How to use an Employer of Record in India

Growing your company in India? Local labor laws, tax rules, and compliance needs make hiring workers remotely difficult. The answer is an Employer of Record (EOR), a service guaranteeing legal compliance and streamlining of employment.

From how to use an employer of record and its benefits to major hurdles and financial considerations, this article will walk you through all you need to know about using an EOR in India.

What Is an Employer of Record (EOR) and How Does It Work?

While expanding into India’s enormous talent pool is wise, hiring legally is not simple. Due to strict, sophisticated, and always-changing Indian labor rules. One error in tax compliance, payroll, or contracts? It can result in business limitations, lawsuits, or fines large enough.

Here in India, an Employer of Record (EOR) changes everything.

Understanding the Employer of Record (EOR) Model

An Employer of Record (EOR) is a partner organization hired on behalf of a parent company, assuming legal ownership of their employees. Companies cooperate with an EOR instead of creating a formal business in India to hire workers swiftly and legally.

The company still oversees daily responsibilities for the employees, but on paper, the EOR is the legal employer. This implies the EOR manages all aspects of labor laws, payroll, and compliance, thereby enabling companies to avoid legal risks and concentrate on operations free from legal concerns.

How an EOR Works in India (Step-by-Step)

First step: Businesses associates with an EOR
An EOR provider is selected by a business seeking Indian employment to be the official employer.

Second step: staff signs a legally compliant contract.
Following Indian labour rules, the EOR creates an employment contract (Shops & Establishments Act, Industrial Disputes Act, Payment of Wages Act, etc.). The worker signs this contract via the EOR.

Third Step: Benefits Management and Payroll
Salary payments, tax deductions (TDS), provident fund (EPF), Employee State Insurance (ESI), and additional perks are handled by the EOR.

Fourth step: constant compliance with HR support
The EOR manages contract renewals, guarantees ongoing compliance with Indian employment regulations, and offers HR help for matters including leave policies, termination, and workplace conflicts.

Fifth step is risk-free scaling and market expansion.
Without legal corporate structure, companies can hire, oversee, and grow staff in India, hence lowering operating expenses and administrative burden.

Key Responsibilities of an EOR in India

An EOR is a legal employer, while companies concentrate on expansion. An EOR manages the following:

Employment Contracts – Designed per Indian labor rules, employment contracts address salary, working hours, termination, and severance pay.

Payroll – Manages pay for bonuses, taxes deducted, labor law compliance, and salaries in payroll processing.

Tax and Compliance Management guarantees – TDS (Tax Deducted at Source), EPF (Provident Fund), ESI (Employee State Insurance), and gratuity contributions made precisely.

Per Indian labor regulations, the Employee Benefits Administration offers health insurance, paid leave, retirement benefits, and maternity/paternity leave.

Protects companies from tax penalties, labor conflicts, and employee misclassification by means of legal risk management. 

EOR vs. Traditional Hiring: Why It Matters

Factor	EOR Hiring	Traditional Entity Setup
Legal Compliance	100% Managed by EOR	Business must handle all labor laws
Setup Time	1-2 Days	3-6 Months
Payroll & Taxes	Fully Handled by EOR	Requires in-house HR & legal team
Employee Benefits	Managed by EOR	Company must set up policies
Risk Level	Low (EOR takes liability)	High (Direct legal responsibility)

Why Businesses Choose an EOR in India

Quick Market Entry – No need to set up a subsidiary, allowing faster hiring.
100% Legal Compliance – The EOR ensures all employment laws are followed.
No HR Headaches – Payroll, taxes, and benefits fully managed.
Cost-Efficient Expansion – Avoid entity setup fees, legal costs, and administrative burdens.

An Employer of Record in India is the fastest, safest, and most compliant way to hire employees without business risks.

Why Use an Employer of Record in India?

India’s large talent pool, competitive pay scale, and thriving tech sector help it to be a top destination for worldwide hiring. Hiring staff members in India is more complicated than just signing a contract, though. The nation boasts rigorous labor rules, convoluted tax laws, and required company compliance with mandated benefits.

One error in movement? Legal conflicts, heft fines, or even corporate limits.

Businesses thus turn to an Employer of Record (EOR) in India—a quicker, safer, entirely compliance employment solution.

1. 100% Compliance With Indian Labor Laws

India has over 50 national and state-level labor laws, ranging from wages, taxes, social security, employee rights, and termination policies. Employers must comply with:

• Shops and Establishments Act – Regulates work hours, overtime, and leave policies.
• The Payment of Wages Act – Ensures timely salary payments and deductions.
• Industrial Disputes Act – Governs hiring, termination, and labor rights.
• The Maternity Benefit Act – Grants maternity leave and benefits.
• The Employees’ Provident Fund (EPF) & ESI Act – Covers social security, healthcare, and retirement benefits.

With an EOR: You get instant compliance—the EOR handles all legal obligations, preventing penalties and lawsuits.
Without an EOR: Your company must constantly monitor and implement labor law changes—or risk fines and legal troubles.

2. No Need to Set Up a Legal Entity

Remunance Expanding into India traditionally requires establishing a private limited company or branch office—a process that takes 3 to 6 months and involves:

• Registering with the Ministry of Corporate Affairs (MCA)

• Opening an Indian corporate bank account

• Setting up a payroll system and tax filings

• Hiring local HR and legal teams for compliance

With an Employer of Record, you can bypass all of this and start hiring in just a few days.
With an EOR: You can hire employees immediately, without entity setup, and operate legally.
Without an EOR: You’ll spend months on company registration, paperwork, and compliance.

3. Fast & Hassle-Free Payroll Processing

Indian payroll is complex and highly regulated. Employers must:

• Deduct TDS (Tax Deducted at Source) from salaries before paying employees.
• Contribute to the Employee Provident Fund (EPF), which is mandatory for most employees.
• File professional tax, labor welfare fund contributions, and statutory bonuses.

Payroll errors can result in government audits, tax fines, and employee dissatisfaction.

With an EOR: Salaries, taxes, and compliance are 100% managed, error-free, and fully legal.
Without an EOR: You’ll need an in-house payroll team to track every tax law and filing deadline.

4. Risk-Free Employee Onboarding & Contracts

Employment contracts in India must comply with strict labor laws. They should include:

• Salary structure & tax deductions
• Termination policies (which vary by state)
• Paid leave, sick leave, and benefits
• Work hours and overtime compensation

With an EOR: Employees receive legally compliant, watertight contracts, avoiding misclassification risks.
Without an EOR: Mistakes in contracts can lead to lawsuits, wrongful termination claims, and fines.

5. Smooth Employee Benefits Management

Employees in India are legally entitled to:

• Health insurance (ESI or private plans)

• Provident fund (retirement savings)

• Paid time off (casual, sick, and earned leave)

• Maternity and paternity leave

• Gratuity (for employees with 5+ years of service)

Setting up and managing these benefits requires expertise. Failing to provide mandatory benefits can result in legal action from employees or penalties from the government.

With an EOR: Benefits are automatically handled, ensuring employee satisfaction and legal compliance.
Without an EOR: You must build an HR team to manage benefits, increasing costs and complexity.

6. Eliminate Employee Misclassification Risks

Many businesses incorrectly classify Indian workers as contractors to avoid compliance headaches. However, misclassification violates Indian labor laws and can lead to:

• Backdated tax liabilities and penalties

• Legal disputes with employees

• Bans from hiring in India

With an EOR: Employees are legally classified, avoiding compliance risks.
Without an EOR: You risk severe legal and financial consequences if contractors are misclassified.

7. Cost-Effective Expansion Into India

Setting up an entity in India costs thousands of dollars in legal fees, government filings, payroll setup, and compliance management.

An EOR offers a cost-effective alternative by charging a flat monthly fee per employee, covering:

• Payroll processing

• Tax filings and compliance

• HR support and benefits administration

With an EOR: You save money by paying only for the employees you hire—no extra legal or setup costs.
Without an EOR: You face large upfront costs and long-term operational expenses.

Is an EOR Right for Your Business?

• If you need to hire quickly and legally → An EOR is the best solution.

• If you want to avoid complex labor laws → An EOR ensures full compliance.

• If you want a low-cost way to expand into India → An EOR saves money and time.

• If you plan to hire just a few employees in India → An EOR is better than setting up an entity.

For businesses expanding into India, an Employer of Record eliminates legal, payroll, and compliance headaches, allowing companies to hire with confidence and scale effortlessly.

How to Choose the Right Employer of Record in India

One of the most important decisions you make is selecting an Employer of Record (EOR) in India. Legal issues, payroll mistakes, employee discontent, and compliance breakdowns can all result from the incorrect EOR. The proper EOR guarantees flawless business operations, legal protection, and frictionless hiring.

But how do you choose the greatest EOR supplier from several ones available in India?

Use this detailed, step-by-step guide to select a trustworthy, compliant, reasonably priced EOR service in India.

1. Research & Compare EOR Providers

Not all EOR companies offer the same level of service, compliance, or expertise. Some have strong local legal teams, while others specialize in fast global hiring.

Key Factors to Compare:

• Legal Expertise in Indian Labor Laws – Does the EOR have a dedicated legal and HR team in India?
• Track Record & Reputation – Does the provider have successful case studies and client reviews?
• Industries Served – Does the EOR specialize in your industry (tech, finance, healthcare, etc.)?
• Speed of Onboarding – How quickly can0 they onboard employees (24 hours? 1 week?)?

Top EOR Providers in India (2025):

According to the list by Peoplemanagingpeople, Remunance is one of the top EOR service provider in India and is ranked as the best for hiring locally without a entity.

 Pro Tip: Shortlist at least three EORs before making a final decision.

2. Verify Compliance & Legal Coverage

A good EOR provider must ensure 100% legal compliance with Indian employment laws, tax regulations, and labor policies.

Key Compliance Questions to Ask:

• Does the EOR ensure compliance with all Indian labor laws? (Shops & Establishments Act, Industrial Disputes Act, Payment of Wages Act)
• Do they provide legally binding employment contracts?
• How do they handle tax deductions (TDS, EPF, ESI, gratuity, professional tax)?
• Do they manage severance pay and employee termination legally?

Warning: Some low-cost EORs cut corners on compliance, which can lead to penalties and legal disputes.

3. Understand the EOR’s Payroll & Tax Process

A trusted EOR should offer transparent payroll processing with zero tax risks.

What to Check:

• Payroll Accuracy – Are salaries processed on time and error-free?
• Tax & Benefits Management – Do they correctly handle TDS, provident fund, gratuity, and insurance?
• Payroll Software & Reports – Do they provide real-time salary slips, tax reports, and compliance audits?

Pro Tip: Ask for a demo of their payroll system before signing a contract.

4. Evaluate the Cost & Pricing Model

EOR pricing varies based on services, compliance complexity, and employee count.

Common EOR Pricing Models:

• Flat Monthly Fee per Employee – $400 to $1,500 per employee/month.
• Percentage of Employee Salary – Typically 5% to 15% of gross salary.
• Custom Pricing – Large companies may get discounted bulk pricing.

Watch Out For: Hidden fees for contract renewals, early terminations, or additional HR support.

Pro Tip: Always request a detailed cost breakdown to avoid unexpected expenses.

5. Review the Employee Experience & HR Support

Your employees will interact directly with the EOR for payroll, benefits, and HR concerns. A poor experience can lead to low employee satisfaction, high turnover, and reputation damage.

Key Areas to Check:

• Onboarding Experience – How smoothly do they onboard new hires?
• HR Support Quality – Do employees get prompt responses for payroll issues?
• Benefits & Perks – Do they offer health insurance, retirement plans, and paid leave?

Pro Tip: Ask to speak with current clients to gauge employee satisfaction.

6. Check Local Expertise & Customer Support

Many global EORs operate in multiple countries but lack strong local expertise in India.

Why Local Presence Matters:

• India-Specific Laws – Labor laws in India change frequently, requiring local expertise.
• State-Specific Compliance – Different states have unique labor laws and tax rates.
• Language & Cultural Understanding – Employees prefer local HR support for payroll queries.

Pro Tip: Choose an EOR with offices and legal teams based in India.

Final Checklist: How to Pick the Best EOR in India

By choosing the right Employer of Record, businesses can hire confidently, stay compliant, and scale efficiently in India.

Employer of Record in India: Key Challenges

Using an Employer of Record (EOR) in India is the fastest and most compliant way to hire employees without setting up a legal entity. However, it’s not without challenges.

While an EOR simplifies hiring, payroll, and compliance, businesses should be aware of potential risks and limitations. Addressing these challenges upfront helps in choosing the right provider and avoiding operational hurdles.

1. Higher Costs for Large-Scale Hiring

An EOR charges a monthly fee per employee, which can be cost-effective for small teams but expensive for larger operations.

Cost Breakdown

• Flat monthly fee model – Ranges from $250 to $1,500 per employee.
• Percentage-based fee model – Some EORs charge 5% to 15% of an employee’s salary.
• Custom pricing – Large enterprises may negotiate discounted bulk pricing.

The Challenge:
For businesses hiring 20+ employees, using an EOR may become more expensive than setting up a private limited company in India.

Solution: If planning long-term expansion, consider switching from an EOR to a subsidiary once you hit a cost threshold.

2. Limited Control Over HR & Company Policies

Since the EOR is the legal employer, companies lose direct control over HR policies like:

• Hiring terms and contract modifications

• Employee promotions and role adjustments

• Termination policies (which must align with labor laws)

• Performance reviews and discipline procedures

The Challenge:
Businesses must operate within the EOR’s legal framework, which can limit flexibility in managing employees.

Solution: Choose an EOR with flexible HR support that allows customized employment contracts and policies.

3. Legal Risks of Choosing the Wrong EOR

Not all EORs comply 100% with Indian labor laws.

Common Risks of a Bad EOR:

• Non-compliant payroll processing → Late salary payments and tax errors.
• Incorrect employment classification → Risk of misclassifying employees as contractors, leading to legal penalties.
• Failure to follow state-specific labor laws → Some states (e.g., Karnataka, Maharashtra) have unique employment laws that must be followed.

The Challenge:
A non-compliant EOR can expose your company to lawsuits, tax audits, and reputational damage.

Solution: Work with EOR providers that have strong legal teams in India and a proven track record of compliance management.

4. Potential Delays in Employee Onboarding

While EORs promise fast onboarding, the actual process depends on:

• Document verification speed

• Background checks & compliance approvals

• State-wise employment registration

The Challenge:
If the EOR has slow processes, onboarding can take weeks instead of days, delaying project timelines.

Solution: Choose an EOR with automated onboarding systems that can complete hiring in 24-72 hours.

5. Restrictions on Employee Benefits Customization

EORs offer standard benefits packages, but customization can be limited.

• Health insurance – May only include basic coverage.
• Provident Fund (EPF) & ESI – Mandatory but may not cover additional retirement perks.
• Bonuses & incentives – Hard to customize through an EOR.

The Challenge:
Companies wanting personalized benefits may find EOR options restrictive.

Solution: Pick an EOR that allows add-ons for expanded benefits and insurance coverage.

6. Exit Strategy Complexity

What if you want to stop using an EOR and hire employees directly? The transition process isn’t always simple.

• EOR termination clauses – Some contracts require advance notice before switching.
• Legal transfer of employees – Employees may need new contracts when moving to your entity.
• Costs & penalties – Some EORs charge exit fees or require long-term contracts.

The Challenge:
Exiting an EOR partnership may take time and require legal approvals, adding complexity to expansion plans.

Solution: Before signing with an EOR, check their offboarding policies and ensure a smooth transition plan if needed.

Are EOR Challenges Deal-Breakers?

Not at all! An Employer of Record in India remains the best option for fast and compliant hiring. However, businesses should:

• Compare pricing to ensure cost-effectiveness.
• Choose a legally compliant EOR with strong local expertise.
• Confirm flexibility in contracts, benefits, and policies.
• Plan an exit strategy in advance for long-term operations.

By understanding and preparing for these challenges, companies can maximize the benefits of using an Employer of Record in India while avoiding potential risks.

How Much Does an Employer of Record Cost in India?

Hiring employees in India through an Employer of Record (EOR) is cost-effective compared to setting up a legal entity. However, EOR costs vary based on the provider, employee salary, benefits, and compliance requirements.

Understanding the EOR pricing structure helps businesses budget accurately and avoid hidden fees.

1. EOR Pricing Models in India

EOR providers in India use different pricing models depending on service levels and business size.

A. Flat Monthly Fee per Employee

Cost: $200 – $1,500 per employee/month
Includes: Payroll processing, compliance, tax deductions, and benefits
Best for: SMBs and startups looking for a simple, fixed-cost model

B. Percentage of Employee Salary

Cost: 5% – 15% of the employee’s gross salary
Includes: Legal employment, payroll, tax compliance, and HR support
Best for: Companies hiring multiple employees with different salary ranges

C. Custom Pricing for Enterprises

Cost: Negotiable (varies by number of employees & service scope)
Includes: Tailored solutions, premium HR support, additional compliance management
Best for: Large enterprises or long-term hiring needs

Pro Tip: Compare at least three EOR providers to find the best pricing model for your needs.

2. Factors Affecting EOR Costs in India

EOR pricing isn’t one-size-fits-all. Several factors influence costs, including:

A. Employee Salary & Benefits Package

Higher salaries = Higher EOR fees (especially with a percentage-based model)
More benefits (health insurance, bonuses, allowances) = Increased costs

B. Number of Employees

Hiring 1-5 employees? Expect higher per-employee costs
Hiring 10+ employees? Some EORs offer bulk discounts

C. Compliance & Tax Complexity

Industries with strict labor laws (finance, healthcare, IT) = Higher compliance costs
Some Indian states (Karnataka, Maharashtra) have higher payroll tax obligations

D. Additional HR & Legal Services

Basic EOR package = Payroll & tax compliance only
Premium EOR package = HR support, contract customization, severance policies, and employee dispute management

3. Hidden EOR Costs to Watch Out For

While EOR pricing seems straightforward, some providers charge hidden fees that increase overall costs.

Beware of:

• Contract Termination Fees – Exiting an EOR before the contract period may come with penalties.
•  Payroll Processing Fees – Extra charges for off-cycle payments or salary adjustments.
•  Currency Exchange Fees – If paying in USD, EUR, or GBP, check if the EOR adds FX conversion fees.

Pro Tip: Always request a detailed pricing breakdown to avoid unexpected costs.

4. Comparing EOR Costs vs. Setting Up a Legal Entity in India

Factor	Employer of Record (EOR)	Legal Entity Setup
Initial Setup Time	Instant (1-5 days)	3-6 months
Payroll Management	Included in fee	Requires in-house payroll team
Compliance & Taxes	Handled by EOR	Company is responsible
Employee Benefits	Managed by EOR	Requires independent setup
Cost per Employee	$400 – $1,500/month	Varies based on operations
Best for	Small-to-mid-sized teams	Large, long-term expansions

Verdict: EORs are cheaper and faster for hiring in India if you need fewer than 20 employees. If planning long-term expansion, setting up an entity might be more cost-effective in the long run.

5. How to Get the Best EOR Pricing in India

•  Compare multiple EOR providers to find the best pricing and services.
•  Negotiate discounts for hiring multiple employees at once.
•  Check for hidden fees and clarify currency conversion rates.
•  Choose a provider with transparent pricing and a proven track record.

Is an EOR Worth the Cost?

• If you want to hire in India quickly and legally → An EOR is the best option.
•  If you need payroll, compliance, and benefits handled → EORs save time and effort.
•  If you’re hiring long-term and scaling → Compare EOR costs with entity setup expenses.

A trusted Employer of Record in India ensures compliance, fast hiring, and cost efficiency, making it a smart investment for businesses expanding into the Indian market.

Is an EOR Right for Your Business?

Expanding into India’s fast-growing economy offers huge opportunities for global businesses. However, hiring legally and compliantly can be challenging due to strict labor laws, payroll complexities, and regulatory requirements.

An Employer of Record (EOR) solves these challenges by handling legal employment, payroll, benefits, and compliance—allowing businesses to hire talent in India quickly, risk-free, and cost-effectively.

But is an EOR the best choice for your business?

When Should You Use an Employer of Record in India?

•  You need to hire employees in India quickly (1-5 days).
•  You don’t want to set up a legal entity or deal with compliance headaches.
•  You’re hiring a small-to-mid-sized team (1-20 employees).
•  You want to test the Indian market before committing to long-term expansion.
•  You need a low-risk, legally compliant hiring solution.

When Does Setting Up a Legal Entity Make More Sense?

• You’re planning a long-term business presence in India.
• You’re hiring 50+ employees and want full control over HR, payroll, and benefits.
•  You’re willing to handle labor law compliance, tax filings, and local regulations.
•  You want to establish a corporate identity in India for branding and operations.

Key Consideration: If you’re scaling gradually, it’s smart to start with an EOR and later transition to a legal entity when it becomes cost-effective.

Why an EOR Is the Best Choice for Most Businesses

• Instant Market Entry – Hire in days, not months, without entity setup.
• Full Compliance Assurance – Avoid legal risks, tax penalties, and employee disputes.
• Hassle-Free Payroll & Benefits – Salaries, taxes, and social security are fully managed.
• Scalability & Flexibility – Expand or exit the market without legal complications.
• Cost-Effective for Small Teams – Lower upfront costs than setting up a legal entity.

For most companies looking to hire talent in India, an Employer of Record is the fastest, safest, and most compliant solution.