Employer of Record in India

An employer of record (EOR) is a company that legally employs people in India on your behalf: it issues the contract, runs payroll, deducts tax and pays statutory contributions, while you direct the day-to-day work. Large global EOR providers publish fees of about US$599 to US$699 per employee per month, on top of salary and statutory costs.

Key points

• An EOR lets a UK company hire in India without its own entity, usually within weeks rather than months.

• Published fees at Deel, Remote and Oyster run from US$599 to US$699 per employee per month; salary and employer statutory costs are extra.

• The EOR removes payroll admin, not tax risk: if your EOR staff sell, negotiate or decide for the UK company, you can still create a permanent establishment in India.

• India's Labour Codes are in force from 21 November 2025, and the EPF wage ceiling rose to ₹25,000 a month from 17 September 2026, which affects EOR employment costs.

• Most UK firms should review switching to their own subsidiary once they pass roughly 10 to 15 people or the team becomes core to the business.

An EOR is one step in a longer India plan. For the full picture of entry vehicles, see our guide on how to set up a company in India.

What is an employer of record?

An employer of record is the legal employer of a worker in a country where the client company has no entity. The EOR signs the employment contract, registers the employee for provident fund and other schemes, runs payroll, deducts income tax at source and handles statutory compliance. The client company chooses the person, sets the work and manages performance.

How hiring in India through an EOR usually works:

1. You select the candidate and agree salary and start date.

2. The EOR issues an Indian employment contract and onboards the employee, including PAN, bank and provident fund details.

3. You sign a services agreement with the EOR. It invoices you monthly for salary, employer statutory costs and its fee, usually with a deposit up front.

4. The EOR pays the employee, deposits tax and contributions, and files returns.

5. Intellectual property is assigned from the employee to the EOR and then to you, so check that chain in both contracts.

Under Indian law the EOR is the employer, so obligations such as notice, gratuity, leave and termination process sit with it, but the commercial risk of a dispute usually comes back to you through the services agreement. For the other legal routes to hire, read can a foreign company hire employees in India.

How much does an EOR in India cost?

EOR cost in India has three parts: the provider's fee, the employee's salary, and the employer's statutory costs. The fee is the only part that changes when you switch to your own entity, so it is the number to watch.

India-focused providers often quote lower fees or a percentage of salary, and fees are usually negotiable above a few hires.

On top of the fee, the main employer statutory costs are:

• Provident fund. Employer contribution of 12% of PF wages. The mandatory wage ceiling rose from ₹15,000 to ₹25,000 a month from 17 September 2026; many employers contribute on higher wages by choice or contract.

• Gratuity. Payable after five years of continuous service (one year for fixed-term employees under the Code on Social Security), at 15 days' wages per year of service. Budgeting about 4.8% of wages is a common rule of thumb.

• Employees' State Insurance. Applies only to lower salary bands, so it rarely affects technology hires.

• Professional tax and labour welfare fund. Small, and vary by state.

• Wage definition. Under the Labour Codes, if allowances exceed 50% of total remuneration, the excess is added back to "wages", which increases PF and gratuity on salary structures heavy with allowances.

A simple way to compare: at US$599 a month, the fee alone is about US$7,200 a year per employee. At 10 people that is about US$72,000 a year, which you can set against the annual cost of running your own subsidiary (accounting, audit, company secretarial, payroll and tax filings).

EOR or your own subsidiary: which is better?

An EOR is better for speed and small numbers; your own subsidiary is better for control, cost at scale and anything strategic. The choice is rarely permanent: most firms start with an EOR and move.

If the alternative is an outsourcing vendor rather than an EOR, the question shifts to whether you should own the capability at all; our guide to whether to build an offshore team in India or keep a vendor covers that decision.

Does using an EOR create permanent establishment risk?

It can. An EOR moves the employment contract, not the activity. If people working for your UK company in India conclude contracts, negotiate on its behalf, or run core business from India, the UK company can still have a permanent establishment (PE) in India and owe Indian tax on profits attributable to it.

The main tests under the India–UK tax treaty:

• Dependent agent. A person in India who habitually concludes contracts, or plays the principal role leading to contracts, for the UK company can create a PE.

• Service PE. Services furnished in India through employees or other personnel for more than 90 days in a 12-month period, or for a related enterprise, can create a PE.

• Fixed place. A place at the UK company's disposal through which its business is carried on, such as a dedicated office.

EOR staff doing engineering, support or back-office work for the UK company carry lower risk than a country manager signing Indian deals. Our analysis of permanent establishment rules explains how a team creates a taxable presence; the same reasoning applies in the UK–India corridor.

Labour law is moving too. India's four Labour Codes took effect on 21 November 2025 and central rules followed on 8 May 2026, but many states had not notified their own rules by mid-2026.

When should you switch from an EOR to your own entity?

Most UK companies should plan the switch when one of these triggers is hit: headcount passes roughly 10 to 15, the team takes on senior or revenue-facing roles, you want to sign Indian customers, or India starts building core product. At that point the fee, the PE exposure and the control problem usually outweigh the convenience.

A switch needs planning: incorporate the subsidiary, complete FDI reporting, register for PF, tax and GST, sign intercompany agreements, then transfer employees with continuity of service and accrued gratuity handled properly. Run both in parallel for a month if you can.

The Greenwolf view: commercial design first, tax follows functions

An EOR is a tool for a stage, not a structure. Take a £15m UK consultancy that hires its first six engineers in Pune through an EOR. That is sensible while it tests the team. Once it has 25 people, a delivery lead and Indian clients, the EOR is costing it fees, control and possibly a PE, and the Indian operation should be its own company, paid on an arm's length basis for what it does.

The stage questions we ask:

1. Is India a market, a capability base, or both?

2. What roles are the first hires, and could any of them create a PE?

3. How many people will you have in 12 and 24 months?

4. Will India contract with customers or own IP?

5. What is the break-even between EOR fees and running your own entity?

6. How will you move employees across without losing continuity?

Talk to Greenwolf

Ready to hire in India or move your EOR team into your own entity? Speak with a strategist. Greenwolf handles the India piece end to end: structuring, incorporation, FDI reporting, payroll set-up, transfer pricing and the move from EOR to subsidiary.

This article is general information, not advice for a specific case.