What is an Employer of Record? Questions to ask when choosing an EOR in India

EOR Employer of Record

Businesses are crossing physical borders and expanding their markets in India. So why should your company be left behind? Competition is fierce because globalization has put the world market on center stage. You can hire employees from anywhere around the globe and make your mark.

Now that you have decided to expand in India, you will be wondering how other companies are doing the same. What steps should you take to connect and retain your Indian employees? How will you reduce costs as much as possible? How will you manage employees without moving from your desk?

The perfect solution for all these problems is to contact an “Employer of Record” or EOR. Let us explain how to hire the best EOR in India who will assist your company.

What is an Employer of Record?

An Employer of Record is just what the name suggests. It is the employer of your workers in India’s record or legal framework. Employer of Record is a third-party organization that manages payrolls, HR duties, and benefits of your Indian employees.

You hire employees according to the required job profile and keep them on the EOR’s payroll. You will have complete authority in all the day-to-day operations of the project. But the official employer in India will be the Employer of Record.

Why do you need an Employer of Record in India?

When setting up a business in India, you need to form a legal entity. Failure to do so can cost heavy penalties. These legal entities can be of seven types:

  1. Public Limited Company
  2. Private Limited Company
  3. Joint-venture Company
  4. Partnership Firm
  5. Solo Proprietorship
  6. Branch Office
  7. Non-governmental Organizations (NGOs)

After setting up these legal entities, you will have to hire managers, HR professionals, and other staff for these entities. Also, a new country poses other problems:

  • Tax filings
  • Statutory Compliance issues
  • Culture Shocks

All these factors distract you from the core business activities. In case of non-compliance, you may lose valuable capital to penalties. You need to fully understand India’s laws, banking structures, and taxation before hiring candidates.

You will not deal with any of the above lengthy processes if you partner with an Employer of Record in India. They have their own legal entities in the host market that protect you from the following scenarios:

  1. Expenditure– Saving you the cost of setting up your legal entity.
  2. Tax Filing– As the legal employer in India, they file all your taxes. 
  3. Statutory Compliance– They are acquainted with the laws and regulations of India. Hence, you will stay compliant.
  4. Culture Shocks– They will connect better with your employees as they understand the work culture and languages in India.

How does the Employer of Record work?

An Employer of Record will perform the following duties:

  • Onboarding– EOR will send out the offer letters, explain the company motto, and organize orientation programs for your employees.
  • Payroll– EOR will process accurate payrolls of your employees after cutting appropriate taxes.
  • Statutory Compliance– EOR is updated about any changes related to laws, worker unions, insurance, and working days.
  • Termination– EOR will also take care of the termination of your employees and distribute the severance package and final settlement.
  • Immigration– EOR will supervise the work visa process for transferred employees.

What questions should you ask when choosing an Employer of Record in India?

Now that we have established the importance of EOR when expanding to India, you need to screen the perfect vendor. Ask the right questions to ensure the best EOR organization is chosen. Prioritize your company values, data protection, and reputation of the EOR. 

# What is the price of the service?

Clear all the cost requirements that the EOR will charge you. Every vendor will have unique pricing. Generally, EORs charge a percentage of the employee’s annual package or monthly salary. Ensure that no extra charges will be incurred in the future.

# Do you know about the employer burden costs in India?

Payroll processing involves employer responsibilities. This is called employer burden. Employers have to deduct provident fund shares, insurance, and income taxes from the salary. The EOR should be experienced enough to complete all these procedures. 

# Are you operating through a third-party legal entity in India?

Some EORs tie up with other EORs in different countries. This leads to unreliable pricing and security issues. Ensure that the EOR you choose has a legal entity in India. 

# How do you handle IP transfers?

Your data protection is of utmost value. Ask the EOR about all the data protection laws in the country and how will they avoid legal trouble. Ask if the trademarks, patents, and company secrets will be safe with them. 

# Do you have certified technology?

EORs must use automation to ensure privacy and clarity in operations. If they use certified technology, you can be assured of data protection. The latest technology will mean faster and more accurate results.

# Do you have a cloud computing hub?

Cloud computing is a centralized software that connects all the employees of a company. If the EOR uses a cloud service to record attendance and leaves management, you can also see the activities of your employees. Thus, total control in project management is confirmed.

Employer of Record will always assist you in comprehending India’s system and how it functions. You will learn more about your employees and their expectations through the EOR. They correctly classify your employees and deliver benefits. Choose a good Indian EOR that will provide the best long-term service.

Paysquare wishes you all the best for business expansion through an Employer of Record. Contact us to manage your Indian temporary staff payrolls and compliance with your organization.