If you are planning to establish a team in India, it will not always be necessary for your company to incorporate there first. It all depends on how quickly you wish to hire, the kind of team that you need to assemble, and whether India is a testing ground or an expansion area.
For many foreign companies, an Employer of Record (EOR) is one of the easiest methods of hiring employees in India without setting up a company locally. An EOR acts as the legal employer, whereas your company controls the work of the workers.
This guide covers EOR hiring, contractors, payroll, benefits, compliance, costs, and when your own entity may make more sense.
Can a Foreign Company Hire Employees in India Without Setting Up a Company?
Yes. A foreign company can hire employees in India without registering an Indian company if it uses a compliant employment structure.
The most common route is an Employer of Record. The EOR signs the contract, runs payroll, manages statutory benefits, keeps records, and handles employment administration.
Contractors are another option, but only when genuinely independent. If someone works like an employee in practice, calling them a contractor does not remove employment obligations.
Three Ways Foreign Businesses Can Hire in India
| Hiring Model | Local Company Needed? | Best For | Main Concern |
| Employer of Record | No | Full-time employees | Service fees |
| Independent Contractor | No | Independent project work | Misclassification risk |
| Own Indian Entity | Yes | Long-term operations | Setup and compliance costs |
Employer of Record
The EOR is generally the quickest route when you wish to employ people in India without having the time to set up a physical presence.
The EOR takes care of employment contracts, payroll management, statutory obligations, benefits, and recordkeeping, whereas your business will handle day-to-day operations.
This route is effective for trying out the market, recruiting your first employees, or forming a remote workforce.
Independent Contractor
Contractors suit professionals who control how, when, and where they complete agreed work.
The real working relationship must match the contract. If someone is treated like an employee, the arrangement can create employment, tax, and labour-law concerns.
Own Indian Entity
Setting up your own company gives you direct control over employment, payroll, contracts and benefits.
It may make sense when your India team becomes larger. The trade-off is taking on setup, tax, accounting, payroll, and ongoing compliance.
How an Employer of Record Works in India: Step by Step
Choose the Candidate
Your company chooses the person, defines the role, agrees on pay and confirms the working relationship.
Prepare the Employment Contract
The EOR will prepare a local contract that covers salary, responsibilities, leave, benefits, notice, confidentiality, intellectual property, probation and termination.
Complete Employee Onboarding
The employee furnishes identity, tax, banking and employment data required for payroll and records.
Set Up Payroll and Benefits
The EOR calculates salary, makes the necessary deductions, deals with statutory contributions and administers agreed benefits.
Manage Daily Work
Your business does tasks, objectives, performance and communication. The EOR is still responsible for the legal administration of employment.
Handle Ongoing Compliance
The EOR keeps records, manages required filings, supports payroll compliance, and handles offboarding.
This takes away a lot of the work in building local HR and payroll infrastructure for companies that need to hire employees in India fast.
India Employment Compliance in 2026: What Foreign Employers Need to Know
India’s four Labour Codes came into force on November 21, 2025. They cover wages, social security, India’s Four Labour Codes came into effect on 21st November, 2025. These codes relate to wages, social security, industrial relations, and occupational safety.
Provisions at the state level are equally important, possibly affecting leaves, holidays, work conditions, registrations, and other compliance requirements.
Employment Contracts
Employees should have written terms relating to salary, duties, place of employment, leaves, notice, confidentiality, intellectual property, probation, perks, and termination.
Payroll and Tax
Indian payroll can involve salary calculations, tax withholding, statutory contributions, payslips, records, and filings.
An EOR generally manages these responsibilities. That is one reason companies choose this model when they first hire employees in India.
Statutory Benefits
Depending on eligibility, obligations can include EPF, ESI, gratuity, maternity-related benefits, leave, and other employee protections.
Qualifying fixed-term employees can become eligible for gratuity after one year of service under the relevant contract.
State-Level Requirements
An employee’s location can affect holidays, leave, professional tax, establishment requirements, and working conditions.
A provider helping you hire employees in India should understand both central and state-level requirements.
New Wage Definition
With the implementation of Labour Codes, there was a new definition of wage. If the sum of the excluded allowances exceeds 50% of the total salary, then that extra amount is included in wages.
So compensation structures should be reviewed rather than assuming a large part of pay can remain outside statutory wages.
How Much Does Hiring Through an EOR in India Cost?
Total employment cost = Employee salary + Statutory employer costs + Benefits + EOR fee
The total cost of using an EOR service provider in India will vary based on certain parameters like the employee salary, the cost of statutory contributions, benefits, and how the particular EOR provider charges its services.
An EOR provider can charge either a flat rate monthly fee per person, a percentage of payroll, or a combination of the two. Carefully analyze the total cost that you might incur, which includes the cost of onboarding, deposits, payroll costs, currency exchange costs, and termination costs before settling for a service provider.
When establishing a team in India, the use of an EOR service can be a more economical choice than establishing your own business in the country. However, as you continue to grow, compare EOR costs with establishing your own Indian entity.
Checklist for Hiring Your First Employee in India Without an Entity
Before you hire employees in India:
When Should You Set Up Your Own Company in India Instead?
An EOR is often a good place to start, but might not be the best long-term option.
If you are growing your India team, hiring is steady, and India is a permanent part of your business strategy, then it is more practical to set up a local entity.
A local company gives you more control over payroll, employee benefits, internal policies, banking, contracts, and day-to-day operations. Many companies start by hiring employees in India through The Right Hiring and then move employees over to their own entity when it makes commercial sense to have a long-term presence.
Not sure whether an EOR or Indian entity is right for your business? Contact The Right Hiring for expert advice on hiring, compliance, and setting up your India operations.