Employer of Record (EOR) in India: How It Works, What It Covers

An employer of record (EOR) in India is an Indian company that legally employs staff on behalf of an overseas business. The overseas business chooses the people and directs their work; the EOR issues the Indian employment contract, runs payroll and TDS, pays provident fund and other statutory contributions, and handles leave, gratuity and exits under Indian law. It lets a company hire in India without setting up its own entity.

India is one of the largest pools of software engineering talent in the world, and more overseas companies want dedicated engineers here rather than project-based outsourcing. Opening an Indian company takes time, money and ongoing compliance work. The EOR model is the faster route, and done properly it gives the people hired regular, protected employment. This guide explains how it works from both sides.

What does employer of record mean?

“Employer of record” describes who is the employer in law. In an EOR arrangement there are three parties:

The client pays the EOR the employment costs plus a service fee. The employee sees an ordinary Indian employment: a contract, monthly salary in rupees, payslips and statutory benefits.

How does hiring through an EOR work?

1. The client finds the candidate (or asks for help finding one) and agrees the role, salary and start date.
2. The EOR issues the employment contract under Indian law, with the client’s confidentiality and intellectual property terms built in.
3. Onboarding: background checks, statutory registrations, equipment and access to the client’s tools.
4. Day-to-day work: the employee joins the client’s team, stand-ups and projects like any other team member.
5. Every month: the EOR runs payroll, deducts tax, pays contributions and sends the client one invoice.
6. Exits: resignations, notice periods and full and final settlements are handled by the EOR under the contract and the law.

What does an EOR handle under Indian law?

India’s employment rules are being consolidated into four labour codes, brought into force in November 2025: the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020. States are notifying their own rules under them. A good EOR tracks those changes so the client doesn’t have to.

In practice, the EOR is responsible for:

• Payroll and income tax. Monthly salary, tax deducted at source (TDS) under the Income-tax Act, payslips and Form 16 each year.
• Provident fund (EPF). Registration with the EPFO and monthly contributions from employer and employee, generally 12% of wages each, subject to the scheme’s rules.
• Employees’ State Insurance (ESI). For employees whose wages are within the ESI limit, which covers medical and sickness benefits.
• Gratuity. A lump sum on leaving after qualifying service: 15 days’ wages for each completed year, now under the Code on Social Security.
• Professional tax and labour welfare fund. Set by each state; some states levy them and others don’t.
• Leave and holidays. Earned, casual and sick leave, public holidays for the employee’s state, and paying for unused earned leave at exit. Our guide to leave encashment rules in India explains how that works.
• The definition of wages. Under the labour codes, if allowances exceed half of total pay, the excess counts as wages for contributions and gratuity. Salary structures designed before the codes may need revisiting.
• Contracts, policies and exits. Notice periods, confidentiality, data protection, and compliant full and final settlements.

What should the client check in an EOR agreement?

• Intellectual property. Under the Copyright Act, 1957, work created in the course of employment belongs first to the employer, which is the EOR. The agreement must assign all IP in the employee’s work to the client, in writing.
• A clear split of responsibilities. Who handles recruitment, equipment, background checks, performance issues and terminations.
• Transparent pricing. Salary, statutory costs and the service fee shown separately on every invoice.
• Data protection. The EOR processes employees’ personal data, so it has obligations under the DPDP Act, 2023. If employees work with your customers’ data, agree how access and security are handled.
• Tax position. Directing employees in India can raise permanent establishment questions for the client. Take tax advice on your own situation.
• Exit and transfer terms. How employees move to your own entity later, and what happens to their service and benefits.

How does EOR compare with an entity or contractors?

Hiring long-term, full-time people as “contractors” is a common mistake: if they work like employees, they may legally be employees, with back-dated obligations. An EOR avoids that by making them employees properly.

What does an EOR role mean for the professional?

For engineers, an EOR job is regular employment, not freelancing:

• a formal Indian employment contract and monthly payslips
• provident fund, gratuity, statutory leave and, where applicable, ESI
• salary paid in rupees with tax deducted correctly, so filing returns is simple
• direct work with an international product team, without relocating

When evaluating an offer through an EOR, ask who the legal employer is, how leave and holidays work, what the notice period is, and who to contact for HR questions day to day.

When is EOR the right model?

EOR suits companies that want dedicated, full-time people in India quickly and without the overhead of a local entity, typically from one engineer to a few dozen. It’s also a sensible way to test India as a location before committing to an entity. Larger, long-term operations often justify their own Indian company eventually, and the move from EOR to entity can be planned from the start.

Building a team in India, or thinking about joining one? Get in touch and we’ll explain how we work with international teams.