CHOOSING A MODEL

EOR vs PEO vs your own entity in India

Three ways to put people on the ground in India, with genuinely different cost, control and risk profiles. Here is how they actually differ, and roughly where each one stops making sense.

The short version

	EOR	PEO	Own entity
Who employs the person	The EOR entity	Co-employment with you	You
Do you need a legal entity	No	Usually yes	Yes
Who carries employment liability	The EOR	Shared	You
Time to first hire	Two to three weeks	After entity setup	Three to six months
Permanent establishment exposure	Structured to avoid it	Depends on structure	You have a presence by design
Best at	1 to 20 people, or testing the market	Companies that already have an entity	20 plus, long term commitment

Employer of Record

An EOR becomes the legal employer of your India based staff through its own registered Indian entity. You direct the work, set the goals and manage the people day to day. The EOR holds the employment contract and carries the compliance obligations that come with it.

It fits when

You want people in India quickly, you do not want to incorporate, and you do not want your US entity exposed to Indian employment law or a permanent establishment argument. It also fits when you are not yet sure how big the India team will get.

The real trade off

You pay a margin over salary. Past a certain headcount that margin exceeds what running your own entity would cost. The honest answer is that this crossover usually sits somewhere between fifteen and twenty five people, depending on seniority and how much hiring you are doing.

The thing to check

Many EOR platforms do not employ anyone in India themselves. They subcontract to a local partner you were never introduced to. Ask who the legal employing entity is, and make sure it is named in your contract.

PEO

A PEO shares employer responsibilities with you under a co-employment arrangement. It handles payroll, benefits and HR administration while you remain an employer in your own right.

The important detail in India is that the co-employment model that exists in the US does not map cleanly onto Indian law. In practice, most arrangements sold as PEO in India either require you to already have a registered entity, or are functionally an EOR with different branding. If a provider offers you a PEO without an entity, ask them to explain precisely who the statutory employer is.

It fits when

You already have an Indian entity and want to outsource payroll, filings and HR administration rather than the employment relationship itself.

The real trade off

You keep more control, and you keep more liability. Compliance failures land at least partly on you.

Your own entity

Incorporating in India, usually as a private limited company or a wholly owned subsidiary. You become the employer outright.

What it actually involves

Requirement	Note
Incorporation	Typically three to six months end to end
Resident director	At least one director must be resident in India
Registered office	Plus Shops and Establishments registration
Statutory registrations	PF, ESI, professional tax, GST where applicable
Ongoing compliance	Monthly filings, annual accounts, audit, board meetings
Corporate tax exposure	You now have a taxable presence in India

It fits when

India is a long term commitment, headcount is above roughly twenty, and you want full control including the ability to hold IP locally, raise invoices in India or sell into the Indian market.

The real trade off

Cost and time before anybody is hired, and a compliance burden that does not go away. The administrative overhead is routinely underestimated by companies used to US or UK filing requirements.

And the fourth option people actually use

Paying people in India as independent contractors. It is quick and it is cheap, and it is also where most of the risk we see sits.

If a contractor works set hours, uses your systems, reports to your managers and has no other clients, Indian authorities may well treat that person as an employee regardless of what the contract says. The exposure is yours: back contributions to Provident Fund and ESI, unpaid gratuity, penalties and interest, calculated from the start of the engagement rather than the date of the finding.

Converting long standing contractors to properly employed staff is one of the more common reasons US companies come to us. It can usually be done without changing anything about how those people work day to day.

A rough rule of thumb

Situation	Usually the right model
First one or two hires in India	EOR
Testing whether an India team works	EOR
Existing contractors you want to regularise	EOR
Five to twenty people, no entity	EOR
Entity already in place, want payroll off your plate	PEO or managed payroll
Twenty plus, long term, selling into India	Own entity

We will tell you when you have outgrown us. If your headcount and plans point at your own entity, saying so is more useful to both of us than keeping you on a margin you no longer need to pay.

Not sure which fits?

Tell us your headcount plans and we will give you a straight answer, including when the answer is that you do not need an EOR at all.

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