In this edition
A UK-based product company found its ideal engineer in Bengaluru. The offer was ready. Then someone asked, "How do we actually employ this person? We don't have a company in India."
A three-day hiring decision for a new hire turned into six weeks of legal research, payroll consultations, and compliance talks. By the time they had answers, the engineer had taken another offer.
A US-based SaaS company had gone further: 47 employees across six states, two years in. Then the EPFO sent a notice. Eight weeks of scrambling followed. The damage:
Over $40,000 spent on legal and compliance fees
Two key employees resigned during the audit
One product launch is 6 weeks behind schedule
Employment agreements are exposed to legal and compliance disputes
Both outcomes were totally avoidable. Both have the same root cause: hiring in India without a structure that actually holds up.
Why India cannot be ignored in 2026?
Currently, India stands as the third-largest source of foreign workers worldwide, as per the State of Global Hiring Report 2025. The GCC network present in India, comprising over 1,900 centres and about 2 million employees, earns in excess of $64 billion in annual revenue and is expected to hit $100 billion by 2030. Organisations that recruit talent from India get the benefit of saving up to 40-60% in salaries relative to comparable US positions.
The typical salary for engineering and data specialists in India stands at around $22,000, while the average salary for such talent in the US is $150,000. It is in a position to be one of the most attractive labour markets in the world for multinational firms to control costs without compromising expertise.
The question for most CEOs, CFOs, and CHROs is no longer whether to hire in India. It is whether their employment structure will hold up when it matters.
The Real Cost of Setting Up an Indian Entity
Most multinational companies vastly underestimate establishing a legal entity in India. In order to incorporate as a private limited company, the firm needs to go through the process of obtaining Director Identification Numbers and Digital Signature Certificates, followed by registering as a Private Limited Company at the Registrar of Companies. These figures speak for themselves:
$8,000–$20,000 in one-time legal setup costs, depending on the states involved
3–6 months before your first compliant hire
$12,000–$20,000 per year for the compliance headcount needed from around 10 employees
Ongoing chartered accountant and legal retainers on top of all of the above
And then there is the regulatory landscape itself.
All four Labour Codes, i.e., covering Wages, Industrial Relations, Social Security, and Occupational Safety, came into force on November 21, 2025, repealing the 29 central laws they replace. The codes are now effective, but central rules are still being finalised, and state-level rules vary widely, with several states still in draft. Critically, the implementing notifications provide for no transitional period, meaning employers are expected to act now rather than once the rules are fully settled.
The Compliance Work Most Companies Don’t Plan For
Compliance in India is not a one-time activity. It is a monthly, quarterly, and annual responsibility, and it operates differently depending on the state your employees are in.
Every single month, you are responsible for:
Contribution to PF by the 15th, contribution to ESIC by the same day
Withholding tax paid on the 7th of the following month
Professional Tax varies according to the state and income slabs
Generating accurate pay slips and taking attendance
Every quarter, TDS returns are filed. Yearly, PF returns, calculation of bonus payment as per the Payment of Bonus Act, and individual income tax filing have to be done. The labour codes introduce a revised wage definition where ‘wages’ generally need to form at least 50% of total remuneration for statutory calculations.
If you miss a PF deadline, EPFO charges a penalty of 12% per annum on the overdue amount. Miss several and you have an audit scenario with all the legal fees, employee attrition and leadership distraction that goes with it.
A global company building an India team from its US or UK headquarters does not have this knowledge in-house. Building it takes years. Hiring for it takes months and adds significant cost before the India operation has generated any return.
Three questions your legal and finance teams should already be asking
- Can you be taken to an Indian labour court without a registered entity here?
Yes, Labour courts in India look at where the work is performed and where the worker is located, not where your company is registered. An employee's claim will be heard in their state regardless of where your headquarters sit.
- What is Permanent Establishment (PE) risk, and why should your CFO care?
India's tax authorities could argue your company has a taxable presence in India if your Indian employees are performing meaningful work, and most engineering, product, and operations jobs clearly fit this description. Even if you don’t have a formal entity. In FY 2024-25, Indian tax authorities assessed over INR 15,000 crore in relation to PEs across multinational enterprises. PE risk is not a theoretical concern but an active enforcement priority, as India’s tax administration increasingly uses data analytics and international information-sharing agreements. This is where the employment contract structure in an EOR arrangement becomes so important.
- Who is liable when things go wrong?
In a loose hiring arrangement without proper structure, the answer is deeply unclear, and that ambiguity is entirely your problem. A proper EOR arrangement defines exactly who holds every statutory obligation at every stage of employment.
What TankhaPay actually handles
TankhaPay becomes your legal employer of record in India and assumes complete statutory responsibility. That, in practice, means:
Employment contracts drafted under Indian law, specific to each employee's state
Monthly payroll with accurate TDS, PF, ESIC, and Professional Tax
All statutory filings on time, every month, PF challan, ESIC challan, PT returns, TDS deposits
Quarterly and annual compliance filings without exception
Onboarding documentation, background checks, and e-offer letters
Payslip, Tax Deductions, and PF-related employee support
A live dashboard so your team always knows where compliance stands.
Beyond process, TankhaPay is backed by 26+ years of India-specific institutional knowledge. From a last-minute audit notice to resignation while conducting a compliance audit to salary revisions in the middle of the year that affect statutory calculations. Such cases need experts who have been through similar experiences, not a generic platform that treats India as yet another option among 150 countries.
What the Cost Difference Looks Like between EOR and Self-setup
Set the self-setup path against an EOR:
Self-setup: $8,000-$20,000 up front, 3-6 month wait time, $12,000-$20,000/year in FTEs for compliance management, plus retainers, plus penalties for failure to pay statutory charges, calculated at 12% annually on any outstanding statutory charges
EOR with TankhaPay: clear monthly charge per employee, first hire on board in days, zero entity cost, zero hidden costs, zero internal headcount needed
When using India-based experts for outsourcing payroll and compliance services, the cost savings range between 60 and 80% when compared to handling such tasks through Western-based personnel in-house. For a team of ten people over two years, the financial difference is material.
The less visible cost is your leadership team's time. For each week that you spend on entity registration, compliance reviews, and labour laws, you miss out on developing your product, serving your customers, and growing your business. It won’t appear in any spreadsheet, but anyone who has experienced it firsthand knows it’s the most costly component of the entire process.
The bottom line
India has some of the deepest talent pools in the world for engineering, product and operations. The World Economic Forum’s Future of Jobs Report 2025 finds that 67% of companies in India expect to draw on diverse talent pools to fill emerging roles well above the global average of 47%. The race to hire the best of that talent is underway.
It is not a matter of whether to hire in India. It is a matter of whether your hiring framework can survive the critical moment. With TankhaPay:
Your first hire is onboarded within days, not weeks
Salary payments are made on time, on a monthly basis
Compliance ensured in all states, filing every cycle
Your HR department. Putting people before paper
As an executive, you focus only on developing the business
No entity setup. No compliance overhead. No HR headache. Just a team in India that works, protected by a structure that holds.
Ready to hire in India the right way?
Does this change anything in your own payroll setup?
Our team can review your current payroll and compliance process against the rules covered in this edition. You get a clear view of where you stand, with no obligation to switch anything.
