Do I Need a Local Entity to Hire in India?

In India, a "local entity" refers to a recognized presence that allows you to act as an employer—typically a subsidiary or branch office. This setup is crucial for managing payroll and fulfilling employment obligations, ensuring compliance with local laws.

Without a local entity, you generally can't manage payroll, register as an employer, or comply with mandatory employment protections. An EOR can help you navigate these requirements by acting as the legal employer on your behalf.

What is Required to Employ Someone in India?

• Local employing entity required to directly employ? Yes (you must register with the Ministry of Corporate Affairs)
• Payroll registration required? Yes (mandatory for tax compliance with the Income Tax Department)
• Withholding/tax remittance required? Yes (employers must withhold taxes from employee salaries)
• Social contributions required? Yes (employers must contribute to Employee Provident Fund and Employee State Insurance)
• Local employment agreement required? Yes (written contracts are essential for compliance)
• Mandatory benefits to budget? Yes (statutory leave, social security, and health benefits)
• Works council/collective agreements considerations? Usually (certain sectors may require adherence to collective agreements)

Best Options If You're Hiring in India

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but be cautious about misclassification risks.

While hiring contractors in India doesn't require a local entity, the legal framework is strict. Misclassifying a contractor as an independent worker can lead to penalties if the relationship resembles employment.

• Ensure the contractor has multiple clients to avoid exclusivity.
• Limit control over how the work is performed to maintain independence.
• Be aware that roles integral to your business may attract scrutiny.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–6 weeks to set up an entity in India, depending on required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated ₹10,000–₹25,000 per month ($120–$300)
• Payroll provider: Estimated ₹1,500–₹3,500 per employee per month ($18–$42)
• Employer registrations and recurring compliance: Varies by complexity
• Corporate tax filings and annual reporting: Estimated ₹30,000–₹80,000 per year ($360–$960)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in India

Hiring in India can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in India quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.