How Foreign Companies Hire in India Without an Entity

A foreign company can hire employees in India without an entity, and in our experience most do exactly that for the first year or two. The structure is the same wherever you hire without an entity: someone local has to be the legal employer, because a company with no registration in the country cannot issue a valid employment contract there.

In India that leaves two routes without incorporating, and a third if you are ready to commit. This page covers what each one costs, what each one exposes you to, and what actually changes once your India team stops being an experiment. It sits alongside our wider guide to hiring employees in India.

Can a foreign company hire employees in India without a local entity?

Yes. The structure is the same wherever you hire without an entity: someone local has to be the legal employer. In India that means one of two routes, an Employer of Record that employs the person on your behalf, or an independent contractor engagement. Your own Indian entity is the third route, and it is the slow one.

Employer of Record

An Employer of Record is a company that already holds a registered legal entity in India. It becomes the legal employer of your hire for payroll, tax and statutory purposes, while your team keeps full control of the work, the projects and the performance conversation. This is the route we run as Wisemonk EOR.

In practice the EOR takes the employment contract, the monthly pay run, provident fund and state insurance contributions, salary tax withholding, and benefits administration. You approve the offer and manage the person. Everything filed in India gets filed by the EOR, under its own registrations, which is why this route also carries India payroll compliance without you building any of it.

It is the usual choice for a company that wants real employees rather than invoices, and wants them working this month rather than next quarter. We can onboard a first hire in 24 to 48 hours once terms are agreed. If you are sizing the spend before you commit, our breakdown of the cost of an EOR in India covers what sits inside the fee and what sits on top of it.

Why companies pick this route:

• No incorporation: you do not register a private limited company, a branch office or a subsidiary, and you do not maintain one afterwards.
• The compliance obligation moves: statutory benefits, professional tax and social security contributions sit with the EOR's Indian entity, not with you.
• Permanent establishment exposure drops: the employment relationship lives inside an Indian company rather than in your foreign one.
• Scaling is reversible: you can add or release people without an entity to wind down. Our guide to hiring remote employees in India through an EOR walks the mechanics.

Independent contractors

The second route is engaging people as independent contractors. It is faster to start, needs no EOR relationship, and the contractor handles their own tax filings, their own invoicing and their own benefits. We cover the practicalities in our guide to hiring and paying contractors in India.

It works for genuinely project-scoped work with a defined end. It stops working the moment the engagement starts to look like employment: exclusive hours, a reporting line, supervision, company equipment, an ongoing role with no scope boundary. Indian authorities can reclassify on those facts regardless of what the contract says, which is the substance of contractor misclassification risk.

Contractors also come with withholding obligations of their own, which is where most first-time payers get caught. Our contractor pay guide for India covers what has to be deducted and documented before money leaves your account.

Use contractors when the work is short, scoped and genuinely independent. Use employment when the person is full time, integrated into your team and expected to still be there next year.

Your own Indian entity

The third route is incorporating. A private limited company gives you the legal employer status, the local bank account, the tax registrations and the ability to issue equity in your own name. It also gives you every monthly, quarterly and annual filing that comes with being an Indian employer, plus the audit. Company registration in India is the starting point, and it is measured in months rather than days.

Most of the companies we work with reach this decision eventually. Very few reach it on day one, and our comparison of the best way to hire employees in India sets out the decision in full.

The same three routes apply whichever country you are hiring from, though the paperwork on your side differs. If you are hiring from the United States specifically, our guide for a US company hiring in India covers the dollar-side mechanics.

Is it legal to hire employees in India without an entity?

The question that matters is not legal versus illegal, it is what creates exposure. Three things do: permanent establishment, which decides whether your India activity gives you a taxable presence; misclassification, which turns on how the person actually works rather than what the contract calls them; and who withholds salary tax and remits PF and ESI.

Whether a foreign company can put an Indian resident directly on its overseas payroll with no local structure at all is contested, and the practical answer turns on the three risks above rather than on a single yes or no.

Each of those three has a clean answer when an Indian employer issues the contract, which is the whole reason the EOR route exists. For the legal reasoning in full, our explainer on whether an EOR is legal in India is the page that owns the depth.

What decides whether you create a permanent establishment

Permanent establishment is a tax concept, not an employment one. It asks whether your company has enough of a fixed or dependent presence in India that Indian corporate tax should apply to the profits attributable to it. Headcount alone is rarely the trigger.

What moves the needle is what the people in India actually do. Negotiating contracts, concluding sales, holding out as your India office, or making decisions that bind the parent all point toward a presence. Our explainer on permanent establishment risk in India sets out the specific tests, and it is worth reading before you hire a country lead rather than after.

Where contractor misclassification actually bites

Misclassification is decided on the facts of the working relationship, not on the label at the top of the agreement. Control over hours and method, exclusivity, integration into your team, and who supplies the tools are the recurring tests.

The consequence lands on the foreign company, not the worker: unpaid statutory contributions, back taxes, interest and penalties, calculated as though the person had been an employee all along. The look-back is measured in years rather than months. Our overview of labor and employment law in India covers where the line sits.

How do you hire an employee in India without an entity, step by step?

Hiring through an EOR follows a short, repeatable sequence: choose the model, sign the EOR agreement, confirm the offer, let the EOR issue a compliant contract, complete statutory onboarding, and run the first payroll. The sequence is the same wherever you are hiring from, and the same whether it is your first India hire or your fifteenth.

Here is the sequence we run at Wisemonk for a first India hire without an entity:

1. Choose your hiring model: an EOR for people you want as long-term employees, or a contractor for genuinely short, project-based work.
2. Sign an EOR agreement: the EOR becomes the legal employer on record while you keep full control of the work, deliverables, and performance.
3. Confirm the offer and pay structure: agree salary, benefits, and start date, structuring basic pay as a high share of the package, because the Code on Wages, 2019 adds any excess of the excluded components back into wages for provident fund and gratuity.
4. Issue a compliant contract: the EOR provides an India-specific employment contract covering statutory benefits, notice periods, leave, and IP assignment to your company.
5. Complete statutory onboarding: PAN, KYC, EPF, ESI, and a local salary account are registered before the start date.
6. Run the first payroll: salary is paid in Indian rupees, with tax, EPF and ESI deducted and deposited on the statutory deadlines, and you fund it from your existing account. Our guide on how to pay employees in India covers the funding side.

Running your own entity uses the same six steps. The difference is that every one of them, plus the ongoing monthly and annual filings, sits with your team instead of the provider.

How long does this actually take?

The provider is almost never the constraint, and this is the part most vendor pages get backwards. Onboarding through an EOR is measured in days once the offer and the contract terms are settled, and we have issued a compliant offer and completed onboarding inside 24 to 48 hours.

The real bottleneck is the candidate. An experienced Indian professional usually owes their current employer a notice period, and it commonly runs one to three months and is routinely the longest single item on the schedule, longer than incorporation would have been for the paperwork alone. Plan the start date backwards from the notice period, not forwards from the signature. Our India hiring timeline breaks down what each stage actually costs you in weeks.

What do you give up by hiring in India without your own entity?

Less than most buyers expect on the management side, and more than most vendor pages admit on the paperwork side. You keep every people decision. What moves is the employer of record on the contract and the payslip, and with it the ability to grant equity in your own company to that person. Both are worth knowing before a senior offer.

What stays with you

Hiring, compensation, performance, promotions and exits stay with you. That is the part clients worry about most and it is the part that does not change: the EOR executes the administration, the payroll and the filings that follow your decision, it does not make the decision. In four years of running this we have never seen the control question be the thing that goes wrong.

What genuinely changes is that some steps now go through someone else. A pay rise is a request to the provider rather than a field you edit. An offboarding runs to Indian full-and-final settlement rules on the provider's timeline, which our guide to EOR employee offboarding in India sets out.

What the employee experiences

Their legal employer is the EOR, not you. India recognizes one legal employer per worker, so employer status is never shared: the contract, the payslip and every statutory return carry the EOR's name, while the person's day-to-day working life is entirely with your team.

Most Indian professionals are familiar with this arrangement and it rarely stalls an offer. The one place it consistently matters is equity. A stock option grant carries the name of the entity that issues it, so an employee of the EOR is not an employee of the company whose shares you want to offer. Companies handle that in different ways, and it is a conversation to have before a senior offer goes out rather than after it is accepted.

When does your own entity beat an EOR in India?

The point where your own entity costs less than an EOR is not a fixed headcount. It moves with the per-employee rate you actually pay, the number of Indian states you hire across, and how much internal finance time an entity would absorb. We work the numbers through in EOR versus entity in India.

What an entity buys you beyond cost is worth naming separately: you can issue equity in your own name, you sign contracts locally, and you own the employment relationship outright. What it costs you is that PF, ESI, salary tax, professional tax, annual audits and state-by-state compliance all become your team's work.

The common path we see is an EOR first, market validation second, entity third, once the India team is clearly permanent. You can model both paths with our EOR versus entity calculator before committing to either.

For the fully loaded per-person number under either route, our employee cost calculator is the faster starting point.

What compliance requirements must companies meet to hire in India?

India layers central statutes and state rules on the same employment, so the answer is always both. A compliant hire needs a written India-specific contract, provident fund and state insurance registration where thresholds are met, monthly salary tax withholding and deposit, and state registrations covering professional tax and Shops and Establishments. As of September 2026, the four labour codes are the governing frame, with one partial commencement that still matters.

Employment contracts

Every Indian employee needs a written appointment letter covering role, wages, working hours, leave and notice period. Foreign companies often reach for a template rolled out in other markets, which is the single most common documentation defect we see.

The contract has to be India-specific: statutory benefits, termination and notice provisions, leave entitlements under the applicable state's Shops and Establishments Act, and an explicit IP assignment. Our guide to employment agreements in India covers what belongs in each clause.

Statutory benefits and contributions

These are the employer-funded items that sit on top of base salary, and where most cost models come in light. Our overview of employee benefits in India covers what employees expect beyond the statutory floor.

• Provident fund: the employer contributes 12% of basic wages plus dearness allowance and the employee matches it. Of the employer's 12%, 8.33% goes to the pension scheme and the rest to provident fund. Contributions are calculated on wages up to ₹15,000 a month, re-notified at that level in May 2026. The employer also pays 0.5% of pay toward the deposit-linked insurance scheme.
• Employees' State Insurance: the employer contributes 3.25% and the employee 0.75%, on wages of ₹21,000 a month or below, and ₹25,000 for a person with a disability. It applies at ten or more persons and the deposit is due within 15 days of month end.
• Gratuity: payable under section 53 of the Code on Social Security, 2020 after five years of continuous service, at 15 days' wages for each completed year based on the last drawn wage. The five-year condition does not apply on death, on disablement, or on expiry of a fixed-term contract, and a fixed-term employee qualifies after one year on a pro rata basis. Position as of September 2026.
• Professional tax: a state-level deduction that varies by location, small in absolute terms, and not levied at all in several states. Where it applies, the employer deducts and remits it.

Salary tax and payroll filings

From April 1, 2026, salary tax withholding is governed by section 392 of the Income-tax Act, 2025, which replaced section 192 of the Income-tax Act, 1961. Tax is deducted at the average rate of income tax for the tax year on the employee's estimated salary income. Salary paid on or before March 31, 2026 remains under the 1961 Act.

Employers file a quarterly salary withholding statement in Form 138, which replaced Form 24Q. Quarters one to three are due on July 31, October 31 and January 31; the fourth quarter is due on May 31 of the following financial year. Each employee then receives Form 130, the annual salary tax certificate that replaced Form 16, by June 15. Our guide to payroll tax in India covers the monthly cycle around those filings, and late deposits attract interest and damages.

The four labour codes

India's four labour codes took effect on November 21, 2025, consolidating 29 central labour laws. The Industrial Relations Code, the Occupational Safety, Health and Working Conditions Code and the Code on Wages are in force in full. The Code on Social Security commenced in part: a few provisions, including its provident fund contribution clause, are not yet notified, so the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 continues to govern PF contributions.

Statutory bonus now sits under the Code on Wages, 2019, which repealed the Payment of Bonus Act, 1965 with effect from November 21, 2025. The code sets the minimum at 8.33% of wages and the maximum at 20%, and leaves the eligibility and calculation wage to notification.

As of September 2026, central and state rules under the codes are still being finalized, so old state rules continue to apply until each state notifies its own. That matters most when your employee lives in a different state from your registration, because the employee's state rules govern professional tax, Shops and Establishments registration and leave. Our explainer on the new labour codes in India tracks where each one stands.

How can Wisemonk help you hire in India without an entity?

We are an India-native platform helping 300+ global companies hire, pay and manage talent in India without a local entity. India is the only country we operate in, and that focus is why we hold a 4.8/5 rating on G2 and currently run $20M+ in Indian payroll across 2,000+ employees.

For people you want as employees, Wisemonk EOR becomes the legal employer: the contract, the pay run, provident fund, state insurance, salary tax withholding, professional tax and state-specific compliance, with a named India-based HR manager rather than a ticket queue, and laptops sourced and shipped as part of the same engagement. Pricing starts at $99 per employee per month and is set out on our pricing page.

For genuinely independent specialists, our Contractor of Record service becomes the contracting party in India, with classification review per role and drift flagged before it becomes a problem. And if you already hold an Indian entity, our PEO services in India run payroll and filings under your own registrations instead.

We came across Wisemonk and met with the CEO and staff to explain our situation, and were very impressed with their customer-focused approach to their business. Wisemonk onboarded all of my employees in one or two days. They paid my employees' salaries on the day after my payment cleared. Needless to say, my employees and I were very satisfied with their service then and remain so over a year later. We are an American company, so I was very happy to see that they have a US bank account where I can make ACH payments to minimize bank charges. All salary payments are timely. They worked directly with my employees to enroll them in the health care program and explain any coverage-related issues. The best part is that we get to work with a dedicated person assigned to our company. I would highly recommend Wisemonk and think of them as our Indian HR department. Frank Menes, Founder & CEO at Senem RFP