Employer of Record in India.

Employer of Record in India: The Complete Guide

If your company wants to hire employees in India without registering an Indian entity, an Employer of Record (EOR) is the fastest compliant route. This guide explains what an EOR does under Indian law, how it compares with entity setup and a PEO, what it costs, how onboarding works, and when an EOR is the wrong choice.

What an EOR legally does in India

An Employer of Record is a licensed Indian organisation that becomes the legal employer of your India-based staff on paper, while you retain full day-to-day direction of their work. The EOR's name appears on the employment contract, payslips and statutory filings; your name appears on the work itself. In practice, the EOR carries these legal obligations:

• Employment contracts: issuing appointment letters and contracts that comply with central and state law, including state-specific Shops and Establishments requirements.
• Payroll and tax withholding: running monthly INR payroll, deducting income tax (TDS) at source and issuing Form 16 to employees each year.
• Social security: registering employees for Provident Fund (PF), Employees' State Insurance (ESI) where applicable, and remitting contributions on time.
• State-level levies: Professional Tax and Labour Welfare Fund contributions, which vary by state and are a common trap for foreign employers.
• Statutory benefits: gratuity accrual, statutory bonus where applicable, paid leave as per state rules, and maternity benefits.
• Terminations and exits: notice periods, severance calculations and full-and-final settlements executed in line with Indian law, which is considerably more employee-protective than the US or UK.

Because the EOR is the entity of record with the PF office, ESI Corporation, income tax department and state labour authorities, compliance risk sits with the EOR — not with your overseas parent company. That separation is the core legal value of the model. For a deeper look at how the statutory layer works, see our guide to statutory compliance in India.

EOR vs entity setup vs PEO: which structure fits

These three terms are often used loosely, but they determine who carries legal liability and how long you wait before your first hire starts work.

The practical rule: use an EOR to enter and test the Indian market; move to your own entity once headcount and revenue justify its fixed cost. A PEO only becomes relevant after that switch.

What an EOR in India costs

TMS prices EOR services in India from USD 300 per employee per month, invoiced in your currency of choice. That flat management fee sits on top of the employee's actual salary and statutory costs, which pass through at actuals — no percentage-of-salary markups that quietly inflate as you award raises.

When comparing providers, look past the headline fee: check whether statutory costs pass through transparently or sit inside an opaque bundled rate, whether offboarding is included or charged separately, and whether payroll runs on the provider's own platform. A low advertised fee with a percentage markup usually overtakes a flat USD 300 fee well before the first appraisal cycle. If you need a large deployed workforce rather than white-collar hires, contract staffing is often the more economical structure — we advise on the split.

How onboarding works: live in 24–48 hours

Because TMS already holds the registrations, bank accounts and payroll infrastructure, onboarding an employee does not wait on any government process. A typical engagement runs like this:

1. Scope call: you share the role, location, proposed compensation and start date.
2. Agreement: a master service agreement is signed between your company and TMS.
3. Offer and contract: TMS issues a locally compliant offer and employment contract to your candidate, including IP assignment and confidentiality clauses that flow protection back to you.
4. Go-live: the employee is registered for PF, ESI (where applicable) and payroll — working for you within 24–48 hours of the signed agreement.

From day one, payroll runs monthly in INR with a full statutory breakup, and the employee receives insurance cover and HRMS access. Monthly filings and remittances are handled by the same team, so there is no hand-off between an onboarding vendor and a payroll provider.

The Labour Codes: why 2026 is different

India's four consolidated Labour Codes — covering wages, social security, industrial relations, and occupational safety and health — came into force on 21 November 2025, replacing 29 separate central labour laws. Employers have a transition window running to November 2026 to migrate registrations and align employment terms, and state-level rules are still being notified at different speeds.

The change with the largest financial impact is the new statutory definition of "wages": basic pay must now constitute at least 50% of total remuneration. Compensation structures built around a low basic and high allowances — common in India for years — now attract higher PF and gratuity outflows, and existing contracts may need restructuring. For a foreign employer, tracking which state has notified which rules is a full-time job; a competent EOR absorbs it. All statutory positions TMS applies are verified by the TMS compliance team against the current central and state notifications, and our HR compliance calendar for 2026 tracks the deadlines that matter.

When NOT to use an EOR

An honest provider will tell you where the model stops working. Do not use an EOR in India if:

• You plan a large permanent operation from day one. Beyond roughly 25–50 employees, the cumulative EOR fee usually exceeds the cost of running your own entity.
• You need to invoice Indian customers. An EOR employs people; it does not give you a legal presence to sell, contract or collect revenue in India. That requires an entity.
• The role creates permanent establishment risk. If your India hires will habitually conclude contracts on your behalf, tax authorities may deem you to have a taxable presence regardless of the EOR structure. Take tax advice first.
• You want to engage genuine freelancers. Independent contractors on deliverable-based work do not need an EOR — though misclassifying employees as contractors is a growing enforcement area, so the line must be drawn carefully.
• The work is licensed or regulated. Certain regulated activities require the operating licence to sit with the actual business, not an intermediary employer.

Where an EOR does fit, the decision is usually not permanent: TMS supports migration of employees onto your own entity later, with continuity of service benefits.

Frequently asked questions

How do I choose an EOR service provider in India?

Check that the provider is an established Indian firm with its own statutory registrations (not a reseller), that pricing is a flat per-employee fee with pass-through statutory costs, that payroll and compliance run in-house, and that exits are included in scope. Ask for the go-live timeline in writing — with TMS it is 24–48 hours.

What makes the best employer of record in India for a foreign company?

Depth on the ground. Indian employment law is state-specific — Professional Tax, Shops and Establishments rules, leave entitlements and Labour Welfare Fund all vary by state. The best EOR partners maintain coverage across all Indian states, keep pace with Labour Code notifications as states issue them, and give you a senior single point of contact rather than a ticketing queue.

What does an EOR in India cost in total?

Budget three components: the employee's gross salary, employer statutory costs on top (PF, ESI where applicable, gratuity accrual and state levies — typically a low-teens percentage of salary, verified per role by the TMS compliance team), and the EOR management fee, which at TMS starts at USD 300 per employee per month. Everything is itemised on one monthly invoice.

Is an EOR legal in India?

Yes. There is no law prohibiting the model; the EOR operates as a lawful Indian employer meeting every obligation under the Labour Codes and allied statutes. What matters is that the EOR genuinely discharges those obligations — which is why provider due diligence matters more in India than in most markets.

Can I convert EOR employees to my own entity later?

Yes. Once you incorporate in India, employees transfer onto your entity's rolls with agreed continuity of tenure for gratuity and leave purposes. TMS manages the transition as a standard part of the engagement, so using an EOR first never locks you in.

Ready to hire in India without an entity? Speak to the TMS EOR team for a role-specific quote and a compliant go-live within 24–48 hours. Contact us or call +91-22-4896-7640.