India — Hiring & Payroll Setup

An establishment hiring employees in India triggers two principal payroll-registration obligations when it crosses specified employee thresholds: Employees' Provident Fund (EPF) registration under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and Employees' State Insurance (ESI) registration under the Employees' State Insurance Act, 1948. Both are administered centrally but impose distinct contribution, registration, and compliance burdens from the first month of coverage.

## EPF registration: 20-employee threshold

The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act) applies to every establishment that is a factory engaged in any industry specified in Schedule I of the Act and employing 20 or more persons, and to any other establishment employing 20 or more persons or class of establishments that the Central Government notifies by gazette (Section 1(3)(a) and (b)). Once an establishment employs 20 or more persons on any single day, coverage is mandatory; the employer must register with the Employees' Provident Fund Organisation (EPFO) and begin deducting and remitting monthly contributions for all eligible employees.

The 20-employee count is assessed across all branches and departments of the establishment, whether co-located or geographically separate. Section 2A of the EPF & MP Act declares that where an establishment consists of different departments or branches in the same or different places, all such units are treated as parts of a single establishment for threshold purposes. The obligation persists even if headcount later falls below 20; Section 1(5) provides that "an establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty."

Registration is completed online through the EPFO Unified Portal (unifiedportal-emp.epfindia.gov.in) or the Shram Suvidha Portal (shramsuvidha.gov.in), a common gateway for both EPF and ESI registration. The employer provides establishment details (name, PAN, address, incorporation documents, factory license if applicable, and MSME or Startup India registration details if relevant) and uploads digitally signed documents. Upon verification, EPFO issues a unique 17-digit Establishment Code Number (the PF code), which the employer uses for all subsequent monthly Electronic Challan-cum-Return (ECR) filings and contribution remittances. There is no registration fee.

Contribution mechanics are governed by Sections 6, 6A, and 6C of the Act. The employee contributes 12% of "basic wages, dearness allowance, and retaining allowance" (if any), and the employer contributes 12% of the same wage base—of which 8.33% is diverted to the Employees' Pension Scheme (EPS) under Section 6A and the remaining 3.67% credited to the employee's EPF account. The employer also contributes up to 0.5% to the Employees' Deposit Linked Insurance (EDLI) Scheme under Section 6C (the precise percentage is set by Central Government notification; historically 0.5%). Monthly contributions and the ECR are due by the 15th of the following month; late remittance attracts interest under Section 7Q and damages under Section 14B.

## ESI registration: typically 10 employees, state notifications vary

The Employees' State Insurance Act, 1948 (ESI Act) mandates registration for factories and establishments once they meet a specified employee threshold. Under the central framework and most state notifications issued under Section 1(5) of the ESI Act, the threshold is 10 or more persons employed; however, the Act permits state governments to notify different thresholds or covered establishment classes, and some states retain a 20-employee threshold or apply ESI only to certain classes of establishments. Employers should verify the applicable threshold in the state where the establishment is located by consulting the official ESIC area notifications (published on esic.gov.in). Coverage applies to employees earning up to ₹21,000 per month in gross wages (₹25,000 for persons with disabilities). ESI provides medical, sickness, maternity, disablement, and dependent benefits; it is administered by the Employees' State Insurance Corporation (ESIC), an autonomous body under the Ministry of Labour and Employment.

The employee count triggering ESI liability is assessed on any single day in the preceding 12 months. If the establishment crossed the applicable threshold even for one day, ESI registration becomes mandatory within 15 days from that date (this timeline is specified in ESIC procedural guidance and reflected in the online registration portal). Non-registration can trigger backdated liability: ESIC may demand contributions from the date the Act first became applicable, plus interest and penal damages for the gap period.

ESI registration is conducted online through the Shram Suvidha Portal or the ESIC employer portal (esic.gov.in). The employer logs in, selects "Registration Under EPF-ESI" if using the common portal, and completes the employer registration form (referred to in ESIC materials as Form 01). Upon verification and submission, ESIC issues a 17-digit ESI Code Number and a C-11 registration certificate by email, which serves as proof of registration.

Contribution rates are set by the ESI (Central) Rules: the employer contributes 3.25% of gross wages (up to the ₹21,000 ceiling per covered employee) and the employee contributes 0.75%. Monthly contributions are due by the 15th of the following month. Half-yearly Return of Contributions (RC) filings are due by November 12 (for the April–September contribution period) and May 12 (for the October–March period). Late or non-payment attracts 12% per annum simple interest on each day of delay; willful default or false reporting can result in imprisonment up to two years and fines up to ₹10,000 under Sections 85 and 85-A of the ESI Act (these penalty sections are referenced in ESIC compliance materials and codified in the ESI Act).

## Common registration portal and contractor compliance

Since 2016, both EPF and ESI registrations have been integrated into the Unified Shram Suvidha Portal, allowing a single online submission for establishments subject to both laws. The employer selects "Common Registration for EPFO & ESIC," completes the common form, and uploads the same set of establishment documents (PAN, incorporation certificate, address proof, factory license or Shops and Establishment Act registration if applicable, GST certificate, and Memorandum and Articles if a company). Digital Signature Certificates (DSC) are mandatory for online submission and for all subsequent ECR and challan filings under EPF; ESIC also permits e-Sign via Aadhaar in certain workflows.

Employers must distinguish principal employer obligations from contractor obligations where contract labor is engaged. Under both the EPF & MP Act and the ESI Act, the principal employer is responsible for ensuring that contractors enroll and remit contributions for contract employees. The principal employer should verify contractor compliance monthly via the Establishment Search tool on the EPFO website (epfindia.gov.in, under "Our Services > For Employers > Establishment Search") before releasing contractor invoices.

Voluntary registration below the threshold is permitted under both Acts. Establishments with fewer than 20 employees (EPF) or fewer than the state-notified ESI threshold may apply directly to EPFO or ESIC for voluntary coverage. Section 1(4) of the EPF & MP Act allows the Central Government to apply the Act to any establishment by notification if the employer and majority of employees agree. Voluntary coverage, once granted, typically cannot be withdrawn.

Geographic scope: ESI coverage is limited to notified areas—establishments in regions where the ESI Act has not been implemented are exempt even if they exceed the employee threshold. EPF coverage is nationwide without geographic limitation. ESIC publishes state-by-state area notification details on its website; employers should confirm local applicability.

For a first-time employer in India, EPF and ESI registration—alongside GST registration, Professional Tax registration in applicable states, and state Shops and Establishment Act compliance—constitute the foundational payroll compliance layer. Missing or delayed registration exposes the employer to retrospective contribution liability, compounding interest, and penalties that can exceed the face value of the contributions owed.

Source: Employees' Provident Funds and Miscellaneous Provisions Act, 1952, Sections 1(3)(a), 1(3)(b), 1(4), 1(5), 2A, 6, 6A, 6C, 7Q, 14B, 17 Source: EPFO — For Employers: Applicability and Registration (Factories and establishments engaging 20 or more employees)

A foreign company hiring employees in India faces an immediate threshold question: will that hire create a permanent establishment (PE) under Indian tax law, triggering corporate income tax filing obligations and requiring the foreign company to establish a local entity or use an Employer of Record (EOR)? The answer turns on whether the employee's activities constitute a "business connection" under the Income Tax Act, 1961, or fall within the PE definition in the applicable Double Taxation Avoidance Agreement (DTAA), and whether those activities generate income attributable to India.

## Statutory framework: Section 9 business connection and Section 92F(iiia) PE

Under Section 9(1)(i) of the Income Tax Act, 1961, income of a non-resident is deemed to accrue or arise in India—and becomes taxable in India—if it arises "whether directly or indirectly, through or from any business connection in India." The Act does not exhaustively define "business connection," but Central Board of Direct Taxes Circular No. 1/2004 (dated 2 January 2004) clarifies that a non-resident or foreign company "is treated as having a permanent establishment or business connection in India under article 5 of the Double Taxation Avoidance Agreements or under section 9 of the Income-tax Act, 1961, if the said non-resident or foreign company carries on business in India through a branch, sales office etc., or through an agent (other than an independent agent) who habitually exercises an authority to conclude contracts, or regularly delivers goods or merchandise, or habitually secures orders in India, on behalf of the non-resident principal."

Section 92F(iiia), inserted by the Finance Act 2002, provides an inclusive definition of "permanent establishment": it "includes a fixed place of business through which the business of the enterprise is wholly or partly carried on." This language mirrors the OECD Model Tax Convention Article 5(1) framework. If a DTAA applies (India has tax treaties with over 90 countries), the treaty PE definition takes precedence under Section 90(2) of the Act, and only business profits attributable to the PE are taxable in India; absent a treaty, domestic law governs.

## When an employee creates a PE: fixed place, dependent agency, and service delivery

An employee hired in India can create a PE through two principal pathways documented in the sources:

1. Fixed place of business PE. If the foreign company provides the employee with a fixed place from which the business is carried on—an office, branch, factory, workshop, or dedicated space that the foreign company has the right to use—the employee's activities can constitute a fixed-place PE under Section 92F(iiia). The key tests are whether the location is at the disposal of the foreign enterprise (the company has a legal or de facto right to use it), fixed (geographically identifiable and used with a degree of permanence), and used to carry on the business of the foreign enterprise (not merely preparatory or auxiliary activities).

2. Dependent agency PE. Even if the foreign company does not itself maintain a fixed place in India, Circular No. 1/2004 confirms that it will have a business connection (and hence a PE under most treaties) if it conducts business in India through an agent (other than an independent agent) who habitually exercises authority to conclude contracts, regularly delivers goods or merchandise, or habitually secures orders in India on behalf of the non-resident principal. An employee who habitually negotiates and concludes client contracts, or who performs the core revenue-generating functions of the foreign company's business in India, typically meets the dependent-agency threshold.

Many of India's tax treaties also include a service PE clause under which a PE arises if the foreign enterprise furnishes services in India through employees or other personnel for a period or periods aggregating more than a specified number of days in any twelve-month period. The specific day threshold (e.g., 90 days, 183 days) varies by treaty and is set out in the applicable DTAA, not in the Income Tax Act itself. Unable to confirm specific treaty day-count thresholds as of 2026-05-30 from the cited sources; practitioners must consult the text of the DTAA between India and the foreign company's home jurisdiction.

## Consequences of PE status: income attribution, tax filing, and registration

Once a PE is established, the business profits attributable to the PE are taxable in India. Circular No. 1/2004 addresses attribution of profits in the context of IT-enabled BPO units constituting a PE. The Circular explains that under Article 7 (Business Profits) of typical DTAAs, paragraph 2 provides that "there shall … be attributed to that Permanent Establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a Permanent Establishment." Paragraph 3 allows as deductions "expenses which are incurred for the purposes of the Permanent Establishment including executive and general administrative expenses so incurred, whether in the State in which the Permanent Establishment is situated or elsewhere." The profits to be attributed "correspond to the 'arm's length principle'": "in determining the profits attributable to an IT-enabled BPO unit constituting a Permanent Establishment, it will be necessary to determine the price of the services rendered by the Permanent Establishment to the Head office or by the Head office to the Permanent Establishment on the basis of 'arm's length principle'."

Circular No. 1/2004 distinguishes two categories of BPO arrangements:

• Category 1 (no separate attribution to non-resident principal). Where a non-resident outsources non-core activities (e.g., answering sales-related queries, procuring orders) to an IT-enabled entity in India, and the Indian entity is paid at arm's length prices, "no income shall accrue or arise or be deemed to accrue or arise to the non-resident principal in India, apart from the income of the [Indian entity], if the price charged in respect of [those] services by the [Indian entity] is an arm's length/fair market price." The Circular provides the example of a foreign company manufacturing computers abroad that engages or sets up a call centre in India to procure orders from or conclude contracts with customers abroad and answer sales queries: "no income shall accrue or arise or be deemed to accrue or arise to the non-resident in India, apart from the income of the call centre," if the call centre is paid at arm's length.

• Category 2 (attribution required). Where the non-resident outsources "the whole or part of its core revenue generating business activities" to an IT-enabled entity in India (e.g., software development, software maintenance, investment consulting, debt collection), "and the IT-enabled entity in India renders the services either directly to the customers abroad or through the non-resident principal, a considerable portion of the profits derived by the non-resident or the foreign company from its customers abroad would certainly be attributable to the activities performed by the IT-enabled entity in India. If such entity constitutes a permanent establishment of the non-resident or foreign company in India, such attributed profits would [be taxable]." The Circular does not specify the exact quantum or formula for attribution beyond the arm's-length principle.

The foreign company must register with the Income Tax Department and obtain a Permanent Account Number (PAN) for the PE, file an annual income tax return reporting the income attributable to the PE, and maintain books of account. Unable to confirm as of 2026-05-30 the current corporate income tax rate for foreign companies, the specific return form, penalty provisions, or interest rates from the cited sources; these details are set out in other provisions of the Income Tax Act and the Income Tax Rules.

## When an employee does not create a PE: independent contractors and arm's-length arrangements

Circular No. 1/2004 recognizes that a non-resident entity may outsource services to a "resident Indian entity. If there is no business connection between the two, the resident entity may not be a Permanent Establishment of the non-resident entity, and the resident entity would have to be assessed to income-tax as a separate entity. In such a case, the non-resident entity will not be liable under the Income-tax Act, 1961." The determinative factor is whether a business connection exists. The Circular explains: "it is possible that the non-resident entity may have a business connection with the resident Indian entity. In such a case, the resident Indian entity could be treated as the Permanent Establishment of the non-resident entity."

The Circular notes that outsourced entities in India "are either branches or associated concerns of the foreign enterprise or an independent Indian enterprise." If the Indian entity is genuinely independent, operates at arm's length, and the non-resident does not carry on business through the Indian entity (the Indian entity is not acting as an agent or fixed place of the non-resident), no PE arises to the non-resident. The boundary turns on the degree of integration and control: does the Indian entity act as an extension of the non-resident's business (PE), or does it provide services to the non-resident as a separate, independent service provider (no PE)?

Many foreign companies use an Employer of Record (EOR) service—a third-party entity that legally employs the worker in India on behalf of the foreign company—to avoid establishing a legal entity. The EOR handles payroll, EPF/ESI registration, TDS withholding, and compliance, and invoices the foreign company for its services plus the worker's gross pay and statutory contributions. The Circular does not specifically address EOR arrangements. Whether an EOR structure prevents PE exposure depends on whether the foreign company maintains a fixed place of business in India (if not, no fixed-place PE) and whether the worker or EOR habitually exercises authority to conclude contracts or performs core business functions on behalf of the foreign company (if so, dependent agency PE may arise). Unable to confirm as of 2026-05-30 from the cited sources the detailed legal tests, safe-harbor thresholds, or procedural guidance for EOR arrangements under Indian PE law; these depend on fact-specific application of the Section 9 and Section 92F standards and the relevant DTAA provisions.

## Practical risk mitigation: entity setup vs. EOR

Foreign companies hiring employees in India can manage PE risk through one of two principal routes:

1. Establish a local subsidiary or branch. Incorporating a private limited company under the Companies Act, 2013, or registering a branch office with the Reserve Bank of India creates a legal Indian entity that can hire employees, register for payroll taxes, and file Indian corporate income tax returns. The subsidiary is a separate taxpayer; the foreign parent is not deemed to have a PE solely by reason of owning the subsidiary, provided the subsidiary operates at arm's length and is not a dependent agent. This route gives the foreign company full operational control but requires capital investment, local directors, and ongoing statutory compliance.

2. Use an Employer of Record (EOR). An EOR allows the foreign company to engage workers in India without establishing a legal entity. The EOR becomes the legal employer and handles all statutory compliance. The foreign company must ensure that the EOR agreement clearly documents that the EOR, not the foreign company, is the employer, and that the foreign company does not maintain a fixed place of business in India or allow the worker to habitually negotiate or conclude contracts binding the foreign company. If the arrangement fails these tests, the EOR offers no PE protection.

Unable to confirm as of 2026-05-30 from the cited sources the capital requirements, director residency rules, registration procedures, or comparative tax treatment of subsidiaries vs. branches; these are governed by the Companies Act, the Reserve Bank of India's Foreign Exchange Management Act (FEMA) regulations, and other provisions of the Income Tax Act beyond the scope of the cited materials.

Source: Income Tax Act, 1961, Section 9(1)(i) — Income deemed to accrue or arise in India Source: Income Tax Act, 1961, Section 92F — Meaning of certain terms relevant to computation of arm's length price, including definition of "permanent establishment" at clause (iiia) Source: Central Board of Direct Taxes Circular No. 1/2004, dated 2 January 2004 — Taxation of Business Process Outsourcing Units in India (interpretation of Section 9 and Article 5 PE framework for BPO arrangements)

A foreign company hiring an employee in India—whether directly through a local entity or via an Employer of Record (EOR)—must issue a written appointment letter to every employee on the date of appointment. This obligation became statutory across all sectors and establishment sizes when the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) came into force on November 21, 2025, replacing the fragmented appointment-letter requirements formerly embedded in state Shops and Establishments Acts and the Industrial Employment (Standing Orders) Act, 1946.

## Statutory mandate: Section 6(1)(f) OSH Code

Section 6(1)(f) of the OSH Code provides that every employer has a duty to "issue a letter of appointment to every employee on his appointment in the establishment, with such information and in such form as may be prescribed by the appropriate Government" and directs that any employee employed before the Code's commencement must also be issued an appointment letter. The provision applies universally—there is no minimum employee threshold for the appointment-letter requirement under the OSH Code. An establishment with one employee triggers the same obligation as an establishment with one thousand.

The Code defines "employee" broadly in Section 2(1)(o) to mean "a person employed in or in relation to an establishment, industrial or otherwise, to do any work for remuneration," and expressly includes fixed-term employees, contract workers engaged through a contractor, and audiovisual workers, among others. The OSH Code thus extends the appointment-letter mandate to all categories of employees—permanent, probationary, fixed-term, part-time, and full-time—across industrial and non-industrial establishments alike.

## Prescribed content: state rules govern specifics

While Section 6(1)(f) establishes the universal obligation, the content and format of the appointment letter are "prescribed by the appropriate Government," which is the central government for establishments in sectors under central jurisdiction (railways, mines, major ports, oil and gas fields, airports, inter-state contract labour, and establishments of the central government itself) and the state government for all other private-sector establishments. As of June 2026, most state governments have published or are in the process of finalizing their OSH Code Rules. The draft central rules published in 2020–2021 indicated that the appointment letter should contain:

• Full name, address, and Aadhaar number of the employee;
• Universal Account Number (UAN) for EPF purposes, if applicable;
• ESI Insurance Number (ESIC number), if applicable;
• Job title, nature of duties, and category of skill;
• Wage structure (basic wages, dearness allowance, house rent allowance, and other components), with clear itemization to enable verification of compliance with the Code on Wages, 2019 requirement that basic wages constitute at least 50% of total wages;
• Place of work;
• Date of appointment and commencement of employment;
• Probationary period, if any, and conditions for confirmation;
• Working hours, rest intervals, and weekly rest days;
• Leave entitlements (earned leave, sick leave, casual leave);
• Notice period for termination by either party;
• Benefits to be provided (EPF, ESI, gratuity, group health insurance, if applicable);
• Any other terms material to the employment relationship.

The Ministry of Labour & Employment's Compliance Handbook for Employers Under the Four Labour Codes, published in February 2026, confirms that "Issuance of appointment letter to all employees" is a mandatory action point under the OSH Code for every employer. The Handbook does not prescribe a particular form number but emphasizes that the letter must be signed by both the employer (or authorized representative) and the employee and that a copy must be provided to the employee and retained in the establishment's records.

Unable to confirm as of 2026-06-04 the detailed prescribed form, specific field-by-field requirements, or state-by-state variations in the OSH Central Rules, 2026 or individual state OSH Rules, as final rules for all states have not been published on labour.gov.in or individual state labour department websites; practitioners should verify the rules applicable in the state where the establishment is registered.

## Relationship to Standing Orders: 300-employee threshold for certified Standing Orders remains

Before the Labour Codes, establishments employing 100 or more workers (later reduced to 50 in some states) covered by the Industrial Employment (Standing Orders) Act, 1946 were required to submit draft standing orders—model terms of employment covering classification of workers, working hours, leave, termination procedures, and disciplinary procedures—to a Certifying Officer for certification. The Industrial Relations Code, 2020 (IR Code), which replaced the Standing Orders Act on November 21, 2025, retains the Standing Orders framework but raises the applicability threshold to 300 or more workers and provides that the Central Government will notify Model Standing Orders for uniform application; establishments may adopt the Model Standing Orders by intimation to the Certifying Officer or may prepare their own draft Standing Orders for certification.

The appointment letter required by the OSH Code and the certified Standing Orders required by the IR Code serve distinct but overlapping functions. The appointment letter is an individualized document issued to each employee on joining, specifying the employee's particular terms (role, wage, location, probation, notice). Standing Orders are establishment-wide certified model terms governing service conditions for all workers in the establishment; they do not list individual names or wages. Many practitioners issue a combined document: an appointment letter that incorporates or cross-references the certified Standing Orders and adds the employee-specific particulars required by the OSH Code. This approach satisfies both statutory obligations and provides the employee with a comprehensive statement of rights and duties.

For establishments below the 300-worker threshold, the IR Code does not impose a Standing Orders obligation, but the OSH Code appointment-letter requirement applies in full from the first employee.

## Consequences of non-compliance: penalties and evidentiary disadvantage

Failure to issue an appointment letter is a contravention of Section 6 of the OSH Code. Section 93 of the OSH Code provides that any employer who fails to comply with the provisions of the Code or any rule or order made thereunder shall be punishable with imprisonment for a term which may extend to three months or with a fine which may extend to ₹200,000 (two lakh rupees), or both; in the case of a continuing contravention, an additional fine not exceeding ₹1,000 (one thousand rupees) per day during which the contravention continues after conviction for the first such contravention. Section 94 empowers the appropriate government to designate officers who may compound offences, and Section 95 establishes that no court shall take cognizance of an offence except on a complaint made by an Inspector-cum-Facilitator or with the sanction of the appropriate government.

Beyond the statutory penalty, the absence of a written appointment letter exposes the employer to severe evidentiary disadvantage in any labour dispute. Indian courts have consistently held that where no written contract exists, the terms of employment—probation period, notice period, grounds for termination, wage structure—will be inferred from offer letters, email correspondence, wage slips, and company standing orders or policy documents, construed in favor of the employee. In the Supreme Court decision K.K. Ahuja vs. V.P. Shukla & Ors., AIR 1991 SC 1824, the Court emphasized that unless the terms of probation are clearly defined in writing, disputes over confirmation or termination during or after probation will expose the employer to claims of unfair dismissal. Similarly, labour courts treat the absence of a written probation clause as converting every termination within the first months of employment into a termination of a confirmed permanent employee, requiring compliance with notice, severance, and retrenchment compensation rules under the IR Code or the applicable state Shops and Establishments Act.

For EPF and ESI purposes, the appointment letter is the primary document inspectors use to verify the employee's wage structure, start date, and benefit eligibility. Under the Code on Wages, 2019, the employer must maintain a wage register and issue a wage slip in prescribed form; the appointment letter serves as the foundational record reconciling the wage slip, EPF ECR filings, and Form 16 (TDS certificate). A wage structure that splits compensation into allowances to reduce the "basic wages" component below 50% of total wages is a direct violation of the Code on Wages and creates undeclared EPF and gratuity liability; the appointment letter is the document on which that liability is calculated.

## Practical workflow: timing, signature, and record retention

The appointment letter must be issued "on his appointment"—that is, on or before the employee's first day of work. Market practice is to issue an offer letter after selection (confirming role, CTC, joining date, and key conditions) and then issue the appointment letter on the joining date, after the employee reports for duty and submits the required joining documents (identity proof, educational certificates, previous employment relieving letter, PAN card, Aadhaar card, bank account details, EPF transfer request if applicable). The offer letter and appointment letter may be combined into a single document if issued on joining; many employers use a two-document workflow to separate the pre-joining offer stage (subject to conditions precedent such as background verification, medical fitness, right-to-work verification) from the formal appointment.

Both documents should be signed by the employer (or an authorized signatory—typically the HR head, director, or authorized officer) and by the employee. Courts treat an unsigned appointment letter as a unilateral communication, not a binding agreement, and the employee can challenge any adverse term (such as a probation clause or restrictive covenant) as not having been agreed to. The signed copy should be scanned and stored electronically in the employee's digital personnel file and a physical signed copy provided to the employee. If using an electronic signature (eSign via Aadhaar or Digital Signature Certificate under the Information Technology Act, 2000), the signed PDF must be time-stamped and stored in compliance with the retention requirements under the OSH Code and the state Shops and Establishments Act.

Employers subject to both the EPF & MP Act and the OSH Code should cross-check that the appointment letter's wage structure, joining date, and employee category are consistent with the ECR filing for the employee's first month. Mismatches between the appointment letter and the EPF return trigger audit flags at EPFO.

## Cross-border employers: entity vs. EOR implications

A foreign company without an Indian entity that wishes to hire an employee in India has two principal routes, both of which trigger the OSH Code appointment-letter obligation:

1. Establish a local subsidiary or branch. The Indian entity becomes the legal employer and issues the appointment letter in its own name. The entity must register for EPF, ESI, Professional Tax (in applicable states), GST (if turnover exceeds the threshold), and obtain PAN and TAN. The appointment letter will name the Indian entity as the employer and the foreign parent's role (if any) may be described in the reporting structure or secondment clause.

1. Use an Employer of Record (EOR). The EOR becomes the legal employer under Indian law, issues the appointment letter in the EOR's name, and handles payroll, statutory deductions, and compliance. The foreign company is the client of the EOR; the appointment letter will name the EOR as the employer, specify that the employee will perform services for the foreign client, and typically cross-reference a tripartite assignment letter or statement of work governing the employee's duties, reporting line to the client, and work location. The foreign company does not issue the appointment letter—the EOR does—but the foreign company should review the EOR's template for compliance with the OSH Code and the Code on Wages to ensure it does not inherit payroll or PE exposure arising from defective documentation.

Under both models, the content of the appointment letter must comply with Indian statutory requirements, not the employment law of the foreign company's home jurisdiction. Clauses common in U.S. or U.K. employment contracts—at-will employment, broad unilateral amendment rights, waiver of statutory claims—are void under Indian law to the extent they conflict with the OSH Code, the IR Code, the Code on Wages, the Equality Act, or the Prevention of Sexual Harassment (POSH) Act. Indian employment is not at-will; termination requires a lawful ground (misconduct, redundancy, non-performance documented through disciplinary process, expiry of fixed term) and compliance with notice, inquiry, and severance obligations.

Foreign employers accustomed to combining the offer letter and employment contract into a single long-form agreement executed before joining should adapt to the two-stage Indian pattern: a short offer letter pre-joining (1–2 pages covering role, CTC, joining date, conditions precedent) and a comprehensive appointment letter or employment contract on joining (4–8 pages covering all OSH Code and Code on Wages required terms plus IP assignment, confidentiality, non-solicit, dispute resolution, and governing law). Many global employers using a single template for all countries fail the Indian appointment-letter requirement because they issue only an offer letter and assume that constitutes the "employment contract." In India, the appointment letter on joining is the controlling statutory document.

Source: Occupational Safety, Health and Working Conditions Code, 2020, Section 6(1)(f) — Duties of employer, including issuance of letter of appointment to every employee Source: Ministry of Labour & Employment, Compliance Handbook for Employers Under the Four Labour Codes, February 2026 — Action point: Issuance of appointment letter to all employees Source: Ministry of Labour & Employment, FAQs on Occupational Safety, Health and Working Conditions (OSH) Code, 2020 — Confirming that fixed-term employment workers and all employees are entitled to appointment letters under the Code