{"id":13042,"date":"2026-05-06T16:25:38","date_gmt":"2026-05-06T10:55:38","guid":{"rendered":"https:\/\/www.tankhapay.com\/blog\/?p=13042"},"modified":"2026-05-07T09:52:02","modified_gmt":"2026-05-07T04:22:02","slug":"employer-of-record-vs-local-entity","status":"publish","type":"post","link":"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/","title":{"rendered":"EOR vs Local Entity Setup (2026): Cost, Compliance &#038; Decision Framework for Hiring in India"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_78 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#What_Is_an_Employer_of_Record_EOR\" >What Is an Employer of Record (EOR)?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Types_of_EOR_Providers\" >Types of EOR Providers<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#What_Is_a_Local_Entity_Setup\" >What Is a Local Entity Setup?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Entity_Options_for_Foreign_Parents_in_India\" >Entity Options for Foreign Parents in India<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#EOR_vs_Local_Entity_Detailed_Comparison\" >EOR vs Local Entity: Detailed Comparison<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Cost_Comparison_Real_Numbers_for_India_Expansion\" >Cost Comparison: Real Numbers for India Expansion<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Year_1_Cost_5_Engineers_in_Bangalore_at_%E2%82%B925_LPA_Each\" >Year 1 Cost: 5 Engineers in Bangalore at \u20b925 LPA Each<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Breakeven_Analysis\" >Breakeven Analysis<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Permanent_Establishment_PE_Risk_The_Hidden_Cost_Most_Companies_Miss\" >Permanent Establishment (PE) Risk: The Hidden Cost Most Companies Miss<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#What_Triggers_PE_Risk\" >What Triggers PE Risk<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#How_EOR_and_Entity_Models_Handle_PE_Differently\" >How EOR and Entity Models Handle PE Differently<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#EOR_vs_PEO_vs_Contractor_vs_Local_Entity_Four-Way_Comparison\" >EOR vs PEO vs Contractor vs Local Entity: Four-Way Comparison<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Compliance_Responsibility_Matrix\" >Compliance Responsibility Matrix<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#IP_Ownership_Confidentiality_Equity_Grants\" >IP Ownership, Confidentiality &amp; Equity Grants<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Setup_Speed_Expansion_Timeline\" >Setup Speed &amp; Expansion Timeline<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#When_Should_You_Switch_From_Employer_of_Record_to_Your_Own_Entity\" >When Should You Switch From Employer of Record to Your Own Entity?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Transition_Playbook_90-Day_Outline\" >Transition Playbook (90-Day Outline)<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Hiring_in_India_Without_a_Local_Entity_What_You_Need_to_Know\" >Hiring in India Without a Local Entity: What You Need to Know<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Decision_Framework_Choose_Your_Model_in_5_Questions\" >Decision Framework: Choose Your Model in 5 Questions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Common_Mistakes_Companies_Make\" >Common Mistakes Companies Make<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Frequently_Asked_Questions\" >Frequently Asked Questions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/www.tankhapay.com\/blog\/employer-of-record-vs-local-entity\/#Which_Model_Is_Better_for_You\" >Which Model Is Better for You?<\/a><\/li><\/ul><\/nav><\/div>\n<p class=\"ai-optimize-7 ai-optimize-introduction\"><b>TL;DR:<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<ul>\n<li class=\"ai-optimize-8\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Using an Employer of Record (EOR) will allow you to <a href=\"https:\/\/www.tankhapay.com\/employer-of-record\">hire your employees in India<\/a> within 5-10 business days for a cost of about \u20b940,000-\u20b970,000 per employee monthly in services charges without creating any legal entities.\u00a0<\/span><\/li>\n<li class=\"ai-optimize-9\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Using a local entity such as Private Limited Company will take 30-75 days to set up the entity, with a cost of about \u20b98-\u20b918 lakh in year one setup and compliances.<\/span><\/li>\n<li class=\"ai-optimize-10\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A local entity would be ideal where you want to establish a longer presence, deal with heavy intellectual property work, provide ESOP grants, or have more than ~20 employees.<\/span><\/li>\n<\/ul>\n<p class=\"ai-optimize-11\"><span style=\"font-weight: 400;\">The guide comprises a breakeven analysis template, compliance checklist, explanation of the PE risk, and a 5-point decision-making process.<\/span><\/p>\n<p class=\"ai-optimize-12\"><strong>Last reviewed: May 2026 \u00b7 Approved by a company secretary with experience in India and an <a href=\"https:\/\/www.tankhapay.com\/global-mobility-services\">international mobility<\/a> expert.<\/strong><\/p>\n<p class=\"ai-optimize-13\"><span style=\"font-weight: 400;\">Entering India or a new market is where three risks converge, legal risk, cost overruns, and time to hire. What you choose structurally in week one will decide if your entry process takes 6 weeks or 6 months, and whether the first compliance audit will be free or cost six figures.<\/span><\/p>\n<p class=\"ai-optimize-14\"><span style=\"font-weight: 400;\">This guide gives you the numbers, statutes, and frameworks to make that decision in a single sitting.<\/span><\/p>\n<h2 class=\"ai-optimize-15\"><span class=\"ez-toc-section\" id=\"What_Is_an_Employer_of_Record_EOR\"><\/span><b>What Is an Employer of Record (EOR)?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ai-optimize-16\"><span style=\"font-weight: 400;\">An <a href=\"https:\/\/www.tankhapay.com\/glossary\/what-is-employer-of-record\">Employer of Record (EOR)<\/a> is an independent agency that acts as a legal employer for your employees within another country, yet you are able to fully manage their work, output, and performance. It is because the EOR enters into employment agreements, manages payroll, pays taxes, provides contributions, and takes on labor law risks in its stead.<\/span><\/p>\n<p class=\"ai-optimize-17\"><span style=\"font-weight: 400;\">The Indian EOR that complies includes the following:<\/span><\/p>\n<ul>\n<li class=\"ai-optimize-18\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Payroll processing at the end of each month in INR, including TDS calculation under Section 192 of Income Tax Act<\/span><\/li>\n<li class=\"ai-optimize-19\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Contributions to EPF, which is 12% by employer and 12% by employee<\/span><\/li>\n<li class=\"ai-optimize-20\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Employee State Insurance, applicable in case of ESI (3.25% employer + 0.75% employee) for wages not exceeding Rs 21,000 per month.<\/span><\/li>\n<li class=\"ai-optimize-21\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Accrual of Gratuity @ 4.81% of Basic Salary<\/span><\/li>\n<li class=\"ai-optimize-22\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Professional Tax<\/span><\/li>\n<li class=\"ai-optimize-23\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Issuing Form 16, filing of Form 24Q every quarter<\/span><\/li>\n<li class=\"ai-optimize-24\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Compliance with The Shops and Establishment Act &amp; Code on Wages 2019 and Maternity<\/span><\/li>\n<li class=\"ai-optimize-25\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">POSH compliance (mandatory Internal Committee for \u226510 employees)<\/span><\/li>\n<\/ul>\n<h3 class=\"ai-optimize-26\"><span class=\"ez-toc-section\" id=\"Types_of_EOR_Providers\"><\/span><b>Types of EOR Providers<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p class=\"ai-optimize-27\"><span style=\"font-weight: 400;\">Not all EORs are equal. There are two operating models:<\/span><\/p>\n<ol>\n<li class=\"ai-optimize-28\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Direct EORs <\/b><span style=\"font-weight: 400;\">are their own legal entities in every country they serve (e.g., the providers operating their own Indian Pvt Ltd subsidiary). Lower compliance risk, faster issue resolution.<\/span><\/li>\n<li class=\"ai-optimize-29\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Aggregator\/Partner EORs<\/b><span style=\"font-weight: 400;\"> subcontract to local partners. Cheaper but introduces a second layer of liability and slower escalation.<\/span><\/li>\n<\/ol>\n<p class=\"ai-optimize-30\"><span style=\"font-weight: 400;\">For India, always verify whether the EOR holds its own PF establishment code and Shops &amp; Establishments registration.<\/span><\/p>\n<h2 class=\"ai-optimize-31\"><span class=\"ez-toc-section\" id=\"What_Is_a_Local_Entity_Setup\"><\/span><b>What Is a Local Entity Setup?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ai-optimize-32\"><span style=\"font-weight: 400;\">&#8216;Local establishment&#8217; refers to establishing a company as an individual presence within India through the registration of a Pvt Ltd company under the Companies Act, 2013, and employing employees under this organization. In this case, you will be regarded as the employer of your staff members, and it becomes your responsibility to do the rest.<\/span><\/p>\n<h3 class=\"ai-optimize-33\"><span class=\"ez-toc-section\" id=\"Entity_Options_for_Foreign_Parents_in_India\"><\/span><b>Entity Options for Foreign Parents in India<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<table>\n<tbody>\n<tr>\n<td>\n<p class=\"ai-optimize-34\"><b>Entity Type<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-35\"><b>Typical Use Case<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-36\"><b>Setup Time<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-37\"><b>FDI Route<\/b><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Private Limited Company (Pvt Ltd)<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Operating subsidiary, full-scale hiring<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">30\u201360 days<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Automatic (most sectors, 100%)<\/td>\n<\/tr>\n<tr style=\"background: #fafafa;\">\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Limited Liability Partnership (LLP)<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Services, lower compliance requirements<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">30\u201345 days<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Automatic (with conditions)<\/td>\n<\/tr>\n<tr>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Branch Office<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Limited activities, RBI approval needed<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">60\u2013120 days<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Approval route<\/td>\n<\/tr>\n<tr style=\"background: #fafafa;\">\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Liaison Office<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Representation only, no revenue generation<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">60\u201390 days<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Approval route<\/td>\n<\/tr>\n<tr>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Project Office<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Site-specific or temporary projects<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">45\u201390 days<\/td>\n<td style=\"padding: 16px; border: 1px solid #ddd;\">Approval route<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p class=\"ai-optimize-58\"><span style=\"font-weight: 400;\">For 95% of foreign companies hiring engineers, sales, or operations talent in India, a Pvt. Ltd. subsidiary is the right answer. It permits 100% foreign ownership under the automatic route, allows revenue-generating activity, and supports ESOP issuance.<\/span><\/p>\n<h2 class=\"ai-optimize-59\"><span class=\"ez-toc-section\" id=\"EOR_vs_Local_Entity_Detailed_Comparison\"><\/span><b>EOR vs Local Entity: Detailed Comparison<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<table>\n<tbody>\n<tr>\n<td>\n<p class=\"ai-optimize-60\"><b>Factor<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-61\"><b>Employer of Record (EOR)<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-62\"><b>Local Entity (Pvt Ltd)<\/b><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-63\"><span style=\"font-weight: 400;\">Time to first hire<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-64\"><span style=\"font-weight: 400;\">5\u201310 business days<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-65\"><span style=\"font-weight: 400;\">30\u201375 days<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-66\"><span style=\"font-weight: 400;\">Upfront setup cost<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-67\"><span style=\"font-weight: 400;\">\u20b90<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-68\"><span style=\"font-weight: 400;\">\u20b93\u20136 lakh<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-69\"><span style=\"font-weight: 400;\">Year 1 fixed compliance cost<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-70\"><span style=\"font-weight: 400;\">Bundled in fee<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-71\"><span style=\"font-weight: 400;\">\u20b94\u201310 lakh<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-72\"><span style=\"font-weight: 400;\">Per-employee monthly fee<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-73\"><span style=\"font-weight: 400;\">\u20b940,000\u2013\u20b970,000<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-74\"><span style=\"font-weight: 400;\">None (internal cost)<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-75\"><span style=\"font-weight: 400;\">Legal entity required<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-76\"><span style=\"font-weight: 400;\">No<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-77\"><span style=\"font-weight: 400;\">Yes<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-78\"><span style=\"font-weight: 400;\">Resident director required<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-79\"><span style=\"font-weight: 400;\">No<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-80\"><span style=\"font-weight: 400;\">Yes (1 mandatory)<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-81\"><span style=\"font-weight: 400;\">Bank account setup<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-82\"><span style=\"font-weight: 400;\">Not required<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-83\"><span style=\"font-weight: 400;\">4\u20138 weeks (often the bottleneck)<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-84\"><span style=\"font-weight: 400;\">Payroll &amp; tax filing<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-85\"><span style=\"font-weight: 400;\">Handled by EOR<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-86\"><span style=\"font-weight: 400;\">Internal \/ outsourced<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-87\"><span style=\"font-weight: 400;\">Statutory registrations (PF, ESI, PT, GST)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-88\"><span style=\"font-weight: 400;\">Held by EOR<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-89\"><span style=\"font-weight: 400;\">Must be obtained<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-90\"><span style=\"font-weight: 400;\">Operational control<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-91\"><span style=\"font-weight: 400;\">Limited (standardized policies)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-92\"><span style=\"font-weight: 400;\">Full (custom policies)<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-93\"><span style=\"font-weight: 400;\">ESOP \/ equity grants<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-94\"><span style=\"font-weight: 400;\">Restricted, work around needed<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-95\"><span style=\"font-weight: 400;\">Direct issuance possible<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-96\"><span style=\"font-weight: 400;\">IP ownership<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-97\"><span style=\"font-weight: 400;\">Via EOR assignment clauses<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-98\"><span style=\"font-weight: 400;\">Direct, cleaner chain<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-99\"><span style=\"font-weight: 400;\">Permanent Establishment (PE) risk<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-100\"><span style=\"font-weight: 400;\">Low if structured correctly<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-101\"><span style=\"font-weight: 400;\">N\/A (you are the entity)<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-102\"><span style=\"font-weight: 400;\">Termination cost &amp; complexity<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-103\"><span style=\"font-weight: 400;\">EOR manages faster.<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-104\"><span style=\"font-weight: 400;\">Internal, requires legal handling<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-105\"><span style=\"font-weight: 400;\">Wind-down cost if exiting<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-106\"><span style=\"font-weight: 400;\">Contract termination only<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-107\"><span style=\"font-weight: 400;\">\u20b93\u20138 lakh + 6\u201312 months<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-108\"><span style=\"font-weight: 400;\">Best for<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-109\"><span style=\"font-weight: 400;\">&lt;15 employees, market testing<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-110\"><span style=\"font-weight: 400;\">&gt;20 employees, long-term presence<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-111\"><span style=\"font-weight: 400;\">Compliance liability<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-112\"><span style=\"font-weight: 400;\">Shared (EOR primary)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-113\"><span style=\"font-weight: 400;\">100% on the company<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 class=\"ai-optimize-114\"><span class=\"ez-toc-section\" id=\"Cost_Comparison_Real_Numbers_for_India_Expansion\"><\/span><b>Cost Comparison: Real Numbers for India Expansion<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3 class=\"ai-optimize-115\"><span class=\"ez-toc-section\" id=\"Year_1_Cost_5_Engineers_in_Bangalore_at_%E2%82%B925_LPA_Each\"><\/span><b>Year 1 Cost: 5 Engineers in Bangalore at \u20b925 LPA Each<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p class=\"ai-optimize-116\"><b>Employer of Record Model<\/b><\/p>\n<ul>\n<li class=\"ai-optimize-117\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Salaries: \u20b912,500,000<\/span><\/li>\n<li class=\"ai-optimize-118\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The employer&#8217;s legal fees (EPF, gratuity, and administrative costs) are about \u20b91,500,000.<\/span><\/li>\n<li class=\"ai-optimize-119\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The EOR fee is \u20b93,300,000 (\u20b955,000 x 5 x 12).<\/span><\/li>\n<li class=\"ai-optimize-120\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Total Cost for Year 1: about \u20b91,73,00,000<\/span><\/li>\n<\/ul>\n<p class=\"ai-optimize-121\"><b>Local Entity Model (Pvt Ltd)<\/b><\/p>\n<ul>\n<li class=\"ai-optimize-122\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Gross pay: \u20b912,500,000<\/span><\/li>\n<li class=\"ai-optimize-123\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Employer&#8217;s legal load: about \u20b91,500,000 (\u20b9150,000 for incorporation, legal, DSC\/DIN, and PAN\/TAN)<\/span><\/li>\n<li class=\"ai-optimize-124\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">\u20b9300,000 for registered office, accounting, and payroll software; \u20b9450,000 for a statutory audit, ROC filings, and a Company Secretary retainer<\/span><\/li>\n<li class=\"ai-optimize-125\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">HR and payroll work, whether done in-house or by a third party, costs \u20b9600,000.<\/span><\/li>\n<li class=\"ai-optimize-126\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Director KYC and other compliance: \u20b9100,000\u00a0<\/span><\/li>\n<li class=\"ai-optimize-127\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">About \u20b915,600,000 for Year 1<\/span><\/li>\n<\/ul>\n<p class=\"ai-optimize-128\"><span style=\"font-weight: 400;\">With 5 employees, the entity is already ~\u20b917 lakh cheaper <\/span><i><span style=\"font-weight: 400;\">if<\/span><\/i><span style=\"font-weight: 400;\"> you can absorb the 60\u201375-day setup delay. But Year 1 understates EOR savings on optionality, if the market doesn\u2019t work, you exit in 30 days instead of winding down a company over 6\u201312 months.<\/span><\/p>\n<h3 class=\"ai-optimize-129\"><span class=\"ez-toc-section\" id=\"Breakeven_Analysis\"><\/span><b>Breakeven Analysis<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p class=\"ai-optimize-130\"><span style=\"font-weight: 400;\">Among the foreign firms which have made the changeover from EOR to entity in India, the average financial break-even point is at the level of 12 to 18 employees maintained for 18 to 24 months. At less than this number of employees, the package deal offered by the EOR and no risk of exit prevail.<\/span><\/p>\n<p class=\"ai-optimize-131\"><span style=\"font-weight: 400;\">A simple rule of thumb:<\/span><\/p>\n<p class=\"ai-optimize-132\"><span style=\"font-weight: 400;\">If (Headcount \u00d7 Months in market) &gt; 250, build the entity. Below that, stay on EOR.<\/span><\/p>\n<p class=\"ai-optimize-133\"><span style=\"font-weight: 400;\">Example: 8 employees \u00d7 24 months = 192 \u2192 stay on Employer of Record. 15 employees \u00d7 18 months = 270 \u2192 transition.<\/span><\/p>\n<h2 class=\"ai-optimize-134\"><span class=\"ez-toc-section\" id=\"Permanent_Establishment_PE_Risk_The_Hidden_Cost_Most_Companies_Miss\"><\/span><b>Permanent Establishment (PE) Risk: The Hidden Cost Most Companies Miss<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ai-optimize-135\"><span style=\"font-weight: 400;\">It is the costliest mistake foreign employers make while recruiting in India, and there\u2019s virtually no comparison guide discussing this issue.<\/span><\/p>\n<p class=\"ai-optimize-136\"><span style=\"font-weight: 400;\">&#8220;Permanent Establishment&#8221; is a concept under the tax treaty (Model Article 5 of OECD; Article 5 of India-US DTAA; Article 5 of India-UK DTAA), and if a permanent establishment is established, India can levy tax on a part of your worldwide earnings attributable to India at corporate income tax rates as high as 40% along with surcharges, regardless of your having any entity registered in India.<\/span><\/p>\n<h3 class=\"ai-optimize-137\"><span class=\"ez-toc-section\" id=\"What_Triggers_PE_Risk\"><\/span><b>What Triggers PE Risk<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li class=\"ai-optimize-138\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Fixed Place PE:<\/b><span style=\"font-weight: 400;\"> maintaining an office, server, or fixed location in India for over 6 months.<\/span><\/li>\n<li class=\"ai-optimize-139\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Agency PE:<\/b><span style=\"font-weight: 400;\"> an India-based person who habitually concludes contracts on your behalf or negotiates the material terms of contracts (this is the most common trap with senior EOR-employed sales staff).<\/span><\/li>\n<li class=\"ai-optimize-140\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Service PE:<\/b><span style=\"font-weight: 400;\"> providing services in India through employees for more than 90\u2013183 days (varies by treaty).<\/span><\/li>\n<\/ul>\n<h3 class=\"ai-optimize-141\"><span class=\"ez-toc-section\" id=\"How_EOR_and_Entity_Models_Handle_PE_Differently\"><\/span><b>How EOR and Entity Models Handle PE Differently<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p class=\"ai-optimize-142\"><span style=\"font-weight: 400;\">A correctly structured EOR engagement <\/span><i><span style=\"font-weight: 400;\">minimizes<\/span><\/i><span style=\"font-weight: 400;\"> PE risk because the EOR is the legal employer, and the worker performs services for the EOR (which then provides a service to your foreign company). However, PE risk is not eliminated; if your India-based EOR-employed VP of Sales signs MSAs on your behalf, you have an agency PE regardless of who runs payroll.<\/span><\/p>\n<p class=\"ai-optimize-143\"><span style=\"font-weight: 400;\">A local entity <\/span><i><span style=\"font-weight: 400;\">eliminates the question of PE<\/span><\/i><span style=\"font-weight: 400;\"> because you have an Indian taxable entity by design. You pay Indian corporate tax on Indian-source income, and the question of treaty attribution becomes irrelevant.<\/span><\/p>\n<p class=\"ai-optimize-144\"><b>Practical mitigation:<\/b><\/p>\n<ul>\n<li class=\"ai-optimize-145\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Do not allow any EOR-related employees to sign contracts.<\/span><\/li>\n<li class=\"ai-optimize-146\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Identify a scope of work which will confine Indian operations to auxiliary functions like engineering, customer success, and internal operations only.<\/span><\/li>\n<li class=\"ai-optimize-147\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Ensure that no senior Employer of Record personnel have \u201cCountry Manager\u201d positions with implied authority.<\/span><\/li>\n<li class=\"ai-optimize-148\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Obtain a letter from an Indian tax advisor regarding PE risk prior to exceeding 5 employees.<\/span><\/li>\n<\/ul>\n<h2 class=\"ai-optimize-149\"><span class=\"ez-toc-section\" id=\"EOR_vs_PEO_vs_Contractor_vs_Local_Entity_Four-Way_Comparison\"><\/span><b>EOR vs PEO vs Contractor vs Local Entity: Four-Way Comparison<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ai-optimize-150\"><span style=\"font-weight: 400;\">Buyers regularly confuse these four models. Here\u2019s the clean difference <a href=\"https:\/\/www.tankhapay.com\/blog\/eor-vs-peo-india\/\">between EOR, PEO,<\/a> and Local Entity:<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td>\n<p class=\"ai-optimize-151\"><b>Dimension<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-152\"><b>EOR<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-153\"><b>PEO<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-154\"><b>Contractor<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-155\"><b>Local Entity<\/b><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-156\"><span style=\"font-weight: 400;\">Legal employer<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-157\"><span style=\"font-weight: 400;\">Employer of Record<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-158\"><span style=\"font-weight: 400;\">Co-employer with you<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-159\"><span style=\"font-weight: 400;\">Self-employed<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-160\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-161\"><span style=\"font-weight: 400;\">Requires your legal entity<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-162\"><span style=\"font-weight: 400;\">No<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-163\"><span style=\"font-weight: 400;\">Yes<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-164\"><span style=\"font-weight: 400;\">No<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-165\"><span style=\"font-weight: 400;\">Yes (you are it)<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-166\"><span style=\"font-weight: 400;\">Best country use<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-167\"><span style=\"font-weight: 400;\">Foreign markets<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-168\"><span style=\"font-weight: 400;\">Domestic (US-style)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-169\"><span style=\"font-weight: 400;\">Short-term, project work<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-170\"><span style=\"font-weight: 400;\">Long-term presence<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-171\"><span style=\"font-weight: 400;\">Misclassification risk<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-172\"><span style=\"font-weight: 400;\">Low<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-173\"><span style=\"font-weight: 400;\">Low<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-174\"><span style=\"font-weight: 400;\">High<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-175\"><span style=\"font-weight: 400;\">None<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-176\"><span style=\"font-weight: 400;\">Statutory benefits<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-177\"><span style=\"font-weight: 400;\">Provided<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-178\"><span style=\"font-weight: 400;\">Provided<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-179\"><span style=\"font-weight: 400;\">None<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-180\"><span style=\"font-weight: 400;\">Your obligation<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-181\"><span style=\"font-weight: 400;\">Typical cost<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-182\"><span style=\"font-weight: 400;\">\u20b940K\u201370K\/employee\/month<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-183\"><span style=\"font-weight: 400;\">% of payroll<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-184\"><span style=\"font-weight: 400;\">Hourly\/project rate<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-185\"><span style=\"font-weight: 400;\">Internal cost<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-186\"><span style=\"font-weight: 400;\">Equity grants<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-187\"><span style=\"font-weight: 400;\">Constrained<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-188\"><span style=\"font-weight: 400;\">Yes<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-189\"><span style=\"font-weight: 400;\">Rare<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-190\"><span style=\"font-weight: 400;\">Yes<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-191\"><span style=\"font-weight: 400;\">Termination ease<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-192\"><span style=\"font-weight: 400;\">High<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-193\"><span style=\"font-weight: 400;\">Moderate<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-194\"><span style=\"font-weight: 400;\">Highest<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-195\"><span style=\"font-weight: 400;\">Lowest<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p class=\"ai-optimize-196\"><span style=\"font-weight: 400;\">Contractors deserve special caution in India: misclassifying an employee as a contractor invites scrutiny under the Code on Social Security 2020 and can trigger backdated PF, gratuity, and tax penalties.<\/span><\/p>\n<h2 class=\"ai-optimize-197\"><span class=\"ez-toc-section\" id=\"Compliance_Responsibility_Matrix\"><\/span><b>Compliance Responsibility Matrix<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ai-optimize-198\"><span style=\"font-weight: 400;\">Who handles what changes meaningfully between models. This matrix is the single most useful artefact for procurement and legal review.<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td>\n<p class=\"ai-optimize-199\"><b>Responsibility<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-200\"><b>EOR Model<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-201\"><b>Local Entity Model<\/b><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-202\"><span style=\"font-weight: 400;\">Drafting employment contract<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-203\"><span style=\"font-weight: 400;\">EOR (using their template)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-204\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-205\"><span style=\"font-weight: 400;\">Offer letter issuance<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-206\"><span style=\"font-weight: 400;\">Employer of Record<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-207\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-208\"><span style=\"font-weight: 400;\">Monthly payroll processing<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-209\"><span style=\"font-weight: 400;\">EOR<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-210\"><span style=\"font-weight: 400;\">You \/ outsourced<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-211\"><span style=\"font-weight: 400;\">TDS deduction &amp; deposit<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-212\"><span style=\"font-weight: 400;\">EOR<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-213\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-214\"><span style=\"font-weight: 400;\">PF registration &amp; remittance<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-215\"><span style=\"font-weight: 400;\">EOR (under their code)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-216\"><span style=\"font-weight: 400;\">You (your own EPFO code)<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-217\"><span style=\"font-weight: 400;\">ESI registration &amp; remittance<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-218\"><span style=\"font-weight: 400;\">EOR<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-219\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-220\"><span style=\"font-weight: 400;\">Professional Tax<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-221\"><span style=\"font-weight: 400;\">Employer of Record<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-222\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-223\"><span style=\"font-weight: 400;\">Form 16, Form 24Q<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-224\"><span style=\"font-weight: 400;\">EOR<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-225\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-226\"><span style=\"font-weight: 400;\">Shops &amp; Establishments registration<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-227\"><span style=\"font-weight: 400;\">EOR<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-228\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-229\"><span style=\"font-weight: 400;\">POSH Internal Committee<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-230\"><span style=\"font-weight: 400;\">Generally you (workplace control)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-231\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-232\"><span style=\"font-weight: 400;\">Statutory audit (Companies Act)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-233\"><span style=\"font-weight: 400;\">N\/A<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-234\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-235\"><span style=\"font-weight: 400;\">ROC filings (AOC-4, MGT-7)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-236\"><span style=\"font-weight: 400;\">N\/A<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-237\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-238\"><span style=\"font-weight: 400;\">GST registration &amp; returns<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-239\"><span style=\"font-weight: 400;\">N\/A unless you have PE<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-240\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-241\"><span style=\"font-weight: 400;\">Director KYC, board resolutions<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-242\"><span style=\"font-weight: 400;\">N\/A<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-243\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-244\"><span style=\"font-weight: 400;\">Termination handling<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-245\"><span style=\"font-weight: 400;\">EOR (per labor law)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-246\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-247\"><span style=\"font-weight: 400;\">ESOP plan administration<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-248\"><span style=\"font-weight: 400;\">Workaround required<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-249\"><span style=\"font-weight: 400;\">You<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-250\"><span style=\"font-weight: 400;\">IP assignment<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-251\"><span style=\"font-weight: 400;\">Via EOR contract<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-252\"><span style=\"font-weight: 400;\">Direct<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-253\"><span style=\"font-weight: 400;\">Data protection (DPDP Act 2023)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-254\"><span style=\"font-weight: 400;\">Shared<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-255\"><span style=\"font-weight: 400;\">You as data fiduciary<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 class=\"ai-optimize-256\"><span class=\"ez-toc-section\" id=\"IP_Ownership_Confidentiality_Equity_Grants\"><\/span><b>IP Ownership, Confidentiality &amp; Equity Grants<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ai-optimize-257\"><span style=\"font-weight: 400;\">For software, IP, and AI companies, this section often outweighs cost. <\/span><b>IP ownership in EOR engagements<\/b><span style=\"font-weight: 400;\"> flows through a chain:\u00a0<\/span><\/p>\n<p class=\"ai-optimize-258\"><span style=\"font-weight: 400;\">employee \u2192 EOR \u2192 your company, via assignment clauses in both the employment contract and <a href=\"https:\/\/www.tankhapay.com\/employer-of-record\">the EOR service<\/a> agreement. This chain works, but it is only as strong as the weakest contract. Insist on:<\/span><\/p>\n<ul>\n<li class=\"ai-optimize-259\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Clear \u201cwork-made-for-hire\u201d language; present-tense assignment language (\u201chereby assigns\u201d, not \u201cagrees to assign\u201d)<\/span><\/li>\n<li class=\"ai-optimize-260\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Release of Moral Rights to the extent permissible under law<\/span><\/li>\n<li class=\"ai-optimize-261\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Confidentiality obligations surviving termination<\/span><\/li>\n<li class=\"ai-optimize-262\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The enforcement rights of your firm directly against the employee (third-party beneficiary provision)<\/span><\/li>\n<\/ul>\n<p class=\"ai-optimize-263\"><b>IP ownership in a local entity<\/b><span style=\"font-weight: 400;\"> is cleaner because there\u2019s no intermediary. The Indian subsidiary owns IP created by its employees and assigns it upstream to the parent under an intercompany IP assignment agreement, priced at arm\u2019s length under transfer-pricing rules.<\/span><\/p>\n<p class=\"ai-optimize-264\"><span style=\"font-weight: 400;\">Equity grants, or ESOPs, make up by far the most frequent reason companies find it necessary to move from EOR to entity before the cost makes sense. No EOR can give stock option grants made by the parent company to their Indian employees without running into some sort of FEMA problem. All three alternative methods (phantom stock, cash-settled SARs, and RSUs via a dedicated plan administrator) are effective, but they aren\u2019t as emotionally satisfying or tax-effective as an actual ESOP grant.<\/span><\/p>\n<h2 class=\"ai-optimize-265\"><span class=\"ez-toc-section\" id=\"Setup_Speed_Expansion_Timeline\"><\/span><b>Setup Speed &amp; Expansion Timeline<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<table>\n<tbody>\n<tr>\n<td>\n<p class=\"ai-optimize-266\"><b>Milestone<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-267\"><b>EOR<\/b><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-268\"><b>Local Entity (Pvt Ltd)<\/b><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-269\"><span style=\"font-weight: 400;\">Provider\/advisor selection<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-270\"><span style=\"font-weight: 400;\">1\u20133 days<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-271\"><span style=\"font-weight: 400;\">1\u20132 weeks<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-272\"><span style=\"font-weight: 400;\">Documentation &amp; KYC<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-273\"><span style=\"font-weight: 400;\">2\u20133 days<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-274\"><span style=\"font-weight: 400;\">1\u20132 weeks<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-275\"><span style=\"font-weight: 400;\">Name reservation (RUN)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-276\"><span style=\"font-weight: 400;\">\u2014<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-277\"><span style=\"font-weight: 400;\">2\u20135 days<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-278\"><span style=\"font-weight: 400;\">Incorporation (SPICe+)<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-279\"><span style=\"font-weight: 400;\">\u2014<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-280\"><span style=\"font-weight: 400;\">7\u201315 days<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-281\"><span style=\"font-weight: 400;\">PAN, TAN, bank account<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-282\"><span style=\"font-weight: 400;\">\u2014<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-283\"><span style=\"font-weight: 400;\">3\u20138 weeks<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-284\"><span style=\"font-weight: 400;\">GST, PF, ESI, PT registrations<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-285\"><span style=\"font-weight: 400;\">Already in place<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-286\"><span style=\"font-weight: 400;\">2\u20134 weeks<\/span><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<p class=\"ai-optimize-287\"><span style=\"font-weight: 400;\">First employee onboarded<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-288\"><span style=\"font-weight: 400;\">Day 5\u201310<\/span><\/p>\n<\/td>\n<td>\n<p class=\"ai-optimize-289\"><span style=\"font-weight: 400;\">Day 45\u201375<\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p class=\"ai-optimize-290\"><span style=\"font-weight: 400;\">The bank account is almost always the bottleneck for entity setup. Build a 60\u201375 day buffer into your hiring plan, not the 30 days that the incorporation process technically takes.<\/span><\/p>\n<h2 class=\"ai-optimize-291\"><span class=\"ez-toc-section\" id=\"When_Should_You_Switch_From_Employer_of_Record_to_Your_Own_Entity\"><\/span><b>When Should You Switch From Employer of Record to Your Own Entity?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ai-optimize-292\"><span style=\"font-weight: 400;\">The transition usually happens 18\u201324 months into market entry. Use these triggers:<\/span><\/p>\n<ol>\n<li class=\"ai-optimize-293\" style=\"font-weight: 400;\" aria-level=\"1\"><b>A headcount above ~15\u201320<\/b><span style=\"font-weight: 400;\"> fixed-cost amortization flips in favour of the entity.<\/span><\/li>\n<li class=\"ai-optimize-294\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Equity-heavy compensation and<\/b><span style=\"font-weight: 400;\"> direct ESOP issuance become important.<\/span><\/li>\n<li class=\"ai-optimize-295\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Revenue-generating activity in India,<\/b><span style=\"font-weight: 400;\"> billing Indian customers or invoicing in INR, is materially easier with a local entity.<\/span><\/li>\n<li class=\"ai-optimize-296\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Senior leadership hires in India<\/b><span style=\"font-weight: 400;\">, country managers, VPs of engineering, or founding India lead roles benefit from a local employer brand.<\/span><\/li>\n<li class=\"ai-optimize-297\" style=\"font-weight: 400;\" aria-level=\"1\"><b>PE risk creeping into substance<\/b><span style=\"font-weight: 400;\">, if your India team is concluding contracts or generating revenue, formalize.<\/span><\/li>\n<li class=\"ai-optimize-298\" style=\"font-weight: 400;\" aria-level=\"1\"><b>M&amp;A or fundraising plans<\/b><span style=\"font-weight: 400;\">, investors and acquirers prefer clean ownership of Indian operations.<\/span><\/li>\n<li class=\"ai-optimize-299\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Obligations under the Data Residency Clause <\/b><span style=\"font-weight: 400;\">of the DPDP Act 2023 and other sector-based guidelines.<\/span><\/li>\n<\/ol>\n<h3 class=\"ai-optimize-300\"><span class=\"ez-toc-section\" id=\"Transition_Playbook_90-Day_Outline\"><\/span><b>Transition Playbook (90-Day Outline)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li class=\"ai-optimize-301\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Days 1\u201330: <\/b><span style=\"font-weight: 400;\">Incorporate Pvt Ltd; get PAN\/TAN; open a bank account; do PF\/ESI\/PT registration; write employment agreements.<\/span><\/li>\n<li class=\"ai-optimize-302\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Days 31\u201360: <\/b><span style=\"font-weight: 400;\">Drafting of offer letters for existing EOR employees, date of transition, equalize benefits, and setup of parallel payroll system.<\/span><\/li>\n<li class=\"ai-optimize-303\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Days 61\u201390: <\/b><span style=\"font-weight: 400;\">Transition the entire process using the payroll cut-off date, move PF accounts, clear pending amounts to EOR, and end the EOR contract notice period.<\/span><\/li>\n<\/ul>\n<p class=\"ai-optimize-304\"><span style=\"font-weight: 400;\">Get an Indian employment lawyer involved from Day 1, continuity of service, gratuity accrual, and benefits parity all need to be handled correctly to avoid disputes. <\/span>Companies hiring remote teams through TankhaPay often prioritize faster onboarding and payroll compliance.<\/p>\n<h2 class=\"ai-optimize-305\"><span class=\"ez-toc-section\" id=\"Hiring_in_India_Without_a_Local_Entity_What_You_Need_to_Know\"><\/span><b>Hiring in India Without a Local Entity: What You Need to Know<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ai-optimize-306\"><span style=\"font-weight: 400;\">India is the largest source of engineering and operational talent worldwide, and EOR is the most common route for overseas companies to enter. Key details to consider:<\/span><\/p>\n<ul>\n<li class=\"ai-optimize-307\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">In India, salaries are made up of many parts (basic, HRA, LTA, special allowance, etc.) to save on taxes. This is how a good EOR will structure offers.<\/span><\/li>\n<li class=\"ai-optimize-308\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It is common and legal for engineers to have notice periods of 60 to 90 days.<\/span><\/li>\n<li class=\"ai-optimize-309\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Most of the time, probation lasts 3 to 6 months. Managing someone&#8217;s performance during probation is much easier than after they have been confirmed.<\/span><\/li>\n<li class=\"ai-optimize-310\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Gratuity starts to build up on Day 1, but it doesn&#8217;t become available until five years later (with a few exceptions). Make sure to plan for the accrual on your books.<\/span><\/li>\n<li class=\"ai-optimize-311\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Maternity leave is 26 weeks of paid leave under the Maternity Benefit (Amendment) Act 2017, non-negotiable and fully employer-funded.<\/span><\/li>\n<li class=\"ai-optimize-312\" style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">POSH compliance requires an internal committee once the workplace has \u226510 employees, regardless of Employer of Record or entity model.<\/span><\/li>\n<\/ul>\n<h2 class=\"ai-optimize-313\"><span class=\"ez-toc-section\" id=\"Decision_Framework_Choose_Your_Model_in_5_Questions\"><\/span><b>Decision Framework: Choose Your Model in 5 Questions<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ol>\n<li class=\"ai-optimize-314\" style=\"font-weight: 400;\" aria-level=\"1\"><b>How many people will you hire in India in the next 12 months?<\/b>\n<ul>\n<li class=\"ai-optimize-315\" style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">If you\u2019re hiring fewer than 10 \u2192 EOR. 10\u201320 \u2192 either, depending on Q2\u2013Q5. More than 20 \u2192 start entity planning now.<\/span><\/li>\n<\/ul>\n<\/li>\n<li class=\"ai-optimize-316\" style=\"font-weight: 400;\" aria-level=\"1\"><b>How long do you expect to operate in India?<\/b>\n<ul>\n<li class=\"ai-optimize-317\" style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Less than 18 months or uncertain \u2192 EOR. More than 24 months committed \u2192 entity.<\/span><\/li>\n<\/ul>\n<\/li>\n<li class=\"ai-optimize-318\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Will Indian staff have contract-signing authority or generate India-source revenue?<\/b>\n<ul>\n<li class=\"ai-optimize-319\" style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Yes \u2192 entity (PE risk &amp; tax certainty). No \u2192 EOR is perfectly fine.<\/span><\/li>\n<\/ul>\n<\/li>\n<li class=\"ai-optimize-320\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Is direct parent-company ESOP issuance important to your hiring proposition?<\/b>\n<ul>\n<li class=\"ai-optimize-321\" style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Yes = entity. Workaround feasible = EOR.<\/span><\/li>\n<\/ul>\n<\/li>\n<li class=\"ai-optimize-322\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Do you have internal HR, legal, and finance bandwidth to manage Indian compliance?<\/b>\n<ul>\n<li class=\"ai-optimize-323\" style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">No \u2192 EOR. Yes (or willing to hire a local CS\/CFO) \u2192 entity.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<p class=\"ai-optimize-324\"><span style=\"font-weight: 400;\">Score: 4 or more answers favouring \u201centity\u201d \u2192 start incorporation. Otherwise, begin on EOR and revisit at 12 months.<\/span><\/p>\n<h2 class=\"ai-optimize-325\"><span class=\"ez-toc-section\" id=\"Common_Mistakes_Companies_Make\"><\/span><b>Common Mistakes Companies Make<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li class=\"ai-optimize-326\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Considering EOR charges as the sole EOR expense. <\/b><span style=\"font-weight: 400;\">Also factor in statutory load and any upfront setup costs.<\/span><\/li>\n<li class=\"ai-optimize-327\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Not considering PE risks until year two. <\/b><span style=\"font-weight: 400;\">Backdating of the tax assessment is possible.<\/span><\/li>\n<li class=\"ai-optimize-328\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Misclassifying employees as contractors<\/b><span style=\"font-weight: 400;\"> to avoid both EOR fees and entity setup. The cheapest model upfront, the most expensive in penalties.<\/span><\/li>\n<li class=\"ai-optimize-329\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Choosing an aggregator EOR for a strategic market.<\/b><span style=\"font-weight: 400;\"> Saves 10\u201315% in fees and costs 10\u00d7 in incident response.<\/span><\/li>\n<li class=\"ai-optimize-330\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Setting up a branch office instead of a Pvt Ltd<\/b><span style=\"font-weight: 400;\"> because it sounds simpler. Branch offices have severe activity restrictions and require RBI approval.<\/span><\/li>\n<li class=\"ai-optimize-331\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Not budgeting for the bank account delay<\/b><span style=\"font-weight: 400;\"> when planning entity-based hires.<\/span><\/li>\n<li class=\"ai-optimize-332\" style=\"font-weight: 400;\" aria-level=\"1\"><b>Forgetting POSH compliance<\/b><span style=\"font-weight: 400;\"> in EOR engagements (workplace responsibility usually sits with the client, not the EOR).<\/span><\/li>\n<\/ul>\n<h2 class=\"ai-optimize-333\"><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span><b>Frequently Asked Questions<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ai-optimize-334\"><b>Is it Legal to use an Employer of Record in India?<\/b><b><br \/>\n<\/b><span style=\"font-weight: 400;\"> Yes, EOR arrangements are legal in India, provided the EOR is a properly registered Indian entity holding its own PF, ESI, and Shops &amp; Establishments registrations and provided the engagement does not amount to disguised contract labour under the Contract Labour (Regulation and Abolition) Act, 1970.<\/span><\/p>\n<p class=\"ai-optimize-335\"><b>Is an EOR cheaper than setting up a Pvt Ltd company in India?<\/b><b><br \/>\n<\/b><span style=\"font-weight: 400;\">Under 15 people for a period of about 18-24 months, yes. Over this mark, it makes more economic sense to use Pvt Ltd subsidiary because of the per-person charge of Employer of Record compared to the mostly fixed cost of having an entity.<\/span><\/p>\n<p class=\"ai-optimize-336\"><b>At what headcount should I switch from EOR to a local entity?<\/b><b><br \/>\n<\/b><span style=\"font-weight: 400;\">Economically, this happens around 12 to 18 people, while strategically this decision needs to be made sooner if there are stock grants, concentrations of IP, or revenues generated out of India.<\/span><\/p>\n<p class=\"ai-optimize-337\"><b>How long does it take to set up a Private Limited Company in India?<\/b><b><br \/>\n<\/b><span style=\"font-weight: 400;\">The legal incorporation process will take about 7-15 days, while the operational preparation (PAN, TAN, bank account, etc.) takes around 45-75 days.<\/span><\/p>\n<p class=\"ai-optimize-338\"><b>What is the key <a href=\"https:\/\/www.tankhapay.com\/blog\/eor-vs-peo-india\/\">difference between an EOR and a PEO?<\/a><\/b><b><br \/>\n<\/b><span style=\"font-weight: 400;\"> An EOR is the <\/span><i><span style=\"font-weight: 400;\">sole legal employer<\/span><\/i><span style=\"font-weight: 400;\"> and is used when you have no entity in the country. A PEO is a <\/span><i><span style=\"font-weight: 400;\">co-employer<\/span><\/i><span style=\"font-weight: 400;\"> used in countries where you already have a legal entity (most commonly the US). In India, the relevant model for foreign companies without a subsidiary is EOR, not PEO.<\/span><\/p>\n<p class=\"ai-optimize-339\"><b>Does using an EOR create permanent establishment risk?<\/b><b><br \/>\n<\/b><span style=\"font-weight: 400;\">The risk is generally low if structured appropriately; however, it is not completely nonexistent. There would be a significantly higher risk of PE if the employees hired by EOR had the right to sign contracts, created Indian-sourced income, or held senior positions.<\/span><\/p>\n<p class=\"ai-optimize-340\"><b>Who owns the IP created by an employee hired through an EOR?<\/b><b><br \/>\n<\/b><span style=\"font-weight: 400;\"> Your company, provided the EOR\u2019s employment contract and your service agreement with the EOR both contain present-tense assignment language (\u201chereby assigns\u201d) and the chain of assignment is unbroken. Insist on reviewing the EOR\u2019s standard contract before signing.<\/span><\/p>\n<p class=\"ai-optimize-341\"><b>Can an EOR sponsor work visas in India?<\/b><b><br \/>\n<\/b><span style=\"font-weight: 400;\"> For foreign nationals working in India, yes, most established EORs can sponsor Employment Visas. The compensation threshold is currently USD 25,000 per year for non-specified categories.<\/span><\/p>\n<p class=\"ai-optimize-342\"><b>What will happen to my workers if I end the EOR agreement?<\/b><\/p>\n<p class=\"ai-optimize-343\"><span style=\"font-weight: 400;\">My employees can either stay with the Employer of Record and be moved to a new local entity (keeping their jobs), or they can be let go with statutory notice. Give yourself at least 60 to 90 days to get used to the change.<\/span><\/p>\n<p class=\"ai-optimize-344\"><b>Is EOR appropriate for employing senior executives in India?<\/b><\/p>\n<p class=\"ai-optimize-345\"><span style=\"font-weight: 400;\">Yes, for the heads of engineering, customer success, and operations. But for the country manager, VP of sales, and others who need to sign contracts, the risks of PE and branding usually make the case for setting up an entity.<\/span><\/p>\n<h2 class=\"ai-optimize-346\"><span class=\"ez-toc-section\" id=\"Which_Model_Is_Better_for_You\"><\/span><b>Which Model Is Better for You?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p class=\"ai-optimize-347\"><span style=\"font-weight: 400;\">Apply the Employer of Record strategy if you are analyzing the Indian market, using fewer than 15 people, emphasizing speed, or are unclear about long-term commitment. If you have more than 20 employees, intend to operate for many years, make money out of India, raise funds through direct issuance of equity, or see India as the hub of R&amp;D and GCC, adopt Pvt Ltd structure locally. <\/span>At <a href=\"https:\/\/www.tankhapay.com\/\">Tankhapay<\/a>, businesses commonly use EOR services during early market expansion before establishing a local entity.<\/p>\n<p class=\"ai-optimize-348\"><span style=\"font-weight: 400;\">Successful companies usually do both in sequence: enter India via an EOR within 1 month, confirm the viability of the Indian market in 18 months, and then switch to a Pvt Ltd local entity when certain conditions are met. This strategy allows you to take minimal risks and gain the necessary experience to run a company locally.<\/span><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<div class=\"tmnf_excerpt\">TL;DR:\u00a0 Using an Employer of Record (EOR) will allow you to hire your employees in India within 5-1\u2026<\/div>","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[281],"tags":[293,283,297,296,298,299,295,294],"class_list":["post-13042","post","type-post","status-publish","format-standard","hentry","category-eor","tag-employer-of-record","tag-employer-of-record-india","tag-employer-of-record-vs-subsidiary","tag-eor-vs-local-entity","tag-global-employment-models","tag-hiring-in-india","tag-international-hiring","tag-local-entity-setup"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v25.2 (Yoast SEO v26.5) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>EOR vs Local Entity: Cost &amp; 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