How much does it typically cost to use an EOR service in India compared to establishing and maintaining our own subsidiary?
You've run the numbers three times. The EOR invoice for your India team keeps climbing, and your CFO is asking whether it's time to set up your own entity. But every comparison you find online gives you a single fee number without showing what happens to total costs at year two, year three, or when you add your tenth employee.
Teamed is the trusted global employment expert for companies who need the right structure for where they are, and trusted advice for where they're going. From first hire to your own presence in-country. The honest answer on India employment costs isn't a simple number. It's a calculation that depends on your headcount trajectory, your time horizon, and how much hidden cost your current EOR is burying in the invoice.
Here's what most comparisons miss: the crossover point where entity ownership becomes cheaper than EOR isn't fixed. It shifts based on factors that most providers have no incentive to explain.
Quick Facts: EOR vs Subsidiary Costs in India
Most EOR providers charge between US$200 and US$700 per employee monthly in India. Some take a percentage instead, usually 8% to 15% of payroll. The exact amount depends on how many people you have, their seniority, and what benefits you offer.
Setting up a basic private limited company in India typically costs US$8,000 to US$25,000 for lawyers, tax advisors, and registration fees. That's before counting your team's time or any travel.
Running a small entity in India costs about US$25,000 to US$80,000 yearly. That covers your accountant, tax filings, payroll provider, company secretary, and someone local to handle the paperwork.
From what we've seen with our clients, companies usually save money by switching from EOR to their own entity when they have 8 to 15 employees in India who'll be there for at least 18 months.
India's employment laws are complex. If you speak the local language, consider an entity at 25 to 35 employees. If you don't, wait until you have 35 to 50 people, since everything takes longer when you need translations and local help.
What does an EOR actually cost in India?
An Employer of Record in India is a third-party organisation that becomes the legal employer of your in-country workers, running compliant payroll, tax withholding, statutory benefits, and employment administration while you direct day-to-day work. The headline fee you see in proposals tells only part of the story.
Teamed models EOR total cost of employment in India as gross salary plus employer statutory contributions plus benefits plus EOR fee plus pass-through vendor costs plus FX and payment friction. Each component can move independently even when base salary appears fixed. Two quotes showing the same monthly fee can differ materially in effective cost once you trace what's actually hitting your bank account.
The visible costs include the monthly service fee, which ranges from US$200 to US$700 per employee depending on provider positioning and your negotiating leverage. Global providers targeting multi-country operations typically charge US$500 to US$700, while India-specialist providers often price at US$200 to US$400. Percentage-based models run 8% to 15% of gross payroll, which becomes expensive quickly for senior hires.
What hidden costs should you look for in EOR pricing?
Teamed's Three Layers of Opacity framework identifies three recurring sources of EOR cost variance that can make two "same fee" quotes differ materially in effective cost. The first layer is FX margin, where some providers apply an undisclosed spread between your billed currency and the INR actually paid to employees. The second is bundled compliance fees, where statutory contributions and benefits administration get marked up without line-item visibility. The third is undisclosed in-country partner markups, where the EOR subcontracts to a local entity that takes its own cut.
Foreign exchange and cross-border payment spread is a frequent hidden cost line item in EOR invoices. Even when the EOR fee appears fixed, you may be paying 2% to 4% more than spot rate on every payroll run. Over a year, that adds up to thousands per employee that never appears as a separate line item.
What does it cost to establish a subsidiary in India?
A wholly owned Indian subsidiary is a separate Indian legal entity, typically a private limited company, that employs workers directly in India, contracts locally, and assumes full responsibility for Indian payroll, labour law compliance, corporate filings, and tax obligations. The setup cost is a one-time investment, but the ongoing operational burden is where most companies underestimate.
Subsidiary establishment cost in India is the one-time set of legal, tax, banking, and registration costs required to incorporate and operationalise an Indian entity so it can employ staff and run payroll. Budget US$8,000 to US$25,000 for external support, with the range depending on complexity of your corporate structure, whether you need a liaison office first, and how quickly you need to be operational.
The setup process typically takes 6 to 12 months in India due to state-level regulatory variations under the Shops and Establishments Act, complex social security registration including Provident Fund and Employee State Insurance, and banking setup friction. You'll need a local director meeting the 182-day residence requirement, registered office address, and patience with bureaucratic timelines that don't match your hiring urgency.
What are the ongoing costs of maintaining an Indian entity?
Subsidiary maintenance cost in India is the recurring annual cost of keeping an Indian entity compliant and operational. This includes accounting, tax filings, audits where applicable, corporate secretarial work, payroll operations, and local HR and administrative support. A reasonable baseline for a small employer is US$25,000 to US$80,000 per year.
For a small India presence, the fully loaded internal cost of running an entity is often dominated by people and process rather than government fees. Payroll operations, local signatories, and vendor management typically require sustained internal ownership. You'll need someone accountable for ensuring statutory deposits happen on time, filings are accurate, and the local team has HR support.
The complexity factors specific to India include state-level variations in the Shops and Establishments Act, multi-layered social security including PF and ESI, gratuity payment obligations calculated at 15 days' wages per year after 5 years of employment, and notice periods typically running 1 to 3 months. These aren't insurmountable, but they require either dedicated internal expertise or reliable outsourced support.
How do EOR and subsidiary costs compare over 1, 3, and 5 years?
The right comparison isn't month-one cost. It's total cost of employment over your realistic planning horizon, with fixed versus variable costs separated so you can see where the crossover happens.
Consider a mid-market company employing 10 people in India at an average gross salary of US$40,000 per year. With an EOR charging US$500 per employee per month, your annual EOR fees alone are US$60,000. Add employer statutory contributions including the 12% provident fund contribution plus other statutory requirements, and you're looking at US$140,000 in total employment cost before any hidden markups.
With your own entity, you'd pay approximately US$15,000 in setup costs, then US$40,000 to US$60,000 annually in compliance and operational overhead, plus the same statutory contributions. The per-employee overhead drops dramatically as you scale because your fixed costs spread across more staff.
At 10 employees sustained for 3 years, the EOR model costs approximately US$420,000 in total employment overhead. The entity model costs approximately US$195,000 to US$255,000 including setup. The break-even point arrives somewhere between month 18 and month 24, depending on your actual fee structure and operational efficiency.
When does the crossover point shift?
Crossover Economics is the structured calculation of when the total cost and risk-adjusted burden of an EOR becomes higher than the total cost of owning and operating an entity. Teamed uses time horizon, headcount, salary levels, and compliance overhead as inputs. The crossover isn't a single number because it depends on your specific situation.
At 5 employees, the math rarely favours entity establishment unless you have a 5-year commitment and need direct contracting capability. At 15 employees, entity ownership almost always wins within 18 months. Between 8 and 15 employees is where the decision requires actual modelling rather than rules of thumb.
What factors beyond cost should influence your decision?
Cost comparison that ignores exit costs will be incomplete. Entity wind-down, employee transitions, and closing filings can add material one-time spend, while EOR offboarding can increase per-employee costs during notice periods and final settlements. If your India presence might be temporary, factor in the cost of unwinding whatever structure you choose.
Choose an EOR in India when you need a legally compliant hire in weeks rather than months and you don't yet have a stable headcount forecast for the next 12 to 24 months. Choose an EOR when you need to test the market with 1 to 7 employees and want to avoid committing to corporate registrations, local signatories, and ongoing Indian entity governance.
Choose a subsidiary in India when you expect sustained headcount of roughly 10 or more employees for 2 or more years and you want to reduce per-employee overhead by spreading fixed compliance costs across more staff. Choose a subsidiary when you need direct contracting capability in India, such as signing local customer or vendor contracts under an Indian entity, that an EOR structure cannot provide without workarounds.
How does control differ between EOR and subsidiary?
An EOR in India differs from a subsidiary in controllability of employment process. The EOR's legal-employer status usually mandates its own compliant contract templates and workflows, while an entity allows you to set policies and approvals directly. If your Legal and Compliance team requires direct visibility and governance over Indian employment decisions, entity ownership places employment contracts, statutory registrations, and filings under your corporate control.
An EOR in India differs from a subsidiary in compliance operating model. The EOR owns employment compliance execution day-to-day, while an entity shifts compliance execution and audit readiness onto your company and its local advisors. Some companies prefer outsourcing this complexity. Others need the control that comes with ownership.
How does the Graduation Model apply to India decisions?
The Graduation Model describes the natural progression companies follow as they scale international teams, moving from contractors to EOR to entity as headcount and commitment grow. Teamed proactively advises when it's time to move to the next stage, even when that means moving off EOR, because we earn our place by making sure you're in the right structure rather than the one that generates the most revenue for us.
India sits in Tier 3 of Teamed's Country Concentration Framework, meaning it's a high-complexity jurisdiction with very high termination costs, extensive mandatory benefits, complex multi-layered compliance requirements, and frequent regulatory changes. The entity transition threshold is higher here than in simpler markets. While a UK or Singapore operation might justify entity establishment at 10 employees, India's complexity means staying on EOR until 25 to 35 employees often makes sense.
The Language Buffer Rule also applies. Operating in a non-native language increases compliance risk and administrative burden by 30% to 50%. If your headquarters team can't read Indian employment law documentation directly, add 30% to 50% to the employee threshold before considering entity establishment.
What should your decision framework look like?
Most EOR versus subsidiary write-ups don't translate the decision into board-ready risk statements. Your CFO and Legal team need a decision pack that ties cost to control, liability, and audit evidence requirements.
Consider transitioning to your own entity when you meet all of these criteria. First, you've reached or exceeded the threshold for your operating tier, which is 25 to 35 employees in India. Second, you're planning a 3-year or longer presence in the market with stable or growing headcount. Third, your annual EOR costs multiplied by expected years exceed entity setup cost plus ongoing annual costs. Fourth, you need direct control over local operations, intellectual property protection, or customer contracts. Fifth, you have HR and legal resources capable of managing local compliance.
Stay with EOR if any of these conditions apply. Your employee count is below the tier threshold. You're in your first 1 to 2 years in the market while validating product-market fit. The regulatory environment is unstable or your business outlook for India is uncertain. You lack local HR and legal expertise and have no budget to acquire it. You have fewer than 10 employees total spread across many countries where complexity outweighs potential savings. You need to hire within days or weeks rather than the 6 to 12 months typical for India entity establishment.
Making the right decision for your situation
The honest answer on EOR versus subsidiary costs in India isn't a single number. It's a calculation that requires your actual headcount projections, your time horizon, and visibility into what your current EOR is actually charging once you trace every line item back to INR.
Most companies asking this question are somewhere in the middle. Too big to ignore the cost differential, but not yet certain enough about their India trajectory to commit to entity establishment. The right structure for where you are isn't necessarily the right structure for where you're going.
If your EOR invoices never match the quote, or you're about to commit serious money without knowing the real long-term costs, let's fix that. Book your Situation Room. We'll review your India setup, check for hidden costs in your current invoices, and show you the actual math on EOR versus entity. You'll leave with numbers your board can use, whether you work with us or not.
