Every company that decides to build a team in India faces the same early fork: set up your own legal entity, or start through an Employer of Record (EOR)? Both are legitimate. The right answer depends on your speed, size and ambitions — and there is a phased path that captures the best of both.
The two models in one minute
- Your own entity: you incorporate an Indian company (typically a private limited subsidiary), register for taxes and payroll, and employ people directly. Full control, full responsibility.
- EOR: a licensed partner legally employs your team in India — payroll, statutory benefits, compliance — while the people work exclusively for you, under your direction, on your systems.
Speed: EOR wins the start
An EOR can have your first hire legally employed in days. Incorporating an entity — registrations, bank accounts, payroll setup, statutory enrolments — realistically takes two to four months end to end. If a key candidate is ready now, EOR removes the wait.
Cost: the crossover point
EORs charge per employee per month. At small headcounts this is cheap compared to running your own compliance stack. As the team grows, the mathematics flip: industry rules of thumb put the crossover somewhere around 30–75 employees, depending on the EOR’s pricing and your internal costs. Past that, your own entity is clearly cheaper.
Control and signalling: entity wins the long game
- Talent signalling. Senior Indian candidates read employment structure as commitment. “You’ll be employed by a third party” can cost you leadership hires; your own entity says you are here to stay.
- Equity and benefits. Granting stock and building custom benefit plans is cleaner with direct employment.
- IP and contracts. Direct employment simplifies intellectual-property assignment and client-facing compliance questionnaires.
- Incentives. SEZ, STPI or GIFT City benefits attach to your entity — an EOR arrangement cannot capture them for you.
Compliance: respect it either way
India’s employment law is manageable but genuinely detailed — provident fund, gratuity, state-specific shops-and-establishments rules, professional tax. A good EOR absorbs this for you; your own entity needs a competent payroll/compliance partner from day one. Neither path forgives improvisation.
The phased path most winners take
- Phase 1 — Prove (months 0–6): start on EOR. Hire the leader and the first pod. Learn the market with zero structural risk.
- Phase 2 — Commit (months 3–9, in parallel): once conviction is real, incorporate. The entity builds while the team already works.
- Phase 3 — Transfer (one payroll cycle): move employees from EOR to your entity with continuity of service and benefits. Done cleanly, nobody’s experience changes except the logo on the payslip — and that change is a positive signal.
Decision checklist
- Fewer than ~25 planned hires in year one, and uncertainty about India? EOR.
- Committed 100+ person roadmap, senior hires, equity plans, incentive zones? Entity — start incorporation now.
- Serious roadmap but urgent first hires? The phased path. It is the most common — and usually the wisest — answer.
HexGn runs both models for clients — EOR to move this month, entity and compliance to own the long term, and clean transfers between the two.
