Cost of Hiring Employees in India: A Complete Guide

Many global companies view India as a significant market for hiring remote employees, given the country’s vast talent pool.

Freelancing/contracting, outsourcing, subsidiary formation, and employer of record (EOR) are popular business models through which overseas businesses hire employees in India.

It’s important to have a complete picture of the cost of hiring remote employees in India for each model before you make a final call for team expansion.

If you’re hiring a remote team for a long-term project, you may later require expanding the workforce size. You must choose the model that will be cost-effective in the long run.

The costs of hiring remote employees become a significant burden when you expand your remote workforce.

Although cost remains a primary concern for any business investment, it isn’t the sole deciding factor.

You also need to consider other factors, including employee management and operational risks, in addition to costs.

This guide will help readers understand the cost of hiring Indian professionals using different business models.

In other words, knowing the cost of hiring remote employees for each model will help you make an informed decision about the team expansion plan in India.

A Cost Overview of Different Business Models for Remote Hiring in India

No doubt, building remote teams in India ensures two major advantages to foreign businesses:

1. 1. The availability of skilled resources
   2. The low labor cost of the workforce

It means you can find the right workforce in India per your requirements and hire them at reduced costs.

Now, let’s understand the cost of hiring employees in India through different business models:

1. 1. Contracting
   2. Outsourcing
   3. EOR (local EOR vs multi-country EOR)
   4. Subsidiary

The cost structure differs from one model to another and is illustrated in the following example.

To illustrate the average cost per hire of employees in India, let’s assume the following conditions.

We calculate the cost of every business model based on the average monthly salary (wages for freelancers) for a 6-member team.

You may also consider some additional costs above salary costs, which are prevalent in some business models.

For the convenience of our analysis, we make some assumptions about the work experiences and different positions within this 6-member team.

The team comprises a manager with over 8 years of work experience, two senior or mid-level contractors with 5-8 years of experience, and three junior-level contractors with 2-4 years of experience. 

Based on these assumptions, we calculate the estimated costs for each model.

Refer to the table below for an overview of the cost structures associated with various remote business models in India.

We explain each cost structure in detail below. 

Tabulation: Cost of Hiring Remote Employees in India

Models	Costs*
Freelancing/contracting	USD 9,146.34
Local EOR	USD 10,046.34
Multi-country EOR	USD 13,346.34
Outsourcing	USD 27,439.02
Subsidiary	USD 41,158.53

* Indicative per-month cost of a team of 6 members. It is the average salary/wages cost of 6 members (1 manager, 2 senior- or mid-level contractors, and 3 junior-level contractors)

Cost of Hiring Freelancers in India

The monthly average cost of hiring freelancers in India is expected to be around USD 9,146.34 for a 6-member team. It means the monthly costs per head will be USD 1,524.39.

This is an estimated salary of how much freelancers would earn when their wages are converted into a monthly salary.

Freelancers earn their wages based on an hourly rate, project, or job. 

Hiring freelancers in India is way more affordable and convenient for businesses focusing on short-term projects, which normally last for 3 to 9 months.

Among business models, freelancing can be considered the cheapest option and you can easily upsize or downsize your workforce with the least costs.

However, you must know certain challenges of working with contractors in India. 

You’re liable to pay additional costs applicable to transaction charges and currency conversion fees (CCF) while transferring salaries to the self-bank accounts of your resources.

The remittance charges in Indian banks range from USD 10 to 20 per transaction, depending on the amount or type of transaction. 

Also, you need to understand how to navigate the Indian legal complexities.

You may face a great risk of legal and financial liabilities if your contractors fail to pay income tax.

Since many freelancers aren’t fully aware of the legal taxation system, they often consult a tax advisor.

In India, under the new tax regime, if an employee’s annual income exceeds USD 8,536.58 (INR 700,000), they are liable to pay tax.

Hiring Cost Using Local EOR Services

The average monthly cost of hiring remote employees through a local EOR partner in India is approximately USD 10,046.34.

This average cost includes service charges (USD 900) and salary costs of your employees of a 6-member team (USD 9,146.34). 

Partnering with a local EOR can easily solve the main issues associated with freelancing, including compliance challenges.

EORs have a vast knowledge of the local market and a team of legal experts who are well-versed in the country’s taxation, accounting system, payroll, etc. 

Besides compliance assistance, you can avail of additional EOR services, including recruitment assistance, payroll processing, employee benefits management, and human resources (HR) administration.

A local EOR would charge a meager USD 150-200 per person monthly as service fees. Therefore, maintaining a 6-member team will cost approximately USD 900 per month. 

A local employer of record differs from a multi-national EOR as the former service providers exclusively offer services within one country.

A local EOR has extensive knowledge about the pulse of local talent and handling business needs in a particular country.

However, both models provide similar services and allow a foreign business to hire employees in India without establishing its entity. 

Hiring Cost of Using Multi-country EORs

The cost of hiring remote employees in India through a multi-country EOR partner would be approximately USD 13,346.34.

This includes the service charge and salaries for the 6-member team. You can take the assistance of a global EOR partner if you plan to run business operations by hiring talent from different countries. 

A multi-country or global EOR offers services across different countries and does not focus on a particular country.

Compared with a local EOR, a multi-country EOR usually charges higher service fees.

Global EORs typically charge a flat service fee between USD 600 and USD 800 per person per month.

Working with a global EOR service provider for multiple teams across different countries can be costly.

Instead, hiring a local EOR separately for each country can substantially reduce costs.

Costs of Hiring Outsourcing Companies in India

Hiring outsourcing companies in India with a team of 6 members would cost USD 27,439.02.

The cost of hiring outsourcing companies is 3 times that of freelancers with the same team size.

The cost could be higher if the outsourcing companies need to hire additional skilled workforce required for the project.

Generally, the outsourcing cost is higher for small projects.

Outsourcing companies work based on a man-month cost and charge on a time-and-material basis. The per-person or per-hour charge is a bundled rate, which can be costly compared to other business models such as EOR or freelancing.

You can also explore the comparative study of outsourcing and EOR.

You can opt for outsourcing when you require specialized tasks and need instant operations.

Outsourcing firms have experts in a particular field and have a ready-made team to execute your tasks. 

Compared to the West, outsourcing in India is still a good option if you want a team of experienced professionals.

However, you must know the challenges when working with outsourcing firms.

In many cases, businesses face challenges such as intellectual property (IP) violation issues, a lack of direct communication with the team, and unfair salary negotiation, which often leads to a high attrition rate among associates.

Cost of a Subsidiary Company in India

The average cost of a subsidiary company in India with a team of 6 members would be around USD 41,158.53.

Subsidiary formation will be 3-4 times costlier than the hiring cost of the employer of record.

It’s the most expensive path a business can take to hire employees in India. Thereby, it’s a significant challenge for small & medium enterprises. 

Subsidiary incorporation in India will allow businesses to hire local talent directly without external help.

However, it’s cost-intensive to establish a legal entity as it requires a huge sum of capital for upfront expenses, including infrastructure setup, office rental fees, legal fees, staffing, etc. 

Subsidiary formation is also not ideal if you’ve only a handful of employees in the target country, where you want to establish your entity.

A thorough understanding of Indian work culture and having proper knowledge of the legal formalities of the territory are essential for successful operations.

We suggest you take some time to assess whether you’re ready to take on all legal and financial responsibilities that help minimize operational risks.

While you’re preparing for the best route for your successful subsidiary company in India, you can take EOR assistance to keep your remote team running and start operations instantly.

Remunance as a Local EOR Guide for Cost-saving Team Expansion in India

You can make a more meaningful decision about your team expansion in India if you’ve got a clear picture of the cost insights.

In the long run, you can see a big difference in the overall cost of hiring remote employees in India when you plan to expand the workforce.   

Remunance, as a leading local EOR service provider in India, can assist you if you want a cost-effective approach to team building in India.

We have a wide network of connections and a team of experts helping you tap into a large pool of highly skilled Indian workforce at the lowest possible cost.

Having in-depth knowledge of recruitment and talent acquisition, Remunance can help you acquire suitable talent for your remote business operations in India.

We’ve helped over 120 foreign businesses hire employees in India from 34 cities. We’re currently working with clients from 22 countries worldwide.