Hiring your first employee: the compliance you can't skip

Registrations triggered by headcount

• EPF: mandatory at 20 employees; voluntary registration earlier is common and helps hiring.
• ESI: mandatory at 10 employees, covering those earning up to ₹21,000 gross a month.
• Professional tax: state-specific, usually from the first employee.
• Shop & Establishment: from day one in most states.

Structure the salary before you offer it

Keep basic pay at 40–50% of CTC. Too low invites scrutiny and pushes up gratuity risk later; too high inflates PF cost for both sides. Split the rest across HRA, special allowance and reimbursements that are genuinely paid.

Paperwork that protects you

• Written offer and appointment letter with notice period and IP assignment.
• Confidentiality clause — essential if the employee touches customer data or code.
• Monthly payslips and a Form 16 at year end; both are legally expected, not optional.