Is using an Employer of Record legal in India?
Yes. Using an Employer of Record in India is fully legal. Indian labor legislation permits a third party to serve as the legal employer responsible for payroll, contracts, taxes, and statutory benefits, as long as all obligations are met under laws such as the Payment of Wages Act, the Income Tax Act, and the EPF and ESI frameworks.
Based on our extensive experience helping US companies hire in India, the EOR model is one of the most compliant and structured ways for foreign entities to employ workers without opening a subsidiary.
How does an Employer of Record operate legally under Indian labor law?[toc=How an EOR Works]
From our experience as the most trusted Employer of Record in India, we can say that the EOR model aligns with the employer obligations mandated by Indian labor statutes.
An Employer of Record becomes the legal employer of the worker in India and is responsible for:
• Issuing locally compliant employment contracts
• Running payroll with statutory deductions
• Withholding and depositing TDS which parallels US federal income tax withholding
• Managing PF which functions similarly to US Social Security
• Managing ESI and Professional Tax where applicable
• Meeting state level Shops and Establishments requirements
All of these fall under legally defined employer duties in India. The foreign company manages work output, but the EOR holds employer compliance responsibility.
Why EOR services reduce legal and tax risk for foreign companies?[toc=Reduce tax & legal risks]
We often observe that US companies underestimate Permanent Establishment risk when hiring employees directly in India.
A foreign company that hires employees directly in India without a legal entity can trigger:
• PE exposure under Indian tax law
• Corporate tax liability in India
• Misclassification penalties
• Incorrect payroll withholding risks
An Employer of Record (EOR) acts as the local employer and removes this exposure. This is the primary legal reason companies choose the model.
What makes the EOR structure compliant in India?[toc=EOR Compliance]
Our audits of EOR frameworks confirm that compliance is maintained when employer obligations are fulfilled exactly as defined by law.
The EOR model is compliant because:
• The EOR is a registered Indian employer
• All statutory contributions are made through the EOR
• Employment contracts follow local labor rules
• Employee records, benefits, and filings are maintained locally
• Terminations and notice periods follow Indian law
Foreign companies remain compliant because they are not acting as the employer of record for statutory purposes.
“Working with the Wisemonk team in India has been a genuinely positive experience from day one. They've been consistently accessible and are building fantastic relationships with our local team. As someone based in the UK, I value the quality of compliance Wisemonk brings. I have full confidence when it comes to financial, legal, and HR matters. They've ensured our team is managed in line with local employment law and have also been flexible when we've wanted to go beyond statutory requirements. Whether it's increasing annual leave or tailoring health insurance, they've offered clear guidance to help us enhance the benefits we provide. It's been a great partnership.”
– Lisa Jones, Chief People Officer at Couch Health
How does the EOR protect employees under Indian law?[toc=How EOR Helps]
From our experience in helping 500+ businesses hire and onboard talent in India, we consistently observe that employees onboarded through a compliant EOR receive stronger documentation and statutory coverage.
Employees receive:
• Written employment contracts
• Proper onboarding documentation
• Correct PF and ESI enrollment
• Statutory leave entitlements
• Gratuity eligibility when applicable
• Consistent payroll processing
• Local HR support
From a legal standpoint, employees are fully protected because the EOR meets every mandated employer obligation.
Many companies mention how the EOR structure supports both compliance and high quality hiring.
“I'm very happy that I discovered Wisemonk. They have been a pure pleasure to work with, and their attention to detail is impressive. They helped us understand their pricing model, find top-qualified individuals, interview them, and then onboard them. The individuals they were able to find have been some of the best engineers I have ever worked with. I recommend Wisemonk to anyone who is in need of staffing assistance.”
– Dan Sampson, Head of Engineering at Cobu
To understand more about employee benefits in India, refer to this detailed guide on “Employee Benefits in India: A Complete Guide (2025)”
Why do US companies rely on Employer of Record(EOR) services when expanding in India?[toc=Why use an EOR]
Based on our work with hundreds of US firms, a compliant EOR is often selected because it prevents legal exposure and accelerates India hiring.
Global companies choose an EOR for:
• Legally compliant hiring without a subsidiary
• Fast access to Indian engineering and GTM talent
• Reduced HR, payroll, and legal complexity
• Protection from PE and tax risks
• Standardized employment processes across states
“I highly recommend them. Wisemonk helped us tap into the vibrant and top-notch Indian talent market and hire our first couple of founding engineers in record time. We've been able to accelerate our roadmap and deliver terrific value to our customers thanks to Wisemonk's efforts. They are easy to work with and very transparent about the process.”
– Krishna Ramachandran, Co-founder at Onform
“The Wisemonk team played a key role in helping us hire for specialized B2B SaaS marketing skills. We were able to build the team within four months, and hire experienced professionals from Tier 1 and major B2B SaaS brands. They are a great partner providing integrated services for EOR and recruitment and I’d recommend them to any B2B SaaS vendor.”
– Saurabh Sharma, Chief Marketing Officer at Onereach
Why is Wisemonk used by US companies for compliant hiring in India?[toc=How Wisemonk Helps]
Wisemonk is an India specialist Employer of Record(EOR) trusted by global companies to hire and manage employees in India with full legal compliance. We help US companies hire in two to four days, run payroll accurately, and meet all statutory obligations.
Our customers repeatedly highlight our accuracy, transparency, and deep local compliance experience, which is why the EOR model works effectively when executed by an India-focused partner. Need help with your global expansion in India? Contact our team to learn how we can support your global operations.