HR for founders in India
Reviewed by Mellow Editorial Team, HR & payroll content team
Running HR as a founder in India means navigating statutory compliance, payroll obligations and employment structure — all at once, usually without a dedicated HR team. Here is what you actually need to know.
Get your employment structure right from day one
The first decision is whether someone is an employee or a contractor. This is not just a paperwork choice — it determines which labour laws apply, what deductions you must make and what benefits you owe.
Employees on your payroll attract EPF contributions (12% from the employee, 12% from the employer on qualifying wages), ESI if they fall below the applicable wage threshold, TDS deductions under the income tax regime, and eventually gratuity after five years of continuous service. Contractors do not attract these obligations in the same way, but misclassifying an employee as a contractor is a compliance risk that regulators take seriously.
If you are hiring people in other countries alongside India, how Mellow runs payroll across six countries on one platform is worth reading before you build your payroll stack.
Understand your payroll obligations before you run your first payroll
Payroll in India is not just salary transfer. Each month you must:
- Calculate gross pay correctly, including any allowances
- Deduct the employee's EPF contribution (12%) and deposit it along with your own employer contribution
- Deduct TDS at the correct rate based on the employee's chosen tax regime — the new regime has slabs rising to 30%, plus a 4% health and education cess, with a section 87A rebate applying at lower income levels
- Deduct ESI contributions where the employee's wages fall below the applicable threshold
- File Form 24Q every quarter — this is your quarterly TDS return for salary
- Issue Form 16 to every employee after the financial year closes — this is their salary TDS certificate and they need it to file their own tax returns
Missing deposit deadlines triggers interest and penalties. Set up standing instructions or reminders well before the 7th of each month, which is the standard TDS deposit due date for the previous month.
Know which labour laws actually apply to your business
India consolidated its central labour legislation into four Labour Codes, which came into force in 2025. These cover wages, industrial relations, social security and occupational safety. The codes changed definitions that matter practically — including how "wages" is defined for the purpose of EPF and gratuity calculations.
At the state level, Shops and Establishments Acts still apply and differ by state. If your office is in Karnataka, your registration and working-hours rules come from Karnataka's act. If you open a second office in Maharashtra, you register separately there. This is not optional — most states require registration within a set number of days of commencing operations, and the certificate must be displayed at the workplace.
For most early-stage companies with fewer than ten or twenty employees, many of the heavier industrial relations provisions under the Labour Codes do not yet apply. But EPF, ESI and TDS obligations begin much earlier — sometimes from the first employee, depending on the scheme.
Build a basic compliance calendar
You do not need a large HR team to stay compliant, but you do need a calendar. The recurring items that catch founders off guard are:
Monthly: EPF and ESI deposits, TDS deposit by the 7th of the following month.
Quarterly: Form 24Q filing (TDS return for salaries).
Annually: Form 16 issuance to employees, EPF annual return, ESI annual return, renewal of Shops and Establishments registration in some states, professional tax returns where applicable.
Professional tax is a state-level levy — rates and applicability vary, but it is a real obligation in states like Maharashtra, Karnataka and West Bengal. It is not a large amount, but failing to register and deduct it creates unnecessary notices.
Offer letters and policies that actually protect you
A well-drafted offer letter is your first line of protection. It should clearly state the fixed pay, any variable component and how it is calculated, notice period on both sides, IP assignment (critical for tech and product companies) and the governing state for disputes.
A leave policy needs to be written down and shared — not because the law prescribes every detail, but because ambiguity about earned leave, sick leave and casual leave creates disputes that take management time to resolve. Under the Labour Codes, the concept of earned leave encashment and carry-forward has clearer treatment than under the previous patchwork of laws, so it is worth reviewing your policy against the current framework.
Confidentiality and non-disclosure agreements should be separate from the offer letter and signed before the employee accesses sensitive information. Indian courts have generally upheld NDAs where the scope is reasonable and the consideration is real.
Founders often delay writing these documents because the team is small and everyone trusts each other. The documents matter most precisely when trust breaks down — at which point it is too late to write them.
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