User query
"We run a small agency in Toronto. Our best candidates for two new roles live in Bengaluru and Noida, and a third is in Kolkata. Do different rules apply in each state, and how do we pay them properly without setting up an office in India?"
Picture this. You've found three great people in India. One lives in Bengaluru, one in Noida, one in Kolkata. Same job title, same salary band, same start date. Then someone tells you the payslips won't look the same, the holiday calendars won't match, and one of them pays a tax the other two don't.
That's the reality of hiring remote employees in India across states. India is one country, but for employment purposes it often behaves like several. Labour law is shared between the centre and the states, so where your hire sits on the map changes some of the rules. None of it is hard once you know where the differences are.
This guide is for businesses in the UAE, USA, UK, Canada and Australia building teams spread across Indian states. It covers why the state matters, where India's new Labour Codes stand today, PF and ESI basics, a state-by-state comparison, your hiring options, and practical tips. If you want the general step-by-step on hiring in India, read our practical guide to hiring remote employees in India first. This one stays on the multi-state angle.
Why the state matters when hiring remote employees in India across states
Here's the short version. In India, labour is on the Concurrent List of the Constitution. That means both the central government and each state government can make laws and rules about it. Parliament sets the national framework, and states fill in a lot of the detail.
For you, that means an employee's home state can change things you'd assume are fixed. Two people with identical contracts can end up with different deductions, different public holidays and different registration requirements.
What changes from state to state
- Minimum wages. States set their own minimum wage rates, usually by skill level and sometimes by zone. They're revised regularly, so a figure you looked up last year may already be out of date.
- Professional tax. This is a small state-level tax on employment income. Some states levy it and some don't. Where it applies, the employer usually deducts it from salary and pays it to the state. The Constitution caps it at ₹2,500 per person per year.
- Shops and Establishments rules. Each state has its own Shops and Establishments Act. These cover things like working hours, weekly offs, leave and registration of the business premises.
- Holidays. Beyond the national holidays, each state publishes its own holiday list. Regional festivals that close offices in one state may be a normal working day in the next.
- Labour welfare funds. Several states run small welfare fund contributions with their own rates and due dates.
Most of these are small amounts. The risk isn't the money. It's getting the paperwork wrong in a state you've never thought about, and finding out a year later.
India's four Labour Codes: where things stand in 2026
If you read about Indian employment law a few years ago, you'll have seen the Labour Codes described as "coming soon." They're here now. The central government brought all four into force on 21 November 2025:
- Code on Wages, 2019, which replaced older laws on minimum wages, payment of wages, bonus and equal pay
- Code on Social Security, 2020, which brought together PF, ESI, gratuity, maternity benefit and related laws
- Industrial Relations Code, 2020, covering trade unions, disputes, standing orders and fixed-term employment
- Occupational Safety, Health and Working Conditions Code, 2020, covering working conditions, contract labour and safety
What changed for employers
A few changes matter for remote teams in particular.
- A common definition of wages. Basic pay, dearness allowance and retaining allowance count as wages. If excluded items such as allowances make up more than half of total pay, the excess is added back. People call this the "50% rule." It can push up PF and gratuity costs if your salary structure is allowance-heavy.
- Floor wages. The Code on Wages introduces a national floor wage. State minimum wages sit on top of it.
- Fixed-term employees and gratuity. Fixed-term employees can qualify for gratuity after one year of continuous service, rather than the five years that still applies to permanent staff.
Why states still matter under the Codes
The Codes simplify the national picture, but they don't remove the state layer. Labour is still on the Concurrent List, and states write many of the rules that make the Codes work on the ground. The central rules under the Code on Wages, for example, were notified on 8 May 2026, and state rules are rolling out on their own timelines. State Shops and Establishments Acts and professional tax laws also still apply. Treat 2026 as a transition year, and check your setup when a state updates its rules.
PF and ESI basics for remote employees in India
Two social security schemes come up with almost every Indian hire. They're national schemes, so they work the same in every state, but you still need to get them right.
Provident Fund (PF)
The Employees' Provident Fund is a retirement savings scheme. Employer and employee each typically contribute 12% of wages. From 17 September 2026, the wage ceiling for mandatory coverage rose from ₹15,000 to ₹25,000 a month. That pulls more mid-level salaries into compulsory PF, so check whether your India payroll was updated for it.
Employees' State Insurance (ESI)
ESI is a health and insurance scheme for lower-paid employees. It covers employees earning up to ₹21,000 a month in gross wages (₹25,000 for employees with a disability). The employer pays 3.25% and the employee pays 0.75%. Many skilled remote roles sit above this ceiling, so ESI often won't apply. Check each person anyway, especially for junior or support roles.
State-wise labour laws in India: comparing major talent states
Most foreign companies hire from a handful of states. Here's how the main ones compare on the points you're most likely to deal with. The talent column is a broad guide, not a rule, since good people live everywhere.
| State / territory | Main hubs | Talent you'll often find | Professional tax applies? |
|---|---|---|---|
| Maharashtra | Mumbai, Pune | Finance, media, IT services, engineering | Yes |
| Karnataka | Bengaluru | Software engineering, product, startups | Yes |
| Tamil Nadu | Chennai, Coimbatore | IT services, SaaS support, engineering | Yes |
| Telangana | Hyderabad | IT services, development, data | Yes |
| West Bengal | Kolkata | Accounting, finance, IT services | Yes |
| Delhi | New Delhi | Sales, marketing, customer support | No |
| Uttar Pradesh | Noida, Lucknow | IT services, customer support, operations | No |
| Haryana | Gurugram | Operations, consulting, customer support | No |
Where professional tax applies, the slabs and payment dates are set by each state. Minimum wages, holiday lists and Shops and Establishments rules differ in all of them, including the ones with no professional tax. Laws change, so confirm the specifics with a local adviser or your employment partner before you finalise anything.
Hiring in more than one Indian state?
Tell us the roles and cities you're looking at. We'll send pre-vetted, dedicated remote professionals and handle the state-by-state compliance — profiles in 48 hours.
Your options for hiring remote employees in India across states
There are four common ways to do this. Which one fits depends on how many people you want, how long you'll stay, and how much admin you're willing to own.
Set up your own Indian entity
You register a company, then handle payroll, PF, ESI, professional tax and state registrations yourself. It gives you full control and makes sense for large, long-term operations. For a team of five spread across four states, it's a lot of setup and ongoing filing for very little gain.
Use an Employer of Record (EOR)
An EOR legally employs your staff in India and runs payroll and statutory deductions for you. It's a common way to hire employees in India without an entity. Most EORs process compliance but leave recruiting, vetting and day-to-day management to you. Our guide to employer of record services explains the model in more detail.
Engage independent contractors
Contracts are quick and simple to start. The catch is misclassification. If a "contractor" works full-time, only for you, on your hours, with your tools and under your direction, Indian authorities may treat them as an employee. That can mean back-paying PF and other benefits, plus penalties. Contractors suit genuine project work, not a permanent team member under another name.
Work with a managed remote staffing partner
A staffing partner recruits, employs and manages dedicated staff who work only for you. State rules, payroll and HR sit with the partner, and you direct the work.
| Own entity | EOR | Contractors | Managed remote staffing | |
|---|---|---|---|---|
| Time to start | Months | Weeks | Days | About two weeks |
| State-wise compliance | You handle it | Handled | Your risk | Handled |
| Recruiting and vetting | You do it | Usually you | You do it | Included |
| Misclassification risk | Low | Low | High for full-time roles | Low |
| Day-to-day HR and performance | You do it | Usually you | None | Included |
| Best for | Large, permanent operations | Teams you can recruit and manage yourself | Short, defined projects | Dedicated full-time teams |
Practical tips for remote employee compliance in India
Whichever route you choose, a few habits will save you trouble with a team spread across states.
- Record each person's work location. The state on file should match where they actually live and work. If someone moves from Pune to Hyderabad, payroll needs to know, because professional tax and holiday rules may change with them.
- Keep salary structures consistent. Under the 50% wage rule, a structure that's heavy on allowances can raise PF and gratuity costs. Use one sensible template for everyone in the same role.
- Build a combined holiday calendar. List national holidays, each employee's state holidays and your own country's holidays in one shared calendar. Then plan deadlines around the clashes, not after them.
- Plan for the time-zone gap. India is on IST, UTC+5:30, with no daylight saving. That's 1.5 hours ahead of the UAE and roughly 9.5 to 10.5 hours ahead of the US East Coast. Agree core overlap hours up front. Our guide to managing remote teams across time zones has more on this.
- Diary the statutory dates. PF, ESI and professional tax each have their own monthly or periodic deadlines, and professional tax dates vary by state.
- Review once a year. With the Labour Codes still bedding in, rules will keep shifting. Set an annual review rather than assuming last year's setup still holds.
How The Remote Staff handles hiring across Indian states
The Remote Staff builds dedicated offshore teams, mostly in India, for businesses in the UAE, USA, UK, Canada and Australia. We find and vet candidates, and once you choose someone, we employ them. They work only for you, on your hours and in your tools.
Because the staff are employed by The Remote Staff, we handle payroll, HR, compliance, office space and equipment. That includes the state-by-state details covered above. Your Bengaluru developer and your Kolkata accountant are both set up correctly, and you get one monthly invoice instead of a pile of state filings.
The process is simple. You share the roles, and we send five pre-vetted profiles within 48 hours. Interviews are free, and you only pay when you hire. Most teams are live in about two weeks.
Why choose The Remote Staff
- One partner, every state. Payroll, HR and compliance for your India team sit with us, wherever your people live.
- Dedicated staff only. Your hires are employed by The Remote Staff and work only for you.
- Fast shortlists. Five pre-vetted profiles in 48 hours, with teams live in about two weeks.
- Low risk to start. Free interviews, no setup fee, and you pay only when you hire.
- Free replacement guarantee. If a hire isn't the right fit, we replace them at no extra cost.
- Real savings. Save up to 70% compared with a local hire, with one simple monthly invoice.
Frequently asked questions
Yes, in several ways. Labour is on the Concurrent List, so both the central government and the states make rules. National schemes such as PF and ESI work the same everywhere, but minimum wages, professional tax, Shops and Establishments rules and public holidays are set by each state. Two employees on identical contracts in different states can have different deductions and holiday calendars, so payroll needs to know where each person actually works.
Professional tax is levied by some states and not others. Maharashtra, Karnataka, Tamil Nadu, Telangana, West Bengal and Gujarat are among the states that charge it, while Delhi, Haryana and Uttar Pradesh do not. Where it applies, the employer usually deducts it from salary and pays it to the state. Rates and due dates vary, but the Constitution caps it at ₹2,500 per person per year.
Yes. All four Labour Codes, covering wages, social security, industrial relations and occupational safety, came into force on 21 November 2025. They replaced 29 older central labour laws. States still write many of the supporting rules, and those are rolling out on different timelines, so 2026 is effectively a transition year. Employers should review salary structures, contracts and payroll against the new rules and check for state updates.
From 17 September 2026, the wage ceiling for mandatory Employees' Provident Fund coverage rose from ₹15,000 to ₹25,000 a month. Employees earning wages up to that level must be covered, and employer and employee typically each contribute 12% of wages. Because the Labour Codes also changed how wages are defined, check that your payroll uses the new ceiling and the correct wage base.
Yes. The two common routes are an Employer of Record, which legally employs your staff and runs payroll, or a managed remote staffing partner, which also recruits and manages the team. Both handle statutory deductions such as PF, ESI and professional tax across states. Hiring full-time people as independent contractors is risky, because they may be treated as employees, which can lead to back payments and penalties.
Start by recording where each person actually lives and works, because that decides which state's professional tax, holidays and Shops and Establishments rules apply. Use a consistent salary structure that meets the 50% wage rule, and keep a calendar of PF, ESI and state tax deadlines. Many foreign companies hand this to an EOR or remote staffing partner so one provider covers every state.
Hire the best people, wherever they live in India
Hiring across Indian states isn't harder than hiring in one place. It just has more moving parts: different professional tax rules, state holidays, Shops and Establishments Acts, and a set of Labour Codes that are still settling in. Know where the differences are, choose a hiring model that covers them, and keep a light annual check on what's changed.
Above all, don't let a state boundary decide who you hire. If the best candidate lives in Kolkata rather than Bengaluru, that should be a payroll detail, not a deal-breaker. Pick the people first, and let the right setup handle the rest.
Build your India team across states
We'll find, employ and look after dedicated remote professionals in whichever Indian state they live, so you can focus on the work. Interviews are free.
