Indian employment is contract-led and statute-heavy: there is no UK-style statutory redundancy or TUPE, but employers must register for provident fund and ESI, pay gratuity after five years of service, follow state shop and establishment rules and comply with the four labour codes. A UK employer can use its own handbook as a base but must rebuild notice, benefits, IP, restrictive covenants and termination terms under Indian law.
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Key facts
| Employer | The Indian subsidiary (or an Employer of Record) must be the employer |
|---|---|
| Provident fund | Employer and employee each contribute 12% of wages up to the wage ceiling of ₹15,000 a month, with higher voluntary contributions possible |
| ESI | Applies to employees earning up to ₹21,000 a month |
| Gratuity | Payable after five years of continuous service, with the labour codes allowing earlier payment in some fixed-term cases |
| Professional tax | State-specific; deducted from salary in states that levy it |
| Labour codes | The four labour codes are notified as effective from 21 November 2025, with state rules still settling |
| Payroll | Monthly; provident fund and ESI by the 15th of the next month; salary TDS by the 7th |
How Indian employment differs from UK practice
| Topic | UK habit | India |
|---|---|---|
| Contract | Statement of terms plus statutory rights | Appointment letter and handbook; rights come from statute and state laws, and the contract must not go below them |
| Probation and notice | One to three months; statutory minimum notice | Set by contract and sector rules; one to three months is common, longer for senior staff |
| Redundancy | Statutory redundancy pay and consultation | Retrenchment compensation and notice for covered "workmen" and conditions for larger units; for managerial staff terms depend on the contract |
| Transfer of business | TUPE protects employees | No direct equivalent; transfers need new contracts or a court-approved scheme |
| Pension | Auto-enrolment | Employees' Provident Fund and the Pension Scheme; gratuity as an additional benefit |
| Health cover | Private medical insurance as a perk | ESI for lower earners; group health insurance is expected by most professionals |
| Restrictive covenants | Enforceable if reasonable | Post-termination non-competes are generally unenforceable; confidentiality and IP assignment clauses are enforceable |
What to put in the Indian employment contract
- Role, reporting line and place of work, and the working hours and leave policy under the state's shops and establishment rules.
- Compensation structure: basic, allowances, provident fund, gratuity and variable pay, expressed as cost to company and as monthly take-home.
- Intellectual property assignment, confidentiality and data protection clauses, written for Indian law and linked to your UK policies. See data protection.
- Notice and termination terms, with cause and notice kept consistent with the standing orders and the labour codes.
- Anti-bribery, anti-fraud and conduct policies from the UK parent, so the Bribery Act and fraud-prevention defences apply in practice. See UK parent obligations.
- A prevention of sexual harassment policy and an Internal Committee where the headcount requires one.
Payroll and registrations in the first 90 days
- Register the establishment under the state shops and establishment law.
- Register for provident fund and ESI once the thresholds are met, and for professional tax where the state requires.
- Set up salary processing with TDS under the income tax rules and monthly provident fund and ESI payments.
- Issue pay slips, maintain the registers and the Form 16 cycle at year end.
- Start the monthly payroll reconciliation against the books.
Share plans: extending a UK scheme to Indian employees
UK tax-advantaged schemes such as EMI and CSOP are built around UK taxpayers and do little for Indian employees, so grant under an international plan or a purpose-designed Indian arrangement. Indian employees can receive shares of the UK parent under the RBI's overseas investment rules, with the reporting handled according to the current rules. The tax follows the Indian perquisite regime: on exercise, the difference between fair market value and the exercise price is taxed as salary, with capital gains tax on a later sale. If the Indian subsidiary reimburses the UK parent for the cost, treat that as an intercompany service with Withholding Tax, GST and transfer pricing considerations. Keep valuation, vesting and leaver rules consistent with the UK plan rules.
Own subsidiary or Employer of Record?
Use an Employer of Record for the first hires while the entity is formed or the market tested, then move employees across, agreeing the transfer terms and continuity of service upfront. See structure options. A subsidiary is the right employer when the team is more than a handful, when it will sign customer contracts or when you wish to build a centre such as the one in our guide to captive centres.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, HMRC, Companies House and the UK legalisation service for apostilles.
Frequently asked questions
Do UK employment contracts work in India?
Not unchanged. Indian employment is governed by Indian statutes and state rules, so the notice, benefits, termination, IP and restrictive covenant terms must be rewritten. The UK contract can be the starting point for structure and policy.
Is there redundancy pay in India?
There is no UK-style statutory redundancy for all staff. Retrenchment compensation and notice apply for covered workmen in qualifying establishments, while managerial staff terms come mainly from their contracts.
Does TUPE apply in India?
No. India has no direct equivalent. A transfer of staff between employers usually requires new contracts with continuity of service agreed, or a scheme approved by a court.
What is the provident fund contribution in India?
Twelve per cent of wages from the employer and 12% from the employee, on wages up to the ₹15,000 monthly ceiling, with higher contributions possible by choice.
Can UK shares be granted to Indian employees?
Yes. Indian residents can acquire shares of the foreign parent under the RBI's rules. The exercise is taxed in India as a perquisite, and the cost recharge between the companies needs transfer pricing and tax review.
Are non-compete clauses enforceable in India?
Post-termination non-compete restrictions are generally not enforceable. Confidentiality, IP assignment and non-solicitation drafted with care are the more reliable protections.
Related guides
UK Employees Working in India: Treaty Relief, Indian Residence and the Double Contributions Convention
How the India-UK tax treaty (Articles 15 and 16), Indian tax residence, provident fund and the 2026 India-UK Double Contributions Convention apply to UK employees working in India.
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How a UK company moves personal data to and from an Indian subsidiary: UK GDPR transfer rules, India's Digital Personal Data Protection Act and Rules, timelines, and practical contract terms.
Read the guide →Choosing an Indian Structure as a UK Company: Subsidiary, Branch, Liaison Office, LLP or Employer of Record
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Read the guide →Building a Global Capability Centre in India as a UK Company: Models, Staging, Regulation and Pricing
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Read the guide →Sources
Last updated 19 October 2026. General information only, not legal or tax advice. Indian and UK rules change often; confirm current requirements before acting.