Human resources India

EOR services in India

Bhargavi Venugopal
Author

January 5, 2023
Published On

According to IMF data, India was the world's 5th largest economy in 2022 in current dollars, with a Gross Domestic Product (GDP) of $3.53 trillion, and $10.21 trillion in Purchasing Power Parity (PPP), ranking 3rd globally after the United States and China ($19.15 trillion). The Indian subcontinent offers vast opportunities, and many companies are considering establishing a presence there. However, the health crisis has changed the landscape and reshuffled the employment deck. Investors are now compelled to review their market entry strategies. Today, to maintain and increase competitiveness without burdening their payroll, there's a simple, reasonable, and reliable solution: Employer of Record (EOR) services.

What is Employer of Record (EOR) services?

Employer of Record (EOR) services is a tripartite contractual relationship between the EOR company, the independent professional being employed, and the client company where the professional will carry out their assignment. Three types of contracts are established:

An employment contract between the independent professional and the EOR company.
A service agreement between the independent professional and the client company (including the applicable collective agreement, retirement fund, etc.).
A service contract between the EOR company and the client company, outlining the terms of the independent professional's assignment.

The EOR company manages the administrative, financial, and legal aspects of this arrangement.

Ultimately, Employer of Record (EOR) services provide a flexible solution for any company looking to outsource a service. Highly adaptable, the contracted professional is immediately operational and brings valuable external perspectives to their assignments.

How does an Employer of Record (EOR) company operate in India?

A company looking to enter the Indian market? Employer of Record (EOR) services is the first, quick, and legal solution to start testing this new market and expanding into the country. In fact, an EOR company often serves as a recruitment platform for Western clients.

Visibility is often lacking when entering India. The EOR company becomes the employer of the contracted professional and handles the following tasks:

Immigration and visa assistance
Recruitment
Drafting employment contracts (which must be written and in Indian rupees, complying with local laws and regulations)
Human resources
Payroll (in India, minimum wages vary by state and sector, and companies usually budget for additional benefits to retain their employees – housing allowance, transportation, medical benefits, etc.)
Administrative tasks (social security, employee benefits, etc.)
Taxation (taxes are deducted and paid to Indian authorities in a timely manner)
Invoicing, client follow-up, accounting
Contract renewal or termination processes

Each month, the EOR company invoices the client company and converts the generated revenue into a salary for the independent professional.

In summary, this allows for the outsourcing of human resources, allowing companies to focus serenely on their core activities and business expansion. At the same time, the contracted professional enjoys benefits comparable to those offered by large companies.

What are the benefits of Employer of Record (EOR) services in India?

Engaging an Employer of Record (EOR) company in India helps minimize hiring costs by leveraging specialized expertise and enables:

Avoiding the creation of a legal entity, which could be time-consuming, costly, and risky.
Scaling a sales team based on business volume, for example, starting with one sales manager.
Streamlining administrative management: maintaining independence while being freed from administrative constraints.
Secure status: the independent professional is covered in case of potential damages by Professional Liability Insurance.
Financial benefits: the professional receives a monthly salary.
Social benefits: the professional is employed under an employment contract (fixed-term or permanent) and enjoys the same coverage as a regular employee.
Reducing employer liability: responsibility is shared between the EOR company and the client company, eliminating legal hassles as Indian labor laws are complex, and legal systems vary greatly from one region to another.