What is an employer of record in India, and when should you use one?
India rules as of 30 October 2026.
An employer of record (EOR) in India is a locally registered company that legally employs your worker, issues the Indian offer and appointment letters, runs payroll with PF, ESI and TDS, and handles exit. You manage the work. It suits one to a handful of hires before you set up your own Indian company.
At a glance
- The EOR is the employer on PF, ESI, gratuity and tax records.
- You direct the work; the EOR holds the contract.
- Fees are vendor-specific; none are quoted here because we have no verified source.
- In LiveRec payroll, a worker in a country where your company has no verified registration is employed through our local payroll partner. See how LiveRec payroll works.
What does the EOR handle?
- Offer and appointment letters in Indian format with CTC (cost to company) breakup.
- Monthly payroll in Rs, TDS on salary (section 192 of the 1961 Act; section 392 of the Income-tax Act, 2025 for payments from 1 April 2026, per the Income Tax Department), employee and employer PF, ESI where applicable, professional tax.
- Leave, maternity and other statutory benefits, notice and exit paperwork.
- Statutory registrations in the EOR's name.
What stays with you?
Day-to-day management, performance, equipment, confidentiality, IP assignment (confirm it is in the contract), and your own foreign tax position.
EOR vs subsidiary in India
| Question | EOR | Own subsidiary |
|---|---|---|
| Time to first hire | Short | Longer: incorporation, PAN/TAN, registrations, bank, FEMA filings |
| Fixed cost | Per-employee fee | Accounting, audit, filings, directors |
| Control of contract | Vendor template with local-law terms | Your own |
| Best at | 1 to 10 people | Larger, long-term teams |
| Exit | Vendor runs it | You run it |
Worked example (illustrative only)
Example: CTC Rs 15,00,000 (Rs 15 lakh). Monthly CTC Rs 1,25,000. Suppose an example vendor fee of Rs 10,000 per month: total monthly cost Rs 1,35,000, which is 8% above CTC. The fee figure is a placeholder, not a market price. Get itemised quotes.
What are the risks?
- Permanent establishment: your foreign company could still create a taxable presence in India depending on activities. Take tax advice.
- Misuse as a way to avoid compliance: the EOR does not remove your duty to treat the person lawfully.
- Notice periods and non-competes: Indian courts often limit post-employment restraints.
- Data and IP clauses must be in the contract.
What to ask an Indian EOR vendor
- Which Indian entity is the employer? Show the registrations (PAN, EPFO, ESIC, shops and establishment).
- Is the fee fixed or % of CTC? What is excluded?
- Who pays gratuity and leave encashment on exit?
- How are statutory increases passed through?
- Notice and termination process and cost.
- Can the employee transfer to my own entity later?
- Where is employee data stored?
FAQ
Is it legal to hire in India through an EOR? EOR arrangements are used widely; you still need compliant contracts and tax treatment. Check with an Indian adviser.
Who pays the salary? The EOR pays in rupees, funded by you.
How long does set-up take? Vendor-specific; ask for a written timeline.
Can I use an EOR for a contractor? No; an EOR employs. A contractor is a separate arrangement.
Next step: compare routes in how to hire in India as a US company.
Related guides
Sources
See front matter. Accessed 30 October 2026.
This is general information, not legal, tax or immigration advice. Rules change and your situation may differ. Consult a licensed attorney or qualified adviser.