Payroll and Labour Law Compliance for Branch Offices in India

Prepared by S U and Company's CA-led advisory team · Published 27 October 2026 · About S U and Company

A branch office is part of the foreign company, so a payroll error does not stay local — it falls on the parent directly. Indian payroll runs on several registrations, monthly payments and yearly returns, each state adds its own layer, and the four Labour Codes now in force have changed what a compliant salary structure actually looks like.

1. Social security: EPF, ESIC and gratuity

Social security compliance runs under the Code on Social Security, 2020, and covers the Employees' Provident Fund (EPF) and pension, state insurance (ESIC), gratuity, and maternity benefit where applicable. EPF generally applies once an establishment reaches 20 or more employees, and ESIC above the notified size for employees within the applicable wage limit — smaller offices can register for EPF voluntarily ahead of the threshold if they want continuity from the first hire.

Expats working at a branch office are generally treated as international workers and contribute to EPF on their full salary with no wage ceiling, unless a social security agreement between India and their home country, backed by a certificate of coverage, exempts them. No agreement is currently known to be in force with Russia or Sri Lanka, so expats from those countries are generally covered as international workers without an exemption — confirm the current position against the EPFO's list before an assignment is priced. See our EPF for international workers guide for the detail, including the conflicting High Court rulings on the rule itself.

2. Professional tax

Professional tax is a state-level deduction from salaries, levied in states such as Maharashtra, Karnataka and West Bengal, where it needs its own registration, payment and return cycle. Each state where the branch or its staff are located needs to be checked separately — there is no single national registration that covers all of them.

3. The Labour Codes and the 50% wage rule

The four Labour Codes — covering wages, industrial relations, social security and workplace safety — have been in force since 21 November 2025, with central rules notified on 8 May 2026 and state-level rules still following in stages. State Shops and Establishments laws apply alongside them.

The Code on Wages requires that wages — basic pay plus dearness allowance — make up at least 50% of total remuneration. This raises the effective base used to calculate provident fund, gratuity and bonus, which means an existing salary structure built around a lower basic-pay proportion may need revising rather than simply carried over.

4. Tax on salary

Tax is deducted from salary, deposited by the 7th of the following month, with quarterly TDS returns and an annual tax certificate issued to each employee, typically by 15 June.

5. Expats: visas and FRRO

An expat generally needs an employment visa to work at a branch office, carrying a minimum annual salary condition of USD 25,000, with limited exceptions for specific roles such as language teachers. A foreign national on a visa valid for more than 180 days must register with the Foreigners Regional Registration Office (FRRO) within 14 days of arrival, and extensions and exit permits also run through the FRRO. See our visa and relocation guide for the fuller process.

An expat's salary for work done in India is taxable here whoever actually pays it, and whether the branch itself deducts tax depends on who bears the cost and on any applicable treaty relief — see our expat tax residency guide and social security for expats guide.

6. Joining and exit formalities

On joining, KYC and bank details are collected, the employee is registered for social security and professional tax, and an offer letter is issued. On exit, pending salary, leave encashment and gratuity where due are settled, PF exit records are completed, and a relieving letter is issued — each step needs its own paper trail, not just a final payslip.

Frequently asked questions

How S U and Company can help

We run monthly payroll, handle EPF/ESIC and professional tax registrations and filings, and support FRRO registration for expats at Indian branch offices. See our accounting and audit guide and ROC compliance guide, or explore the US-to-India entry guides.

Sources and further reading

• Ministry of Labour and Employment — the Labour Codes and labour-law resources.
• Employees' Provident Fund Organisation — international worker rules.