Employer of Record vs Setting Up a Subsidiary in India
An Employer of Record lets you hire in India within weeks with no company registration, while a subsidiary gives you full ownership and control but takes months to set up and carries ongoing legal and compliance overhead. Neither option is universally better. The right choice depends on your timeline, how many people you plan to hire, and how long you expect to operate in India.
Side-by-Side Comparison
| Factor | Employer of Record | Own Subsidiary |
|---|---|---|
| Time to first hire | One to three weeks | Two to four months, sometimes longer |
| Upfront cost | Minimal, service fee only | Incorporation, legal, and setup costs |
| Ongoing compliance burden | Handled by the EOR | Your responsibility, or outsourced separately |
| Legal employer | The EOR | Your own Indian entity |
| Control over branding and IP registration | Limited, since there is no local entity | Full control |
| Best suited for | Testing the market, small to mid-sized teams | Large, long-term operations such as a GCC |
| Exit complexity if plans change | Straightforward contract termination | Formal entity wind-down process |
When an Employer of Record Makes More Sense
An EOR is generally the better fit when you are hiring fewer than twenty or thirty people, testing whether India is the right long-term market before committing capital, need to start quickly to support a project or deal already in motion, or want to avoid the ongoing legal, accounting, and compliance overhead that comes with running an Indian entity.
When a Subsidiary Makes More Sense
A subsidiary generally makes more sense once you are confident India is a long-term part of your operations, plan to build a large team such as a Global Capability Centre, want full control over branding, office space, and local business relationships, or need to hold local intellectual property or contracts directly rather than through an intermediary. Many companies that eventually build a GCC start with an EOR first specifically to validate the market before making that commitment.
The Middle Path: Starting With EOR, Moving to a Subsidiary
This is not always an either-or decision. Many companies start with an EOR to hire their first employees quickly and validate demand or team fit, then transition to their own subsidiary once headcount, budget, or strategic commitment justifies the setup effort. Employees can generally be transferred from EOR employment to direct employment under the new entity, with continuity of service and benefits handled as part of that transition.
Frequently Asked Questions
Is an EOR more expensive than a subsidiary in the long run?
For a small team, an EOR is usually cheaper once ongoing compliance and administrative costs of a subsidiary are factored in. For a large team over several years, a subsidiary often becomes more cost-effective.
Can we run an EOR and a subsidiary at the same time?
Yes. Some companies use an EOR for smaller or exploratory teams while running a subsidiary for their core operations.
How long does it typically take to switch from EOR to a subsidiary?
Incorporation and registration typically take two to four months, after which employees can be transitioned to the new entity in a planned handover.
Does using an EOR limit our ability to build a GCC later?
No. An EOR is commonly used as the first step before setting up a GCC, since it lets you build an initial team and prove the model before committing to entity setup. See our Employer of Record for GCCs in India page for more detail on this path.