Employer of record or your own Indian subsidiary: when should you switch?

Should your first India team be hired through an employer of record or your own subsidiary?

On most published plans, the fees you pay a provider pass USD 1,000 a month, LegalJini's ongoing compliance fee for a subsidiary, by your second or third hire. Treat that point as a floor: the room above it has to pay for whichever of the subsidiary's audit, bookkeeping, payroll and transfer pricing report you still need to buy, so the real crossover comes later.

Three structural facts weigh as much as the fees: who owns the code first, which route your stock options take, and the permanent establishment rules, which decide whether India can tax your US company and still apply when you own a subsidiary.

Use an employer of record for the first hires and while your subsidiary is being set up. Move the team into your own subsidiary once India is a lasting engineering base: when the code should belong to a company you control from the day it is written, when a stock option grant cycle is coming, and when the provider's fees leave room for the subsidiary's running costs at your planned headcount. Where the first engineers must start before your subsidiary can employ them, LegalJini also offers employer of record services in India. A team that will grow into a Global Capability Centre has its own set-up route.

What does each option cost at 5, 10, 20 and 50 people?

An employer of record charges a fee for each employee every month. As published on the providers' pricing pages on 13 October 2026, Wisemonk, which works in India only, charges from USD 99 per employee per month; Multiplier starts its Core plan at USD 459 on an annual contract and USD 499 on a monthly one, and its Growth plan at USD 519 and USD 559; Deel shows USD 599, Teamed from USD 599 and Remote USD 699. Rippling publishes no price and sends a custom quote.

Only Wisemonk's price is specific to India, and Multiplier says about 11% of the countries it supports have adjusted pricing without naming them. The price for an engineer on a given salary comes from a quote: Teamed's own pricing page tells buyers to ask every provider, Teamed included, for the figure for their country and salary.

Salary and statutory contributions, including the 12% that the employer and the employee each contribute to the provident fund under a notification of 1 July 2026, are left out because you pay them under either model.

Monthly employer of record fees: published price times headcount (prices as published on 13 October 2026)

Your own subsidiary carries fixed fees. LegalJini's subsidiary set-up service costs USD 1,500 once, including the foreign direct investment (FDI) and Foreign Exchange Management Act (FEMA) filings, and ongoing compliance costs USD 1,000 a month, including LegalJini's resident director at USD 500 a month. A company incorporated through SPICe+, the incorporation form of the Ministry of Corporate Affairs (MCA), with authorised capital up to Rs 15 lakh pays no MCA filing fee, only the state's stamp duty, according to the MCA's SPICe+ FAQ. The same payment adds Rs 66 for the company's Permanent Account Number (PAN) and Rs 65 for its Tax Deduction and Collection Account Number (TAN), and the MCA fee table applies above Rs 15 lakh. LegalJini's guide to what a subsidiary costs to set up and run sets out those government fees.

The subsidiary's other running costs, the annual audit, bookkeeping, payroll processing and the transfer pricing report, have no official price, so get quotes for whichever of them you still need to buy, and ask LegalJini what its two fees cover for your company.

Set those quotes against the room the provider's fees leave each month above the subsidiary's USD 1,000 compliance fee. At USD 599 a head, the room is USD 1,995 at 5 people, USD 4,990 at 10, USD 10,980 at 20 and USD 28,950 at 50. On Wisemonk's from-price, the fees stay below the USD 1,000 fee on their own at 5 and 10 people, and leave USD 980 at 20 and USD 3,950 at 50. One-time items, such as the set-up fee, the government fees at incorporation and any refundable deposit, sit outside this comparison.

The fees alone pass USD 1,000 a month at 2 people on the USD 599 and USD 699 prices (USD 1,198 and USD 1,398), at 3 people on Multiplier's from-prices (USD 1,377 and USD 1,497) and at 11 people on Wisemonk's from-price (USD 1,089). Below that floor, for one person on the USD 599 or USD 699 plans, up to two on Multiplier's or up to ten on Wisemonk's, an employer of record costs less in fees than the subsidiary's fixed monthly fee alone.

Some charges sit outside the per-employee fee. Teamed asks for a refundable deposit of one month's salary per employee, plus the first month's employment cost, before the first payroll, so a team of 20 funds one month of the whole team's gross salary up front; Teamed says a deposit is standard for the employer of record model, while Remote says it collects reserve payments only in rare, high-risk circumstances. Remote converts pay at its own exchange rate, which it says takes into account currency risk, its own costs and industry benchmarks, and Multiplier lists compliance-mandated add-ons and an implementation fee, as applicable. Remote says it charges no setup fee for its employer of record product, and Teamed says it charges nothing for setup or exit and adds no exchange markup.

Who owns the code your engineers write?

Their employer owns it first. Under section 17(c) of the Copyright Act, 1957, the employer is the first owner of a work made in the course of employment under a contract of service, unless an agreement says otherwise, and section 2(o) treats computer programmes as literary works. Through an employer of record, that employer is the provider's Indian company; in your own subsidiary, it is the subsidiary.

Investors and acquirers of a US company check the chain of title for code written in India, and the code moves to you only by an assignment that meets the Act's rules:

• The assignment must be in writing, signed by the assignor or its authorised agent (section 19(1)), and must identify the work and state the rights, the duration and the territory (section 19(2)).
• With no duration stated, the assignment lasts five years from its date (section 19(5)); with no territory stated, it covers India only (section 19(6)).
• Rights not exercised within one year of the assignment lapse, unless the assignment says otherwise (section 19(4)).

Copyright can be assigned for its whole term, and a future work in advance, with effect from when it comes into existence (section 18(1) and its proviso). So check four points in the provider's contract: the assignment runs for the full term of copyright, covers the whole world, switches off the one-year lapse and covers future work. Teamed lists intellectual property (IP) assignment among the services its fee covers; whichever provider you use, read the assignment itself against these four points.

In your own subsidiary, the same rules govern its assignment to your US company, with both signatures under your control.

Can engineers hired through an employer of record get your stock options?

Yes, within a ceiling. FEMA's Foreign Exchange Management (Overseas Investment) Rules, 2022 let any resident individual acquire shares under an overseas company's Employee Stock Ownership Plan (ESOP) (Schedule III, paragraph 1(2)(iii)(h)). Unless the Schedule provides otherwise, that investment is subject to the overall ceiling of the Reserve Bank of India's Liberalised Remittance Scheme (paragraph 1(1)).

The route without limit, paragraph 3(1), is written for employees and directors of your company's office or branch in India, its Indian subsidiary, or an Indian entity in which it holds direct or indirect equity, where the plan is offered globally on a uniform basis. A provider's Indian company is a third party in which your company holds no equity, so engineers employed through it use the general route. Once they are your subsidiary's employees, paragraph 3(1) covers them.

A US parent's plan falls under FEMA, and the Companies Act 2013 governs an Indian company's own shares. Take FEMA advice before you grant options to engineers employed through a provider, and have your subsidiary employing the team before the next grant cycle.

Does either option create a permanent establishment for the parent?

Either can. Owning an Indian subsidiary does not by itself make your US company taxable in India: under Article 5(6) of the India-US tax treaty of 1989, control alone makes neither company a permanent establishment of the other. The treaty's other tests apply under either model:

• A fixed place of business at your company's disposal, through which its business is carried on, is a permanent establishment unless its activity is only preparatory or auxiliary (Articles 5(1) and 5(3)(e)).
• Services furnished in India through your company's employees or other personnel create one: with no day threshold when they are performed for a related enterprise such as your subsidiary, and otherwise once they continue for more than 90 days within any twelve-month period (Article 5(2)(l)). Included services, as Article 12 defines them, fall outside this test.
• A person in India, other than an independent agent, who habitually exercises authority to conclude contracts on your company's behalf creates one (Article 5(4)(a)).

So when your US engineers or managers work in India for the subsidiary, no 90-day allowance applies.

In the Hyatt case, decided on 24 July 2025 under the India-UAE treaty, the Supreme Court held that a fixed place must be at the enterprise's disposal, that once business operations are continuous the intermittent presence of a particular employee does not matter, and that legal form does not override economic substance (SCC Online's report).

India's own rule is wider than the treaty. Under the Income-tax Act 2025, which applies from 1 April 2026 (tax year 2026-27), income through a business connection in India is deemed to arise in India (section 9(2)(c)). A business connection includes a business whose operations are carried out wholly or partly in India, and activity through a person who habitually concludes contracts, or plays the principal role leading to them, for the non-resident; only the income reasonably attributable to the Indian operations is caught (section 9(9)). Where a treaty applies, the Act applies only to the extent it is more beneficial (section 159(4)), so your US company relies on the treaty's permanent establishment article where that is more favourable.

Before the team starts, check who rents the office it works from, whether anyone in India negotiates or signs contracts for your US company, and how long your US staff will spend in India working for the subsidiary.

What changes when the team reaches 10, 20 and 50 people?

In your own subsidiary, duties under the Code on Social Security, 2020 and the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (the POSH Act) switch on with headcount. At 5 employees none of these thresholds is met. Through an employer of record the provider is the employer, so these duties sit with its own establishment.

Below ten employees, ESI coverage is voluntary, the Labour Ministry says. Under section 4(1) of the POSH Act every employer constitutes an Internal Committee by written order, with one external member from a non-governmental organisation or association committed to the cause of women, or a person familiar with sexual harassment issues (section 4(2)(c)). A workplace that has not constituted one because it has fewer than ten workers sends complaints to the district's Local Committee (section 6(1)). LegalJini provides the external member of the POSH Internal Committee within its POSH package. Through an employer of record, ask the provider to confirm that its Internal Committee covers your team.

The Code on Social Security took effect with the other Labour Codes on 21 November 2025, and rules and schemes made under the Acts they replaced continue during the transition where they are consistent with the Codes (section 164(2)(a)). Hiring guides that still cite the Employees' Provident Funds and Miscellaneous Provisions Act (the EPF Act), the Payment of Wages Act, the Maternity Benefit Act or the Factories Act as current law are out of date: the Code on Social Security repeals the EPF Act and the Maternity Benefit Act (section 164(1)), the Code on Wages, 2019 repeals the Payment of Wages Act (section 69(1)), and the Occupational Safety, Health and Working Conditions Code, 2020 repeals the Factories Act (section 143(1)).

How do you move from an employer of record to your own company?

Run the two side by side: the provider keeps employing the team while your subsidiary is set up, and the engineers move across on a cutover date you agree with the provider. Providers sell this move too: Wisemonk's Enterprise plan lists a phased EOR-to-subsidiary migration, and Teamed's pricing page lists EOR-to-entity migration support.

1. Set up the subsidiary. Incorporation takes 45 days from the date LegalJini receives the documents, and the bank account a further 15 days. No one from your company needs to visit India: a LegalJini resident director is appointed in India and handles the work on the ground. Part B of the SPICe+ form carries the subsidiary's applications for its Employees' Provident Fund Organisation (EPFO) and Employees' State Insurance Corporation (ESIC) numbers, the MCA's SPICe+ FAQ of January 2023 says, so its employer registrations start with incorporation.
2. Agree the gratuity term in writing. Gratuity is payable after five years' continuous service, at fifteen days' wages, or a number of days the Central Government notifies, for each completed year (sections 53(1) and 53(2) of the Code on Social Security); the one-year rule announced with the Labour Codes is for fixed-term employees. Section 53 says nothing about service with a previous employer, so agree in writing whether your subsidiary counts the years through the provider; section 53(5) preserves better terms agreed with the employer. Teamed describes its version of the move, the Graduation Model, as novating employment contracts to the new entity on a single date, and the gratuity term needs the same written agreement on that route.
3. Take a confirmatory IP assignment. Have the provider's Indian company assign the code written before the cutover to your US company, in writing and signed, for the full term of copyright and the whole world.
4. Issue appointment letters. The Labour Codes make appointment letters mandatory, so each engineer needs one from the subsidiary. Salaries in IT and IT-enabled services must be released by the 7th of every month, so plan the first payroll around that date.
5. Price the subsidiary's services to your US company. Income from these international transactions is determined at arm's length price (section 161(1) of the Income-tax Act 2025), and the subsidiary obtains an accountant's report and furnishes it by the specified date each tax year (section 172), so set the terms in an intercompany agreement before the first invoice. A domestic company, including a foreign-owned subsidiary, may opt for income-tax at 22% under section 200 of the Income-tax Act, 2025, with surcharge and cess on top. LegalJini handles transfer pricing work through a partner firm it has worked with for more than 20 years, and LegalJini's guide to the transfer pricing report covers the filing.
6. Time the next stock option grant after the cutover. Paragraph 3(1) of the Overseas Investment Rules covers the engineers once they are your subsidiary's employees.
7. Plan your own director. The subsidiary starts with a resident director from LegalJini's own team, in a purely operational and non-managerial role: signing only on board approval, with two bank signatories, no part in the business and replacement on notice. The director signs basic operational documents with the MCA, the bank and the Registrar of Companies (RoC) against an indemnity from your company, and has no day-to-day business or financial visibility. LegalJini suggests you appoint your own director from the India team 9 to 18 months after set-up.

To start, send LegalJini your planned headcount and cutover date by email or through the callback form on the website; LegalJini replies to every enquiry within 12 hours.

Frequently asked questions

What is an EOR firm?

EOR stands for employer of record: a provider whose Indian company legally employs your team member in India on your behalf, so you can hire there before you have a company of your own. You pay the salary, the statutory contributions and the provider's monthly fee for each employee. Multiplier, for example, says its fee covers compliant employment, local contracts, payroll processing, tax and statutory filings, benefits administration, onboarding and ongoing HR support.

What is a foreign subsidiary company in India?

A foreign subsidiary company in India is an Indian company that a foreign parent controls, incorporated with the Ministry of Corporate Affairs through its SPICe+ form. The subsidiary employs its own staff and, unless an agreement says otherwise, is the first owner of the code they write. Under Article 5(6) of the India-US tax treaty, a US company's control of an Indian company does not by itself make either one a permanent establishment of the other.