Hiring your first employee in India: a step-by-step checklist for 2026
Hiring your first employee takes more than finding the right person. This checklist covers the role, pay, the appointment letter the labour codes now require, PF, ESI and TDS, and the first 30 days.
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Quick answer: To hire your first employee in India, write down the role and the results you expect, set a fair pay range, post the job, shortlist with a short skills task and interview everyone the same way. Then give the person an appointment letter (required for every worker since the labour codes took effect on 21 November 2025), set up payroll with TDS if the salary is taxable, register with your state's shops and establishments office, and plan their first 30 days. PF applies from 20 employees and ESI from 10.
Your first hire changes your business. It is the first time someone else does work you used to do, the first salary you have to fund every month and the first time employment law applies to you directly. This checklist walks through it in order, from deciding whether you need an employee at all to the end of their first month.
First decide: do you need an employee?
Write down the three to five results you need from this person in their first six months. If the list adds up to steady, ongoing work that you will direct day to day, you need an employee. If it is a project with an end date, another option may suit you better.
| Type of hire | Best when | Watch out for |
|---|---|---|
| Full-time employee | The work is ongoing and central to the business | Fixed monthly cost; all the employer duties below apply |
| Fixed-term employee | You need someone for a set period, such as a season or a project | Under the labour codes they get the same benefits as permanent staff, and gratuity after one year |
| Part-time employee | You need a few hours a day, for example accounts or front desk | Still an employee: appointment letter, minimum wages and on-time pay apply |
| Freelancer or consultant | A defined piece of work, such as a website or a tax filing | Agree the scope and price in writing; pay against invoices |
| Intern | You can teach and supervise, and the role is a stepping stone | Give a written internship letter, a stipend and a real learning plan |
Step-by-step: hiring your first employee
- Define the role. A job title people actually search for, the outcomes you expect, the must-have skills, the working hours and the place of work.
- Set the pay. Check what similar jobs in your city offer, then decide a monthly range and whether any part is variable. Under the labour codes, basic pay and dearness allowance (DA) should make up at least half of total pay. If allowances go above 50%, the extra is added back to "wages" when PF and gratuity are worked out, so structure the salary with that in mind.
- Write and post the job. Show the pay range, location and work mode. Our guide on how to write a job description has a template you can copy.
- Shortlist on evidence. Give the best applicants a short task taken from the real work. If you are open to freshers, see how to shortlist freshers.
- Interview everyone the same way. Use the same questions and a simple scorecard, as described in our structured interview guide.
- Check before you offer. Speak to one or two previous managers or teachers, and verify documents with the candidate's written consent.
- Make the offer and issue the appointment letter. See the list of what to include below. Agree the joining date in writing.
- Set up payroll and registrations. Work through the compliance table below before the first salary is due.
- Plan the first 30 days. Decide who the new person will learn from and what a good first month looks like.
Compliance checklist for your first employee
These are the main employer duties, and when each one starts to apply. Rules on shops and establishments, professional tax and minimum wages differ by state, so confirm the details for your state with a CA or a labour consultant.
| Requirement | When it applies | What to do |
|---|---|---|
| Appointment letter | Every worker, from the start | Give a written letter with the role, pay, hours and the other main terms (see below) |
| Minimum wages | Every employee | Pay at least the minimum wage your state has notified for the job's skill level |
| Wages on time | Every employee | Monthly salaries by the 7th of the following month; within two working days when someone leaves |
| Equal pay | Every employee | No difference in pay or hiring on the ground of gender for the same or similar work |
| Shops and establishments registration | Most shops and offices; rules vary by state | Register with your state's labour department and keep the certificate at the workplace |
| TDS on salary | When the employee's income is above the taxable limit | Get a TAN, deduct tax every month, deposit it on time and give the employee their annual TDS certificate |
| Professional tax | In states that levy it, such as Maharashtra, Karnataka and West Bengal (Delhi does not) | Register, deduct it from salary and pay it to the state |
| Employees' Provident Fund (PF) | 20 or more employees | Register with EPFO. Contributions are 12% from the employee and 12% from the employer, compulsory on PF wages of up to ₹25,000 a month (the ceiling since 17 September 2026) |
| Employees' State Insurance (ESI) | 10 or more employees in most states, for employees earning up to ₹21,000 a month | Register with ESIC; the employer pays 3.25% of wages and the employee 0.75% |
| Gratuity | 10 or more employees | Payable after five years of continuous service, or one year for fixed-term employees; many employers buy a group gratuity policy |
| Internal Committee on sexual harassment | 10 or more employees | Set up an Internal Committee under the POSH Act, 2013 and display its details |
Even before you cross the PF and ESI thresholds, you can register voluntarily. Many small businesses do, because PF and health cover help them hire and keep good people.
What to put in the appointment letter
- The employee's name, job title and who they report to
- Joining date and place of work, or how remote work is arranged
- Pay: the CTC and the monthly breakup (basic, allowances, any variable pay) and the date salary is paid
- Working hours, weekly off and leave
- Probation period, if any, and the notice period on both sides
- PF, ESI and any other benefits
- Confidentiality and ownership of work, for roles that create content, code or designs
- How the employment can end, and what happens to dues and company property
Keep a signed copy. The letter protects both of you: the employee knows what was promised, and you have a clear record if a question comes up later.
The first 30 days
- Before day one: set up their email, tools and logins, and tell your customers or team who is joining.
- Day one: walk them through how the business makes money, introduce the people they will work with and give them one small task they can finish that day.
- Week one: agree three goals for the first month and a 15-minute check-in on a fixed day each week.
- Day 30: review the goals together. Say what is going well, what needs to change, and what the next month looks like.
Mistakes first-time employers make
- Hiring someone just like you. Your first hire should cover a gap, not repeat your strengths.
- Paying in cash without records. It makes salary proof, loans and future compliance harder for both of you.
- Skipping the written letter. It is now a legal requirement, and misunderstandings about pay and notice are the most common reason first hires go wrong.
- A vague role. If you can't say what success looks like after three months, the new person can't either.
- No time set aside to train. Plan on spending a few hours a week with your first hire during their first month.
When you are ready, post your first job free on Workafy and manage every application in one place.
Sources
- Press Information Bureau: Government announces implementation of the four labour codes (21 November 2025)
- Ministry of Labour and Employment: FAQs on the labour codes, including the 50% rule in the definition of wages
- Press Information Bureau: Code on Wages, 2019 explainer, including the time limits for paying wages
- Lakshmikumaran & Sridharan: What changed on 21 November 2025 (appointment letters under the OSH Code; central rules notified in May 2026)
- SCC Online: Labour Ministry notifies ₹25,000 PF wage ceiling (17 September 2026)
- Taxguru: PF and ESI thresholds under the labour codes
- Treelife: ESI compliance in India (wage ceiling for ESI coverage)
Frequently asked questions
Is an appointment letter mandatory for every employee in India?
Yes. Since the four labour codes took effect on 21 November 2025, employers must give every worker an appointment letter. It should set out the role, pay, working hours and the other main terms of the job.
When does a small business have to register for PF and ESI?
PF applies once you employ 20 or more people. ESI applies once you employ 10 or more in most states, for employees earning up to ₹21,000 a month. Smaller businesses can choose to join earlier.
Should my first hire be an employee or a freelancer?
If the work is ongoing, central to the business and needs your direction every day, hire an employee. If it is a defined project or a few hours a week, a freelancer or a part-time hire is usually the better fit.
How quickly must I pay an employee who leaves?
Under the Code on Wages, the wages due to an employee who resigns, is dismissed or is retrenched must be paid within two working days.
