Employer of Record (EOR)

While hiring Indian talent as contractors is an effective way to start, building long-term relationships often requires offering permanent employment with the security and benefits that come with it. For companies without a legal entity in India, Employer of Record (EOR) services make this possible.

The Challenge: From Contractor to Permanent Employee

As your relationship with Indian talent matures, you may encounter a common challenge:

Your contractors want:

  • Permanent employment status
  • Traditional benefits (PF, insurance, leave, etc.)
  • Job security and stability
  • Simplified tax situation (no quarterly filings)
  • Recognition as “employees” (not contractors)

You want to provide that, but:

  • You don’t have a legal entity in India
  • Setting up a GCC or subsidiary costs $500K-$2M+ and takes 6-12 months
  • Managing Indian payroll, compliance, and labor laws is complex
  • You’re not ready for the overhead of a full legal presence

The EOR solution bridges this gap.

What is an Employer of Record?

An Employer of Record (EOR) is a third-party service that becomes the legal employer of your talent in India while they continue working for you day-to-day.

How EOR Works

The Three-Party Relationship:

  1. You (Foreign Company) - The client who needs talent
  2. EOR Company - The legal employer in India
  3. Indian Talent - Works for you, employed by EOR

Flow:

  1. You engage an EOR service in India
  2. EOR legally employs your chosen talent on their Indian payroll
  3. Talent works for you (reports to you, does your work)
  4. You pay EOR a fee (talent cost + service fee)
  5. EOR pays talent as an employee with all benefits
  6. EOR handles all compliance, payroll, taxes, benefits, HR

In simple terms: EOR is your “legal employer infrastructure” in India without you having to set up your own entity.

What EOR Provides

For Your Talent:

  • Permanent employment status - Legal employee with an Indian employer
  • Statutory benefits - Provident Fund (PF), Employee State Insurance (ESI)
  • Payroll and TDS - Salary deposited, taxes deducted at source
  • Compliance - All Indian labor law requirements met
  • Benefits - Health insurance, leave policies, gratuity (depends on EOR package)
  • Employee contract - Proper employment agreement under Indian law
  • HR support - Leave management, documentation, queries handled by EOR

For You:

  • No legal entity needed - EOR is the employer of record
  • Full operational control - You manage the talent’s work, projects, performance
  • Compliance assurance - EOR handles all Indian regulations
  • Simplified payroll - One invoice from EOR, they handle individual payments
  • Scalability - Hire 1 person or 50 without entity setup
  • Risk mitigation - EOR assumes employer liabilities and compliance risks
  • Speed - Onboard employees in weeks, not months

Why Consider EOR for Indian Talent?

Retain High-Quality Talent

Top talent prefers permanent employment:

  • Greater job security
  • Traditional benefits
  • Career stability
  • Professional recognition

The reality:

  • Talented professionals often choose permanent roles over contract work
  • Long-term contractors may eventually seek permanent opportunities elsewhere
  • Offering permanent employment (via EOR) helps you retain your best people

If you’ve found great contractors, converting them to EOR-based permanent employment is a strong retention strategy.

Build a Stable, Committed Team

Contractor relationships can be transactional:

  • Less commitment from contractors (can leave with short notice)
  • Contractors may work with multiple clients
  • Limited loyalty or long-term investment

Permanent employment fosters commitment:

  • Employees invest in your company’s success
  • Stability encourages long-term thinking
  • Stronger team cohesion and culture
  • Easier to build institutional knowledge

EOR enables you to build a real team, not just a collection of contractors.

Simplify Growth in India

Starting with contractors makes sense, but as you scale:

  • Managing 10+ contractor relationships individually becomes cumbersome
  • Different contracts, payment terms, invoicing—it gets complex
  • Contractors handle taxes differently, creating inconsistency
  • Difficult to create unified team policies

EOR scales gracefully:

  • Standardized employment terms for all team members
  • Single point of contact for HR, payroll, compliance
  • Consistent benefits and policies across your Indian team
  • Professional HR infrastructure without building it yourself

If you plan to grow your India team to 5+ people, EOR becomes increasingly attractive.

Indian employment regulations are comprehensive:

  • Provident Fund (PF), Employee State Insurance (ESI), Gratuity
  • Shops and Establishments Act, Payment of Wages Act
  • Notice periods, termination procedures, severance rules
  • State-specific labor regulations
  • Annual compliance filings and audits

For foreign companies unfamiliar with Indian regulations:

  • Easy to make compliance mistakes
  • Risk of penalties or legal disputes
  • Difficult to stay updated on changing regulations

EOR companies are India compliance experts:

  • They handle all regulatory requirements
  • Stay current with law changes
  • Manage audits and filings
  • Reduce your risk and compliance burden

You focus on building products and growing business. EOR focuses on compliance.

How to Implement EOR for Your Indian Team

When to Consider EOR

Good situations for EOR:

Initial Hiring:

  • You want to offer permanent employment from the start
  • You’re hiring multiple people at once
  • Talent you’re targeting prefers permanent roles

Converting Contractors:

  • Contractors have proven their value (3-6+ months)
  • You want to retain them long-term
  • Contractors are asking for permanent employment
  • Contract renewal discussions—good time to propose EOR

Scaling Your Team:

  • Growing from 1-2 to 5-10+ people
  • Want unified employment terms and benefits
  • Need professional HR infrastructure

Strategic Commitment:

  • India is a key talent market for you long-term
  • You want to build a stable, committed team
  • Ready to invest in proper employment structure

Choosing an EOR Provider

Popular EOR services operating in India:

  • Deel - Global platform, 150+ countries, strong India presence
  • Remote.com - Full-service global employment solutions
  • Oyster HR - International hiring and compliance
  • Papaya Global - Payroll and EOR platform
  • Multiplier - Employment infrastructure for global teams
  • Velocity Global - International EOR and workforce management
  • Globalization Partners - Established EOR with deep India operations
  • Atlas HXM - Formerly known as Atlas, comprehensive EOR services

What to evaluate when choosing:

1. India Experience

  • How long have they operated in India?
  • How many employees do they manage in India?
  • Do they have local HR teams on the ground?

2. Compliance and Reputation

  • Are they fully compliant with Indian labor laws?
  • What’s their track record? (Reviews, references)
  • How do they handle audits and regulatory changes?

3. Service Level

  • What’s included? (Basic payroll only vs. full HR support?)
  • How responsive is their support team?
  • Do they provide dedicated account management?

4. Benefits and Packages

  • What benefits do they offer employees? (Insurance, leave policies, etc.)
  • Can you customize benefits for your team?
  • Are statutory benefits (PF, ESI) included?

5. Pricing Structure

  • Transparent pricing? (No hidden fees?)
  • Per-employee monthly fee or percentage of salary?
  • Typical range: $200-$600/month per employee + payroll costs

6. Technology and Platform

  • Easy-to-use dashboard for managing employees?
  • Integration with your tools (HRIS, accounting, etc.)?
  • Self-service portal for employees?

7. Scalability

  • Can they grow with you? (1 employee to 50+ employees)
  • Support across multiple Indian cities/states?
  • Multi-country capability if you expand elsewhere?

Do your due diligence: Talk to multiple providers, request demos, check references, compare pricing.

Understanding EOR Costs

Typical EOR pricing model:

  • Employee salary: Full cost of talent’s compensation
  • Employer contributions: Statutory costs (PF, ESI, gratuity provisions) ~13-15% of salary
  • EOR service fee: $200-$600/month per employee (or 10-15% of salary)
  • Benefits package: Cost of health insurance, additional benefits (varies)

Example calculation (illustrative):

  • Employee salary: $3,000/month
  • Employer statutory costs: ~$450/month (15%)
  • EOR service fee: $400/month
  • Total monthly cost: ~$3,850/month per employee

Compared to setting up own entity:

  • GCC setup cost: $500K-$2M+
  • Break-even: ~20-50 employees before own entity becomes more cost-effective
  • Ongoing overhead: HR team, accounting, compliance officers, legal counsel

For smaller teams (1-20 people), EOR is significantly more cost-effective than establishing your own entity.

Is It Worth It?

Yes, if:

  • You want to retain high-quality talent long-term
  • You’re committed to building a stable India team
  • You value compliance and risk mitigation
  • You want to offer competitive permanent employment
  • You plan to scale gradually (5-20+ people over time)

Consider own entity if:

  • You’re hiring 50+ people (EOR costs add up)
  • You need full control over employment policies and operations
  • You’re making a major, long-term investment in India (multi-year, large team)
  • You have resources for entity management (legal, HR, accounting teams)

For most companies on Elphe, EOR is the right choice for transitioning from contractors to permanent employment.

Best Practices

  • 🎯 Start with contractors, evolve to EOR - Prove the relationship first, then offer permanency
  • 🤝 Convert high performers - Use EOR to retain your best contractors
  • 📋 Choose reputable EOR providers - Do your due diligence; this is your employment infrastructure
  • 💬 Be transparent with talent - Explain the EOR model clearly; most appreciate it
  • 📊 Standardize employment terms - Use EOR to create consistent benefits and policies
  • ⚖️ Let EOR handle compliance - Trust them to manage labor law, payroll, benefits
  • 🌱 Scale thoughtfully - EOR grows with you from 1 to 20+ employees seamlessly
  • 🔄 Maintain operational control - You manage work and performance; EOR handles employment admin

Key Takeaways

  • 💼 EOR enables permanent employment - Offer real jobs without setting up a legal entity in India
  • 🏆 Retain top talent - High-quality professionals prefer permanent roles; EOR helps you compete
  • 📈 Scale gracefully - Grow from 1 to 20+ employees with professional HR infrastructure
  • ⚖️ Compliance made easy - EOR handles complex Indian labor laws so you don't have to
  • 💰 Cost-effective for smaller teams - Much cheaper than entity setup for teams under 20-30 people
  • 🚀 Fast to implement - Quicker than setting up your own entity
  • 🔄 Natural evolution - Contractor → EOR → Own entity is a common growth path
  • 🌍 Build a real team - EOR helps you create a committed, stable India team

Starting with contractors is smart—it’s low-risk and fast. But as relationships mature and you want to build a long-term team, EOR services provide the employment infrastructure you need to offer permanent jobs, retain top talent, and scale professionally.

Think of EOR as your “India HR team” that enables you to compete for the best talent without the complexity of setting up your own entity.

When you’re ready to move beyond contract work and offer the security and benefits that top talent values, EOR is your bridge to building a world-class permanent team in India.