An EOR (Employer of Record) is a third-party company that legally employs your hire in India on your behalf, handling payroll, taxes, benefits, and compliance so you do not need to set up a local entity. Use an EOR if you want a full-time employee with benefits and labor-law compliance. Use a contractor arrangement if the engagement is short-term, project-based, or a trial. Most US companies hiring their first 1-5 people in India start with contractors and move to an EOR once the relationship is proven and they want to offer full-time employment.
What an EOR actually does
An Employer of Record is exactly what the name says: they are the legal employer on paper. Your hire in India is technically an employee of the EOR's Indian entity, not of your US company. But you manage them day to day - you assign work, run 1:1s, set goals, and make performance decisions. The EOR handles the back-office employment mechanics:
- Payroll. They calculate and distribute salary in INR, on time, every month. You pay the EOR in USD; they handle the currency conversion.
- Tax withholding. India has income tax (TDS), professional tax, and other statutory deductions. The EOR withholds and remits these to the Indian government.
- Statutory benefits. Indian labor law requires employers to contribute to Provident Fund (PF), Employee State Insurance (ESI for lower-salary employees), and gratuity (a lump-sum payment after 5 years of service). The EOR handles all of this.
- Employment contracts. The EOR drafts compliant employment agreements under Indian law, including offer letters, NDAs, and IP assignment clauses.
- Termination compliance. If you need to let someone go, the EOR ensures notice periods, severance, and legal requirements are followed.
You get an employee who feels like yours and works like yours, without the legal overhead of setting up a company in India.
EOR vs contractor vs own entity
There are three ways to hire someone in India. Each has a place.
| Factor | Contractor | EOR | Own entity |
|---|---|---|---|
| Setup time | 1-3 days | 1-2 weeks | 3-6 months |
| Monthly cost (per person) | $0 overhead | $200-$600 EOR fee | $2,000-$5,000 (accounting, legal, office) |
| Benefits for hire | None (self-managed) | Full (PF, ESI, health, leave) | Full |
| Compliance risk | Moderate (misclassification) | Low (EOR owns it) | Low (you own it) |
| IP protection | Via contract clause | Built into employment agreement | Built into employment agreement |
| Best for | 1-3 people, trial, project work | 1-50 people, full-time, long-term | 50+ people, permanent India ops |
When to use a contractor
Contractors are the fastest and cheapest way to start. You sign a service agreement, they invoice you monthly, and you pay via international wire or a platform like Deel, Wise, or Payoneer. There is no EOR fee, no benefits overhead, and no setup delay.
Use a contractor when:
- You are hiring your first person in India and want to test the relationship before committing to full-time employment.
- The engagement is project-based or time-bound (3-6 months).
- You need someone quickly and cannot wait for EOR onboarding.
- The person already operates as an independent consultant with their own business registration.
The risk: if the relationship looks like employment (fixed hours, exclusive work, long tenure, company email), India's labor authorities could reclassify the person as an employee, which creates back-tax and benefits liability. This risk is low for genuine short-term engagements but increases the longer someone works exclusively for you.
When to use an EOR
An EOR makes sense when you want someone full-time, long-term, with proper employment status, but you do not want to register a company in India. This is the right choice for most US companies hiring 1-50 people in India.
Use an EOR when:
- You want to offer full-time employment with benefits (health insurance, PF, paid leave) to attract and retain better talent.
- The person will work exclusively for you for more than 6 months.
- You want clean compliance - no misclassification risk, no tax surprises.
- You need the EOR to handle termination and severance if the hire does not work out.
When to set up your own entity
If you are hiring 50 or more people in India and plan to grow, registering your own Indian subsidiary makes financial sense. The per-person cost of an EOR ($200-$600/month) adds up at scale, and having your own entity gives you full control over benefits, culture, and operations. But the setup takes 3-6 months, requires local legal counsel, and comes with ongoing accounting and compliance overhead. This is a growth-stage decision, not a day-one decision.
The most common path: start with 1-2 contractors, convert them to EOR employees after 3-6 months once you are confident in the relationship and the role, and consider your own entity only when you cross 40-50 people and the EOR fees become material.
What an EOR costs in India
EOR pricing in India falls into two models:
- Flat fee: $200-$600 per employee per month. This is the most common model. The fee covers payroll processing, tax withholding, statutory benefits administration, employment contracts, and compliance management. Lower end for basic service; higher end includes health insurance, equipment provisioning, and HR support.
- Percentage of salary: 15-25% of the employee's gross salary. Less common and less predictable, especially as salaries increase. Flat-fee is usually the better deal for mid-to-senior hires.
On top of the EOR fee, you pay the employee's salary, statutory employer contributions (PF, ESI), and any benefits you choose to offer (health insurance, equipment stipend). Total cost for an India employee via EOR is typically the salary plus 25-35% for all-in employer costs and EOR fee combined.
Top EOR providers for India (2026)
These are the providers we see most often with our clients. All support India, have local entities, and handle the full compliance stack.
- Deel - the largest global EOR platform. Strong self-serve dashboard, fast onboarding (typically 5-7 business days), competitive pricing. Good for companies that want a tech-first experience.
- Remote.com - strong India coverage with a focus on compliance. Owns their local entities (does not subcontract to local PEOs). Transparent pricing.
- Oyster HR - good mid-market option. Clean interface, solid benefits management, and a focus on distributed-team culture tools alongside the EOR mechanics.
- Multiplier - Asia-focused EOR with deep India expertise. Strong local support and fast onboarding. Good choice if most of your international hiring is in India or Southeast Asia.
- Papaya Global - enterprise-focused, strong reporting and analytics. Better fit for companies hiring 20+ people through an EOR who need consolidated global payroll visibility.
What to watch out for
- Hidden fees. Some EORs charge extra for offboarding, amendments to employment contracts, or benefits administration. Ask for a full fee schedule before signing.
- IP assignment. Make sure the employment agreement includes a clear IP assignment clause that gives your US company ownership of all work product. The EOR should handle this, but review the language.
- Notice periods. Indian employment law requires notice periods for termination, typically 30-90 days depending on the contract. Factor this into your timeline if you need to let someone go. You cannot fire someone on a Friday and have them gone on Monday.
- Benefits quality. Not all EOR health insurance plans are equal. Ask what the coverage includes and what hospitals are in-network. Good health insurance is a real retention lever in India - do not cheap out on it.
- Lock-in. Some EORs have minimum contract terms (6-12 months). Ask about this upfront, especially if you are testing with your first hire.
An EOR is not a staffing agency. They do not find candidates for you - they employ the people you have already selected. You still need a sourcing and vetting process to find the right person. That is where a recruiting partner like GTMly fits in: we find and vet the talent, and you or your EOR handles the employment.
The decision in one sentence
If you want a full-time employee in India with benefits and clean compliance, use an EOR. If you want a fast, flexible, low-overhead engagement for a trial or short-term project, start with a contractor. Either way, you do not need your own Indian entity until you are well past 40-50 people.
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