The United Kingdom and India share deep commercial ties across fintech, pharmaceuticals, professional services, and legal sectors, and ongoing UK-India Free Trade Agreement negotiations have accelerated interest from UK-headquartered companies in building permanent India teams rather than relying on project-by-project outsourcing. The sizeable Indian diaspora in the UK also generates a specific hiring pattern: Indian-origin professionals based in the UK who wish to relocate back to India and work for their UK employer remotely. TMS provides EOR infrastructure that accommodates both established UK multinationals entering India for the first time and UK SMEs hiring their first one or two India-based employees.
UK employment law concepts — including the distinction between employees, workers, and self-employed individuals under the Employment Rights Act 1996, and IR35 off-payroll working rules — do not translate to India. India employment is governed by a combination of central labour legislation and state-specific rules. UK companies should also be aware that India’s model of statutory benefits (EPF, gratuity, ESIC) creates ongoing employer obligations that differ significantly from UK employer NI contributions and auto-enrolment pension rules.
The India-UK Double Tax Avoidance Agreement (entered into force 1981, as amended) provides that salary income earned by a resident of India for employment exercised in India is taxable only in India. UK companies do not withhold PAYE or National Insurance contributions for India-resident employees on India payroll — TMS handles all India income tax (TDS) deductions and filings. The DTAA also contains specific provisions around the taxation of business profits and the definition of Permanent Establishment: if a UK company’s India-based employees are senior enough to regularly exercise authority to bind the UK entity, the Indian tax authorities may assert PE status, potentially subjecting the UK company’s India-attributable profits to Indian corporate tax at 25–30%.
TMS completes India employee onboarding within 10–14 business days of receiving confirmed hire details. UK clients receive monthly payroll summaries in GBP equivalent alongside the INR payroll register, structured for easy reconciliation with UK management accounts.
Yes, this is a common scenario. The employee would resign from the UK employment (with appropriate UK tax and NI settlement), and TMS would engage them as a new India employee with a fresh India employment contract. There is no automatic continuity of UK service entitlements in India — gratuity, EPF, and other India statutory benefits start accruing from the India employment start date. TMS coordinates the onboarding so there is no gap in pay.
Potentially yes. If an individual in India invoices a UK company directly for ongoing services that resemble employment (fixed hours, direction and control, single client), the Indian Income Tax Department and PF authorities may reclassify the arrangement as employment, creating liability for unpaid TDS, EPF contributions, and interest penalties. TMS can assess the arrangement and, where reclassification risk is identified, transition the individual to a compliant India employment under TMS EOR.
The FTA negotiations, if concluded, are expected to address professional services market access and potentially short-term business visitor visas — not employment tax or EOR arrangements. The statutory employment compliance framework (EPF, ESIC, TDS) is governed by Indian domestic law and will not change as a result of the FTA. UK companies hiring now through TMS EOR are not disadvantaged by waiting for the FTA.
20+ years of expertise in Contract Staffing, EOR, Payroll & Compliance
Tell us about your staffing needs