What an employer of record in India actually does
An employer of record (EOR) is an Indian firm that legally employs staff on behalf of a foreign company that has no entity in India. The EOR issues compliant employment contracts, runs monthly payroll, remits statutory contributions, administers benefits and handles exits — while the client company directs the employee's day-to-day work, targets and career path. The model exists because employing someone in India requires an Indian legal employer with statutory registrations; an EOR supplies that legal wrapper in days, against the months required to incorporate, register and staff an entity. In 2026 the model is well established: it is the default route for foreign companies making their first two to ten Indian hires, for pilot teams ahead of a GCC (global capability centre) decision, and for regularising contractors who should have been employees. The full mechanics are covered on our EOR in India service page.
What Indian employment really costs: reading an EOR quote
The most common budgeting mistake is treating gross salary as the cost of an Indian hire. Total cost has three layers, and a transparent EOR quote should show each separately:
| Cost layer | What it includes | How to verify it |
|---|
| Gross salary (CTC) | Basic pay, allowances and any variable pay agreed with the candidate | Model the employee's net pay with the CTC to take-home calculator |
| Statutory employer costs | Provident fund, insurance contributions where applicable, gratuity accrual, statutory bonus and state levies | Check the PF calculator and gratuity calculator for the main components |
| EOR service fee | The provider's per-employee monthly fee for carrying employment and compliance | Insist on a flat, published fee — percentage-of-salary pricing penalises you for hiring senior people |
Statutory employer costs add a material premium above gross salary, and the exact figure depends on how the salary is structured — which is itself constrained by the Labour Codes' standardised wage definition in force since 21 November 2025. A competent EOR will show you the structure before the offer goes out, not after the first payslip surprises the employee.
Seven questions that separate serious EOR providers from resellers
- Do you employ through your own Indian establishment, or subcontract to a local partner? Subcontracted chains blur liability and slow every escalation.
- Who defends statutory inspections? The correct answer is the EOR, with its own compliance team and records — not "we will coordinate with you".
- How is intellectual property assigned? IP must flow from employee to EOR to client through back-to-back contract clauses; ask to see the template language.
- What is your Labour Codes position? Providers should explain how appointment letters, wage structuring and state rule notifications are handled in 2026 — vague answers signal outdated templates.
- What happens at offboarding? Full-and-final settlements, gratuity where due and experience letters should have defined timelines in the contract.
- Can we later move employees to our own entity? A clean transition clause — preserving tenure and statutory IDs — protects your exit options.
- Is pricing flat and all-inclusive? Onboarding fees, offboarding fees and "compliance surcharges" hidden below a low headline rate are the industry's oldest trick.
TMS answers all seven in writing as part of every proposal — statutory positions verified by the TMS compliance team, one SPOC per account, and a stated path from EOR to entity when you are ready. For flexible or project-based roles that do not warrant permanent employment, the parallel option is contract staffing.
Frequently asked questions
What is an employer of record in India?
An employer of record is an Indian company that legally employs workers on behalf of a foreign business without an Indian entity. It carries the employment contracts, payroll, statutory contributions and compliance liability, while the client directs the employee's actual work. It is the fastest compliant route to hiring in India.
Are employer of record services legal in India?
Yes. EOR is a lawful employment outsourcing structure in which the EOR is the genuine legal employer, registered with all statutory authorities and responsible for every employer obligation. The arrangement is documented through an employment contract with the worker and a service agreement with the client, including IP assignment and confidentiality flow-through.
How much does an employer of record cost in India?
You pay the employee's agreed salary, statutory employer costs on top, and the EOR's per-employee monthly service fee. Market fees vary widely between providers, so compare on total monthly cost per employee against a written scope — and treat percentage-of-salary pricing with caution.
When should we use an EOR instead of opening an entity?
Use an EOR for your first hires, pilot teams and any India presence you may still unwind; incorporate once the team is established and you are confident of sustained scale. Most companies run EOR for the first one to two years, then migrate to their own entity with continuity of tenure.
How fast can an EOR onboard an employee in India?
Once the candidate accepts, a prepared EOR can issue a compliant contract and complete statutory onboarding within days — against the months required to incorporate an entity, open bank accounts and obtain registrations before the first hire.
Shortlisting EOR providers for India? Book a discovery call with the TMS EOR team and get a tailored quote within 48 hours.
