Yes. You can transition an employee from an Employer of Record (EOR) arrangement to your own Indian subsidiary once your legal entity is operational. The transition involves ending their employment under the EOR and rehiring them under your new company through a compliant, documented process. Indian labor laws allow this, and it is a standard path for companies that start with an EOR and later establish a subsidiary.
Based on our extensive experience helping 500+ global firms scale into India, transitioning employees from EOR to entity-hired roles is extremely common once headcount increases or a long-term India strategy becomes clear. The key is that the transition must follow India’s termination, notice, and onboarding rules, even though the employee continues working in the same role.
How the transition process works in India?[toc=Key Steps Involved]
In our experience as an India specialist Employer of Record helping hundreds of global business, here are the key steps for a smooth EOR-to-Entity transition:
Set up your Indian subsidiary
Before you can hire directly, your legal entity must be incorporated and registered with all required authorities. This includes obtaining tax IDs, opening an Indian bank account, registering for PF/ESI, and aligning your HR policies with local labor regulations. Without this setup, you cannot legally employ the worker under your subsidiary.
Read more: Employer of Record vs Subsidiary in India
Communicate clearly with the employee
Transparency is essential. Explain why you're transitioning from the EOR model, what changes the employee can expect, and how their role, compensation, and benefits will evolve. A positive, open conversation prevents confusion and helps maintain trust during the switch.
Issue a new compliant employment contract
Once your entity is ready, you must create a fresh employment contract under your subsidiary. This contract needs to follow Indian labor laws covering salary structure, PF/ESI eligibility, leave rules, notice periods, confidentiality, and IP protection.
Employee resignation from the EOR
The employee must formally resign from their EOR employment. India doesn’t follow TUPE-style automatic transfers, so the EOR must close employment correctly , including notice periods and final settlements. This step prevents future legal ambiguity.
Complete onboarding under your subsidiary
After resignation, the employee is hired afresh by your company. This involves collecting documentation again, processing HR system access, and re-registering them for payroll, tax deductions (TDS), statutory contributions, and benefits under your entity.
Transfer statutory benefits and social security
PF accounts, insurance details, and service continuity must be handled correctly. While certain benefits (like PF) follow the employee’s unique ID, others require updates on the employer side. Your entity becomes the new responsible party for statutory filings going forward.
Read more: Employer of Record vs Own Entity: What to Choose in 2025
Important Considerations Before the Transition[toc=Considerations]
- Timing matters: Companies often make the switch after validating long-term growth, typically after 12 to 24 months. This avoids unnecessary PE risk and ensures the investment in an entity is justified by team size and plans.
- Employee experience should be prioritized: Ensuring no drop in compensation, benefits, or seniority leads to a smooth shift. Offering equal or better terms is best practice.
- Compliance is non-negotiable: India’s termination, severance, and onboarding rules differ from Western norms. Both the EOR and the new entity must execute their parts precisely to avoid penalties or employee disputes.
Wisemonk: Your Trusted Employer of Record Partner[toc=How Wisemonk Helps]
Wisemonk is an India-specialist Employer of Record and expansion partner trusted by 500+ global companies to hire, manage, and grow teams in India without the complexity of setting up a legal entity. We provide compliant hiring, payroll, equipment procurement, benefits administration, and deep local HR support.
When you're ready to move from EOR to your own subsidiary, our team guides you through every step, from entity setup to seamless employee transitions, ensuring zero disruption for your talent and full compliance for your business. Need help with your global expansion in India? Contact our team to learn how we can support your global operations.