Introduction to Employer of Record (EOR) in India

Expanding a business into India presents immense opportunities, but it also comes with complex legal, financial, and administrative challenges. Hiring employees in India requires adherence to the country’s labor laws, payroll regulations, tax requirements, and compliance frameworks. This is where NSquareIT Offshore Agency as an Employer of Record (EOR) Agency comes into play.

An Employer of Record is a third-party organization that legally employs workers on behalf of a company. This allows businesses to expand into India without setting up a legal entity. The EOR handles various employment-related responsibilities, including payroll processing, tax compliance, employee benefits administration, and legal compliance.

How an EOR Helps with Hiring, Pre-Onboarding & Onboarding, Payroll, Benefits and Taxation in India

One of the primary reasons companies use an EOR in India is to simplify the hiring process and ensure compliance with local labor laws. Below is a detailed breakdown of how an EOR supports businesses:

1. Hiring/Recruitment

When a company wants to hire employees (Full Time OR Independent Contractor) in India without establishing a local subsidiary, an EOR acts as the official employer. We manage all employment-related aspects, such as:

  • Drafting legally compliant employment contracts
  • Conducting background checks and document verification
  • Managing offer letters and appointment letters
  • Ensuring compliance with the Indian labor market’s rules and regulations

By leveraging an EOR, companies can quickly hire skilled professionals without navigating the complexities of Indian employment laws themselves.

Key Factors to Consider When Hiring in India

Hiring in India presents immense opportunities for businesses looking to access a diverse and skilled talent pool. At NSquareIT Offshore Agency, we specialize in streamlining the hiring process, ensuring compliance with local regulations, and helping businesses build a strong workforce. Our expertise in recruitment, payroll management, and workforce solutions makes us the ideal partner for companies looking to expand their operations in India.

Navigating India’s labor laws can be complex, but NSquareIT Offshore Agency ensures full compliance.

  • We help businesses understand key regulations, including the Industrial Disputes Act, Shops and Establishments Act, and Payment of Wages Act.
  • Our team ensures that statutory benefits such as Provident Fund (PF), Employee State Insurance (ESI), and gratuity are managed efficiently.
  • We handle employment contracts, ensuring that businesses remain compliant while hiring full-time, contract, or freelance employees.

Every business has unique hiring needs, and we offer flexible employment models to suit your requirements.

  • Whether you need full-time employees, contract workers, or freelancers, we identify the best hiring solutions.
  • Our experts guide businesses through the legal and tax implications of different employment models.
  • We ensure a seamless onboarding process for both short-term and long-term hires.

Managing payroll in India requires adherence to multiple tax and labor laws, and we simplify the process.

  • We handle salary structuring, tax deductions (TDS), and statutory contributions on behalf of our clients.
  • Our payroll management services ensure accurate and timely payments to employees.
  • We assist foreign businesses in understanding the Double Taxation Avoidance Agreement (DTAA) when hiring remote workers.

NSquareIT Offshore Agency connects businesses with top talent across IT, engineering, healthcare, finance, and more.

  • Our extensive network and recruitment expertise help us identify candidates that fit your business needs.
  • We develop competitive compensation packages to attract and retain skilled professionals.
  • Our branding and marketing strategies enhance employer credibility, making businesses more attractive to potential hires.

As a trusted offshore hiring partner, we guide businesses through India’s diverse workplace culture.

  • We help companies adapt to local communication styles, work ethics, and professional expectations.
  • Our insights into regional holidays and workplace flexibility ensure a smooth integration of global teams.
  • We assist businesses in creating inclusive work environments to foster productivity and employee satisfaction.

Ensuring employee authenticity and compliance is crucial, and we take care of all necessary verifications.

  • We conduct thorough background checks, including employment history and criminal record verification.
  • Our partnerships with top verification agencies ensure accuracy and reliability.
  • We comply with data protection laws, ensuring that employee information is handled securely.

With remote work becoming the new norm, we help businesses build efficient virtual teams in India.

  • We provide infrastructure support, cybersecurity solutions, and communication tools for remote employees.
  • Our hybrid work model strategies enable businesses to offer flexible work arrangements.
  • We ensure that remote hiring, onboarding, and management processes run smoothly.

For companies hiring foreign professionals in India, NSquareIT Offshore Agency facilitates visa processing.

  • We assist with obtaining Employment Visas and Business Visas for international employees.
  • Our team ensures compliance with the Foreigners Act and other immigration regulations.
  • We handle all legal formalities, allowing businesses to focus on their core operations.

We help businesses design salary and benefits packages that attract top talent.

  • Our expertise ensures compliance with industry standards and labor laws.
  • We offer guidance on health insurance, PF contributions, performance bonuses, and other benefits.
  • Our HR solutions include wellness programs, learning opportunities, and employee engagement initiatives.

Retaining talent is just as important as hiring the right people, and we provide solutions to improve retention.

  • We create customized training programs to enhance employee skills and career growth.
  • Our HR experts implement recognition and rewards programs to boost employee motivation.
  • We work closely with businesses to develop long-term employee engagement strategies for higher retention rates.

2. Pre-Onboarding & Onboarding

An Employer of Record (EOR) is a third-party service provider that manages employment responsibilities on behalf of a company. When hiring employees in India, an EOR ensures compliance with local labor laws, streamlines HR processes, and reduces administrative burdens.

EOR's Responsibilities in the Pre-Onboarding Phase (Prior to Employee Joining)
  1. Legal & Compliance Management – Ensures employment contracts comply with Indian labor laws, tax regulations, and statutory benefits.
  2. Offer Letter & Employment Contract – Prepares and issues legally compliant offer letters and contracts on behalf of the employer.
  3. Document Verification & Background Checks – Manages the verification of educational, professional, and personal records of new hires.
  4. Workforce Classification – Ensures proper classification of employees as full-time, contract-based, or remote, avoiding misclassification risks.
  5. Pre-Onboarding Communication – Provides new hires with an overview of company culture.
  6. IT & Workstation Arrangements – Coordinates access to company systems, software, and necessary tools.
EOR's Responsibilities in the Pre-Onboarding Phase (Prior to Employee Joining)
  1. First-Day Welcome & Orientation – Greet the employee, provide an office tour, and introduce them to key team members.
  2. HR & Compliance Induction – Educates employees about workplace policies, tax obligations, statutory benefits (EPF, ESI, gratuity), and compliance requirements.
  3. Payroll Processing & Benefits Administration – Manages timely salary payments, tax deductions, insurance, and benefits processing.
  4. IT & System Access – Ensures employees receive login credentials for company systems, email, and other tools.
  5. Probation & Performance Monitoring – Supports in setting up KPIs and performance review mechanisms during the probation period.
  6. Employee Relations & Support – Acts as an HR partner to handle grievances, legal queries, and workplace concerns.
  7. Ongoing Compliance & Risk Management – Ensures continued adherence to employment laws and regulations in India.
  8. Seamless Offboarding (if needed) – If an employee leaves, the EOR manages exit formalities, final settlements, and compliance documentation.

All processes are not applicable to all as it varies based on companies’ requirement of hiring process, but we ensure that everything compliant for employee and employer prospective before decision made for onboarding.

Distinguishing Onboarding Responsibilities Between Your Company and the EOR:

Your company focuses on role-specific tasks like training, performance management, and cultural integration.

The EOR handles legal, compliance, and payroll-related tasks to ensure smooth, legally sound employment in India.

Here’s a table differentiating the Onboarding Responsibilities of Your Company and the Employer of Record (EOR):

Responsibility Your Company’s Role EOR’s Role (e.g., NSquareIT)
Legal & Compliance Ensure adherence to internal company policies and culture. Manage legal compliance with local labor laws, tax regulations, and benefits.
Offer Letter & Employment Contract Define job expectations, role, and internal conditions. Prepare legally compliant offer letters and employment contracts.
Document Verification Verify role-specific documents and qualifications. Verify employee’s background, education, and conduct necessary checks.
Pre-Onboarding Communication Share company culture, values, and role-specific information. Provide company handbooks, policies, and essential information.
IT Setup & Workstation Preparation Set up specific work tools, software, and company systems for the new employee. Coordinate access to all IT tools, email accounts, and other systems.
Payroll Setup & Tax Registration Provide internal payment guidelines and communicate with EOR for compliance. Register employees for local tax, provident fund, and other statutory benefits.
Onboarding Training (Role-Specific) Provide job-related training, skills development, and role orientation. N/A (Focuses on compliance-related training, if required).
Employee Benefits Provide information on internal employee benefits and perks. Manage statutory benefits such as EPF, ESI, Gratuity, etc.
Performance Management Set expectations for role performance, KPIs, and feedback sessions. Support the establishment of performance tracking systems.
Employee Relations & Support Manage internal team relationships, performance issues, and company culture. Address HR concerns, disputes, and ensure compliance-related support.
Probation Period Management Monitor performance, feedback, and probation evaluations. Support performance reviews and ensure compliance with probation guidelines.

3. Payroll Processing

Managing payroll in India involves multiple components, including salary structure, tax deductions, provident fund contributions, and statutory benefits. As an EOR, we ensure smooth payroll processing by:

  • Calculating gross and net salaries
  • Withholding income tax as per the Income Tax Act, 1961
  • Managing social security contributions such as Provident Fund (PF) and Employee State Insurance (ESI)
  • Disbursing salaries in compliance with Indian banking regulations

Payroll management is a critical aspect of every business, ensuring employees are compensated accurately and on time while maintaining legal compliance. In India, payroll management involves various components regulated by the government, and adhering to these regulations is essential for smooth business operations. As an Employer of Record (EOR), NSquareIT Offshore Agency assists businesses with payroll management while ensuring full compliance with Indian laws and regulations.

Key Components of Payroll Management in India:
  • The salary structure must clearly outline the gross salary, deductions, and net pay. The components typically include:
    • Basic Salary
    • House Rent Allowance (HRA)
    • Special Allowances
    • Bonus
    • Provident Fund (PF) Contributions
    • Gratuity
    • Tax Deductions
  • Deductions are made based on government regulations, such as:
    • Employee Provident Fund (EPF)
    • Professional Tax (PT)
    • Income Tax (TDS – Tax Deducted at Source)
    • Employee State Insurance (ESI), where applicable
  • Payroll management must comply with various labor laws, such as the Payment of Wages Act, Minimum Wages Act, and Shops & Establishments Act.
  • Maintaining records as per the Factories Act is also necessary for companies employing a large number of workers.

Businesses are responsible for calculating and remitting income tax on behalf of their employees. This is done via TDS (Tax Deducted at Source), and the necessary tax returns must be filed with the Income Tax Department.

  • Employers are required to contribute to the Employee Provident Fund (EPF) and Employee State Insurance (ESI) for eligible employees.
  • These contributions are set by the government and are critical for employee social security benefits.

Payroll management involves generating payslips, salary statements, and reports, which must be shared with employees and filed for tax purposes.

Under the Payment of Bonus Act, employers must pay a bonus to employees if they meet certain criteria regarding their earnings and the company’s profits.

Government Guidelines:

For specific payroll management guidelines, companies can refer to the official websites of the Indian government. A useful resource is the Ministry of Labour and Employment website, which provides comprehensive information about labor laws and payroll requirements.

Payroll Management Table Overview:
Component Description
Basic Salary The core compensation before allowances and deductions.
House Rent Allowance Compensation for housing expenses, typically 40-50% of the basic salary.
Special Allowances Additional payments such as transportation, food, or performance bonuses.
Provident Fund (PF) Employee contribution to the retirement fund, usually 12% of the basic salary.
Gratuity A lump-sum payment upon leaving the organization, typically after 5 years of service.
Tax Deductions (TDS) Tax deducted at source as per applicable income tax slabs.
ESI Contributions Contributions for social security benefits for eligible employees.
Bonus Based on company profit and employee eligibility under the Bonus Act.

NSquareIT Offshore Agency ensures that businesses meet all these payroll management requirements in India, offering a seamless experience by managing all aspects of payroll while maintaining strict compliance with Indian labor laws and government guidelines.

4. Employment Benefits

Employees in India are entitled to several statutory benefits under labor laws. An EOR ensures that all employees receive these benefits while keeping the employer fully compliant.

  • Calculating gross and net salaries
  • Withholding income tax as per the Income Tax Act, 1961
  • Managing social security contributions such as Provident Fund (PF) and Employee State Insurance (ESI)
  • Disbursing salaries in compliance with Indian banking regulations
1. Provident Fund (PF)

The Employees’ Provident Fund Organization (EPFO) mandates that employees and employers contribute to a retirement savings scheme. The contribution is typically 12% of the employee’s basic salary OR 1800 INR from both the employer and the employee.

2. Employee State Insurance (ESI)

This is a social security and health insurance scheme that applies to employees earning below INR 21,000 per month. It provides medical, maternity, disability, and unemployment benefits.

3. Gratuity

Gratuity is a lump sum amount paid to an employee who has completed at least five years of service with a company. The payment is calculated as: Gratuity = (Last Drawn Salary × 15 × Number of Years Worked) / 26

4. Paid Leave and Holidays

Employees in India are entitled to various leave benefits, including:

Casual Leave (CL)

Short leaves for unforeseen personal reasons.

Paid/ Annual Leave (EL)

Accumulated leave that can be availed for vacations.

Sick Leave (SL)

Leave taken due to illness.

Public Holidays

These are official 12 days off declared by the government, including national holidays like Independence Day and state-specific holidays for festivals or regional occasions.

Maternity Leave

Maternity leave is typically 26 weeks in India for the first two children.

5. Medical Insurance and Other Perks

Many EORs provide additional health insurance and wellness benefits to employees, ensuring they receive a comprehensive benefits package beyond mandatory requirements. We provide Health and Term Life Insurance to employees from well-known service provider.

5. Taxation Compliance

India’s tax system is complex, with multiple tax obligations for employers and employees. An EOR ensures compliance with:

Income Tax (TDS – Tax Deducted at Source)

Employers must deduct tax at source from employees’ salaries and deposit it with the government.

Provident Fund (PF)

A mandatory retirement savings contribution where both employer and employee contribute.

Employee State Insurance (ESI)

Applicable to employees earning below a specific threshold, providing healthcare benefits.

Professional Tax (PT)

Levied by state governments on salaried employees.

Gratuity and Bonus Payments

Ensuring compliance with statutory bonus and gratuity payments upon employee exit.

By handling these responsibilities, an EOR eliminates the burden of navigating India’s intricate taxation system.

Employee Offboarding Process by EOR in India

Employee offboarding is a crucial process that ensures a smooth transition when an employee leaves an organization. As an Employer of Record (EOR), NOA ensures that all legal, financial, and compliance aspects of employee termination are managed in accordance with Indian labor laws.

Types of Termination

1. Voluntary Termination (Resignation)
  • When an employee decides to resign, they are required to serve the notice period as per their employment contract.
  • EOR facilitates communication between the employee and the client company to ensure a smooth exit.
  • The resignation must be formally documented, and a resignation letter must be submitted.
2. Involuntary Termination (Employer-Initiated)
  • This includes termination due to performance issues, misconduct, redundancy, or restructuring.
  • We ensure compliance with Indian labor laws by handling legal documentation and notice period requirements.
3. Mutual Termination
  • In some cases, both the employee and the employer agree to terminate the contract on mutually accepted terms.
  • We prepare the necessary agreements to document this arrangement.
4. Probation Termination
  • If an employee is unable to meet performance expectations during the probationary period, the employer may terminate the contract.
  • We ensure compliance with probation termination clauses specified in the contract.
5. Retirement or End of Contract
  • When an employee reaches the retirement age or completes a fixed-term contract, we manage the necessary formalities such as final settlements and documentation.

Steps Involved in Employee Termination

1. Notification & Documentation
  • The employer (client company) informs us about the termination decision.
  • We ensure that the termination is legally justified and documented properly.
  • The employee receives a formal termination letter from NOA or Company.
2. Notice Period Management
  • Depending on the type of termination, a notice period is served as per the employment contract.
  • NOA ensures compliance with labor laws and contract terms regarding notice pay or waiver.
3. Final Settlement & Payroll Closure
  • We calculate and processes the final salary, including:
    • Pending salary dues
    • Leave encashment (if applicable)
    • Gratuity and provident fund (if eligible)
    • Tax deductions and compliance
  • The final settlement is disbursed to the employee within the legally mandated timeline.
4. Exit Interviews & Feedback
  • NOA may conduct an exit interview to gather feedback and improve employer-client relationships.
  • Feedback is documented for internal improvements.
5. Revocation of Access & Asset Return
  • The client company ensures that company assets (laptop, ID card, etc.) are collected.
  • NOA assists in revoking system access and ensuring data security compliance.
6. Compliance & Legal Documentation
  • NOA provides the employee with:
    • Relieving Letter (confirming employment end date)
    • Experience Certificate (if applicable)
    • Full & Final Settlement Report
  • Any statutory compliance requirements (e.g., filing with EPFO, Income Tax Department) are managed by NOA.
7. Post-Termination Support (If Applicable)
  • In cases of layoffs, NOA may assist in offering outplacement services.
  • Any disputes or claims raised by the employee are handled per Indian labor law provisions

By handling the entire offboarding process, we ensures legal compliance, reduces risks, and facilitates a seamless transition for both employees and employers in India.

Advantages of Using an EOR in India

Using an EOR comes with several key benefits for companies looking to expand into India:

Faster Market Entry

Companies can hire talent without setting up a legal entity, saving time and effort.

Legal Compliance

An EOR ensures compliance with complex labor laws and regulations.

Cost Savings

Avoids the high costs associated with entity establishment and HR administration.

Risk Mitigation

Reduces the risk of non-compliance, fines, and legal disputes.

Focus on Core Business

Companies can focus on growth while the EOR handles employment logistics.

Access to local expertise

EOR providers bring valuable expertise in Indian business culture, employment practices, and market conditions. This knowledge enables companies to make informed decisions and successfully navigate the complexities of the Indian business landscape.

NOA is your one-stop solution for entering the Indian market. As a top Employer of Record (EOR) provider, we offer a wide range of services that go beyond standard EOR solutions:

  • Comprehensive EOR services, including payroll management and compliance
  • End-to-end talent sourcing and recruitment
  • Assistance with equipment procurement and office setup
  • Individual Contractor payroll Management
  • Reimbursement assistance

What sets us apart? Our deep local expertise, transparent pricing (starting at just $75 per employee per month), and a cutting-edge technology platform. We also provide added benefits like expense reimbursements and employee gifting at no extra cost.

With NOA, you can easily hire, pay, and manage talent in India—without the need to establish a local entity. We take care of the complexities, so you can focus on growing your business. Whether you’re a startup, SME, or multinational corporation, partnering with an EOR can simplify your expansion strategy and help you access top talent in India without legal and administrative hurdles.

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FAQs

An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of a company, allowing businesses to hire employees in India without setting up a local entity. The EOR manages payroll, tax compliance, employee benefits, and legal requirements, ensuring full compliance with Indian labor laws.

An EOR handles employment contracts, background verification, payroll setup, tax registration, benefits administration, and compliance with labor laws. During onboarding, the EOR manages documentation, IT setup, statutory registrations, and ensures adherence to local regulations, while the company focuses on role-specific training and integration.

An EOR ensures compliance by drafting legally valid employment contracts, managing statutory benefits like Provident Fund (PF) and Employee State Insurance (ESI), handling payroll tax deductions, and adhering to regulations such as the Industrial Disputes Act and Payment of Wages Act.

Yes, an EOR provides customized employment solutions, including full-time, contract, and freelance hiring. It ensures proper classification of workers, mitigates misclassification risks, and manages legal and tax implications for each employment model.

An EOR manages salary structuring, tax deductions (TDS), statutory contributions, timely payroll processing, and compliance with tax laws. It also assists foreign companies with the Double Taxation Avoidance Agreement (DTAA) when hiring remote workers in India.

An EOR manages payroll by calculating salaries, withholding income tax (TDS), handling Provident Fund (PF) and Employee State Insurance (ESI) contributions, and ensuring timely salary disbursements in compliance with Indian regulations.

Payroll management includes salary structuring, tax deductions (TDS), statutory contributions (PF, ESI), compliance with labor laws, payroll reporting, and adherence to government regulations such as the Payment of Wages Act and Minimum Wages Act.

Employers must provide benefits such as Provident Fund (PF), Employee State Insurance (ESI), gratuity for employees with at least five years of service, paid leave, maternity leave (26 weeks for the first two children), and public holidays as per government mandates.

An EOR ensures compliance by deducting and remitting TDS on salaries, managing PF and ESI contributions, handling professional tax (PT) payments, and ensuring adherence to statutory bonus and gratuity obligations.

In addition to mandatory benefits, an EOR can offer health insurance, term life insurance, wellness programs, and other employee perks to enhance job satisfaction and retention.

Employee offboarding is the process of managing an employee’s exit from an organization. It ensures a smooth transition, legal compliance, proper documentation, and risk mitigation.

NOA manages various types of employee termination, including voluntary termination (resignation), involuntary termination (employer-initiated), mutual termination, probation termination, and retirement or end of contract.

The steps include notification and documentation, notice period management, final settlement and payroll closure, exit interviews and feedback, revocation of access and asset return, compliance and legal documentation, and post-termination support if applicable.

Using an EOR offers benefits such as faster market entry, legal compliance, cost savings, risk mitigation, focus on core business activities, and access to local expertise in Indian business practices.

Companies can contact NSquareIT Offshore Agency to connect with an expert and initiate the process of hiring, paying, and managing talent in India without the need for establishing a local entity.

At NOA, we’re proud to offer flexible solutions for businesses of all sizes. Whether you need to onboard a single employee in India, our services are scalable to meet your specific requirements.

The price of EOR services in India can fluctuate based on factors like the number of employees, their salary ranges, the complexity of the required services, and the specific location in India. When selecting an EOR in India, it’s essential to evaluate different pricing models and take into account both the base fees and any possible hidden costs. At NOA, we take pride in providing transparent, flat-rate pricing while ensuring a high standard of quality and strict compliance.

Yes you can.

Contact NSquareIT Offshore Agency today to simplify your expansion while reducing costs and compliance risks.