What Does It Really Cost to Hire in India in 2026? (Complete Employer Breakdown)

Most founders get this wrong in the same way: they see an Indian engineer's salary in LPA, convert it to USD, and assume that's the cost. It isn't. Between statutory contributions, compliance overhead, and the PEO or EOR fee needed to hire legally without an Indian entity, the true number is meaningfully higher — but still dramatically lower than the US equivalent.

This post gives you the complete picture, layer by layer, with real numbers.

The short version before we dive in:

• Statutory employer costs add 17–22% on top of gross salary

• EPF (Provident Fund) is 12% of basic salary, capped at ₹1,800/month employer contribution

• ESI only applies to employees earning ₹21,000/month or less

• Gratuity must be provisioned at 4.81% of basic salary per year

• A PEO service like Be.first costs $200–$550 per employee per month

• India is typically 60–70% cheaper all-in than hiring the same role in the US

The 4 Layers of Hiring Cost in India

Hiring an employee in India involves four distinct cost layers:

Layer 1 — Gross salary: what the employee earns before tax

Layer 2 — Statutory employer contributions: legally mandatory, non-negotiable, set by Indian law

Layer 3 — Compliance infrastructure: either a PEO/EOR service fee, or the cost of setting up your own Indian entity

Layer 4 — Optional add-ons: health insurance, equipment, internet allowance

Understanding each layer separately prevents both underbudgeting (common among first-time India hirers) and overestimating (common among people who've been quoted generic EOR rates from global platforms).

Layer 1: Gross Salary

Indian salaries are quoted in LPA — Lakhs Per Annum. One Lakh equals ₹1,00,000. At the current exchange rate of approximately ₹84 to $1, a salary of ₹25 LPA equals roughly $29,760 per year.

The figures below cover the most commonly hired roles by global startups, benchmarked at mid-level seniority, Bengaluru location, and Series A stage. These reflect Q1 2026 market data from AmbitionBox, LinkedIn Salary Insights, Glassdoor India, and NASSCOM.

Engineering roles — median salary (Mid-level · Bengaluru · Series A):

Backend Engineer: ₹26 LPA (~$30,950/year) ML / AI Engineer: ₹34 LPA (~$40,475/year) DevOps / Platform Engineer: ₹28 LPA (~$33,330/year) Full Stack Engineer: ₹24 LPA (~$28,570/year) Data Engineer: ₹26 LPA (~$30,950/year) Data Scientist: ₹25 LPA (~$29,760/year) Security Engineer: ₹28 LPA (~$33,330/year)

Product & Design roles:

Product Manager: ₹28 LPA (~$33,330/year) Product Designer (UX/UI): ₹18 LPA (~$21,430/year) UX Researcher: ₹16 LPA (~$19,045/year)

Business roles:

Growth Manager: ₹18 LPA (~$21,430/year) Data Analyst: ₹14 LPA (~$16,665/year)

Adjusting for city: Bengaluru is the baseline. Mumbai salaries run about 5% lower, Delhi/NCR about 8% lower, Hyderabad about 12% lower, Pune about 18% lower, and Chennai about 20% lower. Remote hires typically come in around 25% below Bengaluru rates.

Adjusting for company stage: Series A is the baseline above. Series B roles run about 18% higher, Series C+ about 35% higher, and MNCs about 24% higher. Seed stage roles run about 26% lower — partly offset by equity.

Adjusting for seniority: Junior hires (0–2 years) come in at roughly half the mid-level rate. Senior engineers (5–8 years) run about 65% above mid-level. Lead or Staff engineers are typically 2.4× the mid-level rate.

A worked example: A Senior Backend Engineer in Hyderabad at Series B has a median salary of roughly ₹26 LPA × 1.65 (senior) × 0.88 (Hyderabad) × 1.18 (Series B) = ₹44.4 LPA, or approximately $52,850 per year.

Layer 2: Statutory Employer Contributions

This is where most foreign companies get caught out. Under Indian law, employers must make the following contributions on top of the agreed gross salary. These are not optional and non-compliance carries significant financial penalties.

EPF — Employees' Provident Fund

Rate: 12% of basic salary, employer contribution Legislation: Employees' Provident Funds and Miscellaneous Provisions Act, 1952

Basic salary in Indian payroll is typically set at 40% of gross CTC. The EPF contribution is capped — it applies to a maximum basic salary of ₹15,000 per month, meaning the maximum employer EPF contribution is ₹1,800 per month, or ₹21,600 per year, regardless of how high the employee's total salary is.

This means EPF is effectively a flat annual cost of ₹21,600 for almost every mid-to-senior tech hire — not a percentage that scales with salary.

Example: On a ₹25 LPA salary, basic is ₹10 LPA = ₹83,333/month. Capped at ₹15,000 for EPF. Employer EPF = ₹15,000 × 12% × 12 months = ₹21,600/year.

ESI — Employees' State Insurance

Rate: 3.25% of gross monthly salary, employer contribution Legislation: Employees' State Insurance Act, 1948 Threshold: Only applies to employees earning ₹21,000 per month or less

This is the contribution that catches founders off guard. ESI is only relevant for lower-salary employees — most mid-to-senior tech hires earn well above ₹21,000/month and are therefore exempt. It primarily applies to junior hires and operations or support staff.

Example: A junior hire on ₹8 LPA earns ₹66,667/month — above threshold, so ESI does not apply. A support hire on ₹2.4 LPA earns ₹20,000/month — below threshold, so ESI applies at 3.25% = ₹650/month employer contribution.

Gratuity

Rate: 4.81% of basic salary per year Legislation: Payment of Gratuity Act, 1972 Trigger: Payable to employees who complete 5 years of continuous service

Even though gratuity only becomes payable at 5 years, best practice — and increasingly common expectation — is to provision for it from day one. A PEO service handles this automatically.

Example: On a ₹25 LPA salary with basic of ₹10 LPA, annual gratuity provision = ₹10,00,000 × 4.81% = ₹48,100 per year.

Professional Tax

Rate: Varies by state — national average approximately ₹2,400 per year Legislation: State-level legislation, varies by state

Maharashtra charges ₹2,500/year for salaries above ₹10,000/month. Karnataka charges up to ₹2,400/year. Some states (including Delhi) have no Professional Tax at all. A PEO handles the correct state-specific rate automatically.

Labour Welfare Fund

A nominal statutory contribution averaging ₹1,200 per year. Amounts and applicability vary significantly by state.

What this adds up to

For a mid-to-senior tech hire on ₹25 LPA in Bengaluru, the total annual statutory employer cost above their salary is approximately:

EPF: ₹21,600 Gratuity provision: ₹48,100 Professional Tax: ₹2,400 Labour Welfare Fund: ₹1,200 Total statutory additions: ₹73,300 per year (about 2.9% of gross salary)

For a junior hire on ₹8 LPA where ESI applies, the total would be higher proportionally — statutory additions of approximately ₹76,900 per year (around 9.6% of gross), reflecting that the fixed EPF and gratuity costs are a larger share of a smaller salary.

Layer 3: Compliance Infrastructure

To employ someone in India legally as a foreign company, you need either your own Indian legal entity or a PEO/EOR service that employs the worker on your behalf.

Setting up your own entity

Incorporating a Private Limited Company in India takes 4–6 months and involves registrations for GST, EPF, ESI, and Professional Tax on top of the incorporation itself. Professional fees typically run ₹1.5–3 lakh upfront, with ongoing compliance costs of ₹3–5 lakh per year. This makes sense once you have 15 or more employees and a long-term commitment to India.

Using a PEO service (Be.first)

A PEO — Professional Employer Organisation — employs your team member on your behalf, handles all statutory contributions and filings, and gives you full management control of the employee's day-to-day work. Your hire is active within 2–4 weeks with zero entity setup required.

Be.first PEO pricing (published rates, 2026):

Basic Plan — $200 to $250 per employee per month Includes: Payroll, compliance & contracts, on-request replacement Best for: Early-stage hiring, first India hires

Standard Plan — $350 to $400 per employee per month (most popular) Includes: Everything in Basic, plus leave and time tracking Best for: Funded startups needing full PEO support

Premium Plan — $500 to $550 per employee per month Includes: Everything in Standard, plus benefits admin and performance support Best for: Teams scaling across India and APAC

Optional add-ons: Infrastructure & Benefits management: +$50 per employee per month Cross-border EOR: +$75 to $100 per month Visa and work permit support: +$100 to $150 (one-time per employee)

Volume discounts: 5 to 10 employees: 5% off PEO fees 10 to 25 employees: 10% off PEO fees 25+ employees: Custom pricing

In annual terms, the Standard Plan costs approximately $4,200–$4,800 per employee per year (₹3.5–4 lakh), which is the most common choice for Series A and B startups building their first India team.

Layer 4: Optional Add-Ons

These are not statutory but are increasingly expected by mid-to-senior Indian candidates and can affect your ability to attract top talent.

Health insurance (group policy): ₹10,000–₹25,000 per employee per year. Strongly recommended — candidates at Series A+ companies typically expect this.

Term life insurance: ₹3,000–₹8,000 per employee per year. Common at funded startups.

Laptop or equipment: ₹60,000–₹1,50,000 as a one-time cost. Often provided by the employer, especially for remote hires.

Internet allowance: ₹12,000–₹24,000 per year. Common for fully remote employees.

Putting It All Together — Two Real Examples

Example 1: Mid-level Backend Engineer, Bengaluru, Series A, Be.first Standard Plan

Gross salary: ₹26,00,000 per year ($30,950) EPF employer contribution: ₹21,600 ($257) Gratuity provision: ₹49,920 ($594) Professional Tax + LWF: ₹3,600 ($43) Be.first Standard PEO fee: ₹3,78,000 ($4,500) Health insurance: ₹15,000 ($179)

Total annual employer cost: ₹29,68,120 ($35,335)

US equivalent for the same role: approximately $130,000–$150,000 per year all-in. You save roughly 73–76% by hiring through Be.first in India.

Example 2: Senior ML/AI Engineer, Hyderabad, Series B, Be.first Standard Plan

Gross salary (34 LPA × 1.65 × 0.88 × 1.18): ₹57,95,270 per year ($68,991) EPF employer contribution: ₹21,600 ($257) Gratuity provision: ₹1,11,379 ($1,326) Professional Tax + LWF: ₹3,600 ($43) Be.first Standard PEO fee: ₹3,78,000 ($4,500) Health insurance: ₹20,000 ($238)

Total annual employer cost: ₹63,29,849 ($75,355)

US equivalent for a senior ML engineer: approximately $250,000–$300,000 per year all-in. You save roughly 70–75% by hiring through Be.first in India.

Common Questions

Does the employer pay income tax for the employee?

No. Income tax in India works through TDS — Tax Deducted at Source. The employer withholds the correct amount from the employee's salary and remits it to the government on the employee's behalf. It is not an additional cost to the employer; it comes out of the employee's gross salary.

Is EPF mandatory for small teams?

Under the Employees' Provident Funds and Miscellaneous Provisions Act 1952, EPF registration is technically mandatory only once you reach 20 employees. However, most compliance advisors recommend registering earlier, and a PEO service handles this automatically from day one regardless of team size.

Can I just pay someone as a contractor to avoid all this?

This is the most common — and most penalised — mistake foreign companies make in India. If the working relationship resembles employment (regular hours, exclusivity, direction from the company), Indian tax and labour authorities will classify it as employment regardless of what the contract says. The consequences include backdated EPF and ESI contributions, interest, and fines. A proper employment structure through a PEO eliminates this risk entirely.

What if I already have an Indian entity?

If you have a registered Indian entity and simply want to outsource payroll, compliance, and HR operations, Be.first can operate as a PEO on top of your existing structure. This is common for companies that incorporated early but don't want to manage statutory filings in-house.

The Bottom Line

The India cost advantage is real, significant, and durable. A strong Backend Engineer who costs $130,000–$180,000 per year all-in at a US company costs $33,000–$40,000 per year through Be.first — compliantly, with full statutory coverage, and with a replacement guarantee built in.

That difference is not a rounding error. It's the reason global startups are building core engineering, product, and data teams in India rather than just support functions. The compliance complexity is real but entirely manageable with the right partner.

Calculate Your Exact Numbers

Every figure in this post is a starting point. Your actual cost depends on role, city, seniority, plan, and headcount.

Use Be.first's free India salary benchmark and employment cost calculator to get numbers specific to your hire — it uses the same data and statutory rates as this post:

👉 befirsthub.com/

Or talk to a Be.first specialist for a full proposal within 24 hours:

👉 befirsthub.com/contact-sales

Statutory rates reflect Indian law as of April 2025. EPF at 12% employer contribution under the EPF & MP Act 1952. ESI at 3.25% employer contribution under the ESI Act 1948. Gratuity at 4.81% of basic salary under the Payment of Gratuity Act 1972. Be.first pricing reflects published rates at befirsthub.com/pricing as of February 2026. Exchange rate: ₹84 = $1 (approximate February 2026 rate). All figures are indicative.