Quick answer: Staff augmentation is a hiring model in which a vendor places its own skilled people inside your team for a set period. The vendor stays their employer and bills you for their time. In India, these placements count as contract labour under the OSH Code, 2020. Principal employer duties start once 50 or more contract workers are engaged.
- The OSH Code raised the contract labour threshold from 20 to 50 workers on 21 November 2025.
- A contractor engaging 50 or more contract workers needs a single licence, valid for five years.
- Manpower supply invoices attract 18% GST, usually on the full bill.
- From 1 April 2026, manpower supply counts as “work”, so 1% or 2% TDS applies under section 393(1).
How does staff augmentation work in India?
You borrow capacity without adding headcount. The vendor recruits, employs and pays. You direct the work.
Most Indian deals run on monthly rate cards. A senior developer might bill at a fixed monthly rate that covers salary, statutory costs and the vendor’s margin. You can scale down at the end of a sprint without a retrenchment process, because the person was never on your rolls.
That flexibility suits short projects. It also explains the churn. Placed staff know they belong to the vendor, so attrition tends to run high on long engagements. Our staff augmentation guide and the staff augmentation vs outsourcing comparison cover vendor selection.
What do the Labour Codes say about augmented staff?
They count as contract labour. That makes you the principal employer, with duties of your own.
The contract labour chapter applies once 50 or more contract workers were engaged on any day in the previous 12 months, under section 45 of the OSH Code. If the vendor skips wages, you pay. Section 57 also bars contract labour in core activities, with exceptions for work normally done through contractors, part-time needs or a sudden surge.
| Question | Staff augmentation | Employer of record |
|---|---|---|
| Who employs the person? | The vendor | The EOR |
| Can the role be your core activity? | Restricted under section 57 | Yes |
| Who pays if wages go unpaid? | You, as principal employer | The EOR |
| Typical length | Weeks to months | Ongoing |
Housekeeping, security and canteen work are not core. A software company’s engineering is core. So a long engineering bench built through an agency carries more risk than most foreign buyers expect. Read more on contract labour rules and the wider co-employment picture.
When does an EOR beat staff augmentation?
When the role is long-term, central to your product or needs people who feel like part of your company.
An employer of record hires the person you choose, on your title and salary band, with gratuity, PF and leave that run with their service. Augmentation suits a three-month migration or a short burst of testing, while a dedicated multi-year team is better weighed against an offshore development center. Our article on EOR vs staffing agency in India runs the numbers.
How can Remunance build your India team without staffing-agency churn?
Remunance recruits through its bundled talent acquisition service, then employs the hire directly as your EOR, with laptops and IT provisioning handled. Onboarding can happen in as little as 2 working days from a signed contract. If you are replacing a vendor bench with your own people, plan a dedicated India team with us.
What else do people ask about staff augmentation?
What is the difference between staff augmentation and outsourcing?
With staff augmentation you direct the people and own the outcome. With outsourcing the vendor delivers a defined result and manages its own team.
Is staff augmentation legal in India?
Yes. The vendor must hold a licence under the OSH Code once it engages 50 or more contract workers, and you cannot use contract labour for core activities outside the listed exceptions.
Does GST apply to staff augmentation invoices?
Yes, at 18%. Most advance rulings tax the whole invoice, salary included, because the vendor supplies manpower rather than acting as a pure agent.