How to Hire in India Without a Local Entity
You can hire in India without a local entity by using an Employer of Record, a company already registered in India that becomes the legal employer on your behalf while you direct the employee’s actual work. This avoids the incorporation, tax registration, and local bank account that setting up your own entity would require, and it is the structure most foreign companies use for their first hires in India.
Why You Cannot Simply Hire Someone Directly
Indian labour law requires an employer to be a registered entity within India. A foreign company with no Indian registration cannot legally issue an employment contract, run payroll, or make the statutory contributions Indian employment law requires. This is what forces most foreign companies into one of two paths: register an entity first, or use a provider that already holds that registration on their behalf.
Trying to work around this by paying someone directly from a foreign bank account, or by treating what is really an employment relationship as an independent contractor arrangement, creates real compliance risk rather than solving the underlying problem. Indian courts look at the actual working relationship, not the label used, and misclassification can trigger retrospective penalties.
The Employer of Record Path
An Employer of Record is a company registered in India that legally employs a worker on your behalf. It signs the employment contract, runs monthly payroll, deducts and deposits statutory contributions such as Provident Fund and Employee State Insurance, and issues tax documentation. You continue to manage the employee’s actual role, targets, and day to day work, exactly as you would for anyone else on your team.
The practical steps are straightforward. You identify or ask the EOR to source a candidate. The EOR drafts a compliant employment contract and completes onboarding. Payroll and statutory compliance run every month from that point on. You pay the EOR a single invoice covering salary, statutory costs, and a service fee, in your own currency, without ever needing an Indian bank account.
How Long This Actually Takes
Most employees can be onboarded within one to three weeks of finalising a candidate, since there is no entity registration step involved. Compare that to setting up your own subsidiary, which typically takes two to four months once incorporation, tax registration, and bank account opening are all accounted for. For a company that wants to hire one or two people to test the market, or that needs to move quickly to support a deal already in motion, that time difference is usually the deciding factor.
Other Ways Companies Try to Hire Without an Entity
A few other approaches come up alongside EOR, each with real limitations.
- Independent contractors work for short, well-defined projects, but carry misclassification risk if the relationship starts to look like ongoing employment
- Staffing agencies are built for temporary or project-based roles rather than permanent team members
- PEO arrangements generally require you to already have an Indian entity, since they operate on a co-employment basis rather than as the sole legal employer
For a company with no Indian entity that wants to hire someone in what functions as a permanent role, an EOR remains the most straightforward option that avoids both entity setup and misclassification risk.
When You Might Eventually Need an Entity Anyway
An EOR is not meant to be permanent for every company. Once headcount grows into the dozens, or the business becomes confident India is a long-term part of its operations, setting up a subsidiary usually becomes more cost-effective than continuing to pay an ongoing EOR service fee across a large team. Many companies treat the EOR phase as validation, then transition employees to their own entity once the numbers justify making that move.
Frequently Asked Questions
Is it legal to hire in India without registering a company there?
Yes, through an Employer of Record. The EOR is the registered Indian entity acting as legal employer, which is a recognised and lawful structure under Indian law.
Can we open our own Indian bank account instead of using an EOR?
Opening a bank account alone does not make you a legal employer in India. You would still need a registered entity to employ someone directly, which is the setup an EOR is specifically designed to avoid.
How many people can we hire in India before we need our own entity?
There is no fixed legal limit, but most companies find an EOR becomes less cost-efficient once headcount grows into the dozens, at which point a subsidiary usually makes more financial sense.
What happens to the employee if we later set up our own entity?
Employees can generally be transitioned from EOR employment to direct employment under your new entity, with continuity of service preserved.
For a full breakdown of how this structure works in India specifically, including payroll, compliance, and cost, see our Employer of Record in India guide.