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How to Run Payroll in India for a 10-Person Remote Team
- Saransh Garg
- 1 day ago
- 11 min read
A 10-person remote engineering team based in India costs you roughly ₹85–₹1.4 lakh per person per month in gross salary, depending on seniority. That sounds simple. What is not simple is the compliance stack sitting underneath it. To run payroll in India for a remote team legally, you must navigate the Employees' Provident Fund and Miscellaneous Provisions Act 1952 (EPF Act), the Payment of Gratuity Act 1972, the Payment of Bonus Act 1965, the Professional Tax rules of whichever state your engineers sit in, and if your headcount crosses 10 mandatory ESIC registration under the Employees' State Insurance Act 1948. Miss any one of these and you are looking at retrospective penalties, interest at 12% per annum on EPF arrears, and in some cases personal liability for the Indian entity's authorised signatory.
We have set up compliant payroll structures for over 60 cross-border remote teams in the last four years. Here is exactly what it takes.
Why Running Indian Remote Payroll Is Harder Than It Looks
Most finance heads we speak to assume Indian payroll is straightforward because salaries are lower. The complexity is not in the quantum it is in the layering.
India has no single federal payroll law. Instead, you are dealing with at least six overlapping compliance obligations simultaneously. The EPF Act mandates 12% employer contribution and 12% employee contribution on basic salary (capped at ₹15,000 per month for contribution calculation, though many employers go above this). ESIC applies to employees earning below ₹21,000 gross per month and for a 10-person tech team, you may have some engineers under that threshold in Tier 2 cities like Jaipur or Coimbatore.
Professional Tax is state-specific: Maharashtra charges up to ₹2,500 per year, Karnataka up to ₹2,400, while Delhi charges nothing. If you have engineers spread across three states, your payroll team is filing in three different state portals on three different cycles.
Then there is TDS Tax Deducted at Source under Section 192 of the Income Tax Act. Your payroll processor must compute each employee's annual tax liability, deduct it monthly, file quarterly TDS returns in Form 24Q, and issue Form 16 by June 15 each year. If any engineer has declared HRA, LTA, or 80C investments, those must be factored into the monthly deduction calculation. A mistake here triggers a demand notice from the Income Tax Department not against your engineer, against whoever filed the TDS return.
We have seen European companies assume their home-country payroll vendor can handle India as an add-on. In three separate mandates two from the Netherlands and one from Sweden the vendor processed the first three months correctly, then missed the half-yearly ESIC return deadline. The penalty was modest (₹5,000 per instance) but the audit flag stayed on record.
At 10 people, you are also approaching thresholds that trigger the Shops and Establishments Act registration in most states, and potentially the Maternity Benefit Act 1961 if any employees are women, which most tech teams include.
Which Indian Cities Your 10-Person Team Is Likely Spread Across
Most global companies hiring a 10-person remote team do not get to pick a single city. Engineers live where they live. A realistic 10-person remote team we have placed recently included three engineers in Bengaluru, two in Hyderabad, two in Pune, two in Noida, and one in Chennai. That is five states and five Professional Tax jurisdictions.
Bengaluru has the deepest talent pool for cloud, DevOps, and full-stack roles but Karnataka PT filings are monthly above ₹10 lakh annual salary, which most senior engineers exceed. Hyderabad has strong data engineering and SAP talent; Telangana PT is due annually. Pune is strong for Java backend and QA automation; Maharashtra PT is monthly. Chennai has deep SAP and infrastructure talent; Tamil Nadu PT is half-yearly. Noida falls under Uttar Pradesh, which has no Professional Tax one less filing, at least.
This geographic spread is not a problem if your global payroll outsourcing partner knows each state's cadence cold. It becomes a serious problem if you are trying to manage it with a spreadsheet and a part-time Indian accountant.
The Legal Framework You Must Understand to Run Payroll in India for Remote Team Correctly
The foundation is the EPF and Miscellaneous Provisions Act 1952. Once your team hits 20 employees (across all your India engagements, not just this team), EPF registration is mandatory. But many of our clients choose to register voluntarily even at 10 because it helps with engineer retention EPF is a deeply valued benefit in India.
ESIC registration triggers at 10 or more employees in most states (some use a 20-employee threshold). Employer contribution is 3.25% of gross wages; employee contribution is 0.75%. If an engineer earns above ₹21,000 gross, they opt out of ESIC but you must still file a nil return for them.
The most common mistake we see: companies set up an Indian private limited company (Pvt Ltd) to employ the team, appoint a local director, and assume the director handles compliance. What they miss is that the director becomes a "principal employer" under the Contract Labour (Regulation and Abolition) Act 1970 if any engineer is technically on a third-party contract. One US-based SaaS client came to us after their first payroll audit revealed they had misclassified three contractors as employees and three employees as contractors triggering back-payment of EPF employer contributions for 18 months plus interest.
If you do not have an Indian entity, the cleanest route to run payroll legally is through an Employer of Record (EOR). The EOR becomes the legal employer, holds all registrations, files all returns, and indemnifies you against compliance risk. You pay a management fee typically ₹8,000–₹15,000 per employee per month depending on salary level and complexity and your engineers are on a fully compliant India payroll from day one.
For companies that want full control, a contractual hiring structure works when engineers are genuine contractors (project-based, no fixed hours, no exclusivity). But the Income Tax Department and the EPF authorities increasingly scrutinise long-term contractor relationships if the same person has been on "contract" for 18+ months, expect a reclassification notice.
India Remote Team Payroll: Compliance Checklist You Can Use Today
Use this checklist before you process your first payroll run. Each item maps to a specific law.
Compliance Item | Law / Authority | Frequency | Threshold |
EPF employer registration | EPF Act 1952 | One-time + monthly ECR filing | 20 employees (voluntary at 10) |
ESIC employer registration | ESI Act 1948 | One-time + half-yearly return | 10 employees in most states |
Professional Tax registration | State PT Act (varies) | Monthly / quarterly / annual | Varies by state |
TDS deduction (Section 192) | Income Tax Act 1961 | Monthly deduction, quarterly return | All salaried employees |
Form 24Q filing | Income Tax Act 1961 | Quarterly | All salaried employees |
Form 16 issuance | Income Tax Act 1961 | Annual (by June 15) | All salaried employees |
Shops & Establishments registration | State-specific Act | One-time | 10+ employees in most states |
Labour Welfare Fund contribution | State LWF Acts | Half-yearly / annual | State-specific |
Payroll register maintenance | Payment of Wages Act 1936 | Monthly | All employees |
Gratuity provisioning | Payment of Gratuity Act 1972 | Ongoing | Triggers at 5 years of service |
What this checklist means in practice: A 10-person team spread across four states generates approximately 38–44 individual compliance filings per year before you count annual returns. Each missed deadline carries a penalty. Some (like EPF) carry criminal liability for the employer's authorised signatory after a set grace period.
We give this checklist to every international recruitment firm client at the start of an engagement, before we discuss salary benchmarks. Payroll structure determines your employment model. Employment model determines your cost.
How We Set This Up: A Real Engagement and What Almost Went Wrong
A mid-size European logistics-tech company around 200 employees globally, with no prior India presence approached us in Q1 last year. They had already hired five engineers via a freelance platform, paid them in USD directly, and were about to add five more. Their Finance Head had flagged a potential PE (Permanent Establishment) risk if Indian employees were closing contracts or making business decisions on behalf of the parent company, India's tax authority (CBDT) could argue the company had a taxable presence in India.
The problem: Three of their five engineers were listed as "Business Development Consultants" in their contracts. Two had been representing the company in vendor calls.
What we did: We unwound the freelance arrangements, classified each engineer correctly (two genuine contractors on fixed-scope projects, three permanent employees), and routed the permanent employees through our EOR structure within 19 days. We filed retrospective EPF contributions for two of the three salaried engineers covering the prior four months total back-payment of ₹68,400 in employer contributions plus ₹4,100 in interest.
What almost went wrong: One engineer had declared a different gross salary to his bank (for a home loan) than what appeared in the original freelance invoices. Reconciling that before EPF registration required a corrected employment letter, a revised loan NOC, and a conversation between our compliance team and the engineer's bank relationship manager. It took 11 additional days and nearly delayed the whole team's payroll go-live.
Outcome: All 10 engineers are now on a compliant payroll. The client's PE risk is resolved. Their monthly HR outsourcing and payroll cost for 10 people runs to approximately ₹1.1 lakh per month inclusive of EOR fees, compliance filings, and payroll software. Their Finance Head told us that was less than what they were paying their UK-based payroll vendor to manage 12 UK employees.
What It Actually Costs to Run Payroll for 10 Engineers in India
Here are real numbers — gross salaries in INR, employer-side costs, and EOR fees — for three seniority levels. All figures are monthly.
Level | Gross Salary (INR/month) | EPF Employer (12%) | ESIC Employer (3.25%, if applicable) | EOR / Payroll Fee | Total Monthly Cost to Client |
Mid (3–5 yrs) | ₹80,000 – ₹1,10,000 | ₹9,600 – ₹13,200 | ₹2,600 (if gross <₹21K, N/A at this level) | ₹10,000 – ₹12,000 | ₹99,600 – ₹1,35,200 |
Senior (6–9 yrs) | ₹1,30,000 – ₹1,80,000 | ₹15,600 – ₹21,600 | N/A | ₹12,000 – ₹14,000 | ₹1,57,600 – ₹2,15,600 |
Lead (10+ yrs) | ₹2,00,000 – ₹2,80,000 | ₹24,000 – ₹33,600 | N/A | ₹13,000 – ₹15,000 | ₹2,37,000 – ₹3,28,600 |
A balanced 10-person team (3 mid, 5 senior, 2 lead) runs approximately ₹18–₹22 lakh per month all-in. At current rates, that is roughly €19,000–€23,500/month, or USD $21,500–$26,500/month.
What do our clients reinvest the savings into? Consistently, the answer is headcount. A company that would have hired 4 engineers in their home market for the same budget can run payroll in India for a remote team of 10 and still have budget left for a senior tech lead in-country for oversight. That asymmetry compounds over time.
If you are at the stage of figuring out employment model before salary structure, the offshore recruitment process conversation should come first because how you hire determines what you owe.
Conclusion
Over the next 12–18 months, we expect India's gig classification rules to tighten further the Code on Social Security 2020, once fully operationalised across states, will bring platform workers and long-term contractors into the EPF and ESIC net for the first time. For any global company with engineers on extended freelance arrangements, the window to restructure those engagements compliantly is narrowing. In our live mandates right now, we are seeing a sharp uptick in Finance Heads asking us to audit existing contractor relationships before renewing them precisely because they have seen the penalty notices landing on peers.
If you are ready to run payroll in India for a remote team correctly — or need us to audit what you already have running tell us where you are and we will map the fastest compliant path from there.
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FAQs
1. Does the EPF Act 1952 apply to a 10-person remote team in India without an Indian entity?
Yes, the EPF Act applies based on where employees work, not where the company is incorporated. If your engineers are working remotely from India, EPF compliance may still apply through the legal employer structure. Companies using an Employer of Record (EOR) or staffing partner generally handle EPF registration and monthly filings. Indian authorities are increasingly scrutinizing long-term contractor arrangements that resemble employment relationships. For foreign startups, setting up compliant payroll from day one helps avoid retrospective penalties and improves employee trust.
2. Do remote teams across multiple Indian states require separate Professional Tax registrations?
Yes, Professional Tax registration is required separately in every Indian state where employees are located. Since Professional Tax is governed by state laws, each state has different tax slabs, filing schedules, and compliance rules. Remote teams spread across states like Karnataka, Maharashtra, Tamil Nadu, or Telangana must comply individually in each jurisdiction. Most EOR providers and payroll vendors manage these registrations as part of their services. Businesses should still verify state-wise coverage in contracts to avoid hidden compliance costs later.
3. What is better for a remote India team: an EOR or a Pvt Ltd company?
An Employer of Record (EOR) is usually the faster and more cost-effective option for small remote teams in India. The EOR manages payroll, EPF, ESIC, TDS, and labour law compliance without requiring the company to establish a local entity. Setting up a Private Limited company offers greater operational control and direct ownership of employment contracts. However, it also involves company incorporation costs, ROC filings, local directors, and ongoing compliance obligations. For teams under 20 employees, an EOR is generally the simpler and lower-risk solution.
4. How does TDS under Section 192 work for Indian remote employees?
Under Section 192, employers must estimate each employee’s annual taxable income and deduct monthly TDS accordingly. Tax deductions depend on salary levels, declared investments, exemptions, and the selected tax regime. Employees typically submit investment declarations at the start of the financial year and supporting proofs before year-end. Any tax shortfall identified during final calculations is usually adjusted in the March payroll cycle. Accurate TDS processing is essential to maintain payroll compliance and avoid employee tax disputes.
5. Can foreign companies pay Indian engineers in USD and avoid payroll compliance?
No, paying employees in USD does not remove Indian payroll or employment law obligations. If services are performed in India, the income remains taxable under Indian tax regulations regardless of payment currency. Salary received in foreign currency is converted into INR when credited to Indian bank accounts. Statutory obligations such as TDS deductions and EPF contributions may still apply to India-based employees. For most remote teams, compliant INR payroll through an EOR or Indian entity is the safest legal structure.
6. How does gratuity liability affect long-term remote teams in India?
Under the Payment of Gratuity Act, employees completing five continuous years of service become eligible for gratuity benefits. Gratuity is calculated based on the employee’s last drawn basic salary and total years of employment. Senior engineers and long-serving employees can create significant future liabilities for growing companies. Many foreign startups overlook gratuity provisioning because the financial impact appears only after several years. Building monthly gratuity accruals into payroll planning helps businesses avoid large unexpected liabilities later.
7. How will the Code on Social Security 2020 impact remote teams and contractors?
India’s Code on Social Security 2020 consolidates several labour and social security laws into a single framework. Once fully operational, it may expand benefits coverage to gig workers, freelancers, and platform workers. Companies relying heavily on long-term contractor arrangements could face stricter compliance scrutiny and reclassification risks. Foreign businesses hiring remote teams should review contractor structures before new state-level rules become fully enforceable. Early compliance planning reduces the risk of penalties and retrospective employment liabilities.
8. Who owns intellectual property created by engineers hired through an EOR?
Intellectual property ownership depends primarily on the employment agreement and IP assignment clauses. When an EOR acts as the legal employer, the initial employer relationship technically sits with the EOR provider. Well-drafted EOR agreements include clauses transferring all IP rights, source code, and work products to the client company. Missing or unclear IP assignment language can create future ownership disputes for software businesses and startups. Companies should always conduct legal reviews of EOR contracts before onboarding engineers.
9. What payroll schedule do Indian remote employees generally expect?
Monthly payroll is the standard compensation structure for salaried employees in India, especially in the technology sector. Most employees expect salaries to be credited on or before the last working day of the month. Although weekly or fortnightly payroll is legally possible, it is uncommon for professional remote teams. Monthly payroll aligns better with TDS deductions, EPF contributions, and statutory filing cycles. It also matches employees’ financial planning needs, including rent, EMIs, and household expenses.
10. How long does it take to set up compliant payroll for a remote India team?
For companies using an Employer of Record, compliant India payroll can usually be activated within 10 to 19 working days. The EOR typically manages EPF registration, TDS setup, Professional Tax registrations, and employment documentation in parallel. Delays often occur because of PAN-Aadhaar mismatches or incomplete employee KYC documentation. Setting up an Indian Private Limited company generally takes much longer due to incorporation and statutory registration timelines. For most small remote teams, the EOR route provides faster onboarding and significantly lower operational complexity.
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