Employee Onboarding Checklist for Indian Subsidiaries

Why a Structured Onboarding Checklist Matters for Indian Subsidiaries

India's four new Labour Codes took effect on 21 November 2025, restructuring wage definitions, gratuity eligibility, social-security coverage, and employee benefit calculations — so any onboarding workflow built before that date is now partially outdated. Before you can legally employ anyone, your subsidiary must also hold several entity-level registrations: miss a single deadline and you face penalties from the Employees' Provident Fund Organisation (EPFO), the Employees' State Insurance Corporation (ESIC), or the Income Tax Department.

For a wholly owned subsidiary of a foreign company, the compliance burden is even heavier because the parent entity is ultimately liable. This comprehensive checklist reflects the current regulatory requirements as of March 2026 and covers everything from entity-level registrations to the 90-day milestone review.

Pre-Offer Stage: Entity-Level Registrations

Before you can legally employ anyone in India, your subsidiary must hold several registrations. If these are not in place, your very first hire is non-compliant.

Mandatory Entity Registrations

Threshold-Based Registrations

The following registrations become mandatory once you cross specific employee thresholds:

• EPF Registration: Mandatory once the establishment has 20 or more employees. Both employer and employee contribute 12% of basic wages plus dearness allowance. The employer's 12% is split into 3.67% towards EPF and 8.33% towards EPS (Employees' Pension Scheme), subject to a pensionable salary cap of INR 15,000 per month.
• ESI Registration: Mandatory once the establishment has 10 or more employees (20 in some states). Employer contributes 3.25% and employee contributes 0.75% of wages. The wage ceiling is INR 21,000 per month (INR 25,000 for persons with disability).
• Gratuity: Applicable to establishments with 10 or more employees. Under the definition of fixed term employment in section 2(o) of the Industrial Relations Code, 2020, a fixed-term employee "shall be eligible for gratuity if he renders service under the contract for a period of one year", down from the previous five-year requirement.

Offer Letter and Employment Contract

Under section 6 of the Occupational Safety, Health and Working Conditions Code, 2020, it is a statutory duty of the employer to "issue a letter of appointment to every employee on his appointment in the establishment". This is a significant change from the earlier regime, where a written appointment letter was merely a best practice.

Essential Clauses in the Employment Contract

• Compensation structure: Under the definition of "wages" in section 2(y) of the Code on Wages, 2019, if the excluded components listed in clauses (a) to (i) — HRA, conveyance allowance, overtime, commission, the employer's provident fund contribution and the rest — exceed one-half of all remuneration, the excess is deemed to be wages and added back. In practice this means basic pay plus dearness allowance has to be at least half of remuneration, which drives EPF, ESI, gratuity and bonus calculations.
• Designation and reporting structure
• Working hours: Typically 48 hours per week under most state Shops & Establishments Acts; the OSH Code caps daily hours at eight, with weekly limits and overtime entitlements set by the applicable central or state rules.
• Leave entitlements: Earned leave, casual leave, sick leave, and maternity leave (26 weeks under the Maternity Benefit Act, 1961 as amended in 2017, now carried into the Code on Social Security, 2020).
• Notice period: Typically 30-90 days for permanent employees.
• Probation period: Usually 3-6 months, with clear terms on confirmation.
• Non-compete and IP assignment: Non-competes are generally unenforceable in India post-employment but are standard during employment.
• Confidentiality and NDA provisions
• Termination provisions: Must comply with the Industrial Relations Code requirements.

Day-One Documentation Checklist

On the employee's first day, your HR team must collect and process the following documents. Missing even one can delay payroll processing or create compliance gaps.

Identity and Tax Documents

• PAN Card: Mandatory for TDS deduction. Without a valid PAN, tax is deducted at the higher of the rate in force or 20% under section 397(2) of the Income-tax Act, 2025 (section 206AA of the Income-tax Act, 1961), instead of the applicable slab rate.
• Aadhaar Card: Required for EPF enrollment (linked to Universal Account Number) and ESI registration.
• Passport and visa copies: For foreign nationals on employment visas, retain copies of the passport, visa stamp, and FRRO registration certificate.

Statutory Enrollment Forms

Other Documents to Collect

• Cancelled cheque or bank account proof for salary credit
• Educational certificates and experience letters
• Relieving letter from previous employer
• Previous employer's Form 130 (formerly Form 16) (if joining mid-financial year, for accurate TDS calculation)
• Passport-size photographs (2-4 copies)
• Emergency contact details

Payroll Setup and Tax Compliance

India's payroll system involves multiple statutory deductions, each with its own deposit timeline and return-filing schedule. As an employer, your subsidiary must obtain a TAN before making the first salary payment.

Monthly Payroll Obligations

Quarterly and Annual Filings

• Form 138 (formerly Form 24Q): Quarterly TDS return for salary payments, filed electronically.
• Form 130: Annual TDS certificate issued to each employee by 15 June following the financial year.
• EPF ECR (Electronic Challan cum Return): Monthly filing on the EPFO Unified Portal.
• ESI contributions: Paid and filed monthly on the ESIC portal, against contribution periods running 1 April to 30 September and 1 October to 31 March.

Mandatory Training During Onboarding

Several training requirements are legally mandated and must be completed during the first week of employment.

PoSH (Prevention of Sexual Harassment) Training

Under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, any organisation with 10 or more employees must form an Internal Complaints Committee (ICC) and organise PoSH workshops and awareness programmes at regular intervals (section 19(c)). New employees must complete PoSH training during their first week. Section 26 of that Act makes a first contravention punishable with a fine of up to INR 50,000; a repeat contravention attracts twice that punishment and can lead to cancellation of the employer's licence or registration.

Other Mandatory Training

• Workplace safety orientation: Required under the Occupational Safety, Health and Working Conditions Code, 2020.
• Anti-bribery and ethics policy: Particularly important for subsidiaries of US companies subject to the FCPA or UK companies under the Bribery Act.
• IT and data protection policies: Cover acceptable use, data handling under India's Digital Personal Data Protection Act, 2023, and any parent company GDPR obligations.
• Whistleblower policy: Required under Section 177 of the Companies Act, 2013 for listed companies and recommended for all subsidiaries.

Background Verification

While not a statutory requirement in all cases, background verification is a compliance best practice for Indian subsidiaries, especially those handling sensitive data or operating in regulated industries.

Standard Verification Checks

• Identity verification: PAN and Aadhaar validation through government databases.
• Criminal background check: Police verification through the state police portal or third-party providers.
• Employment history: Verify previous employment, designation, and tenure with former employers.
• Educational qualifications: Verify degrees and certifications with issuing institutions.
• Address verification: Physical or digital address confirmation.

Under India's Digital Personal Data Protection Act, 2023, you must obtain clear written consent from candidates before initiating any background verification process. Maintain proper documentation of who checked what and when for audit purposes.

State-Specific Compliance Considerations

India's labour laws are a concurrent subject, meaning both the central government and state governments can legislate. Key state-level variations include:

Professional Tax Rates (Select States)

Article 276(2) of the Constitution caps professional tax at INR 2,500 per person per year, so no state can charge more. The top salaried slab in some states works out to INR 2,400 over twelve months (INR 200 a month) rather than the full ceiling — check the slab table for the state where the employee is based.

Shops & Establishments Act

Each state has its own Shops & Establishments Act governing working hours, overtime, weekly offs, and record-keeping requirements. Overtime ceilings are set by each state's own Act and rules and differ materially between states, so check the Act that applies where the employee is based rather than assuming a single national figure. Your employment contract and attendance systems must reflect the state-specific rules where the employee is based.

Special Considerations for Foreign National Employees

If your subsidiary is hiring foreign nationals, additional onboarding steps apply:

• Employment visa verification: Confirm the employee holds a valid Employment Visa (not a Business Visa). The visa must specify the employer's name.
• FRRO/FRO registration: Foreign nationals holding a visa valid for more than 180 days must register with the Foreigners Regional Registration Office within 14 days of arrival — the clock runs from the arrival stamp in the passport.
• Aadhaar for foreign nationals: Foreign nationals on employment visas who have resided in India for 182 days or more in the twelve months immediately preceding the application are eligible for Aadhaar enrolment.
• Salary structuring: Minimum salary thresholds apply for Employment Visas (generally USD 25,000 per annum). See our guide on expat salary structuring.
• Tax residency determination: Track the number of days the employee is present in India to determine their tax residency status under section 6 of the Income-tax Act, 2025.

IT and Systems Setup Checklist

While not a statutory requirement, a structured IT setup process prevents security incidents and ensures compliance with your parent company's information security policies. For subsidiaries handling sensitive financial data or operating under FEMA reporting obligations, proper access controls are especially critical.

• Corporate email account and communication tools
• Access to HRIS (Human Resource Information System) and payroll portal
• EPF UAN (Universal Account Number) activation and employee self-service access
• ESI IP number issuance and hospital/dispensary list
• Access to leave management and attendance tracking systems
• IT security policy acknowledgment form
• Data classification and handling training completion certificate

30-60-90 Day Onboarding Milestones

First 30 Days

• Complete all statutory registrations (EPF, ESI, TDS setup)
• Issue appointment letter and collect all signed documents
• Complete PoSH and workplace safety training
• Set up payroll and run first salary cycle
• Assign a buddy or mentor for cultural integration
• First 1:1 with reporting manager with documented goals

Days 31-60

• Verify all statutory deductions are correctly reflected in first payslip
• Confirm UAN activation and EPF passbook access for employee
• Confirm ESI IP number issuance and dispensary enrolment
• Complete background verification if not done pre-joining
• Mid-probation check-in with documented feedback

Days 61-90

• Review and update Form 12BB investment declarations if needed
• Confirm all training certifications are on file
• Probation review meeting (if probation is 90 days)
• Process confirmation letter if probation is cleared
• Update employee handbook acknowledgment

Common Onboarding Mistakes Foreign Companies Make

Based on our experience advising foreign companies establishing subsidiaries in India, including those entering through the automatic route for foreign direct investment, these are the most frequent onboarding errors:

1. Delaying EPF/ESI registration: Coverage attaches from the date the establishment first employs 20 or more persons, so contributions run from that date for every eligible employee — late registration produces a retrospective demand, not a clean start. Register proactively once you plan to reach the threshold.
2. Incorrect wage structuring: Under the Code on Wages definition, excluded allowances above one-half of remuneration are deemed to be wages, so a low basic silently raises the EPF, ESI, gratuity and bonus base instead of lowering it.
3. Skipping Professional Tax: This state-level tax is easy to overlook, and the consequences are set by each state's Act — in Karnataka, for example, interest of 1.25% per month plus a penalty of up to 50% of the tax due.
4. No PoSH Committee: Many small subsidiaries skip forming the Internal Complaints Committee, not realising it is mandatory at 10 employees and that contraventions carry fines and, on repetition, cancellation of the employer's licence or registration.
5. Missing the Shops & Establishments registration: The window runs from the date you commence operations and is set by the state Act — commonly between 30 and 90 days, so confirm the figure for your state rather than assuming.

Key Takeaways

• Complete entity-level registrations (TAN, Professional Tax, Shops & Establishments) before hiring your first employee.
• Restructure salary components so that basic pay plus dearness allowance is at least half of remuneration — anything above that half in the excluded allowances is deemed to be wages under the Code on Wages.
• Collect EPF Form 11, ESI Form 1, Gratuity Nomination, and Form 12BB from every employee on day one.
• Complete PoSH training within the first week and form an Internal Complaints Committee once you have 10 employees.
• Track state-specific compliance requirements, as labour law varies significantly across Indian states.
• Consider engaging a compliance advisory service for the first year until your internal HR processes are stable.