Employer of Record (EOR) In India

EOR vs. Entity Setup in India — Which Route Is Right for You?

Foreign companies entering India face a structural choice before hiring a single employee. The four most common routes — Employer of Record, Liaison Office, Branch Office, and Wholly Owned Subsidiary — differ significantly on speed, cost, and risk. The table below compares them on the criteria that matter most at the point of market entry.

For companies testing the Indian market or scaling a remote team quickly, EOR is the fastest, lowest-risk path. TMS functions as the legal employer while your team works exclusively under your direction.

Key India Employment Laws TMS Manages on Your Behalf

India’s employment legislation is central legislation-heavy, with multiple acts governing different aspects of the employment relationship. TMS ensures your employees are covered under each applicable statute:

• The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 — mandates a 12% employer contribution to the Provident Fund for establishments with 20 or more employees, covering retirement savings and linked insurance benefits.
• Employees’ State Insurance Act, 1948 — requires employer and employee contributions to the ESI fund, providing medical, maternity, disability, and dependent benefits to eligible workers earning up to the notified wage ceiling.
• Payment of Wages Act, 1936 — governs the timely disbursement of wages, prohibiting unauthorised deductions and setting wage payment deadlines by establishment size.
• Maternity Benefit Act, 1961 — entitles female employees to 26 weeks of paid maternity leave (for the first two children), with protections against dismissal during pregnancy and the nursing period.
• Payment of Gratuity Act, 1972 — requires employers to pay a gratuity lump sum to employees who complete five or more years of continuous service, calculated at 15 days’ wages per completed year.
• Contract Labour (Regulation and Abolition) Act, 1970 — regulates the employment of contract workers, requiring principal employers and contractors to obtain licences and maintain prescribed registers and records.

TMS registers your employees under each applicable act, files returns, and manages contributions — so your internal team carries no compliance overhead.

FEMA Compliance for Foreign Companies Paying Indian Employees

When a foreign company engages an Indian EOR, salary remittances flowing between the foreign parent and the Indian EOR entity are governed by the Foreign Exchange Management Act (FEMA) and Reserve Bank of India regulations. Non-compliant remittance structures can trigger penalties and scrutiny. TMS structures all inward remittances and payroll disbursements within RBI-prescribed channels, ensuring that every salary transaction is documented, reported, and compliant with applicable FEMA provisions. Foreign clients receive regular remittance summaries aligned with their own treasury and audit requirements.

DPDP Act 2023 — Employee Data Protection in India

India’s Digital Personal Data Protection Act, 2023 (DPDP Act) applies to the processing of digital personal data, which includes all employee personal information — PAN, Aadhaar, salary records, bank details, and health data. Employers processing employee data without a lawful basis or adequate safeguards face regulatory risk under the Act. TMS signs a Data Processing Agreement with each client, defines clear data principal rights for employees, implements purpose-limitation and data minimisation controls, and retains employee data only for the periods prescribed by applicable law. This ensures that your India workforce data is handled in full compliance with the DPDP Act framework.