Hiring through an EOR in India is fundamentally different from engaging independent contractors because an EOR creates a full, legally recognized employment relationship, while contractors remain self-employed and operate on a business-to-business basis. With an EOR, all employment obligations, payroll, taxes, statutory benefits like PF and ESI, compliance filings, and legal liability are handled by the EOR as the official employer. This gives you compliant employment, protects you from misclassification risks, and gives workers the stability, benefits, and experience of being part of your team. Contractors, on the other hand, run their own business. They pay their own taxes, do not receive employee benefits, control how they work, and offer services under a service agreement. The client must ensure the contractor relationship is genuine; otherwise, Indian authorities can reclassify them as employees, leading to penalties.
From our experience helping 500+ global teams expand in India, misclassification is one of the biggest risks foreign companies overlook, making EOR the safer option when the work resembles long-term employment rather than short-term, project-based contracting.
Employer of Record (EOR)[toc=Employer of Record]
Working with an EOR creates a formal employer-employee relationship, with the EOR taking full responsibility for compliance, payroll, and legal obligations.
- Employment structure: The individual is a full employee on the EOR’s payroll, which means they receive an official employment contract that complies with Indian labor laws.
- Compliance ownership: The EOR ensures full compliance with statutory requirements such as PF, ESI, TDS, gratuity eligibility, and state-specific employment rules. This shields your company from compliance errors and audits.
- Payroll & benefits: The EOR runs payroll in INR, deposits all statutory contributions, withholds and files taxes, and manages employee benefits like health insurance and paid leave.
- Reduced risk: Misclassification risk is eliminated because the employee is formally employed by the EOR and not treated as a contractor.
- Worker engagement: Employees generally feel more integrated with your team, they receive benefits, have a clear reporting structure, and often show long-term commitment and better alignment with company goals.
Independent Contractors[toc=Independent Contractors]
Hiring an independent contractor is a business-to-business commercial engagement, but it requires careful classification to avoid legal and tax issues.
- Engagement structure: Contractors are considered self-employed and work on a contract for services. They are not added to your payroll and are not legally treated as employees.
- Compliance responsibilities: Contractors pay their own taxes, maintain their own business identity (GST registration, service invoices, etc.), and manage their own records. Your company must ensure they truly meet the legal test for “independent contractor status.”
- Payroll & benefits: Contractors invoice for their work and do not receive statutory benefits, paid leave, or company-provided insurance.
- Higher misclassification risk: Indian labor authorities can reclassify contractors as employees if they work like full-time hires, leading to penalties, back payments, and compliance disputes.
- Workstyle & control: Contractors have more autonomy over their schedules and methods. They usually treat you as a client rather than an employer, which can affect loyalty and long-term continuity.
Read more: Independent Contractor vs EOR Employee in India 2025
Wisemonk: Your Trusted Global Hiring Partner[toc=How Wisemonk Helps]
Wisemonk is an India-specialist Employer of Record helping global companies hire, pay, and manage talent compliantly without setting up an entity. We handle payroll, benefits, statutory compliance, equipment procurement, and ongoing HR support so your team can stay productive from day one. Companies trust us for our transparent pricing, deep India expertise, and ability to build high-quality remote teams at speed. Need help with your global expansion in India? Contact our team to learn how we can support your global operations.