Hiring in South Asia is not hard. Getting the details wrong is easy.
The five below are the ones that repeat. None of them is about labour law being complicated. Each one comes from a reasonable assumption that happens to be untrue in this region.
Every one is cheap to avoid and expensive to fix.
The examples come from the markets Meteors employs in today, which are Bangladesh, India, and Pakistan. The principles behind them hold across South Asia, because the things that cause each mistake are shared.
The short version
- Budgeting on salary and forgetting what sits on top of it
- Taking a candidate’s headline number as their salary
- Picking the contract type for convenience rather than for the law
- Treating a country as if it were one market
- Reusing the employment contract that works at home
Mistake 1: Budgeting on salary alone
You agree a gross salary. You put that number in the plan. The first invoice is higher.
What is actually happening. Every market in the region obliges an employer to pay statutory amounts on top of salary. In Bangladesh that means festival bonus, gratuity, and annual leave accrual.
For a permanent employee those three add 16.39% of gross. On a gross salary of $1,000 the employee costs $1,163.89 a month. The gap is not a rounding error.
The part that catches people twice. Two of those three are not calculated on gross at all. They are calculated on basic salary, which is a portion of gross.
Salary in South Asia is structured as basic plus allowances. In Bangladesh basic is half of gross. So a rate of 8.33% on basic is 4.17% of gross, and a rate applied to the wrong figure is wrong by double.
| Item | Rate | Applied to |
|---|---|---|
| Festival bonus | 16.667% | Basic |
| Gratuity accrual | 8.333% | Basic |
| Annual leave accrual | 3.889% | Gross |
What to do instead. Budget the total, not the salary. Ask any provider or accountant to tell you two things for every rate they quote: the percentage, and whether it applies to basic or gross. A quote without that second answer is not a quote.
The employee cost calculator does this for each market, so you can see the full figure before you make an offer.
Mistake 2: Taking a candidate’s headline number as their salary
The number a candidate quotes is often not the number you would pay them. In India it usually is not, and the gap turns up during the offer conversation.
Indian candidates state their pay as CTC, or cost to company. It is the total the employer spends, not the salary the employee receives.
CTC includes the employer’s own contributions. Provident fund sits inside it. So does the gratuity provision, and any insurance premium the company pays. So does any variable component the employee has not yet earned.
So a candidate quoting 12 lakh CTC is not asking for a 12 lakh salary. Gross is lower. Take-home is lower again, often by 30% to 50% of the headline figure.
Which way the mistake runs. Both ways, and both are painful.
Read CTC as gross and you underpay the offer. The candidate declines, and you never find out why.
Offer a gross figure that matches their CTC and you overpay. You then add employer contributions on top of a number that already contained them.
What to do instead. Never negotiate on a single number. Ask the candidate for their current CTC, gross, and in-hand separately. Make your offer as a full breakdown showing each line. It takes one extra email and removes the whole problem.
This is one reason hiring in India rewards a local pair of eyes on the offer before it goes out.
Mistake 3: Choosing the contract type for convenience
A short fixed term contract feels simpler. Less commitment, less paperwork, easier to end. So companies default to it.
Then the contract renews, and renews again, and the assumptions underneath it stop holding.
What the contract type actually decides. In Bangladesh it decides which employer costs apply at all.
| Employer cost | Fixed term, 1 year or less | Fixed term, more than 1 year | Permanent |
|---|---|---|---|
| Festival bonus | Optional | Required | Required |
| Gratuity accrual | Optional | Optional | Required |
| Annual leave accrual | Optional | Required | Required |
| Required total | 0% of gross | 12.22% of gross | 16.39% of gross |
Same person, same salary, same desk. The cost moves by more than sixteen percentage points depending on what the contract says.
Why the cheap option is not always the right one. A short fixed term contract is correct for genuinely short work. Used to hold a permanent role, it creates two problems.
The first is that the employee knows. Someone doing a permanent job on a rolling short contract has no festival bonus and no gratuity building up. They leave, and they tell their friends why.
The second is that length of service does not reset because you issued a new document. When the arrangement is examined, what matters is how long the person actually worked and what they actually did.
What to do instead. Pick the contract type from the work, not from the budget. If the role is permanent, say so and price it properly. If you are already running a long chain of short contracts, that is worth looking at now rather than at exit.
Mistake 4: Treating a country as if it were one market
Companies quote a national salary benchmark, pick a national provider, and assume one set of rules. In several countries in this region, employment law is written below the national level.
Two of the markets we cover show it clearly.
India. Provident fund and state insurance are national schemes with the same rules everywhere. Almost nothing else is.
Professional tax is set by each state. So is the labour welfare fund. It exists in only sixteen states and union territories, and each one sets its own rate and threshold. Coverage starts at a single employee in Goa and Madhya Pradesh. It starts at twenty or more in Odisha, Punjab, and Karnataka.
Registration under the Shops and Establishments Act is also state by state. It has to be in place before the first employee starts.
So a company hiring in Bengaluru, Mumbai, and Chennai runs three professional tax structures, three labour welfare fund positions, and three registrations. The two national schemes sit on top of that.
Pakistan. The 18th Constitutional Amendment in 2010 moved most labour matters from the federal government to the provinces. Since then each province writes its own rules.
Minimum wage differs. For 2026 an unskilled adult worker is on PKR 40,000 a month in Punjab, Sindh, and Khyber Pakhtunkhwa. In Balochistan and Islamabad it is PKR 37,000.
Old age benefits sit with EOBI, which is federal. Social security sits with provincial institutions, so a Sindh employee and a Punjab employee are registered with different bodies under different rules.
What to do instead. Ask which state or province before you ask anything else. When a provider quotes you a cost for a country, ask which part of it that figure is for, and what changes if you hire somewhere else.
Mistake 5: Reusing the contract that works at home
The template has been through legal review at home. It has protected the company for years. So it gets sent out with the country name changed.
Parts of it will not hold. Which parts differ by market. The rule underneath does not. A clause is worth what local law says it is worth, not what your template says.
India gives the sharpest example. Section 27 of the Indian Contract Act 1872 makes void any agreement that restrains someone from exercising a lawful profession or trade.
A post-employment non-compete is void in India. That is the whole answer, and it surprises people because of what it does not do.
Indian law applies no reasonableness test. Shortening the period does not save the clause. Narrowing the territory does not save it. Limiting it to direct competitors does not save it. Those adjustments work in English and American law, and they do nothing here.
The Supreme Court settled the point in Percept D’Mark (India) Private Limited v. Zaheer Khan. A restrictive covenant extending beyond the term of the contract is void. The single exception concerns the sale of business goodwill, and it has nothing to do with employment.
Which leaves you with what actually works. Confidentiality survives termination and is enforceable. So is a properly drafted assignment of intellectual property. Non-solicitation of clients and staff sits in a narrower and more argued space, but it is a stronger place to spend your effort than a clause that is void on its face.
What to do instead. Have the contract drafted locally rather than translated, in every market you enter. The clauses that matter to you, IP and confidentiality, need to be written so they hold under local law. That is a different job from removing the parts that do not apply.
What these five have in common
None of them is caused by the law being unclear. All five come from applying a reasonable assumption that happens to be untrue here.
Salary is not the cost. A headline number is not a salary. A contract type is not an administrative preference. A country is not always one market. A contract that works at home does not travel.
Each one is a five-minute question asked before the offer, or an expensive conversation afterwards. That stays true as the region opens up, because none of these five is about a particular country. They are about the difference between how employment works at home and how it works here.
An Employer of Record removes most of them, because the employment sits with a company that already knows the answers. Setting up your own legal entity removes none of them, which is one of the trade-offs weighed in EOR vs local entity.
Frequently asked questions
How much does an employee really cost in South Asia, on top of salary?
In Bangladesh, 16.39% of gross for a permanent employee, covering festival bonus, gratuity, and annual leave accrual. Less for a fixed term contract. India and Pakistan carry their own sets, including some that vary by state or province. Work out a specific figure in the employee cost calculator.
Why do Indian candidates talk about CTC instead of salary?
Because it is the convention there. CTC is the employer’s total cost, including contributions the employee never sees monthly. Ask for CTC, gross, and in-hand as three separate figures and the confusion disappears.
Can I use a fixed term contract for a permanent role to save money?
You can issue one, and in Bangladesh it carries no required additions. Whether it holds is a different question. Length of service and the real nature of the work are what get examined, not the label on the document.
Is a non-compete worth including in an Indian employment contract?
Not for the period after employment ends. Section 27 of the Indian Contract Act makes it void, and no amount of narrowing rescues it. Confidentiality and IP assignment are where the protection actually is.
Do I need to register in every Indian state where I hire?
If you employ through your own legal entity, yes. Shops and Establishments registration is state by state, and professional tax and labour welfare fund obligations follow the state too. Employing through an Employer of Record moves that work to the provider.
Which countries does this cover?
The examples come from Bangladesh, India, and Pakistan, which are the markets Meteors employs in today. The five mistakes themselves are not country specific. Each one comes from the gap between how employment works in North America or Europe and how it works across South Asia. So they apply as coverage widens.
Does hiring one person in these markets create a tax presence for my company?
It depends on what the person does rather than on how they are employed. That question has its own answer in permanent establishment risk.
We already hire contractors in the region. Is that simpler?
Sometimes, and sometimes it is the same problem wearing a different label. The test is what the working relationship looks like in practice, not what the agreement is called.
Hiring in Bangladesh, India, or Pakistan? Tell us the role and the market, and we will tell you what it costs before you make the offer.
