Hiring in India From China: How an Employer of Record Works

Hiring in India From China: How an Employer of Record Works

India has become one of the largest hiring markets open to Chinese companies, particularly for engineering, support and back-office roles. The obstacle is rarely the talent. It is the structure. Registering an Indian subsidiary takes months, carries ongoing director and audit obligations, and commits capital before a single hire proves out.

An Employer of Record, or EOR, offers a narrower route. A licensed Indian company employs the staff on your behalf. You direct their work. The EOR carries the employment contract, runs payroll, and files the statutory returns.

This guide covers what that arrangement does for a China-headquartered business, and the rule you need to check before you plan anything.

The rule Chinese companies ask about first: Press Note 3, and what changed in 2026

For six years, investment into India from a country sharing a land border needed prior government approval in every case. That was Press Note 3 of 2020, and China was the main target. Approvals were slow and often refused. Of 526 applications up to April 2024, 124 were approved and 201 were rejected.

That changed in 2026, though not on the date most write-ups give. The Union Cabinet approved the easing on 10 March 2026, DPIIT issued Press Note 2 of 2026 on 15 March, and the change took legal effect on 2 May 2026, when the amended FEMA Non-Debt Instruments Rules were gazetted. The press note says in terms that it takes effect from the date of the FEMA notification, so anything done before May was still under the old regime.

What changed is the test. Investment from a land border country still runs through the government route, but beneficial ownership is now defined by reference to the Prevention of Money-laundering Act and determined on the 10 percent threshold in Rule 9(3) of its rules, replacing a term the 2020 note left undefined. The practical effect is an automatic route where a land border investor holds no more than 10 percent of the investing entity and has no control over that entity or over the Indian company. Above that level, or where control passes, government approval is still required. Investments that no longer need approval must still be reported to DPIIT, and sectoral caps and entry route conditions continue to apply.

Pakistan is treated more strictly than the rest: investment runs through the government route and is barred from defence, space and atomic energy. Separately, the Cabinet set a 60 day processing timeline for proposals in capital goods, electronic capital goods, electronic components, polysilicon and ingot wafer manufacturing, in place of the open ended wait that applied before.

The seven countries are unchanged: China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar and Afghanistan. Hong Kong is treated the same as mainland China.

Where does an Employer of Record sit in this? An EOR engagement is a contract for services, not an equity investment, so it does not fall inside the FDI approval framework at all. That is a genuine distinction rather than a workaround, and it is worth being clear about what it does not do. Two questions still need Indian tax and corporate advice:

• Permanent establishment. If your India team’s work creates a taxable presence for your China entity, that follows from what the team does, not from who employs them or which FDI route applies.
• The eventual entity. If the EOR is a bridge to your own Indian company, the Press Note 2 thresholds apply at that point, so plan the structure early rather than after the team is in place.

Take advice on both. Any provider who tells you an EOR makes these questions disappear is overselling.

What the Employer of Record handles

The EOR becomes the legal employer of record for your India staff. In practice that covers:

• Employment contracts drawn under Indian law, with notice periods, confidentiality and IP assignment that hold up in an Indian forum
• Monthly payroll, including salary structuring and payslips
• Provident Fund, at 12 percent employee and 12 percent employer, mandatory for establishments with 20 or more employees
• ESIC, at 0.75 percent employee and 3.25 percent employer, applicable from 10 employees where gross wages are 21,000 rupees or below
• Professional Tax, which is levied by state and varies
• Gratuity, payable after five years of service in establishments with 10 or more employees
• TDS on salary, deducted and deposited monthly, with the annual return filed on time

India’s four Labour Codes took legal effect on 21 November 2025, and the Central Rules were notified on 8 May 2026. Provident Fund, ESI, gratuity and maternity benefit now sit under the Code on Social Security, 2020 rather than in separate Acts. State-level rules are still rolling out unevenly, so the position in Karnataka is not necessarily the position in Maharashtra. A competent EOR tracks this by state rather than applying one national template.

What it does not cover

An EOR does not manage your people. It does not set objectives, run appraisals, or decide who gets promoted. It does not give you a legal presence in India for signing customer contracts, holding a bank account, or importing goods. If you need any of those, you need an entity, and the Press Note 2 thresholds come back into play.

Timelines

Onboarding an employee through an established India EOR usually runs in days rather than months, once the commercial terms and the candidate are settled. Compare that with a private limited company, where incorporation, registrations and bank account opening typically take four to six months before the first salary can legally be paid.

The realistic sequence is a scoping call, a proposal and signed agreement, offer letters issued to your chosen candidates, and then payroll going live from the following cycle.

When an entity is the better answer

An EOR fits a team of roughly two to thirty people, a market test, or a first year of operations. It stops fitting when:

• Headcount grows past the point where per-employee fees exceed the cost of running your own compliance function
• You need to sign revenue contracts with Indian customers in your own name
• You are building physical operations, holding inventory, or acquiring assets
• Your investors or auditors require a consolidated Indian subsidiary

Plenty of companies use an EOR for the first eighteen months, then move the same employees onto their own entity. A good agreement allows that transfer without the staff resigning and being rehired.

RIC cooperation and what it actually changes

Trade discussion between Russia, India and China has increased interest in India-facing operations. It is worth keeping the effect in proportion. Cooperation at a diplomatic level does not alter the Press Note thresholds, the Labour Codes, or the tax treatment of a permanent establishment. The practical case for hiring in India rests on the talent pool, the cost base and the time zone, not on any expectation that the rules are about to loosen further. Plan on the rules as they stand today.

Frequently asked questions

Can a Chinese company hire employees in India without an Indian entity?

Yes, through an Employer of Record. The EOR employs the staff under Indian law and you direct their work. The Press Note thresholds apply to investment rather than to a services contract, so take advice if an Indian entity is part of the longer plan.

Does using an EOR create a permanent establishment in India?

It reduces the risk compared with hiring directly, but it does not eliminate it. Permanent establishment depends on what the India team does, not only on who employs them. Staff who negotiate or conclude contracts on your behalf raise the risk regardless of structure.

What does an EOR cost in India?

Providers usually charge a fee per employee per month, or a percentage of salary, on top of the employee’s full cost. The fee is separate from gross salary, employer PF, ESIC and gratuity provisioning, so compare quotes on total cost rather than headline fee.

How quickly can we start?

Once the agreement is signed and candidates are selected, onboarding commonly happens within days and payroll runs from the next cycle.

Can we move the team to our own entity later?

Yes, and it is a common path. Agree the transfer mechanism before you sign, including notice, accrued gratuity and continuity of service, so the move does not reset employee entitlements.

Hiring in India from China: how TMS can help

Team Management Services has run HR outsourcing from India since 2006. For a China headquartered business that means one accountable partner instead of four vendors:

• Employer of Record. We become the legal employer for your India staff, so you can hire without setting up an entity.
• Payroll outsourcing. Salaries, Provident Fund, ESIC, Professional Tax and TDS, calculated and filed on time every month.
• Statutory compliance. Registrations and returns under the Labour Codes, tracked state by state rather than on one national template.
• Contract staffing. Scale the India team up or down without changing the structure underneath it.

We also say no when an EOR is the wrong answer. If your plan needs an Indian entity from the start, you will hear that on the first call, not after you have signed.

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