Hiring Across Multiple States? How Employer Costs Change by Location

Introduction

You finalise a CTC of ₹6 lakhs for a customer support executive. Naturally, the role, JD, and salary structure stay identical. So you hire one person in Mumbai, another in Bengaluru, and a third in Jaipur. However, by the second payroll cycle, your finance team flags a problem. As it turns out, the employer cost differs for all three.

In one state, professional tax applies. In another, it does not. Similarly, ESIC kicks in at one location but stays dormant at the next. Because employer costs in India follow state rules rather than national ones, hiring across multiple states without adjusting for these differences means your CTC structures are already off.

This guide breaks down what changes and what stays the same when you hire across Indian states.

What stays the same across all states

Before looking at what varies, it helps to know what remains uniform across India.

Provident Fund (EPF)

Every employer contributes 12% of wages to EPF, up to the EPF wage ceiling of Rs 25,000 per month (from 17 September 2026), under the Code on Social Security, 2020 (formerly the EPF Act, 1952). Because this rate comes from the central government, it does not change by state. Likewise, every employee contributes 12%, which gets deducted from gross pay.

Gratuity

Under the Code on Social Security, 2020 (formerly the Payment of Gratuity Act, 1972), the gratuity provision works out to 4.81% of basic salary (basic × 15 ÷ 26). Companies include this amount in CTC, although employees receive it only after completing 5 years of continuous service (1 year for fixed-term employees).

Whether your employee works from Mumbai, Delhi, or Coimbatore, both these components stay exactly the same.

What changes from state to state

Five statutory components vary by location, and consequently, each one affects the real employer cost differently.

1. Professional Tax (PT)

Professional Tax stands out as the single biggest variable in multi-state payroll. State governments levy it under Article 276 of the Constitution, with a cap of ₹2,500 per year. However, the slabs, exemptions, and even whether PT exists at all differ significantly from one state to the next.

Delhi, Uttar Pradesh, Haryana, Rajasthan, Punjab, Himachal Pradesh, Uttarakhand, and J&K do not levy PT at all. On the other hand, Maharashtra, Karnataka, Tamil Nadu, West Bengal, Gujarat, Telangana, Andhra Pradesh, Kerala, Madhya Pradesh, Odisha, and Jharkhand actively collect it.

For instance, an employee earning ₹25,000 per month pays ₹200 monthly in Maharashtra (₹300 in February, totalling ₹2,500 annually), ₹200 per month in Karnataka (₹300 in February, ₹2,500 annually), and ₹130 per month in West Bengal (its ₹15,001 to ₹25,000 slab). In contrast, Delhi charges ₹0 because PT simply does not apply there. Additionally, Maharashtra exempts women earning up to ₹25,000, while Karnataka exempts all employees earning below ₹25,000 per month (from 1 April 2025).

Although PT gets deducted from the employee’s salary, the employer bears legal responsibility for depositing it. If you miss a deposit, the penalty falls on the company. As a result, you need a separate PT registration (PTRC and PTEC in Maharashtra) for every state where employees work.

2. Employees’ State Insurance (ESIC)

ESIC follows uniform contribution rates (3.25% employer, 0.75% employee), and registration applies once an establishment has 10 or more employees, in all states, under the Code on Social Security, 2020. Importantly, the scheme covers only employees earning gross wages up to ₹21,000 per month (₹25,000 for persons with disabilities).

To illustrate, on a ₹20,000 gross salary, the employer pays ₹650 per month toward ESIC. However, for someone earning ₹22,000, that cost drops to ₹0 because they exceed the ceiling. Beyond the numbers, the operational catch is that ESIC routes contributions through regional offices based on work location. Therefore, filing under the wrong region creates compliance gaps even when the amount itself is correct.

3. Minimum wages

Out of all five variables, this is where state wise employer costs diverge the most. India does not enforce a single national minimum wage. Instead, each state sets its own rates by skill level, industry, and geographic zone.

Here are the monthly minimum wages for unskilled workers in each state’s highest-paid zone, as at 26 October 2026. A figure is shown only where we could confirm it from the state’s own published notification; for the other states, check the current notification, because rates are revised once or twice a year (Maharashtra in January and July, most others in April and/or October):

As a result, the gap between Delhi and Bihar is roughly ₹7,000 per month on base salary alone. Furthermore, rates change within a single state by zone. Maharashtra, for example, runs Zone I/II/III rates, while Karnataka and Tamil Nadu publish 80+ industry specific schedules. If your CTC structure assumes a flat minimum across locations, you may end up underpaying in one state and overpaying in another.

4. Labour Welfare Fund (LWF)

Unlike PF and ESIC, LWF uses a small fixed contribution (not percentage based) that goes to a state welfare board. Not every state runs an LWF, and the states that do set their own amounts and deadlines (half-yearly in states such as Maharashtra and Gujarat, yearly in others such as Karnataka and Tamil Nadu). The amounts are revised by notification, so confirm the current rate on your state labour welfare board website before running payroll.

Although the amounts look negligible, auditors and labour inspectors increasingly ask for LWF deposit receipts. Even missing ₹75 creates a non-compliance record on file.

5. Shops and Establishments Act registration

Every state enforces its own Shops and Establishments Act, covering working hours, leave entitlements, and overtime rules. Consequently, you must register under each state’s Act separately. For example, Maharashtra mandates 21 days of annual leave, while some states prescribe only 12 to 15. Although this does not appear as a CTC line item, it directly affects policy design. A leave policy built for Maharashtra, therefore, will not hold up if applied unchanged to Tamil Nadu.

A real example: same CTC, different employer cost

To see this in practice, take a ₹6 LPA CTC (₹50,000/month, basic ₹20,000) and compare across three states:

*ESIC does not apply here because gross exceeds ₹21,000.

Professional Tax is deducted from the employee’s salary, so it lowers take-home pay by ₹2,500 a year in Maharashtra and Karnataka compared with Haryana, and the employer must register and remit it on time. Across 50 employees, that is a real payroll task to manage. On top of that, entry level roles under ₹21,000 gross attract an additional ESIC employer cost of ₹650+ per month per employee.

What to check before hiring in a new state

Before extending an offer in a new state, make sure you verify these five things:

• Does this state levy Professional Tax? If yes, register for PTRC/PTEC before processing the first salary
• Will your headcount here trigger ESIC registration (10 or more employees, nationwide under the Code on Social Security, 2020)?
• What minimum wage applies to this role’s skill category and zone?
• Is LWF active in this state, and what deposit cycle does it follow?
• Have you completed Shops and Establishments Act registration?

Even one missed step creates a compliance exposure that surfaces during audits, due diligence, and employee disputes.

Conclusion

Ultimately, the same CTC means different things in different states. Professional Tax, ESIC thresholds, minimum wages, and LWF all shift by location. If you are expanding to new cities or hiring remote employees across states, factor in these differences before the offer letter goes out.

HRTailor.AI’s Employer CTC Calculator helps you build location aware CTC structures that account for state specific statutory costs. As a result, your offer reflects the real cost and your compliance stays clean.

Related reading

• How AI Ensures Legal Compliance in HR Policies Across Multiple Countries
• How Startups Can Handle HR Without Hiring an HR Manager
• How to Structure Leave Policies Based on Location