Quick answer: Payroll outsourcing means handing your salary calculations, payslips and statutory filings to an outside provider, while your own Indian entity stays the legal employer. The provider works on your registrations: your TAN for TDS, your EPF code and your ESIC number. If a deadline under the Code on Wages or the Income-tax Act, 2025 is missed, the liability is still yours.
- You need an Indian entity first, so payroll outsourcing starts after incorporation.
- Every person deducting TDS must hold a TAN under section 397 of the Income-tax Act, 2025.
- EPF applies once an establishment has 20 or more employees, and ESI generally at 10 or more.
- An employer of record, by contrast, employs your staff on its own entity and registrations.
How does outsourced payroll work in India?
You send the inputs and the provider runs the numbers. Your entity signs off and pays.
Each month you share attendance, joiners, exits and revisions. The provider computes gross pay, PF, ESI, Professional Tax and TDS, prepares the bank file and issues payslips. It then files returns on your logins, inside the deadlines of your payroll cycle.
The legal position doesn’t move. Section 397 of the Income-tax Act, 2025 puts the TAN and the TDS duty on the person deducting tax. That person is your company.
Employment contracts, Shops and Establishments registration, POSH compliance and exits stay with your HR team too. A provider can help, but you sign.
One 2025-26 point to test. Since 21 November 2025, EPF and gratuity are computed on “wages” under the Labour Codes, including the 50% wage rule. Ask your provider to show a recalculated payslip before you renew.
Is payroll outsourcing the same as an EOR?
No. The difference is who the employer is.
| Question | Payroll outsourcing | Employer of record |
|---|---|---|
| Indian entity needed? | Yes, yours | No, the EOR’s |
| Legal employer | Your company | The EOR |
| TAN, PF and ESI codes | Yours | The EOR’s |
| Employment contract signed by | Your company | The EOR |
| Liability for missed filings | Yours | The EOR’s |
| Typical user | Companies with an entity | Companies without one |
A PEO sits in between, with shared employer duties. Our explainer on payrolling vs employer of record goes deeper.
Which mistake costs foreign companies most?
Assuming outsourcing moves the risk. It doesn’t.
Suppose your provider files a Form 138 late. The fee and any interest attach to your TAN, and the labour inspector writes to your registered office, not the vendor’s. So check the contract for indemnities and audit what gets filed.
How does Remunance fit if you already have an Indian entity?
Remunance offers compliance management for companies already employing in India, covering TDS, quarterly TDS returns, EPF, ESIC, Professional Tax and Labour Welfare Fund on your registrations. Teams still without an entity can use our EOR, and later move those staff onto their own company through our India subsidiary formation service. To work out which model suits your headcount, ask for a payroll model comparison.
What else do people ask about payroll outsourcing?
Is payroll outsourcing legal in India?
Yes. Indian law doesn’t stop you using a payroll processor. What it does is keep the statutory duties, and the penalties, with the employer.
Do I need an Indian entity to outsource payroll?
Yes. Without an entity you have no TAN, PF code or ESI number for a provider to file under. That gap is why foreign companies without an entity use an employer of record instead.
What does payroll outsourcing cost in India?
Pricing varies by provider and headcount, so compare quotes on scope. Check whether filings, payslips, shadow payroll for expats and year-end certificates are included or billed extra.