Employer of record, contractors or a dedicated team: ways to hire in India 

You can hire in India through your own entity, an employer of record, independent contractors or a dedicated team held by a partner. An entity gives the most control and the most obligations. An EOR employs people for you. Contractors are quick but carry misclassification risk, and a dedicated team adds selection, office, equipment and management to the EOR model.

What is the decision?

At heart, the decision is about who employs the person and who carries the obligations that come with employing them.

An employer of record, or EOR, is a provider that acts as the legal employer of people you choose. A dedicated team is a group of people who work only on your business, with a partner holding the employment, payroll, tax and compliance. A contractor is an independent person or firm engaged for a defined piece of work, and an entity is your own Indian company or branch.

Behind every employee in India sit provident fund, employees' state insurance, gratuity, tax deducted from salaries, professional tax and the rules of the labour codes. Each comes with its own filings, deadlines and penalties, and the four routes differ mostly in who carries that load.

How do the four routes compare side by side?

Read the table as a guide rather than a rule. Terms differ from one provider to the next, so ask each one to confirm every row in writing.

What is the contractor trap?

Contractors look like the simplest route, and for defined work they are. The trap appears when a business engages people as contractors but treats them as employees: set hours, working only for you, under your direction, month after month.

At that point the label may no longer match the reality. The arrangement can be challenged, and awkward questions can arise over who owns the work and whether the business has created a tax presence in India it never planned. Our guide on treating full-time people as contractors explains the risks.

Where the need is ongoing, the usual alternatives are an employer of record or a dedicated team, both of which put a proper employment relationship in place.

What risks does each route carry?

No route is free of risk. Each one simply moves the risk to a different place, and knowing where it sits helps you decide what you can live with.

• Own entity: the risk is the load. Registration, payroll, filings and labour law all sit with you, and any mistake is yours alone.
• Employer of record: the risk is in the gaps. The provider employs the people, but you recruit, equip and manage them, and you must check who is responsible for each task.
• Contractors: the risk is misclassification. If people work like employees, the contractor label may not hold, and questions can arise over disputes, ownership of the work and tax presence.
• Dedicated team: the risk is the partner. You depend on one provider to employ well and file correctly, so choosing that partner carefully matters.

To reduce partner risk, ask for the contract terms, proof of filing and a clear exit route. It is also worth asking who replies if an Indian authority sends a notice.

Which questions decide the route?

Work through these in order. Your answers will usually point to one route.

1. Is the work a defined piece with an end date? If yes, a contractor may do. If no, move on.
2. Do you plan a large, permanent business in India that you want to own fully? If yes, consider your own entity. If no, move on.
3. Do you already have the people, or can you recruit them well yourself? If yes, an employer of record may be enough. If no, move on.
4. Do you want to choose from a shortlist, and have office, equipment and compliance handled in one arrangement? Then a dedicated team fits.

Treat these questions as a guide. A business can use two routes at once, keeping a contractor for a short project, say, while a dedicated team handles the ongoing work.

What does this look like in practice?

Here are three imagined cases. They are not clients, only illustrations of how the questions play out.

A software company abroad needs one specialist for a three-month migration. The work is defined and has an end date, so a contractor with a clear written agreement, including assignment of intellectual property, fits well.

A business abroad has found two engineers it likes and wants to employ them properly. It already knows the people and has a way to equip them, so an employer of record can employ them and run payroll and compliance while the business manages the work.

A business abroad needs six senior people over the next year, in engineering, testing and back-office roles. It has no Indian presence and no wish to run one. It wants to interview, choose and manage the people, and have everything else handled. That is where a dedicated team fits.

What should you check in the contract, whichever route you choose?

Some points matter whichever route you take. Check them before you sign, and ask for changes if anything is missing.

• Who is the legal employer, or if there is none, who is the independent party?
• Does the agreement assign intellectual property to you, and does it carry confidentiality terms?
• Which party is responsible for each statutory obligation, and how is proof of filing shared?
• What notice applies if either side ends the arrangement?
• What happens to your data, systems access and equipment on exit?

A provider that welcomes these questions is a good sign, and one that avoids them is a warning. Ask for the answers in the contract itself, and not only in a sales call or a brochure, because the contract is what you can rely on if a disagreement arises later. Keep a copy of every version you receive, so you can see what changed and who asked for it.

When does each route fit?

Own entity

Choose it when you plan a large, permanent presence in India and are ready to run payroll, filings and labour law yourself. You get the most control, and you also carry every obligation.

Employer of record

Choose it when you already know the people you want to hire, or can recruit them yourself, and you only need someone to employ them legally. You still arrange equipment, workspace and day-to-day setup.

Contractors

Choose them for a defined piece of work with a clear end. Keep the working relationship genuinely independent, and put the assignment of intellectual property in writing.

Dedicated team

Choose it when you need ongoing senior capacity and want one accountable partner for selection, employment, office, equipment and compliance. You interview and choose the people, and you manage the work.

Many businesses begin with one route and change later. A business might start with a dedicated team while it learns how India works, then set up its own entity once the team has grown. Ask each provider how moving between routes works.

This article gives general information, not legal or tax advice. Rules, rates and dates change. Check the current position with your own advisers before you act.