.
The Ministry has published 2026 Central Rules and FAQs under the Occupational Safety, Health and Working Conditions Code, confirming that employers need to consider the current operational framework rather than rely solely on pre-Code policies.
Industrial Relations Code
The Industrial Relations Code deals with areas including industrial relations, standing orders and industrial disputes, subject to the applicability of particular provisions.
An overseas employer should therefore avoid treating termination as a matter governed solely by its foreign HR policy.
A contractual termination clause must be assessed alongside applicable statutory requirements.
Which Employment Structure Should an Overseas Employer Choose?
There is no single structure that is legally appropriate for every overseas business.
The main possibilities are:
|
Structure |
Principal issue |
Compliance focus |
|
Direct employment |
Overseas company employs the worker |
Indian employment, payroll and statutory requirements |
|
Indian subsidiary |
Indian entity employs the worker |
Local entity and employment compliance |
|
EOR |
EOR acts as formal employer |
Allocation of statutory and contractual responsibilities |
|
Independent contractor |
Worker is genuinely independent |
Correct classification and contractual independence |
The decision should reflect the business's workforce size, degree of control, permanence of operations and plans for India.
Direct Employment
If an overseas company directly employs an individual working from India, it should assess the employment structure, applicable registrations, payroll obligations and state-specific requirements.
The absence of a conventional Indian office does not, by itself, answer these questions.
Indian Subsidiary
An Indian subsidiary can provide a conventional local employment structure.
The Indian entity may act as employer, maintain employment records and administer local payroll and benefits.
However, incorporation also creates separate corporate, tax, accounting and regulatory obligations. It should therefore be considered as part of the company's overall India-entry strategy.
Employer of Record
An EOR can simplify the practical process of hiring employees in India without immediately establishing a local entity.
It should not, however, be treated as a complete transfer of legal risk.
The overseas business should examine the EOR agreement and clearly identify responsibility for:
- Employment contracts;
- Payroll;
- Statutory contributions;
- Leave and benefits;
- Employee records;
- Workplace complaints;
- Termination;
- Regulatory notices;
- Employment disputes.
The important question is not simply whether an EOR is being used.
It is:
Who is responsible for each obligation, and what does the contract say about that responsibility?
Independent Contractors
Contractor classification requires particular care.
Calling a worker a "consultant" does not, by itself, establish an independent commercial relationship.
The actual arrangement should be assessed for factors such as:
- Control over working hours;
- Reporting structure;
- Exclusivity;
- Regular remuneration;
- Integration into the business;
- Leave approval;
- Performance supervision;
- Provision of equipment;
- Long-term continuity.
Where the substance of the relationship resembles employment, the contractual label may not adequately protect the business.
Can an Overseas Employment Contract Be Used in India?
A foreign employment contract can be adapted, but simply importing the employer's standard US, UK or Singapore agreement is not a sound compliance strategy.
An India-specific agreement should address:
- Employing entity;
- Place of work;
- Remote-working arrangements;
- Salary and statutory deductions;
- Working hours;
- Leave;
- Benefits;
- Notice and termination;
- Confidentiality;
- Intellectual property;
- Data and information security;
- Workplace policies;
- Dispute resolution.
Foreign Governing Law Is Not a Complete Shield
An overseas company may prefer its home-country law to govern the employment agreement.
That contractual choice should not be treated as a blanket exclusion of mandatory Indian employment requirements where Indian law applies.
he safer approach is to identify mandatory requirements first and draft the employment agreement around them.
How Should Remote Working Hours Be Managed?
International teams create a practical difficulty that traditional Indian offices may not face: time-zone differences.
An employee in India may routinely attend meetings late at night because management operates from North America or Europe.
Calling the arrangement "flexible working" does not necessarily resolve statutory working-time concerns.
The employer should establish clear rules for:
- Normal working hours;
- Time-zone expectations;
- Overtime approval;
- Recording additional hours;
- Weekly rest;
- Managerial contact outside scheduled hours.
The Code on Wages also addresses overtime. The employer should therefore review working-time arrangements together with the applicable wage and overtime requirements rather than treat them as separate HR issues.
What Leave and Holiday Rules Apply?
A global holiday calendar should not automatically be imposed on Indian employees.
The employer should prepare a location-specific leave and holiday matrix that considers applicable statutory requirements and company benefits.
This becomes more important as the workforce expands across multiple Indian states.
The HR team should be able to identify which policy applies to each employee and the legal basis for that policy.
Is POSH Relevant for Remote Employees?
Being away from the office doesn't mean that one gets excused from workplace harassment norms.
If the necessary conditions to trigger the Prevention of Sexual Harassment provisions arise, then it is important for workers to have a proper channel for lodging complaints.
The employer should explain:
- Where a complaint can be made;
- Who receives it;
- How confidentiality is maintained;
- How an inquiry is conducted;
- How remote participation is facilitated;
- What protections exist against retaliation.
Where required, the employer should also ensure appropriate arrangements concerning the Internal Committee.
The overseas HR team must not assume that their international workplace harassment policy is adequate for those employees working in India.
What Documentation Must an Overseas Employer Collect?
The mere signing of the employment contract cannot be seen as a measure of compliance.
Depending on the applicable requirements, the employer should maintain appropriate records relating to:
- Employee particulars;
- Salary and deductions;
- Working hours;
- Leave;
- Overtime;
- Statutory contributions;
- Benefits;
- Employment policies;
- Disciplinary action;
- Termination.
The overseas HR and payroll systems should therefore be capable of supporting India-specific records.
Payroll vendors can administer calculations and payments, but they should not be expected to determine the complete legal position without appropriate legal and compliance input.
A Practical Compliance Framework for Overseas Employers
A cross-border employer can reduce risk by following a structured process.
Map the Indian Workforce
For every worker, record:
- State and place of work;
- Employment status;
- Employing entity;
- Salary structure;
- Working arrangement;
- Reporting structure;
- EOR or contractor status.
Identify the Applicable Laws
Map the workforce against:
- Applicable Labour Code provisions;
- Relevant rules;
- State Shops & Establishments requirements;
- Wage obligations;
- Social security;
- Working-time requirements;
- Leave and holiday provisions;
- POSH requirements.
Audit Existing Contracts
Check whether the agreement accurately reflects the actual relationship.
Pay particular attention to classification, termination, working hours, benefits, confidentiality and governing-law provisions.
Review Payroll and Benefits
Confirm that salary structures, deductions, statutory contributions and benefits have been evaluated under the current framework.
Allocate EOR Responsibilities
Where an EOR is used, document which party handles each statutory and operational obligation.
Create a State-Wise Compliance Matrix
Do not use one generic India checklist for employees working in different states.
Record the applicable state requirements separately and assign responsibility for each compliance action.
Review the Arrangement Periodically
Labour compliance should not be treated as a one-time exercise.
The Ministry's 2026 materials already include updated Central Rules and additional FAQs issued during the year. A compliance review should therefore account for subsequent legal and regulatory developments.
Common Mistakes Overseas Employers Should Avoid
Assuming Remote Work Removes Indian Obligations
Remote working is a method of performing work. It is not, by itself, an exemption from applicable employment requirements.
Using a Single Global Employment Contract
A foreign template may fail to address mandatory Indian requirements.
Treating an EOR as a Complete Legal Shield
The EOR agreement must be reviewed to determine the actual allocation of responsibilities and liabilities.
Misclassifying Employees as Contractors
A contractual label cannot safely replace a genuine independent relationship.
Applying One Policy Across India
State-level requirements can differ. A distributed workforce requires location-specific analysis.
Focusing Only on Payroll
Employment regulation goes beyond salary payments to employment conditions, leaves, social security, behaviour at work, and dismissal.
What Should Foreign Companies Do in 2026?
Companies looking for new Labour Codes 2026 should not treat the issue as an easy legislative amendment.
The better question to ask is:
Which provisions apply to our particular employees, engagement structure and locations in India?
Similarly, information about new labour laws in India 2026 should not be treated as a substitute for a fact-specific compliance assessment.
The Government's current materials include the four Codes, 2026 Central Rules and multiple 2026 FAQs. The official Labour Ministry page also records the continuing implementation material and related notifications.
Foreign companies should not assume that the arrangements made prior to 21 November 2025 are entirely in sync with the existing framework. They must assess their employment agreements, payroll systems, employee classification, EOR solutions, and compliance with state-wise regulations.
When Should an Overseas Company Take Legal Help?
Legal help becomes particularly important for a foreign business that is:
- Hiring its first employee in India;
- Expanding into multiple states;
- Converting contractors into employees;
- Considering an EOR;
- Establishing an Indian subsidiary;
- Revising compensation structures;
- Preparing to terminate employees;
- Investigating a workplace complaint;
- Reviewing Shops & Establishments compliance;
- Responding to a labour authority.
An Indian labour law compliance lawyer can assist with workforce classification, employment agreements, state-wise compliance, EOR arrangements, statutory obligations and employment-law audits.
The timing of that advice matters.
It is generally more effective to identify the correct structure before employees are onboarded than to correct years of potentially non-compliant employment arrangements later.
How A Law Firm in India Can Help
For an overseas business, Indian employment compliance should begin with the structure of the workforce rather than with a generic HR checklist.
An Indian law firm can assist overseas employers with:
- India-specific employment agreements;
- Labour Code compliance reviews;
- Shops & Establishments assessments;
- State-wise employment-law analysis;
- Contractor classification;
- EOR arrangements;
- Employment policies;
- Termination documentation;
- Workplace compliance;
- Ongoing legal support for Indian employees.
The objective is not simply to create documents. It is to build an employment structure that is legally appropriate for the employer's actual operations in India.
Building a Compliant Remote Workforce in India
An overseas employer managing a remote Indian workforce cannot safely rely on its foreign HR policies alone.
The correct process starts by determining who the employer of the individual worker is, where the work is performed, whether the relation is an employment relation or true contracting for services, which Labour Codes should be applied and what else is required by states.
The four Labour Codes have been applicable since 21 November 2025, and in 2026 the government introduced additional rules and clarifications. Yet, compliance is not just about ticking all boxes on a single national checklist.
For foreign employers, it is better to look at India-specific employment documents, accurate classification of workers, state-wise compliance mapping, allocation of responsibilities of EOR and regular legal assessment.
That approach allows an international business to build its Indian remote workforce on a legally considered foundation rather than attempting to correct employment-law problems after they arise.
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