Top 5 reasons companies choose an Employer of Record (EOR) in India
- Natia Gabarashvili
- Sep 17
- 9 min read
Table of contents:
Introduction: Why companies are turning to EOR in India
India’s talent pool is massive. Engineers, data scientists, finance pros, customer support teams, you name it, you’ll find them here. And at salaries that make US and European CFOs quietly weep with relief.
But there’s a catch: compliance in India is a maze. Every state has its own Shops & Establishments Act, PF and ESI must be filed on time, gratuity rules kick in after five years, and the penalties for slipping up aren’t small.
Setting up your own entity sounds good in theory, until you hit the 3–6 month wait for incorporation, licenses, and registrations.
Add in local HR, legal retainers, and audits, and suddenly that “cheap” expansion looks a lot more expensive.
That’s why more and more global companies are choosing to hire through an Employer of Record (EOR). With an EOR, you can start onboarding employees in weeks, stay fully compliant, and keep your costs predictable.
In this article, we’ll break down the top 5 reasons companies prefer EORs in India:
Quick market entry without entity setup
Full compliance with complex Indian labor laws
Access to India’s skilled talent pool
Cost efficiency compared to entity setup
Comprehensive HR and payroll management
Let’s get into it.
Quick market entry without legal entity setup
If you’ve ever tried to set up a legal entity in India, you’ll know it’s not like grabbing a dosa from a street vendor, fast, cheap, and satisfying.
It’s more like getting married in India: paperwork everywhere, a cast of thousands (lawyers, accountants, government officers), and a timeline that drags on 3–6 months, minimum.
Here’s the checklist you’ll face:
MCA Incorporation through the Ministry of Corporate Affairs (forms, digital signatures, director IDs).
PAN, TAN, and GST registrations are just to pay taxes legally.
Shops & Establishments Act registration in each state where you operate.
PF and ESI registrations for social security.
A corporate bank account, which in India can sometimes feel like applying for citizenship.
All that before you can legally put one engineer in Bengaluru on payroll. That’s not “time-to-hire,” that’s “time-to-yawn.”
Now contrast that with an Employer of Record (EOR). You sign one agreement, and your employees can be onboarded in 2–3 weeks.
Contracts are compliant with Indian labor laws, payroll runs in rupees, Provident Fund and ESI filings happen on schedule, and your new team is already working while your competitors are still stuck explaining to a notary why their stamp is slightly smudged.
This speed isn’t just a nice-to-have; it’s a competitive edge. In India, top engineers and data scientists are off the market in 10–15 days. If you can’t issue a legal offer quickly, you lose them to the startup across the road in Koramangala that can.
Who benefits most from EOR speed?
Startups that want to test the Indian market without sinking cash into bureaucracy.
Pilot teams for product-market validation in hubs like Hyderabad or Pune.
Enterprises need a fast ramp-up for support centers without waiting half a year.
The bottom line: an EOR lets you skip the Bollywood-length bureaucracy and get straight to the work.
Full compliance with complex Indian labor laws
Hiring in India means navigating one of the most layered regulatory systems anywhere. National laws, state-specific rules, and industry-specific obligations all stack together. A company hiring in Bengaluru and another in Mumbai may face different sets of rules, even though both are in the same country. Missing a single filing doesn’t just trigger fines; it can snowball into lawsuits, delayed operations, and reputational damage.
The key regulations every employer faces
Provident Fund (PF): Employers contribute 12% of basic wages into a government-managed retirement scheme. Delays or errors in filing bring penalties and interest charges.
Employee State Insurance (ESI): Covers medical, disability, and maternity benefits for employees earning below ₹21,000/month. Employer contribution is around 3.25% of wages.
Gratuity: Employees who complete five years of continuous service are entitled to gratuity. Employers need to provision about 4.81% of wages. Non-payment can lead to claims in labor courts.
Maternity Leave: Female employees are entitled to 26 weeks of paid maternity leave. Non-compliance risks both fines and reputational backlash.
Shops & Establishments Acts: Each state mandates its own rules on working hours, leave, overtime, and record-keeping. Inspections are common, and missing registers often attract penalties.
Other Statutory Liabilities: Professional tax in some states, mandatory bonuses for eligible employees, and compliance with the Minimum Wages Act.
The risk of going it alone
Foreign companies often underestimate how fragmented compliance is in India. Payroll errors, missing ESI registrations, or misapplied state rules can lead to:
Hefty fines from authorities.
Employees filing disputes in labor courts.
Operational delays while legal issues are resolved.
For businesses new to India, compliance isn’t just “legal hygiene”, it’s a barrier to growth.
How an EOR acts as a compliance shield
An Employer of Record (EOR) takes full ownership of these obligations. They:
Handle PF and ESI registrations and filings on time.
Maintain gratuity provisions for long-term employees.
Draft contracts that comply with both central and state laws.
Manage maternity benefits, leave entitlements, and statutory bonuses.
Ensure payroll taxes (TDS) are calculated and filed correctly.
In short, the EOR becomes the legal employer on paper, absorbing compliance risk so you don’t have to. That means you can focus on growth while your EOR provider in India ensures no inspector walks in with a fine notice.
Access to India’s large and skilled talent pool
India isn’t just BIG, it’s deep.
With more than 1.4 billion people and a workforce that adds over 12 million new graduates every year, the country offers unmatched scale.
It’s not just numbers either; the quality is world-class. From Bengaluru’s software engineers to Hyderabad’s biotech researchers, Mumbai’s finance analysts, and Gurgaon’s customer success managers, India covers the spectrum of modern business needs.
Add in the world’s largest English-speaking talent pool outside the US, and suddenly India isn’t just an option, it’s a competitive advantage.
Sector-by-sector highlights
IT & Engineering: India is home to over 5 million software developers, and hubs like Bengaluru, Pune, and Hyderabad churn out coders, cloud specialists, and AI engineers faster than Silicon Valley can recruit them.
Finance & Accounting: Mumbai, India’s financial capital, produces some of the best-trained accountants, analysts, and fintech experts, many of whom are ACCA- or CFA-certified.
Healthcare & Life Sciences: From Chennai’s medical research centers to global pharmaceutical hubs in Ahmedabad, the talent pipeline supports both R&D and clinical roles.
Customer Support & BPO: With decades of outsourcing experience, India has built a global reputation for affordable, high-quality multilingual support teams.
The EOR advantage: nationwide hiring without red tape
Here’s the catch: hiring directly in India means separate registrations in every state where your employees sit. Karnataka has its Shops & Establishments Act. Maharashtra has its own version. Each comes with unique paperwork, inspectors, and filing schedules.
An Employer of Record (EOR) cuts through this. Instead of navigating 28 states and 8 union territories, you sign one agreement and can hire employees anywhere—from Tier 1 metros to Tier 3 cities without touching multiple local labor offices.
Scaling beyond borders
It’s not just domestic hires.
For global companies bringing in specialists from abroad, immigration and residency requirements add another layer of complexity. A strong EOR handles sponsorships, work visas, and registrations with the FRRO (Foreigners Regional Registration Office) so you can blend local and expat teams seamlessly.
Cost-efficiency compared to entity setup
On paper, India looks cheap. Salaries are lower than in the US or Europe, and office space in Bengaluru costs less than a single desk at WeWork in London. But the real cost isn’t just salaries, it’s the bureaucracy.
To legally hire in India, you need to:
Pay incorporation and registration fees with the Ministry of Corporate Affairs.
Register under the Shops & Establishments Act in every state where you operate.
Set up GST, PAN, TAN, and payroll tax accounts.
Maintain a local HR team to handle Provident Fund (PF), Employee State Insurance (ESI), gratuity, and maternity leave filings.
Retain legal and accounting counsel for ROC filings, tax audits, and inspections.
Rent or lease an office to maintain “substance” for compliance.
Even before hiring your first employee, you’re looking at $15,000–$20,000 in setup costs, plus recurring annual overheads.
Why EORs are cheaper (and smarter)
With an Employer of Record (EOR), all of that disappears. For a flat fee of €199 per employee per month with TeamUp, you get:
No hidden audits. No surprise penalties. Just one invoice that covers everything.
Cost scenario: Hiring 5 employees in Bengaluru
Let’s say you want to hire 5 software developers in Bengaluru at ₹100,000/month each (~€1,100).
Entity Setup:
Upfront incorporation and registrations: ~€18,000.
Annual compliance (legal, HR, audits): ~€12,000.
Office lease + admin: ~€15,000/year.
Total Year 1 overhead (before salaries): €45,000+.
EOR with Team Up:
Monthly fee: €199 × 5 employees × 12 months = €11,940/year.
Zero setup cost, zero audit stress.
The math is simple. By going EOR, you save tens of thousands of euros in year one, while staying compliant and agile.
The hidden price tag of setting up in India
On paper, India looks cheap. Salaries are lower than in the US or Europe, and office space in Bengaluru costs less than a single WeWork desk in London. But the real cost isn’t just salaries, it’s the bureaucracy.
To legally hire in India, you need to:
Pay incorporation and registration fees with the Ministry of Corporate Affairs.
Register under the Shops & Establishments Act in every state where you operate.
Set up GST, PAN, TAN, and payroll tax accounts.
Maintain a local HR team to handle Provident Fund (PF), Employee State Insurance (ESI), gratuity, and maternity leave filings.
Retain legal and accounting counsel for ROC filings, tax audits, and inspections.
Rent or lease an office to maintain “substance” for compliance.
Even before hiring your first employee, you’re looking at $15,000–$20,000 in setup costs, plus recurring annual overheads.
Why EORs are cheaper (and smarter)
With an Employer of Record (EOR), all of that disappears. For a flat fee of €199 per employee per month with TeamUp, you get:
Legal contracts issued under Indian law.
Payroll processed in INR with all PF, ESI, and tax filings.
Statutory benefits like gratuity and maternity leave are administered correctly.
Optional add-ons like health insurance, equipment, and workspace stipends.
No hidden audits. No surprise penalties. Just one invoice that covers everything.
Cost scenario: Hiring 5 employees in Bengaluru
Let’s say you want to hire 5 software developers in Bengaluru at ₹100,000/month each (~€1,100).
Entity Setup:
Upfront incorporation and registrations: ~€18,000.
Annual compliance (legal, HR, audits): ~€12,000.
Office lease + admin: ~€15,000/year.
Total Year 1 overhead (before salaries): €45,000+.
EOR with TeamUp:
Monthly fee: €199 × 5 employees × 12 months = €11,940/year.
Zero setup cost, zero audit stress.
The math is simple. By going EOR, you save tens of thousands of euros in year one, while staying compliant and agile.
Comprehensive HR and payroll management
Running a compliant HR and payroll operation in India is not a “nice to have”, but a survival. The list is long and unrelenting:
Contracts: Drafted in line with Indian labor laws, bilingual if needed, and watertight for IP and confidentiality.
Payroll: Salaries calculated in INR with correct tax deductions (TDS) and contributions to Provident Fund (PF) and Employee State Insurance (ESI).
Benefits: Statutory obligations like gratuity and maternity leave, plus health insurance, allowances, and voluntary perks.
Leave Management: Tracking annual, sick, and maternity leave while complying with state-specific Shops & Establishments Acts.
Offboarding: Full & final settlements, relieving letters, and exit documentation required under Indian law.
Why leaders choose to offload this
For a foreign company, setting up HR operations in India means hiring local HR staff, finding benefits vendors, and keeping up with every compliance update issued by ministries and state labor departments.
Leadership teams then spend hours firefighting payroll errors, reviewing contracts, or scrambling to resolve employee grievances.
An Employer of Record (EOR) absorbs all of this. The EOR becomes the legal employer, handling day-to-day HR and payroll administration so your leadership team can focus on product, customers, and growth instead of paperwork.
Employee experience matters
Smooth HR and payroll aren’t just about compliance; they’re about retention. Employees in India expect:
On-time salaries (delays are a dealbreaker).
Proper PF and ESI deposits (they check their accounts).
Health insurance and perks that match what competitors offer.
An EOR ensures that employees feel cared for from day one, which directly impacts engagement and retention.
Conclusion
Expanding into India is exciting, but it’s not simple. Entity setup drags on for months, labor laws vary by state, and compliance mistakes can get expensive fast.
That’s why more global companies are leaning on Employer of Record (EOR) services: they let you hire in weeks, guarantee compliance, and keep costs predictable.
With an EOR, you get more than contracts and payroll; you get a partner who manages PF, ESI, gratuity, benefits, workspace, and even offboarding.
Your leadership team focuses on scaling, while your employees in India enjoy a seamless experience from day one.
At TeamUp, we keep it transparent: a flat €199/employee/month covers the full scope of EOR services in India.
No hidden fees, no surprise audits, no wasted months waiting on entity registration.
