Employer of record in India: how it works, what it costs, when to exit
SRF Capital Studio Research DeskFunding Intelligence, SRF Capital StudioAn employer of record lets a foreign company employ people in India without an Indian entity. It is fast and clean for a small team and expensive for a large one. This report sets out how it works, what it costs, and when to leave.
Summary
- An employer of record legally employs people in India on a client's behalf, running contracts, payroll, tax and statutory contributions while the client directs the work.
- Global platforms list their EOR fees at roughly $400 to $699 per employee a month, which makes EOR cheap for a handful of hires and, on SRF's illustrative numbers, more expensive than an own entity beyond six or seven people.
- CFOs should use EOR for speed and for small or uncertain teams, price the permanent establishment, contract-labour and data-protection risks explicitly, and write the exit to an own entity into the contract on day one.
What this report covers
This is SRF's specialist report on employer-of-record services in India. It is written for CFOs of foreign companies and global capability centres deciding how to employ people here, for Indian founders using EOR to hire abroad or offering it as a service, and for investors in EOR and payroll businesses.
It covers what an employer of record is and is not, how the model works under Indian employment and tax law, the market and the main platforms, pricing and the build-or-rent decision, the use of EOR as a bridge for new capability centres, the risks on both sides of the contract, and what each reader should do. The wider Indian staffing market, its segments and its listed players are covered in our companion recruitment and staffing industry report, and we do not repeat that material here.
What an employer of record is
An employer of record is a company that becomes the legal employer of a worker in a country, on behalf of a client that has no entity there. The client chooses the person, sets the work and manages them day to day. The EOR issues the employment contract, runs payroll, withholds income tax, pays the statutory contributions, administers leave and benefits, and handles the termination if the job ends.
The simplest way to think about it is that the client owns the work and the EOR owns the employment. That split is what lets a company in Stockholm or Singapore employ a data engineer in Pune within weeks, without incorporating an Indian subsidiary, opening a bank account, registering for provident fund and state taxes, and appointing auditors first.
It is easy to confuse EOR with its neighbours, and the differences matter for price, risk and regulation.
Employer of record compared with the alternatives in India
| Model | Legal employer | Who finds the person | Typical pricing | Best used for |
|---|---|---|---|---|
| Employer of record | The EOR provider | The client | Flat monthly fee per employee | Hiring in a country with no local entity |
| General staffing | The staffing firm | The staffing firm | Markup on the wage bill | Volume or temporary workforce |
| Recruitment agency | The client | The agency | One-time fee on first-year pay | Permanent hiring into an existing entity |
| Independent contractor | Nobody; self-employed | The client | Invoice from the contractor | Genuinely independent, project-based work |
| Own subsidiary | The client's Indian entity | The client | Fixed running cost plus payroll | A team large or permanent enough to justify it |
The key distinction from staffing is that an EOR does not source people. A staffing firm sells access to workers; an EOR sells the legal and administrative capacity to employ someone the client has already chosen. The two are converging, as staffing firms add EOR desks and EOR platforms add recruitment, but they are priced and valued differently.
How an employer of record works under Indian law
Indian employment law has no separate legal category for an employer of record. The provider is simply the employer, with every obligation that brings, and the client is a customer that receives services. That clarity is useful, but it also means that an inspector or a court will look at the substance of the arrangement rather than its label.
What the EOR takes on
- The employment contract and appointment letter, which the labour codes now require for every employee.
- Payroll and tax deduction at source on salary, with the quarterly returns and annual Form 16.
- Provident fund and, where wages fall within its limits, ESIC, with monthly filings and remittances.
- State-level obligations such as professional tax, labour welfare fund and shops and establishments registration, which differ by state.
- Gratuity, leave and bonus, including the new rule that fixed-term employees earn pro-rata gratuity after one year rather than five.
- Termination and full-and-final settlement, following notice and severance terms that the contract and state rules set.
What the client keeps
The client keeps the management of the work, and with it some exposure that no contract can move. Three areas deserve attention from a CFO.
Contract-labour characterisation. Where a provider supplies people who work under a client's control, Indian law can treat the arrangement as contract labour, and the principal employer can be liable for wages or contributions the contractor fails to pay. A well-run EOR removes most of the practical risk, but the client should still see monthly proof of remittances.
Permanent establishment. A foreign company whose Indian team negotiates or concludes contracts on its behalf, or runs a core business function from India, risks being treated as having a taxable presence here. The EOR does not change that analysis. Sales roles and senior leadership roles need tax advice before they are hired through an EOR.
Intellectual property. The employee's contract is with the EOR, so the chain by which inventions and code pass to the client has to be written explicitly: from employee to EOR, and from EOR to client. Investors will check this in diligence.
The client owns the work and the EOR owns the employment, but a CFO should never assume the EOR owns all of the risk.
The market and the platforms
How big the EOR market is
Published estimates of the global employer-of-record market in 2025 cluster between about $4.7 billion and $6.8 billion, depending on what each research house counts. Business Research Insights puts it at $5.6 billion. Forecasts diverge even more widely: Custom Market Insights projects $15.9 billion by 2035, and other houses project anything from about $10 billion to $25 billion over similar horizons.
We would not build a plan on any single number. What the spread tells a reader is that the market is young, its boundaries with global payroll and contractor management are blurred, and most of its value is concentrated in a few platforms whose own revenue is a better guide than any market report.
The platform that sets the pace
Deel is the clearest marker. It raised $300 million in October 2025 in a Series E led by Ribbit Capital, at a valuation of $17.3 billion. It has passed $1 billion of annual recurring revenue, serves more than 35,000 customers across more than 150 countries, and says it has been profitable for three years. Remote, Multiplier, Globalization Partners (G-P), Velocity Global and Papaya Global compete for the same buyers, alongside Indian specialists and the EOR desks of Indian staffing firms.
The strategic question among platforms is whether to own an entity in each country or to work through local partners. Owning entities costs more up front and takes years, but it removes a partner's margin and puts compliance under the platform's own control. For a client, the practical question is simpler: in India, who is the actual legal employer, and do they have their own registrations here or are they reselling someone else's?
Why India matters to EOR
India is both a destination and a source. As a destination, it is where foreign companies most want to hire engineering, data and operations talent, and where 2,117 global capability centres employed 2.36 million people in FY2026, according to Zinnov and nasscom. As a source, Indian startups selling abroad increasingly use EOR platforms to hire their first salespeople and customer teams in the US, Europe and the Gulf before they open entities there.
The Indian providers' advantage is local depth: state-by-state compliance, faster resolution of payroll issues, and familiarity with the labour codes as they are implemented. The global platforms' advantage is one contract and one dashboard across dozens of countries. Which matters more depends on whether a client's problem is India or the world.
What EOR costs, and when an own entity is cheaper
Published prices
Published EOR list prices of selected global platforms, 2026
| Platform | Published EOR price per employee per month | Notes |
|---|---|---|
| Deel | From $599 | Volume discounts reported at $350-500 |
| Remote | $699 billed monthly; $599 billed annually | Flat global price |
| Multiplier | From $400 | Positions itself on price |
These are list prices. They sit on top of the employee's full cost, including employer contributions, and most providers add charges for extras such as health insurance administration, equipment, or terminations. Many also ask for a security deposit and invoice before payroll runs, so the client funds salaries in advance.
That last point reverses the working-capital position of an ordinary staffing firm. A staffing company pays its associates before its client pays it. An EOR is usually paid before it pays anyone. For the provider this is one of the model's best features; for the client's CFO it is a cash outflow that belongs in the forecast. We discuss how payment terms change the real price of a contract in payment terms are price.
What a monthly EOR invoice actually contains
CFOs comparing providers often compare only the fee. The invoice is larger than that, and its shape explains why a flat fee suits some roles far better than others. Take an employee on ₹24 lakh a year of gross salary, or ₹2 lakh a month, with basic pay set at half of gross. Under the Code on Wages, allowances above half of total pay count back into wages for contribution purposes, so a 50% basic is now the practical floor for many employers.
Illustrative monthly EOR invoice for one employee on ₹24 lakh a year
| Line on the invoice | Monthly amount | Basis |
|---|---|---|
| Gross salary | ₹2,00,000 | ₹24 lakh a year |
| Employer provident fund | ₹12,000 | 12% of basic pay of ₹1 lakh, if paid on full basic |
| Gratuity provision | ₹4,810 | About 4.81% of basic, from 15 days' pay per year of service |
| Group health insurance | ₹1,500 | Assumed premium |
| EOR fee | ₹52,712 | $599 at an assumed ₹88 per dollar |
| Total billed | ₹2,71,022 | Before GST on the fee |
Two things follow. First, the fee is a fixed amount, so its weight depends on the salary it sits on. On a ₹50 lakh salary it adds about 13% to gross pay; on ₹24 lakh, about 26%; on ₹15 lakh, about 42%; and on an ₹8 lakh support role, close to 80%. EOR is an efficient way to employ a senior engineer and an expensive way to employ a junior operations team.
Second, several lines are provisions for costs that arrive later. Gratuity is accrued monthly but paid on exit. A provider that invoices gratuity month by month should be able to show where that money sits and how it will be settled when the employee leaves or transfers. A provider that does not invoice it has left the client with an unfunded liability.
EOR is an efficient way to employ a senior engineer and an expensive way to employ a junior operations team.
The build-or-rent arithmetic
The decision that matters most for a CFO is when to stop renting employment and set up an Indian entity. The illustration below compares a $599 monthly EOR fee with a subsidiary whose annual running cost, covering , statutory and transfer-pricing audits, company secretarial work, a registered office, a resident director and outsourced payroll, we assume at ₹40 lakh plus ₹24,000 per employee a year. The exchange rate is assumed at ₹88 to the dollar.
Illustrative annual cost of EOR against an own Indian entity, excluding salaries
| Team size | EOR fees a year | Own entity running cost a year | Cheaper option |
|---|---|---|---|
| 3 | ₹19 lakh | ₹40.7 lakh | EOR |
| 5 | ₹31.6 lakh | ₹41.2 lakh | EOR |
| 10 | ₹63.3 lakh | ₹42.4 lakh | Own entity |
| 25 | ₹1.58 crore | ₹46 lakh | Own entity |
| 50 | ₹3.16 crore | ₹52 lakh | Own entity |
On these assumptions the lines cross at six or seven employees. Volume discounts move the crossing point higher, and a leaner entity moves it lower. The point is not the exact number; it is that EOR fees scale with every hire while an entity's cost is mostly fixed, so the gap widens quickly once a team passes ten people.
Money is not the only input. An entity takes months to make ready for hiring, needs management attention, and creates transfer-pricing and tax filing obligations of its own. An EOR hire can start within weeks. For a team of uncertain size, or a market a company is testing, the premium buys an option to leave cheaply. For a team that is clearly staying and growing, it is rent paid on something the company should own.
EOR as the bridge for a new capability centre
The most common serious use of EOR in India today is as a launch vehicle for a global capability centre. The parent decides to build a centre, but its Indian subsidiary will take months to incorporate, register and staff with finance and HR. Hiring the first leaders and engineers through an EOR lets the centre start work while the entity is being built, and moves them across once it is ready.
That transfer is where bridges fail. Four points should be settled before the first offer letter is sent.
- Continuity of service. Decide whether time served on the EOR's payroll will count for gratuity and leave at the new entity, and put the answer in both the EOR contract and the employee's offer. Employees will ask, and a surprise here costs goodwill with the team you most need to keep.
- Transfer mechanics and fees. Many EOR contracts charge a conversion fee when employees move to the client's entity, or require notice. Negotiate these at the start, when the client still has bargaining power.
- Benefits parity. If the EOR's insurance or leave policy is richer or poorer than the new entity's, the transfer becomes a renegotiation. Align them in advance.
- Data and records. Payroll history, tax records, PF account details and employee files must move cleanly, in a way that satisfies the Digital Personal Data Protection Act, 2023.
For how capability-centre demand is reshaping the Indian staffing firms that support these set-ups, see what the GCC boom means for staffing firms.
Choosing a provider
Price comparisons between EOR providers are easy and mostly beside the point. The differences that cost money show up later, in a delayed payroll, a missed state filing or a messy transfer. Before signing, a CFO should get written answers to a short list of questions.
- Who is the legal employer in India? The provider's own Indian company, or a local partner it contracts with? If a partner, ask for its name and registrations, because that is the entity your employees will actually work for.
- Which states is it registered in? Professional tax, labour welfare fund and shops and establishments rules differ by state. A provider registered in Karnataka and Maharashtra may not yet be set up in Telangana or Tamil Nadu.
- How are statutory remittances evidenced? Ask for monthly challans for provident fund, ESIC and tax deducted at source, not a summary statement.
- Where are client funds and deposits held? Prefunded payroll and deposits should sit in accounts the provider cannot use for its own operations, and the contract should say what happens to them if the provider fails.
- What does leaving cost? Conversion fees, notice periods and the handover of payroll records should be fixed in the contract, with a timetable.
- How are gratuity and leave balances settled on transfer? The answer should match what you intend to tell employees.
- Where is employee data stored and processed? The answer determines your obligations under the data protection law and those of your parent company at home.
A provider that answers all seven clearly and in writing is usually worth a higher fee than one that is cheaper and vague. The cost of switching providers mid-year, with employees watching, is far higher than the difference in monthly fees.
Risks for the client
Risks of using an employer of record in India, from the client's side
| Risk | Likelihood | Damage | How to manage it |
|---|---|---|---|
| Permanent establishment for tax | Medium | High | Tax advice before hiring sales or leadership roles |
| Contract-labour or co-employment claims | Low to medium | Medium | Monthly proof of pf, esic and tax remittances |
| Contractor misclassification outside the EOR | High | High | Move long-term exclusive contractors onto EOR or payroll |
| Data protection breach | Medium | High | Check where the provider stores and processes employee data |
| Provider failure or dispute | Low | High | Know who holds the deposit and the payroll funds |
| Rising EOR cost as the team grows | High | Medium | Set a headcount trigger for moving to an own entity |
Contractor misclassification is the risk EOR most often exists to solve. Many foreign companies begin by paying Indian workers as independent consultants on monthly invoices. Where the person works exclusively for one company, on its schedule, under its direction, for years, that looks like employment, with the exposure to back contributions, tax and dispute that follows. Moving those people onto an EOR is often the cheapest way to clean up the position before a funding round or an acquisition.
Data protection is the risk most often ignored. Salary, bank, tax and health data for an Indian employee of a foreign company may be processed by an EOR in one country and accessed by a manager in another. The Digital Personal Data Protection Act, 2023 applies to that processing, and its obligations are being phased in. Ask the provider where data sits and who can see it.
Provider risk is rare but serious. A client that has prefunded payroll and paid a deposit is a creditor of its EOR. Due diligence on a provider's own finances, and on whether it employs people in India directly or through a partner, is as important as comparing prices.
Risks for providers and their investors
For anyone building or backing an EOR business, the picture is different. The model's strengths are real: recurring monthly revenue per employee, payment before payroll, and expansion as clients hire in more countries. Its weaknesses are just as structural.
- Price compression. Global list prices of $400 to $699 set a ceiling that local providers must work under, and volume discounts push effective prices lower for the largest clients.
- Built-in churn at the top. The best clients grow into their own entities and leave. An EOR business needs a steady supply of new small teams to replace the large ones it graduates.
- Compliance errors are expensive. A wrong contribution or a missed state filing carries penalties and destroys trust faster than any competitor can.
- Regulatory change. The labour codes are being implemented state by state, and some jurisdictions may yet take a harder view of arrangements where a provider employs people who work entirely under a client's control.
Our view is that the Indian EOR opportunity is best captured by firms that combine it with something clients keep when they graduate: payroll processing for the new entity, compliance services, or recruitment. A pure EOR provider in India competes on price with the global platforms and loses its best customers by design. We place EOR within the wider set of hiring-infrastructure investments in India's talent economy as an investment theme.
What to do
For CFOs of foreign companies and GCCs
Use an employer of record when speed matters, when the team is small, or when you are not yet sure India is a long-term location. Before signing, get tax advice on permanent establishment for any role that sells or leads. Put a headcount trigger, around the point where the illustrative lines cross, into your plan for setting up an entity, and negotiate the conversion terms now. Treat the deposit and prefunded payroll as working capital in your cash forecast, which is the kind of discipline our FP&A work builds.
For Indian founders
If you are hiring abroad, an EOR is almost always the right first step for your first few people in a new country; plan the move to an entity once the team or the revenue there is established. If you have long-term contractors in India working only for you, regularise them before a funding round, because investors will find them. If you are building an EOR or payroll business, pair it with a service your clients keep when they outgrow you.
For investors
Judge an EOR business on net revenue retention after graduations, the share of employees on its own registrations rather than partners', the size of its compliance team relative to headcount employed, and the incidence of payroll errors. Growth that comes only from adding small teams at falling prices is a treadmill; growth that adds payroll and compliance contracts that survive graduation is a business.
For MSMEs
An MSME with a single foreign customer that wants dedicated staff may be asked to act as an informal employer of record. If you agree, price the statutory costs, gratuity and termination risk fully, and put the client's obligations in writing.
Method and sources
This report reflects information available in September 2026. Market sizes are given as ranges because published estimates disagree widely. Company facts come from the companies' own announcements and from reporting of them. The build-or-rent table is an illustration on stated assumptions, not a quote, and readers should replace the entity cost and exchange rate with their own. Legal points describe the general position and are not legal or tax advice for any specific case.
- Business Research Insights: Employer of Record Market Share, Growth and Forecast 2026-2035
- Custom Market Insights: Global Employer of Record Market Size, Share 2026-2035
- Deel: Series E announcement, October 2025; reporting by Bloomberg and Crunchbase News
- Deel, Remote and Multiplier: published EOR pricing, 2026, and independent pricing guides
- Zinnov and nasscom: India GCC Landscape Report FY2026
- Ministry of Labour and Employment: notification of the four labour codes, November 2025
- Digital Personal Data Protection Act, 2023
For SRF's work with staffing, payroll and EOR businesses, see our staffing and recruitment industry page.
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SRF Capital Studio Research Desk
Funding Intelligence, SRF Capital Studio
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