India’s forecast GDP growth of 6.4% in 2026 and Net Employment Outlook of 42% for Q3 2025 indicate robust macroeconomic fundamentals and substantial hiring potential. In fact, global hiring in 2025 India has emerged as a key strategic focus to tap into a big, talented, and cost-effective pool of talent.
However, converting this potential into actual recruitments presents numerous barriers. Labor legislation in India is state-specific, misclassification incurs penalties, and compliance entails working around statutory elements like provident funds, ESIC, and gratuity.
To manage this, businesses normally opt for one of four models: Professional Employer Organisation (PEO), Employer of Record (EOR), Agent of Record (AOR), or set up their own entity.
This article explains how these four models work, when to use them, and how to select the right structure for hiring talent in India.
Different Models for Global Hiring in 2025
There are four options for setting up your Indian remote workforce.
PEO Services:
It considers employment a shared responsibility. The PEO would handle payroll, HR, and local compliances, whereas the client (employer) would oversee the daily work of the employees.
EOR Services:
It is ideal when the company wants to onboard full-time employees without setting up a local entity. The EOR is the employer on record, responsible for all compliance, and the client maintains full control over day-to-day work.
AOR Services:
Good if you want to hire independent contractors. The AOR facilitates contracts, payments, and legal protection without establishing an employment relationship.
Entity Setup Services:
Here, the business provides a formal entity in India with absolute control while managing compliance, payroll, and administration on an ongoing basis.
Professional Employer Organization (PEO): Shared Employer Model
Under a shared-employment model, a PEO takes care of payroll and compliance, but you remain fully responsible for your team and the results of their work. Thus, a PEO lets companies hire talent in India quickly through a bypassing of the otherwise long-winded process of establishing a legal presence.
This setup is best for firms that want to hire quickly while ensuring regulatory adherence and minimal administrative overhead.
Here are a few more reasons to partner with a PEO in India.
- Faster entry to markets: Lets businesses hire in India without being delayed by entity registrations or licensing.
- Simplified compliances: The PEO handles PF, ESIC, gratuity, and all mandatory filings as per Indian labor laws.
- Lower administrative burden: It removes the need for setting up HR, payroll, and legal operations locally.
- Business impact: Companies using a PEO have reported 40% higher revenue growth, 14-16% less employee turnover, and up to 50% less attrition rates.
- Scalable hiring: Enables scaling of teams up or down quicker without worrying about compliance barriers.
Employer of Record Services(EOR): Full Compliance Without Entity Setup
EOR enables companies to hire full-time employees in India without creating a local entity. This takes care of all employment contracts, payroll, taxes, and statutory compliances. Though the EOR is a legal employer, you would, however, be controlling the team’s workflow and performance, just like you would if the hire were direct.
EOR is best suited for companies that want talent in India but are not ready to spend time and energy on entity setup. EOR ensures this is 100% legal while still giving the client operational control.
Here are some key benefits of having an employer of record in India:
- Legal Employer of Record: The EOR assumes complete legal responsibility for the employee under Indian law, so the client need not worry about employment contracts, labor law filings, or payroll registration.
- End-to-end compliance: Takes care of PF, ESIC, professional tax, Shops & Establishment registration, and all filings punctually.
- Protection of IP and confidentiality: Assists with the enforcement of contracts and NDAs under Indian jurisdiction to safeguard business interests without forming a legal entity.
Agent of Record (AOR) Services: Best for Independent Contractors
An Agent of Record (AOR) is used by companies to engage independent contractors in India without considering them as fully-fledged regular employees. The Client performs the work, while the AOR handles the contract management, payments, and tax compliance.
Companies in India generally employ AORs for one-off projects or flexible engagements that are incorporated into larger outsourcing programs. This is another sure way to avoid some big headaches from the wrong treatment of occasions, which in India could be quite expensive.
- Legally valid contracts: Ensures all contracts abide by the strict Indian legal provisions regarding independent contractor relationships.
- Misclassification protection: Assists in minimising risk by keeping contractor relationships separate from any kind of full-time employment.
- Tax compliance assistance: Withholds TDS and provides required documentation for both parties.
- Contractor Payments Made Easy: Converts currency, accepts invoices, and takes care of paying on time.
Setting Up a Legal Entity in India
Being one of the prime global talent hubs, India enables companies to exercise full control by setting up their own legal entity. It gives companies full control over operations, branding, and employment terms.
But there are issues attached to hiring employees by setting up an entity in India:
- Labor laws: Labor laws differ from state to state. These include central laws like the Industrial Disputes Act, Shops & Establishment Acts, etc.
- Registration requirements: Companies should consider registering themselves for PAN, TAN, GST, PF, ESIC, professional tax, and Shops & Establishment licenses before hiring employees.
- Statutory compliances: After hiring, the employer has to perform statutory compliances like filing of PF returns, salary tax deduction, gratuity tracking, etc. Employee benefits are also to be ensured.
- Payroll setup: Local payroll would need to be set up in accordance with Indian salary structures, tax regime, and statutory deductions.
- Time and cost: Setting up an entity would typically take around 2 to 6 months, factoring in legal expenses, incorporation costs, and compliance-related expenses.
PEO vs EOR vs AOR vs Entity Setup Services: Detailed Comparison
Each hiring model serves a different operational need. This table outlines the key differences across control, compliance, cost, and suitability to help you evaluate the right option for hiring talent in India.
| Criteria | PEO | EOR | AOR | Entity Setup |
|---|---|---|---|---|
|
Employment Type |
Full-time employees |
Full-time employees |
Independent contractors |
Full-time employees |
|
Legal Employer |
Shared (co-employment) |
EOR |
Contractor remains self-employed |
Client company |
|
Entity Required |
No |
No |
No |
Yes |
|
Compliance Ownership |
PEO handles statutory compliance |
EOR handles full compliance |
AOR handles contractor compliance |
The client is responsible for all compliance |
|
Control over Work |
The client controls daily work |
The client controls daily work |
Full control |
Client controls project scope |
|
Use Case Fit |
Fast scaling, short to mid-term hiring |
Long-term hires without entity setup |
Working with contractors or freelancers |
Large teams, long-term market presence |
|
Setup Time |
Days |
Days |
Days |
2–6 months |
|
Exit Flexibility |
High |
High |
High |
Low |
|
Cost Overhead |
Medium (includes service fee) |
Medium (includes service fee) |
Low (per contractor) |
High (ongoing legal and admin costs) |
|
IP & Confidentiality Coverage |
Covered under a co-employment contract |
Covered under EOR contract |
Covered through a contractor agreement |
Directly covered under the company contract |
|
Employee Benefits Handling |
Handled by PEO as per Indian norms |
Handled by EOR as per Indian norms |
Not applicable |
Handled by the client |
Verdict: How to Choose the Right Model for Global Hiring in 2025?
Choosing the right hiring model hinges on your growth stage, headcount projection, and risk appetite.
PEO Services: Great for the speedy hiring of full-time employees when you want to avoid having to set up any kind of local entity but wish to retain the right to control the day-to-day aspect of work.
EOR Services: Hiring full-time, with full legal compliance, but without becoming party to the employment relationship and statutory obligations.
AOR Services: Engaging with independent contractors for a specific project and staying compliant with Indian tax and labor laws.
Entity Setup: Full legal control, locational branding, and direct employer status available to companies long planning in India.
As you weigh your choices for global hiring in 2025, Husys assists global companies in hiring in India through PEO, EOR, and AOR models.
With over 23 years of experience, we take care of engagement, onboarding, payroll, compliance, and HR support for you to build your own local team without establishing a legal entity. You will get access to our proprietary HRIS software, where you can manage all processes on one platform.
Want to hire in India? Let Husys handle all the complexities while you focus on your growth!
