Your next great developer might be located in Bangalore. Your ideal AI prompt engineer could be in Hyderabad. Though India boasts a large and skilled tech talent pool, there is always a catch in hiring them, and that is going through India’s complex employment laws and tax rules, and compliance requirements.
The norm has been for companies to set up a subsidiary first, which meant months-long paperwork, legal fees, and approvals even before anybody could be hired. PEO vs EOR India services solve the challenge.
PEOs (Professional Employer Organisations) and EORs (Employers of Record) in India let you hire in India without entity. They take care of Indian employment compliance so that you can focus on locating the right people for your team.
Let’s understand what an EOR is and what PEO means in India so you can choose which service best fits your business needs.
Challenges in Hiring in India Without an Entity
Foreign companies trying to enter the direct employment market of India face a number of regulatory obstacles. For instance, compliance requirements are across labour laws, tax obligations, and statutory contributions, all varying across states and by employee categories.
Here are some more challenges you’ll likely face.
Statutory and tax obligations
You must handle things like Provident Fund, Employee State Insurance, professional tax, and tax deducted at source. Each comes with its own deadlines and paperwork. It takes effort to keep everything up to date with Indian employment compliance and avoid penalties.
Payroll complexities
Payroll is more than just paying salaries. You need to calculate the right deductions for each employee based on where they work. Payments have to be made on time every month. Mistakes or delays can cause unhappy employees and even attract government action.
Legal documentation
Every employee needs a contract that follows Indian labour laws and matches your company’s policies. Writing these contracts takes care to make sure they protect both sides and avoid problems later.
Labour law compliance
Indian employment compliance can be tricky because it varies from state to state. If you hire contract workers, you’re responsible for making sure their wages, safety, and working conditions meet the law. You also have to keep proper records and report to the authorities.
Registration requirements
Where your employees work matters since different places need different licenses or registrations. These are ongoing responsibilities, and you can’t just do them once and forget. Staying on top of them means regular updates and more paperwork.
For instance, if a tech startup wants to hire developers in Mumbai, they would have to look into the Maharashtra-specific labour laws, obtain contractor licenses if at all applicable, and set up payroll mechanisms that deal with local tax requirements.
What are PEO Services in India?
A PEO is like having a local partner in India who takes care of all the legal and paperwork side of hiring. You still run your team, decide who to hire, and manage their day-to-day work. The PEO handles things like payroll, taxes, employee benefits, and compliance with local laws.
This way, you hire in India without entity, and the PEO ensures everything is done right behind the scenes, so you can focus on growing your business and managing your people. PEO services in India also help with things like onboarding new employees and customising benefits so your team feels valued and supported.
What Is An EOR In India?
An Employer of Record takes full legal employer status for your Indian team members. The EOR signs employment contracts on behalf of the company, manages all HR functions, and assumes full responsibility for compliance with Indian labour laws. This means, even with an EOR, you can hire in India without entity.
Unlike PEOs, an EOR takes on full responsibility for employing your staff in India. You decide who to hire, what they will do, and how much to pay them. The EOR then handles everything else, including employment contracts, payroll, taxes, benefits, and legal compliance.
Because the EOR is the legal employer, they carry the full liability for meeting Indian labour laws and provide the highest level of protection from compliance risks.
PEO vs EOR India: What is the Difference?
PEO and EOR services both allow you to hire in India without entity, but they are quite different in structure, control, and liability distribution. Here’s a table that highlights the core differences in PEO vs EOR India.
| Aspect | PEO India | EOR India |
|---|---|---|
|
Legal Employer |
The PEO shares legal employer status with you. Both parties have responsibilities under the law. |
The EOR is the official employer on record and takes full legal responsibility. |
|
Employee Control |
You keep control over daily management, task assignments, and performance reviews. |
The EOR handles employment contracts and HR processes, while you manage the employee’s daily work. |
|
Compliance & Risk |
Compliance duties are shared, so some risk remains with your company. |
The EOR assumes full compliance risk and liability for labour laws and regulations. |
|
Payroll & Benefits |
The PEO processes payroll, administers benefits, and ensures statutory compliance. |
The EOR manages payroll, benefits, tax filings, and legal employment requirements completely. |
|
Hiring & Termination |
You select, hire, and fire employees, with the PEO supporting compliance. |
The EOR hires and terminates employees on your behalf, handling all legal procedures. |
|
Local Entity Setup |
No need to set up a local company in India. |
No need to set up a local company in India. |
|
Contractual Relationship |
Co-employment contract between you and the PEO. |
The EOR holds the employment contract with the employee. |
|
Best Use Case |
When you want to maintain operational control but outsource compliance and payroll. |
When you want to fully outsource employment responsibilities and legal risks. |
|
Cost Structure |
Usually lower cost since some responsibilities remain with your company. |
Typically higher cost as EOR takes on full legal and compliance duties. |
Why Use a PEO for Hiring in India?
Working with a PEO means they handle a lot of the legal and admin work that comes with being an employer. So you get to spend your time managing your team instead of worrying about payroll or tax filings. Instead of building a whole HR department in India, the PEO takes care of things like salaries, benefits, and compliance with local laws.
You still get to offer benefits your way, such as health insurance or bonuses that fit your company’s style, but the PEO makes sure it all follows Indian rules. They also keep things up to date as laws change, so you don’t have to.
You stay in charge of hiring, daily work, and performance reviews. The PEO just handles the paperwork and legal stuff. Plus, if any compliance problems come up, they share the responsibility, which lowers your risk. This also makes it easier to grow your team, since the PEO adjusts payroll and filings as you add people.
Why Use an EOR for Hiring in India?
An EOR officially hires your employees through its own company in India, which means they take full legal responsibility. Your company isn’t the official employer, so the EOR handles all the compliance and legal stuff.
Because the EOR already has a presence in India, they can get new employees onboard fast, sometimes within days. They take care of everything: payroll, taxes, benefits, Provident Fund, and all the filings you need to do.
EOR experts stay on top of any changes in the law, so you don’t have to. You don’t need to set up offices or hire HR staff locally, which saves you time and money. When you have questions, you just talk to your EOR contact, making things much simpler and letting you focus on your business.
PEO vs EOR India: Which One Should You Choose?
Both PEO and EOR services let you hire in India without setting up a legal entity. The key difference lies in how they handle Indian employment compliance, payroll, and legal employer responsibilities.
When to Choose a PEO
- Maintain greater control over your employees’ daily tasks and management.
- Prefer to manage some HR functions internally while outsourcing compliance and payroll.
- Need a flexible and cost-effective way to quickly expand with local contractors or employees.
- Mostly hiring full-time employees with limited legal risks.
- Want a partner to simplify employment compliance but not take full employer liability.
When to Choose an EOR
- Require a local legal employer to handle all compliance and labour law responsibilities.
- Wish to transfer employment risk and liability fully to a trusted local partner.
- Hiring across multiple Indian states and need centralised compliance management.
- Seek a complete solution covering benefits, contracts, and statutory filings.
- Prefer to avoid the administrative burden of Indian employment compliance entirely.
Conclusion
PEO vs EOR India services eliminate the complexity of hiring talented professionals without establishing a local entity. Whether you choose PEO services India for greater control or EOR benefits in India for complete outsourcing, both options provide compliant pathways to access India’s skilled workforce quickly and efficiently.
Husys has helped over 1,000 global companies expand into India through comprehensive PEO and EOR solutions since 2003. With services across 150+ countries and 100% compliance guarantee, Husys streamlines your global expansion while you focus on core business operations and team growth.
