India is the most common overseas hiring market for UK tech startups. The reasons are well known: a mid-level developer in Bangalore costs around 60% less than the same engineer in London, the time-zone overlap covers your whole UK afternoon, and the talent pool is the deepest in the world outside the USA.
What’s not so well known is the bit after “we’ve found someone we want to hire.” That’s where most first-time founders make the mistakes that turn into unpaid statutory contributions, broken IP assignment and, from May 2027 onwards, potential fines under India’s new data protection law. This article is the legal, compliant version of how to do it, written for UK companies hiring one or two people in India for the first time.
Three ways to structure the employment
The first decision is how the employment is structured. You can hire them as a contractor through a freelance platform, set up your own Indian entity, or use an Employer of Record. Each is the right answer in different situations.
Hiring as a contractor is cheap and fast and feels like the obvious move. It also stops being legal the moment your developer only works for you, follows your hours, and uses tools you provided — at that point Indian tax authorities will treat them as a disguised employee, with all the unpaid PF and gratuity exposure that goes with it. UK HMRC’s IR35 logic has a close Indian cousin, and both tax authorities have got better at spotting this pattern over the last three years. It’s fine for genuine project work with multiple clients. It’s not fine as a way to dodge employment.
Setting up your own Indian entity is the most compliant route. It’s also expensive and slow. You’re looking at incorporation under the Companies Act, GST registration, a registered office in India, statutory audits, and annual filings that you’ll need a local accountant to handle. Worth doing once you have ten or fifteen people in-country. Overkill for one developer.
That leaves the third option, which is what most UK startups should actually use: an Employer of Record. The EOR is the legal employer in India, but the developer reports to you, you decide what they work on, and the EOR handles the statutory paperwork in the background. The rest of this article is about that route.
Recommended Employer of Record
What an India EOR is actually doing for you
The visible part of an EOR — payslips, monthly invoice, the dashboard — is the small part. The bigger part is everything they’re handling so you don’t have to learn it.
Provident Fund is the big one. You contribute 12% of basic salary plus dearness allowance, the employee contributes another 12%, and it accrues into a state-administered pension fund. Gratuity is a separate accrual at 4.81% of basic, payable to the employee after five years of continuous service. There’s Employee State Insurance for lower earners (it won’t apply to most developer salaries because it cuts off at ₹21,000 a month gross). There’s a small Professional Tax administered at state level. And there’s the annual Form 16, which is the Indian equivalent of a P60 that your developer will need at tax time.
Total employer-side statutory burden lands at roughly 15-20% on top of gross salary, which is broadly comparable to UK employer NI plus auto-enrolment pension. Not a hidden cost so much as the equivalent of what you’d pay here.
The 2026 rule change you should know about
India’s central labour codes took effect in April 2026 with a provision known as the 50% wages rule. In short: an employee’s basic salary plus dearness allowance must now equal at least 50% of total compensation. The practical effect is that you can no longer structure a contract as a small basic plus a huge “allowances” bucket designed to minimise PF and gratuity contributions.
If you were getting India quotes in 2024 or 2025, expect the headline cost to have risen by roughly 2-3% as compliant providers restructured their salary templates. Anyone still quoting you the old maths in 2026 is either confused or non-compliant. Ask the provider directly how they’ve restructured for the new rule.
What it actually costs
A worked example helps more than a pricing page. Using Deel EOR as an example provider, let’s say you’re hiring a mid-level developer with four years of experience, working from home in Bangalore, on a salary of ₹16 lakh a year. That’s roughly £15,000 gross at May 2026 exchange rates.
Statutory contributions on top of that, factored at the new 50%-basic rule, come to about £2,700 a year. Add Deel’s EOR fee of roughly £5,640 a year and your total annual cost lands at around £23,340.
The equivalent mid-level engineer hired in the UK on £55,000 costs you about £63,250 once you add employer NI and pension. So the same person costs you roughly £40,000 less per year in India, which is the 60%-cheaper figure the cost-saving articles tend to lead with. The saving is real. It just isn’t the headline £15,000 figure that some EOR sales decks imply.
Two contract clauses to actually read
The standard employment contract your EOR drafts will almost certainly be fine. But two clauses are worth reading yourself because they’re the ones that bite if they’re wrong.
The first is IP assignment. Indian copyright law gives the employer rights to “work for hire” by default, but the default is narrower than the UK equivalent and explicit assignment clauses are standard practice. You want a comprehensive IP assignment in the body of the contract, a separate NDA, and an inventions clause that covers anything created outside working hours using your tools or your customer data. The major EORs (Deel, Remote, Oyster) all use templates that handle this competently, but it’s the paragraph to actually read rather than skim.
The second is data protection. India’s Digital Personal Data Protection Act 2023 is rolling out enforcement in phases, with the substantive provisions taking effect 18 months after November 2025, which means May 2027. Under DPDP your EOR is technically a data processor and you’re the data fiduciary. The better providers have already built the processor obligations into their employment templates and their own customer terms. If your developer will be handling personal data of users — almost any consumer-facing app counts — make sure both the EOR contract and the employment contract explicitly bind the developer to DPDP processor duties. The compliance window for getting this right ends in May 2027.
Who to actually get quotes from
Three of the big international EORs have strong India operations and they’re the providers most UK startups will end up choosing between.
Deel is usually the default. Owned entity in India, headline rate around £470 a month per employee, typically the fastest at getting someone onboarded (five working days is realistic), and the contract templates handle DPDP cleanly. If you can’t think of a specific reason to choose otherwise, Deel is fine.
Pebl is well worth reviewing alongside Deel and provides all the services you need at a similar price.
Remote sits at the same price point on an annual commitment and onboards in roughly seven working days. Its big selling point is the owned-entity model and stronger built-in IP and data protections, which matters if your developer will be touching sensitive code or regulated data.
Oyster runs about £75 a month more expensive than the other two but includes consultative HR support in the base fee. That’s worth real money if you don’t have an internal HR person and you’d rather not generate a separate consulting invoice every time you have a question about probation terms or sick leave.
There’s also a tier of India specialists — Wisemonk, Tarmack, Multiplier, Anjusmriti — who charge $99-200 a month and can be roughly half the price of the global players. They’re worth a quote if India is your only overseas hire for the foreseeable future. The tradeoff is that you’ll need to find a different provider the day you decide to hire in Germany or Brazil.
How long this actually takes
From the day you’ve decided who you want to hire, the realistic timeline is seven to ten working days. About one or two days to get a contract signed with the EOR if you haven’t already. Two or three days for the developer to receive and sign their offer. Three to five days for background verification and onboarding paperwork (the DPDP-compliant version is slightly slower than the old version). First payroll runs at the end of the calendar month they started.
The fastest I’ve seen anyone do this is four days. The slowest, where the developer needed extensive background verification and the company hadn’t sorted equipment provisioning, was six weeks. Plan for two weeks and you’ll usually be fine.
Common mistakes to avoid
The pattern that catches almost everyone is paying the developer as a contractor for the first three to six months “while we see how it goes”. You’re not de-risking anything. You’re building a misclassification problem that the EOR will then have to clean up retroactively, and the developer can’t access PF, healthcare or any of the protections employment gives them while you stall.
The second pattern is letting the EOR write the IP clause without reading it. Standard templates are usually fine. They’re occasionally not, and it’s the most important paragraph in the entire contract.
The third is forgetting equipment. Shipping a MacBook to Bangalore through Indian customs is genuinely a hassle and most EORs will provision a device for a modest fee. Worth the line item.
For an introduction, read our guide to EOR services and, if you’ve worked through this and decided an EOR is the right route, our shortlist of the ten best EORs for UK businesses covers each provider’s India offer in more detail.
