Employer of Record Services in India: A Comprehensive Overview

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Setting up and managing a business in India is complex due to the ever-changing employment laws and strict tax and visa regulations. Due to lengthy approvals and compliances, it can take between 6 and 9 months to onboard employees. 

However, India is the fifth largest economy in the world with a large talent pool of web developers, software engineers and IT consultants. However, it is challenging to own and run a legal entity in the country because each of its 28+ states and union territories has different employment laws. There are strict laws related to taxes, social security and employee insurance. Here, an employer of record (EOR)  in India comes into the picture.

An employer of record service with local expertise can fulfil an organisation's compliance with the law. It mitigates the administrative complexities related to business registration as they have a firm grip on licensing, working hours, leave policies etc. EOR service providers in India, like Rapid, can reduce employee onboarding time from months to minutes.

In this article, we will understand the advantages and disadvantages of setting up one's own legal entity vs hiring EOR services to deal with the hiring, payroll, benefits and compliances. We'll also explain the factors to consider for choosing EOR services.

What is an Employer of Record Service? 

An employer of record service enables businesses to employ individuals in foreign countries where they don’t have a legal entity. They handle payroll, employee benefits, taxes, compliances and human resource administration.

They are the official employer on paper, but the control of workflow management is always with the business owners. This arrangement allows businesses to expand into new markets and hire employees in different jurisdictions without the need to establish their own local entities.

What services do EORs provide?

  • They facilitate global workforce expansion by hiring full-time employees in foreign  countries as legitimate employers.
  • They manage employer taxes and handle payroll processing with tax compliance. 
  • They administer benefits such as health insurance and provide background verification services to ensure the credibility of potential hires.
  • They manage compliance with local employment laws, reducing legal risks for companies.

What is the difference between PEO and EOR?

A professional employer organisation (PEO) requires a company to own a legal entity in a foreign country. It operates as an outsourced human resource department but with a requirement of co-employment. 

But, EOR services allow you to hire in foreign countries without owning a legal entity. Instead, it will act as the legal employer of your company's distributed workforce on paper and be accountable for full employment responsibilities.

What is the difference between EOR and staffing agencies?

An EOR is a legal employer, assuming all employment responsibilities for your company's distributed workforce. In contrast, staffing agencies act as intermediaries that connect jobseekers with full-time and part-time job opportunities.

An EOR may collaborate with a staffing agency to fulfil specific staffing requirements. For example, they can engage a staffing agency if a client requires specialised skill sets. 

However, the staffing agency itself cannot take on the responsibilities and functions of EOR services, which involve comprehensive employment obligations like payroll, benefits administration, compliance and legal responsibilities.

Advantages of Choosing an EOR Services in India

An India employer of record service offers various advantages. Here are the key benefits:

1. Removes market entry barriers

Setting up a business in India takes a long time due to the complexities of employment laws, tax regulations and compliances. EOR services that support the Indian geography handle the legal and administrative aspects of running a business so that companies can focus on growth.

2. Ensures adherence to local laws

EOR services in India help companies abide by tax regulations and employment requirements. They have expertise in the Indian labour market, which makes it easy to navigate compliance obligations.

3. Saves time

Partnering with EOR services saves businesses considerable time and effort. They handle administrative tasks that include:

  • Payroll processing: They handle the calculation, processing and distribution of employee salaries
  • Tax compliance: They manage filing tax returns and staying updated with tax regulations
  • Employee benefits administration: They assist in managing health insurance and other employee welfare benefits
  • HR management: They handle functions like onboarding and offboarding employees and managing leave and attendance
  • Legal compliance: They adhere to employment laws, including labour contracts and employment agreements

4. Reduces business risks

EOR services shoulder the legal responsibilities associated with being an employer. It mitigates business risks and provides a buffer for companies, protecting them from potential legal penalties.

5. Reduces costs: 

EOR services reduce costs of setting up and running a legal entity. As they handle administrative tasks, they reduce the need for dedicated staff. Also, they ensure compliance with local laws and regulations, protecting businesses from penalties. 

6. Offers flexibility in scaling operations

An employer of record service in India enables businesses to scale their workforce up or down to maintain agility and optimise according to changing requirements.

Things to Know When Hiring in India 

India is a diverse country to tap into for talent. The business culture, Indian labour laws and employee benefits are bound to differ from those in foreign countries. So when deciding to hire Indian employees, businesses should consider the following things: 

Working Hours: In India, the typical working hours are 40-45 hours a week. People work eight to nine hours a day. In case of working overtime, they should be compensated double their normal wages. 

Flexibility Matters: Post the pandemic, Indian employees place a lot of emphasis on work flexibility and the ability to work remotely. A survey found that 71% of Indian employees prefer flexibility over higher salaries. 

Holidays: The vacation days in India differ from one state to another. But on average, there are 10-12 public holidays annually in India based on significant religious festivals. Three of these are mandatory holidays, and the employers can choose the rest. 

The list of these holidays must be specified when an employee joins the organisation. If an employee happens to work on any of these days, they are entitled to a compensatory off. Other than the public holidays, some companies have additional provisions for sick and casual leaves. 

Employee benefits: Indian labour laws have well-defined regulations to provide some statutory employment benefits to its employees. These include medical insurance, provident fund, maternity leave, pension, and gratuity. Some organisations may also provide supplemental benefits like reimbursements, food coupons, transportation services etc. 

Notice period: Whether you plan to hire a new employee from another organisation or wish to terminate one’s employment contract, they are liable to at least a month’s notice period. The notice period is applicable to employees who have been with the company for a year. 

The regulatory framework for hiring in India can be complex for foreign companies. It is thus best to partner with employer of record services in India who know all these local nuances. They understand the Indian business environment, minimum wage requirements, regulations related to foreign investments and so on. 

How to Choose the Right EOR  in India

Factors/questions to consider when choosing the right employer of record services in India:

1. Is the EOR service knowledgeable about India and its regulations? 

EOR in India must have a good grip on the Indian market. That includes local employment laws, regulations and cultural nuances. 

2. What is the level of customer support provided? 

Check the status of customer support offered by the EOR services. Prioritise those that offer responsive support, promptly address queries and provide timely assistance to the company and its employees.

3. Does it offer employee benefits?

EOR services offer health insurance, background verification and other employee benefits in partnership with local vendors. An important differentiator for choosing the ideal EOR service would be their benefits packages.

4. Does it offer intellectual property (IP) protection? 

IP protection is important, particularly in technology-driven industries. Verify if the EOR service has measures to safeguard your company's confidential information. Reviewing their data security protocols to protect sensitive data is advisable.

5. Does the EOR service provide other workforce solutions?

Consider whether the EOR services offers other workforce solutions such as recruitment support, workspace customisation, office rentals and equipment purchases.

6. Does the EOR platform have technology and reporting capabilities?

Check the technology infrastructure and reporting capabilities of the EOR service. A modern platform can streamline payroll management, human resource administration and reporting processes.

7. Does it enable scalability?

Assess the ability to support your business's growth. Consider if the EOR service has a scalable model that can accommodate your workforce size.

8. How is its reputation and does it have references?

Look for client testimonials, case studies or references for their services in India. Positive feedback can give you confidence in their ability to deliver quality services.

9. Is it agile? 

Assess their ability to adapt to changing business needs and regulatory updates. Agile EOR services will be helpful in addressing challenges and providing customised solutions. 

10. Does it have transparent pricing?

Ensure the EOR services offer transparent pricing models without any hidden fees, enabling you to effectively manage your allocated budget.

Why Choose Rapid EOR in India?

Rapid, an EOR with deep expertise in India makes hiring agile and cost-effective by adapting to the needs of each business. It provides:

  1. Flexible workspace solutions: Unlike other platforms, Rapid empowers you to choose and rent office spaces according to your preference, enhancing your workspace customisation options.
  1. Health insurance: Rapid offers three medical insurance plans based on your company's needs in partnership with Plum. 
  1. Equipment ownership: Rapid enables you to purchase equipment and ensures proper management, while some platforms limit equipment options to expensive rentals.
  1. GST exemption: Rapid exempts non-salary payments, such as office space rentals and equipment purchases, from additional GST charges. It results in substantial savings of nearly 18%.
  1. Flexibility to implement your organisational culture: Businesses can design their salary structure, create a customised holiday calendar, establish their leave policy and determine the benefits they wish to provide to their employees.
  1. Integrated services marketplace: Streamline your operations by eliminating the need to engage with multiple vendors. Rapid's integrated marketplace offers you to hire the necessary professionals while enjoying an end-to-end customer experience on a single platform, from team recruitment and management to onboarding.

How Much Does it Cost To Hire in India?

Businesses should have a stipulated budget for business expansion by hiring international employees. One must consider all the costs of hiring a new employee besides the remuneration. As per the US Small Business Association, there is a rule of thumb that the cost of hiring an employee is typically 1.25 to 1.4 times the base salary.

An employer has certain mandatory costs when employing Indian workers, such as payroll taxes (Employee Provident Fund), overtime pay, paid vacation leaves, and other employee benefits. Other additional hiring costs include posting ads on premium job boards, background verification fees, visa processing (in case of relocation) and onboarding. 

If businesses plan to register an entity in the country, the costs are manifold with registrations and licenses required in the process.

The average salaries in India differ as per roles and industry. But in comparison to the US, the costs are cheaper in India. The cost of living in India is also relatively low compared to many Western countries, which translates into lower labour costs for businesses. A report states the average monthly salary of a skilled worker in India is ₹ 32,840 ($422). With additional costs, these average costs could be approximately $600. These costs would vary depending on the experience of the employee you hire. 

On the other hand, if you look for EOR service providers in India, you could get a comprehensive package that handles all the hiring needs at a significantly lower cost. You can consider Rapid for your cost-effective hiring requirements in India.  


1. What are the benefits of using an India employer of record service?

An India EOR services has deep local expertise and can help companies navigate the complexities of approvals and compliances while setting up a legal entity in the country.

2. What matters most when choosing an employer of record?

When choosing an employer of record, the essential factors to consider are:

  • Knowledge of employment laws 
  • Transparency in pricing and services
  • Level of customer support provided
  • Compliance expertise
  • Ability to handle payroll with tax compliance
  • Flexibility in meeting specific business needs

3. Is an EOR legal?

Yes, an employer of record (EOR) is a legal entity that serves as the official employer for tax and legal purposes. 

4. How much does an EOR cost?

While Rapid’s pricing is $599 per month per employee for full-time employees, other EOR providers can charge up to $770 for full-time employees. 

Rapid also has special prices for startups: 

  • $349 per employee per month (employees) 
  • $39 per employee per month (contractors). 

Rapid has 100% transparent pricing with no hidden fees. In contrast, many EOR services do not provide open pricing on their websites.

5. Does an EOR protect your sensitive and confidential information?

Yes, an employer of record has measures to protect sensitive and confidential information.  

6. What is the duration to get operational with an EOR service?

The time required to get operational with an EOR service ranges from a few weeks to a couple of months. In comparison, Rapid can reduce the onboarding time from 6 months to 5 minutes.

7. Does EOR in India help with tax filing?

Yes, an EOR in India can assist with tax filing through its partnerships with local service providers, including handling employer taxes to ensure compliance with tax regulations for the company it serves.

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