Hiring & EOR 12 min read

If you're an HR manager at a US startup, chances are you've already had this conversation with your CTO or founder: "Can we just hire some engineers in India?"

Simple question. Not-so-simple answer — unless you know exactly how it works.

This guide walks you through everything: what an EOR actually is, how it compares to setting up your own entity, what it costs, and how to get your first India hire live without losing your mind.

1. What Is an Employer of Record (EOR)?

An Employer of Record is a company that legally employs workers on your behalf in a country where you don't have a legal entity.

Here's what that means in practice:

• The EOR is the legal employer on paper
• Your engineer gets a compliant employment contract, payroll, and benefits under the EOR's entity
• You direct the engineer's day-to-day work — they're 100% your team member
• The EOR handles all the legal, tax, and compliance obligations in that country

Think of it like a staffing company — except you retain full control over who you hire, what they work on, and how they're managed. The EOR just handles the local legal infrastructure.

What an EOR is NOT:

• It's not a staffing agency that finds people for you
• It's not a contractor arrangement (your team members are full employees with benefits)
• It's not a permanent solution if you're planning to scale significantly in India

2. Why India? A Quick Reality Check

India has over 5 million software engineers — the largest English-speaking tech talent pool in the world. Senior engineers with 5+ years of experience cost 60–70% less than their US counterparts, and the quality at the top end is genuinely world-class.

But India is also one of the most complex countries in the world to employ someone. Here's why that matters:

The compliance stack is enormous. A company with just 5 employees in India has the same compliance obligations as a 500-person company: monthly payroll tax filings, quarterly GST returns, annual income tax filings, Provident Fund (PF) registrations, Employee State Insurance (ESI) registrations, Professional Tax, Labour Welfare Fund contributions, and annual filings to India's central bank (RBI) if foreign funds are involved.

Miss one of these and you're looking at penalties — and in some cases, personal liability for the directors of your Indian entity.

That's exactly why EOR exists.

3. EOR vs. Your Own Entity in India

This is the most important decision you'll make when expanding to India. Here's an honest comparison:

The honest take: For most US startups hiring their first 5–15 engineers in India, EOR is the right answer. You can move fast, stay compliant, and avoid a 12-month entity setup process that pulls your attention away from building product.

Once you hit 40+ employees and you're confident India is a long-term bet, transitioning to your own entity starts to make financial sense — the EOR markup becomes significant at scale.

4. What Does an EOR Actually Handle?

A good India EOR should handle all of this for you:

Employment & HR

• Drafting compliant employment contracts under Indian labour law (India has no at-will employment — notice periods of 30–90 days are standard)
• Managing offer letters, background checks, and onboarding paperwork
• Handling PTO, resignations, and terminations in compliance with India's updated Labour Codes
• Maintaining employee records as required by law

Payroll

• Monthly payroll processing in Indian Rupees (INR)
• TDS (Tax Deducted at Source) — India's equivalent of federal income tax withholding, deposited monthly to the Income Tax Department
• Provident Fund (PF) contributions — India's mandatory retirement savings plan, similar to a 401(k) but compulsory; employer contributes 12% of basic salary via the EPFO
• Employee State Insurance (ESI) — India's government health coverage scheme, similar to Medicaid; applies to employees earning below ~$250/month
• Professional Tax — a small state-level payroll tax, varies by state, similar to state income tax withholding
• Generating payslips and Form 16 — India's equivalent of a W-2, issued annually to every employee

Compliance Filings

• Monthly PF and ESI returns (equivalent of monthly 941 payroll tax deposits)
• Quarterly TDS returns (equivalent of quarterly 941 filings)
• Annual income tax filings for employees
• FEMA/RBI filings — required because your US entity is wiring USD to an Indian company for employment services; India's central bank requires these disclosures (35+ filings per year in total)

What most SaaS EORs DON'T handle (but you need):

• Hardware procurement (buying and shipping laptops to employees in India without attracting 40% customs duties)
• Hardware recovery when an employee leaves
• Office space if your team works in person

5. The Step-by-Step Hiring Process via EOR

Here's exactly what happens from the moment you decide to hire in India to the day your new engineer is productive.

Step 1: Select Your Candidate (That's Your Job)

An EOR doesn't recruit for you. You source, interview, and select the person you want to hire — through your own network, LinkedIn, Indian job boards like Naukri, or a local recruiting agency.

Once you've made an offer verbally, you bring in the EOR.

Step 2: Share Offer Details with the EOR

You give the EOR the basics:

• Candidate's name, contact, and PAN (India's tax ID — equivalent to SSN, used for all payroll tax filings)
• Agreed salary (in INR)
• Job title and role description
• Start date
• Any additional benefits (health insurance, variable pay, etc.)

Step 3: EOR Prepares the Employment Contract

The EOR drafts a compliant employment agreement under Indian law. This will include:

• Fixed and variable compensation breakdown (base + variable is standard in India, similar to base + bonus structures in the US)
• Notice period (typically 30–90 days in India — unlike US at-will employment, Indian law requires contractual notice on both sides)
• Non-disclosure and IP assignment clauses
• Leave entitlements per the applicable Labour Code (India has statutory PTO — typically 12–15 days earned leave per year, plus national and state holidays)

You review and approve. The candidate signs.

Step 4: Compliance Setup (Happens in Parallel)

Behind the scenes, the EOR registers your employee in their payroll system, sets up PF contributions, ESI (if applicable), and Professional Tax based on the employee's state of residence.

If this is your first employee via that EOR, there may be a one-time onboarding fee.

Step 5: Hardware and Workspace (If Needed)

If your engineer needs a laptop, a good EOR will procure it locally (no customs duties), configure it to your specs, and deliver it before day one. If they need office access, the EOR should be able to provide that too.

Step 6: Payroll Goes Live

On the first payroll cycle after the start date, your engineer gets paid on time in INR. You receive a single USD invoice covering salary, employer-side statutory contributions, and the EOR's fee.

Total time from signed contract to first day: typically 48–72 hours for a straightforward hire.

6. What Does It Cost?

EOR pricing in India generally has two components:

One-time onboarding fee

Typically $99–$250 per employee. Covers the compliance setup, contract drafting, and registration.

Monthly subscription fee

Usually charged per employee per month. For India, expect $99–$199/employee/month for a quality EOR. This covers payroll processing, all statutory filings, and the EOR's legal liability as the employer of record.

What's typically NOT included in the monthly fee:

• Hardware (quoted separately based on device and specs)
• Office space (quoted separately based on location and headcount)
• Health insurance (group health coverage in India costs ~$30/employee/month — a fraction of US rates)

Example: 5 engineers, mid-level salaries

For comparison: 5 mid-level engineers in the US Bay Area would cost $80,000–$120,000/month — and that's before you factor in FICA, FUTA, state unemployment insurance, and benefits like 401(k) matching and health premiums that typically add 20–30% on top of base salary.

7. When Should You Graduate from EOR to Your Own Entity?

EOR is not meant to be permanent. At some point, the economics flip and it makes more sense to run your own Indian entity.

The general rule of thumb: 40+ employees.

At that size, the cumulative EOR fees typically exceed the cost of running your own compliant entity (which requires a dedicated CA firm, a company secretary, and a local HR manager).

Beyond pure cost, there are other reasons to incorporate your own Indian entity:

• You want to issue ESOPs to Indian employees under a formal Indian ESOP scheme (US stock option grants to Indian employees have FEMA implications — a local entity simplifies this significantly)
• You're receiving significant revenue from Indian customers and need a local entity for GST purposes
• You want to apply for government incentives or tenders that require an Indian entity
• Your investors, board, or auditors require a cleaner corporate structure

The good news: a well-structured EOR relationship should make this transition seamless. Your employees stay in place, their employment continuity is protected, and the only change is who signs their payslips.

8. How to Choose the Right EOR for India

Not all EORs are equal. Here's what to look for specifically for India:

India-specific compliance expertise

India has 29+ states, each with slightly different labour law applicability. Your EOR should know the difference between Karnataka and Maharashtra employment rules. Ask them: "How do you handle Professional Tax across different states?" If they can't answer immediately, that's a red flag.

CA-backed compliance team

In India, payroll and tax compliance must be handled by Chartered Accountants. Check whether the EOR has in-house CAs or relies entirely on software. Software gets it right 90% of the time. A CA gets it right 100% of the time — and knows what to do when something goes wrong.

Physical infrastructure

Can they procure hardware locally? Do they have office space relationships? These matter more than you'd expect when you're managing a remote team 9.5 hours ahead of EST.

Transparent transfer policy

Ask directly: "What does it cost and how long does it take to move employees to our own entity?" If the answer is vague or involves large penalties, keep looking.

References from US tech companies

Ask for 2–3 client references specifically from US tech companies of a similar size. India EOR for a UK consulting firm is very different from India EOR for a US SaaS startup.

9. Common Mistakes US Companies Make

Treating Indian engineers as contractors instead of employees

This is the most common and most dangerous mistake. Misclassifying an employee as a contractor in India exposes you to back-tax liability, PF penalties, and potential legal action from the employee. Unlike the US, where contractor vs. employee classification has some grey area (the IRS's common law test, the ABC test in some states), India's position is much stricter. If someone works 40+ hours a week exclusively for you, they're an employee — full stop. There's no 1099 equivalent in India.

Not budgeting for the total cost of employment

The salary is only part of the cost. Employer-side PF contributions (12% of basic salary — think of it as mandatory 401(k) matching), group health insurance (~$30/employee/month), and gratuity accruals (a statutory severance-like benefit that vests after 5 years) add 18–22% on top of gross salary. The good news: even all-in, India's total employment cost is dramatically lower than a US W-2 employee where FICA, FUTA, SUI, health premiums, and 401(k) matching alone can add 25–35%.

Choosing a global EOR that doesn't specialise in India

A platform that covers 150 countries often covers India superficially. India's compliance complexity requires specialists, not generalists.

Skipping hardware planning

Many US founders assume their Indian hire will use their own laptop. That works for week one — until the laptop breaks, is stolen, or needs to be wiped when they leave. Sort out hardware before day one.

Not asking about the exit

The EOR you choose today is the one that controls the transition to your own entity tomorrow. Make sure you understand exactly what that transition looks like before you sign anything.

Peple is India's Employer of Record for US tech companies. We're founded by Chartered Accountants with deep India compliance expertise, and our BOT model is specifically designed to help you graduate to your own entity when you're ready. Learn more about how we work.

Written by Peple Team