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Tag: DPDP Act

  • Payroll Outsourcing India 2026: Cost, Compliance & Switch Guide

    Payroll Outsourcing India 2026: Cost, Compliance & Switch Guide

    Payroll outsourcing India 2026 sits at the intersection of the biggest compliance shift in a decade. First, the Income Tax Act 2025 comes into effect from 1 April 2026, replacing Form 24Q with Form 138 for quarterly salary TDS. Second, the four Labour Codes went operational on 21 November 2025, changing wage definition, payment timing, and exit settlement rules. Consequently, every corporate payroll team is re-evaluating its in-house versus outsourced model.

    This guide walks corporate finance and HR leaders through what payroll outsourcing India 2026 actually costs, what compliance surface it must cover, and when a switch from in-house payroll makes commercial sense.

    Payroll outsourcing India 2026 compliance and cost framework — TMS

    What payroll outsourcing India 2026 must cover

    In 2026, a modern payroll outsourcing engagement now covers seven workstreams. Furthermore, the vendor takes end-to-end ownership from data intake to statutory deposit.

    • Payroll processing — monthly calculation, payslip generation, bank file, disbursement.
    • Statutory deductions — TDS under Form 138, PF, ESIC, professional tax, Labour Welfare Fund.
    • Statutory returns — Form 138 quarterly, Form 140 for other payments, PF and ESIC monthly, PT state-specific, LWF half-yearly.
    • Year-end — Form 16 (now Form 130 under the new Act) issuance, investment declaration reconciliation.
    • Full and final settlement — within two working days of exit under Section 17(2) of the Code on Wages.
    • Employee self-service — payslip download, tax declaration, POSH complaint portal.
    • Reporting — MIS to finance, headcount reconciliation, statutory audit support.

    Payroll outsourcing India 2026: the Labour Codes wage rule impact

    Additionally, the Code on Wages introduces a unified wage definition. Basic wage plus dearness allowance plus retaining allowance must be at least 50 percent of total remuneration. Consequently, PF, gratuity, and bonus contributions all rise for employees whose current basic sits below 50 percent of gross.

    For a corporate payroll team, three practical points follow:

    • You need a one-time salary restructure across the workforce; a capable payroll partner runs this as a project with employee consent flows.
    • Employer PF and gratuity accrual rise by 10 to 20 percent for previously low-basic salary structures.
    • The Yearly balance sheet gratuity liability increases; brief the CFO before the next audit cycle.

    Additionally, wages must now be paid by the 7th of the following month for units under 1,000 employees. Furthermore, full and final settlement of wages must happen within two working days of exit, while gratuity retains its 30-day timeline. You can verify Section 17 obligations on the Ministry of Labour and Employment portal.

    Form 138 and the Income Tax Act 2025: what changes on 1 April 2026

    The Income Tax Act 2025 replaces the 1961 Act from 1 April 2026. Salary TDS reporting moves from Form 24Q to Form 138, filed quarterly. Additionally, Form 26Q becomes Form 140, Form 27Q becomes Form 144, and TCS return Form 27EQ becomes Form 143. Form 16 salary certificate becomes Form 130.

    For payroll operations, this means:

    • TDS challan software must upgrade to the new form schemas before the first Q1 return (due 31 July 2026).
    • Similarly, Employee Form 130 (salary certificate) issuance replaces the annual Form 16 process.
    • Section 392 governs salary TDS while Section 393 covers all non-salary TDS, both effective from 1 April 2026.

    Consequently, a payroll outsourcing partner should already have transitioned its filing engine and issued a transition note to every client.

    DPDP Act 2023: the new data layer over payroll outsourcing India 2026

    The Digital Personal Data Protection Act 2023 applies to every employee data flow between your organisation and any payroll processor. Consequently, your payroll partner must collect and process employee data on a lawful basis, share only what is necessary, and log access.

    Additionally, three vendor obligations to demand in your MSA:

    • Named Data Protection Officer or Grievance Officer with 72-hour breach notification.
    • Documented data transfer agreement for any cross-border processing (relevant for MNC parents).
    • Employee data disposal timeline post-exit, aligned with statutory retention windows.

    Cost model for payroll outsourcing India 2026

    Meanwhile, pricing follows two common structures. Firstly, a flat per-employee-per-month fee (PEPM). Secondly, a hybrid of base platform fee plus per-transaction charge for exits, one-time projects, and audits.

    In particular, typical 2026 India market bands sit around:

    • Small mid-market (50 to 500 employees) — ₹150 to ₹350 PEPM.
    • Mid to large enterprise (500 to 5,000 employees) — ₹80 to ₹200 PEPM with tiered discounts.
    • Large enterprise (5,000+ employees) — ₹40 to ₹120 PEPM plus custom SLA fees.
    • Add-ons — full and final settlement (₹500 to ₹2,000 per exit), one-time restructure projects, expat payroll.

    Additionally, GST at 18 percent applies on the service invoice. These are directional bands based on 2026 market surveys.

    When does payroll outsourcing India 2026 beat in-house?

    Run this five-point test. If three or more are true, an outsourcing move usually pays back within 12 months.

    1. Your in-house payroll team is under 3 people for a 500+ workforce (compliance load exceeds capacity).
    2. You operate across 3 or more states with different PT and LWF slabs.
    3. Your leadership expects headcount to grow 30 percent or more over the next 18 months.
    4. You have received a statutory notice or audit query in the last 24 months.
    5. You want to redirect the payroll team’s time to HR analytics, employee experience, or M&A integration work.

    Consequently, the switch is less about cost and more about compliance resilience and management bandwidth. Furthermore, the annual audit trail is materially cleaner with a dedicated processor than with in-house staff juggling other tasks.

    Vendor vetting checklist for payroll outsourcing India 2026

    Also, score potential partners on eight dimensions:

    1. Labour Codes readiness — templates and computations updated for the 50 percent wage rule and Section 17 exit timeline.
    2. Income Tax Act 2025 readiness — Form 138 filing engine live, Form 130 issuance mapped.
    3. DPDP Act compliance — named DPO, breach notification SLA, data transfer agreement template.
    4. State coverage — active PT and LWF filings in every state where you operate.
    5. Employee self-service — mobile-friendly portal, tax declaration flow, payslip archive.
    6. Integration — clean two-way sync with your HRMS (Workday, SAP SuccessFactors, greytHR, Keka).
    7. Turnaround SLAs — payroll close by day 3 of following month, F&F within 2 working days.
    8. Escalation and audit trail — named account manager, quarterly compliance sign-off, immutable log.

    Common mistakes in switching to payroll outsourcing India 2026

    Notably, three mistakes appear again and again in transitions:

    • Underscoping the historic clean-up. Legacy PF mismatches, missing employee KYC, and untagged tax investments show up in the first month. Budget two months of parallel run.
    • Skipping the DPDP employee notice. When you share employee data with a new processor, DPDP requires a fresh notice. A one-line addition to the payslip is not enough.
    • Bundling too many services in year one. Start with core payroll plus statutory. Add expat, ESOP, and analytics in year two once base delivery is stable.

    Frequently asked questions

    Is payroll outsourcing legal and safe in India?

    Yes. In practice, payroll outsourcing is a routine and well-established engagement model. The processor operates as a data processor under DPDP and as your service provider under the Contract Act. Statutory liability for deposits stays with the employer, so oversight is still required.

    Does payroll outsourcing India 2026 mean my payroll team disappears?

    No. Instead, a lean in-house team of one or two people typically stays to own vendor management, employee escalations, and MIS review. The vendor handles processing, filings, and compliance updates.

    How is Form 138 different from Form 24Q?

    Form 138 replaces Form 24Q from 1 April 2026 under the Income Tax Act 2025. The form structure and schema are largely similar for salary TDS reporting, but the section references and filing utility are new. Your vendor should already have transitioned.

    Can a payroll partner handle expat and international assignments?

    Yes, but not every vendor does this well. Ask for case studies on inbound and outbound assignments, tax equalisation, and shadow payroll. Additionally, confirm DPDP handling for cross-border employee data.

    How long does the transition to a new payroll partner take?

    In general, the typical timeline runs 8 to 12 weeks for a 1,000-employee organisation across three states. Furthermore, the first two months should run in parallel with in-house or the outgoing vendor to catch mismatches.

    Bottom line for the corporate finance leader

    Payroll outsourcing India 2026 has moved from “nice to have” to “compliance-critical” for any mid to large employer. The Income Tax Act 2025 transition, Labour Codes wage restructure, and DPDP Act obligations sit on top of the usual PF, ESIC, and PT filings. Consequently, running this in-house at scale is now measurably harder than it was two years ago. A capable outsourcing partner absorbs the change management and lets your team focus on higher-value HR and finance work.

    Need a payroll outsourcing partner with full Labour Codes and Income Tax Act 2025 readiness? Talk to the TMS Payroll Outsourcing team for a costed proposal within 48 hours.

  • Labour Codes EOR India: 2026 Foreign Employer Guide

    Labour Codes EOR India: 2026 Foreign Employer Guide

    Every foreign employer with staff in India is now working out what the labour codes EOR India relationship actually looks like. First, the four Labour Codes went operational on 21 November 2025. Furthermore, the Ministry of Labour published draft Central Rules on 30 December 2025 and has been finalising them through 2026. Consequently, the compliance surface for every India-based hire, direct or through an Employer of Record, has shifted.

    This guide walks foreign employers through what the labour codes EOR India stack must now cover, what your EOR partner should already have done, and where your own contracts and policies need updating. Additionally, it flags the transitions that state rules will still trigger over the next few quarters.

    Labour codes EOR India compliance framework 2026 — TMS Employer of Record

    Labour codes EOR India: what actually changed on 21 November 2025

    The government consolidated 29 older central laws into four codes:

    • Code on Wages, 2019 — wage definition, minimum wages, timely payment, bonus, equal pay.
    • Industrial Relations Code, 2020 — standing orders, retrenchment, layoff, unions, fixed-term employment.
    • Code on Social Security, 2020 — PF, ESIC, gratuity, maternity benefit, gig worker fund.
    • Occupational Safety, Health and Working Conditions Code, 2020 — safety, working hours, leave, welfare.

    Every one of these codes touches an EOR arrangement because your EOR is the legal employer under Indian law. Therefore, when the codes speak of employer obligations, they speak of your EOR partner, with cost pass-through to you.

    Wage structure and payroll: the biggest labour codes EOR India change

    The Code on Wages introduces a unified wage definition. Basic wage plus dearness allowance plus retaining allowance must be at least 50 percent of total remuneration. Consequently, PF, gratuity, and bonus contributions all rise for any employee whose current basic sits below 50 percent of gross.

    For a foreign employer, three practical points follow:

    • Your EOR must restructure salary components for existing employees, ideally at the next appraisal cycle.
    • Employer PF cost may rise by 10 to 20 percent for high-CTC engineers who had a low-basic, high-allowance structure.
    • Full and final settlement of wages must happen within two working days of exit under Section 17(2) of the Code on Wages. Gratuity retains its 30-day timeline.

    Additionally, wages must be paid by the 7th of the following month. Also, written appointment letters are now mandatory for every hire; ask your EOR to backfill these for any legacy employees onboarded via short-form contracts.

    Industrial Relations Code: what foreign employers need to know

    Two provisions matter most for EOR arrangements. Firstly, the retrenchment and layoff approval threshold rose from 100 to 300 workers. Consequently, most foreign employers hiring 10 to 50 India engineers sit well below the approval trigger. However, procedural notice, retrenchment compensation, and due process still apply.

    Secondly, the IR Code formalises fixed-term employment on a statutory basis. Fixed-term hires get pro-rated gratuity even before completing five years. Furthermore, they must receive the same wages, hours, and benefits as permanent staff. This changes the calculus for project-based or contractor-style engagements routed through an EOR.

    Social Security Code and gig workers under the labour codes EOR India setup

    The Code on Social Security merges PF, ESIC, gratuity, and maternity benefit. The trigger points are unchanged: PF at 20 employees, ESIC at 10, both administered by the EOR on its own registrations. Additionally, the PF wage ceiling remains ₹15,000 basic plus DA and ESIC coverage applies up to ₹21,000 gross.

    Two changes matter for foreign employers using contractors or platform workers alongside EOR engineers:

    • Fixed-term contract staff now receive pro-rated gratuity from day one, not from year five.
    • Aggregators (typically platform companies) must contribute 1 to 2 percent of annual turnover to a social security fund for gig and platform workers. This is a new line item for platform-model businesses.

    You can verify current status on the Ministry of Labour and Employment portal.

    OSH Code: hours, leave, and women employees

    The OSH Code caps the working day at 8 hours and the working week at 48 hours. Overtime is allowed up to 125 hours per quarter at double the ordinary rate. Additionally, earned leave now accrues at one day for every 20 days worked, and encashment above 30 days is permitted.

    Women employees can now work in all shifts, including night shifts, with written consent and safety arrangements. Consequently, if your India team runs any 24-hour support or on-call rota, ask your EOR to document the shift policy, transport, and safety measures. Furthermore, the same rules apply to remote-only roles when on-call hours are formal.

    What your EOR partner should already have done

    A capable EOR will have completed the following by mid-2026. Use this as a health check on your current partner.

    1. Rewritten appointment letter templates to reflect the Code on Wages definitions.
    2. Restructured salary components for all managed employees to meet the 50 percent basic plus DA rule.
    3. Updated payroll cut-off so wages land by the 7th of the following month.
    4. Built a two-working-day full and final settlement workflow.
    5. Refreshed leave and overtime policies against the OSH Code.
    6. Documented night shift policy for any women employees working outside standard hours.
    7. Registered on and kept current the establishment code on the Shram Suvidha portal.
    8. Named an Internal Committee under POSH with contact details in every appointment letter.

    Labour codes EOR India state rules: the moving piece

    Labour is a concurrent subject in India, so both central and state rules must sit in place before every provision can be enforced end to end. Some states have moved fast. Others are still drafting. Consequently, a few provisions will apply in Karnataka months before they apply in West Bengal, or vice versa.

    For a foreign employer, this means two things. First, ask your EOR for a state-by-state tracker of where your employees sit and which rules have been notified there. Second, do not treat all-India rollout as uniform in your compliance dashboards. Your EOR should be updating monthly.

    DPDP Act 2023: the compliance layer that sits alongside the labour codes

    The Digital Personal Data Protection Act 2023 is not part of the Labour Codes, but it applies simultaneously to every employee data flow between your India EOR and your home entity. Consequently, your EOR must collect employee data on a lawful basis, share only what is necessary, and log access.

    Furthermore, cross-border transfer of employee data (payroll files, tax records, ID documents) needs a documented data transfer agreement. Ask your EOR for their standard template and the name of their Data Protection Officer or nominated Grievance Officer.

    Cost impact of the labour codes on your EOR bill

    Expect a moderate increase in your all-in India EOR cost through 2026 and 2027, driven mostly by the wage restructure. Directional impact:

    • Employer PF and gratuity accrual rise by 10 to 20 percent for previously low-basic salary structures.
    • Backfilling appointment letters and running fresh state-level registrations may add a one-time EOR fee.
    • ESIC contribution is unchanged unless the wage ceiling revises from ₹21,000 (proposed ₹30,000, not notified as of mid-2026).
    • New leave accrual may raise your accrued liability by 5 to 8 percent on the balance sheet.

    Additionally, factor in a modest EOR service fee increase reflecting their compliance uplift. A good partner will be transparent about the components rather than bundling them.

    Frequently asked questions

    Are the labour codes fully in force in 2026?

    The four Labour Codes went operational on 21 November 2025. However, several provisions rely on state rules that are still being notified in phases through 2026. Your EOR should be tracking state-by-state readiness.

    Does the new wage definition apply to my India engineers hired through an EOR?

    Yes. Your EOR is the legal employer, so the 50 percent basic plus DA rule applies to every employee on its payroll. Consequently, expect your EOR to propose a salary restructure at the next review cycle.

    What is the exit process under the Code on Wages in 2026?

    Wages, including notice pay and unused leave encashment, must be paid within two working days of the last working day under Section 17(2). Gratuity retains its 30-day timeline. Your EOR handles the mechanics; you approve the settlement calculation.

    Do I need to register as an employer in India if I use an EOR?

    No. The EOR is the legal employer of record on its own PAN, PF, and ESIC registrations. Consequently, you do not need to register any Indian entity for hiring purposes. You may still need to register for other reasons, such as invoicing Indian customers.

    What happens if my EOR is not compliant with the new labour codes?

    Legal liability sits with the EOR as the employer of record. However, reputational and continuity risk sits with you. Consequently, always ask for a written note on Labour Codes and state rule readiness, and revisit vendor selection if the answers are vague.

    Bottom line for the foreign employer

    The labour codes EOR India relationship is now the primary compliance surface for every India-based hire in 2026. A capable EOR partner absorbs most of the mechanical work: wage restructure, appointment letter refresh, payroll timing, F&F workflow, and POSH committee. Your role is to hold them to a monthly state-rule tracker and to align your own home-entity contracts with the new expectations.

    Need a Labour Codes readiness review for your India EOR arrangement? Talk to the TMS Employer of Record team for a costed compliance briefing.

  • India Tech Talent EOR: 2026 Global Employer Hiring Guide

    India Tech Talent EOR: 2026 Global Employer Hiring Guide

    Global employers who want to hire India tech talent EOR arrangements are the fastest path forward. First, the Indian tech pool of engineers, data scientists, and AI specialists is deep and cost-competitive. Second, an Employer of Record structure lets you onboard from day one without registering a subsidiary. Consequently, EOR has moved from workaround to default entry model for foreign firms hiring one to fifty engineers in India.

    This guide walks a foreign employer through how to hire India tech talent EOR-style in 2026: what an EOR does, what it costs, how compliance works after the new Labour Codes, and when it makes sense to graduate to a subsidiary. Furthermore, it flags the tax, payroll, and data-protection points that most global HR teams miss.

    Hire India tech talent EOR — TMS Employer of Record for global companies

    What an EOR does when you hire India tech talent

    An Employer of Record is the legal employer of your India-based hires. The engineer works for your product team every day. However, the EOR issues the appointment letter, runs payroll, deducts and deposits PF and ESIC, files TDS, and manages exit formalities. As a result, you get a fully compliant Indian workforce without setting up an Indian entity.

    Key differences from a payroll processor:

    • An EOR carries the legal employer liability, including under the Code on Wages and IR Code.
    • An EOR signs the employment contract in its own name.
    • An EOR is registered with EPFO, ESIC, and the state labour department.
    • A payroll processor only calculates and disburses; the client is still the employer.

    Why global employers hire India tech talent through EOR in 2026

    Three shifts have made 2026 the tipping year for the EOR route. Firstly, India’s tech and AI talent supply has grown faster than any single hiring hub globally. Secondly, the Global Capability Centre count reached 2,117 units in 2026 per the Nasscom-Zinnov landscape report, pushing salaries up in tier-1 cities while creating strong secondary talent in tier-2 hubs. Thirdly, the new Labour Codes and the DPDP Act 2023 have raised the compliance cost for setting up your own entity too early.

    Additionally, a well-run EOR shortens onboarding from twelve to fourteen weeks (typical subsidiary route) to five to seven working days. For a lean team hiring their first ten India engineers, that speed alone justifies the model.

    Hire India tech talent EOR compliance under the new Labour Codes

    The four Labour Codes went operational on 21 November 2025. Furthermore, the Ministry of Labour published draft Central Rules on 30 December 2025 and has been finalising them through 2026. State rules are being notified in phases. A capable EOR partner will already have aligned its templates to the new codes.

    The changes that matter most for hiring India tech talent through an EOR:

    • Wage structure — basic wage plus DA plus retaining allowance must be at least 50 percent of total remuneration under the Code on Wages.
    • Appointment letters — a written appointment letter is now mandatory for every hire, including consultants shifted to employment.
    • Payment timing — wages must be paid by the 7th of the following month.
    • Full and final settlement — wages settled within two working days of exit under Section 17(2); gratuity retains its 30-day timeline.
    • Social security — PF applies from 20 employees, ESIC from 10; both administered by the EOR.
    • POSH Act — an Internal Committee is mandatory at 10 employees; the EOR typically hosts one on your behalf.

    Tax treatment when you hire India tech talent EOR-style

    The tax picture is cleaner than many foreign HR leads assume. The EOR withholds and deposits Indian income tax under the new IT Act 2025 (Form 138 quarterly TDS). You reimburse the EOR for gross salary, employer PF, ESIC, gratuity accrual, and a service fee. Furthermore, no permanent establishment is created in India solely by hiring a small team through an EOR, provided the engineers are not empowered to conclude contracts on your behalf.

    Key rates to plan against:

    • India resident individual TDS follows the standard slabs, either old or new regime as elected by the employee.
    • Employer PF contribution is 12 percent of basic plus DA, capped at the ₹15,000 wage ceiling for statutory calculation.
    • ESIC applies to employees earning up to ₹21,000 gross, at 3.25 percent employer plus 0.75 percent employee.
    • Foreign company tax in India, if you later create a PE, is 35 percent plus surcharge and cess (~36.4 to 38.2 percent effective).
    • A domestic Indian subsidiary under Section 115BAA pays 25.17 percent effective corporate tax.

    What it costs to hire India tech talent through an EOR

    EOR pricing in India is either a flat monthly fee per employee or a percentage of gross salary. The typical range in 2026 is ₹35,000 to ₹75,000 per employee per month or 8 to 15 percent of gross salary, depending on volume and complexity. Additionally, one-time onboarding and offboarding fees are common.

    Add on top the actual cost-to-company for the engineer:

    • Mid-level software engineer (5 to 8 years) in Bengaluru or Hyderabad — ₹22 to ₹40 lakh per annum.
    • Senior engineer or tech lead (8 to 12 years) — ₹40 to ₹80 lakh per annum.
    • AI or ML specialist (5+ years, top tier) — ₹45 to ₹1.2 crore per annum.
    • Employer PF, gratuity accrual, and insurance typically add 12 to 15 percent to gross salary.

    These are directional bands based on 2026 market surveys. Meanwhile, tier-2 hires (Pune, Chennai, Coimbatore) can run 20 to 30 percent lower for equivalent skill sets.

    Hire India tech talent EOR data protection under the DPDP Act 2023

    The Digital Personal Data Protection Act 2023 is now the operating law for employee and customer data handled in India. Consequently, your EOR must collect employee data on a defined lawful basis (typically contract performance and consent) and share only what you need for product work. Additionally, cross-border transfer of employee data to your home entity must sit inside a documented data transfer agreement.

    Ask your EOR partner three questions during vendor selection. First, do they have a Data Protection Officer or nominated Grievance Officer? Second, what is their standard data transfer agreement for foreign parents? Third, how do they log employee-data access?

    When to switch from EOR to a subsidiary

    EOR economics start to invert around headcount 20 to 30 in India, depending on average salary. At that point, the EOR fee stack exceeds what a lean private limited company plus a payroll partner would cost. Furthermore, a subsidiary opens up ESOPs, direct banking, and long-horizon leases that an EOR cannot offer.

    Signals that it is time to graduate:

    1. You plan to cross 25 India employees in the next 12 months.
    2. You need to offer ESOPs with Indian tax treatment.
    3. You are opening a physical office beyond a coworking desk.
    4. You are winning Indian customers and need local invoicing.
    5. Your EOR fees exceed the projected first-year cost of a subsidiary plus in-house HR.

    How to pick the right EOR partner in India

    Not every India EOR is set up for tech and AI hiring. Additionally, some are white-labelled resellers of a smaller back-end operation. Vet on five points:

    1. Direct India presence — the EOR is the actual employer of record on its own PAN and PF/ESIC registrations, not a subcontractor chain.
    2. Labour Codes readiness — templates updated for the 50 percent wage rule, 2-day F&F, and appointment letter changes.
    3. DPDP Act compliance — documented data handling and a named Grievance Officer.
    4. Tech hiring track record — the EOR routinely onboards engineers, not just admin or sales staff.
    5. Transparent pricing — flat per-head or clear percentage, without hidden pass-throughs on statutory items.

    Frequently asked questions

    Do I need a subsidiary to hire India tech talent?

    No. An EOR lets you employ India-based engineers legally without setting up a subsidiary. Consequently, most foreign firms start with EOR and set up an entity only when scale or ESOP needs demand it.

    Can I offer ESOPs to India engineers through an EOR?

    Yes for the parent company’s stock plan, but the tax and RBI compliance is more complex than through a domestic subsidiary. Most foreign employers issue foreign ESOPs to India EOR employees under advance authorisation from RBI.

    How fast can an EOR onboard a new India hire?

    Five to seven working days is standard, subject to background verification. A capable EOR completes appointment letter, PF/ESIC enrolment, device shipping, and access provisioning in parallel.

    What happens to my India hires if I later set up a subsidiary?

    The EOR transfers the employment to your new entity. Continuity of service, gratuity, and PF balances all carry over. Additionally, a clean transfer typically takes four to six weeks.

    Does hiring via EOR create a permanent establishment in India?

    Generally, no. As long as the engineers do not conclude contracts on your behalf and the EOR is a genuine third-party employer, PE risk is low. However, always confirm with your tax advisor for your specific set-up.

    Bottom line for the foreign employer

    If your goal is to hire India tech talent EOR-first in 2026, the model is now mature, well-priced, and aligned with the new Labour Codes. Furthermore, it lets you test the India market with real engineering output before committing to a subsidiary. When you cross 25 hires, revisit the entity question. Until then, a strong EOR partner is the fastest and cleanest path.

    Looking to hire India tech talent through a compliant EOR? Talk to the TMS Employer of Record team for a costed proposal within 48 hours.

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