Employer of record is a market phrase, and India's labour statutes do not carry it as a category. The Occupational Safety, Health and Working Conditions Code, 2020 and the Code on Social Security, 2020 name an employer, a contractor, a principal employer and an establishment, and it is those definitions that decide who may lawfully put an accountant on a payroll for you.
So the first question to an Indian provider is not whether it is an EOR. It is which Indian registration it actually holds, what the per-seat number is built from, and how the invoice is raised.
What an Employer of Record in India Can Lawfully Be
Any Indian company that can employ people and supply their services can call itself an employer of record. The label is written by the seller. The entitlement is registered, and it comes in two shapes that carry different documents.
The first shape is a contractor. The Occupational Safety, Health and Working Conditions Code, 2020 defines a contractor, in relation to an establishment, as a person who either undertakes to produce a given result for the establishment through contract labour, or supplies contract labour for any work of the establishment as mere human resource, and it includes a sub-contractor. Contract labour means a worker hired in connection with an establishment's work by or through a contractor. Sources: the Code, section 2(1)(n) and section 2(1)(m).
The contract labour chapter does not apply to everyone. It applies to every establishment in which fifty or more contract labour are employed, or were employed on any day of the preceding twelve months through contract, and to every manpower supply contractor who has employed fifty or more contract labour on any day of the preceding twelve months, under section 45 of the same Code.
Above that threshold the document exists and you can ask for it. A contractor the chapter applies to may not supply or engage contract labour, or execute work through contract labour, except under a license issued by the designated authority, and that license states the number of contract labour it covers and the security deposit behind it, under section 47 of the Code. A license issued under section 47(1) runs for five years, under section 48(3). A contractor that does not meet the prescribed qualifications gets a narrower work specific license instead, tied to one work order and renewable on its own clock, so ask which of the two you are being shown.
The second shape can take the licensing question off the table entirely. Contract labour, in the same Code, does not include a worker, other than a part time employee, who is regularly employed by the contractor for any activity of his own establishment, whose employment is governed by mutually accepted standards including engagement on a permanent basis, and who receives periodical increments in pay, social security coverage and other welfare benefits, under section 2(1)(m). If the accountants on your pod are the provider's own permanent staff rather than labour supplied into somebody else's establishment, a contractor license is not the document to ask for, and its absence is not a finding.
Which Duties Reach Back to the Buyer
The reach-back written into that chapter is real, and it runs to an Indian address. A contractor is responsible for paying wages to each contract labour it employs, and where the contractor fails to pay or pays short, the principal employer becomes liable to pay those wages in full and to recover the amount from the contractor, under section 55 of the Code. Employing contract labour through a contractor who was required to hold a license but has not obtained one is itself a contravention, under section 54.
Read who that lands on. Principal employer is defined in relation to an establishment, and for an establishment that is not a factory, a mine or a government office it means any person responsible for the supervision and control of the establishment, under section 2(1)(zz) of the Code. A US firm with no place of business in India does not answer that description, so on those definitions this Code puts the duty on the provider's own Indian office rather than on your firm.
That is where India and the Philippines part company. Philippine law writes a route from a labour-only contractor straight back to the principal, and that route and the diligence it calls for are set out in the published post on EOR versus independent contractor. India's chain runs between an Indian establishment and an Indian contractor, and the Code on Social Security reaches the same answer by a different road, through its own employer and establishment definitions, which are covered in offshore contractor misclassification risk. Put the structure you actually intend in front of Indian counsel before you rely on either reading.
What reaches your firm is commercial rather than statutory. A license suspended for a missed filing, a provider repricing because it was funding an obligation it had not priced, or a team leaving because the employment behind it was informal. Any of those arrives as a service failure in your March. The duties that stay with your firm whatever the payroll arrangement says, from client consent before a file travels to the diligence standing behind a signature, are set out with their rules in the published employer of record post.
What Sits Inside an Indian Per Seat Quote
An Indian per-seat price is a wage plus a short list of statutory add-ons, and every one of them is set by a rule you can read. Ask for the build-up line by line, then check it against what follows.
The Provident Fund Line
Provident fund is the largest statutory add-on, and it is a percentage of wages rather than a flat fee. The Code on Social Security, 2020 sets the employer's contribution to the Provident Fund at ten percent of the wages payable to each employee, whether employed directly or through a contractor, and makes the employee's contribution equal to it. A proviso to the same clause substitutes twelve percent for establishments the Central Government notifies. Source: the Code, section 16.
Two more lines sit in that same section. Part of the employer's contribution is routed into the Pension Fund instead of the provident fund itself, capped at eight and one-third percent of wages, and the employer pays a further amount, not more than one percent of wages, into the Deposit Linked Insurance Fund, under section 16 of the same Code.
A quote can therefore show a figure that is not the one in the statute. The Ministry of Labour and Employment describes the Employees' Provident Fund Scheme, 1952 as requiring an employee of a covered establishment drawing monthly wages up to ₹15,000 to join the fund and contribute 12% of wages, with the employer required to contribute 12% as well. So ask two things about this line, whether the 12% is calculated on basic wages, dearness allowance and retaining allowance or on the whole salary, and whether the provider contributes above the ₹15,000 ceiling or stops there. Source: Press Information Bureau.
One question decides whether two quotes are comparable at all. The employee's contribution is equal to the employer's, but it is a deduction from the salary rather than a cost on top of it, and Indian income tax withheld from that salary comes out of the same number. Ask for the build-up split into employer cost and employee deduction, or two providers pricing the same seat will look different for no real reason.
Employees' State Insurance, and When It Should Not Be There
Employees' State Insurance is the government health and cash benefit scheme for Indian workers, and it is the line most likely to be absent from an accountant's seat for a good reason. The employee's contribution rate is 0.75% of wages and the employer's is 3.25%, per the Employees' State Insurance Corporation.
Whether it applies at all turns on the establishment first and then on pay. Coverage runs to factories and to notified classes of establishment above a headcount, and only in districts where the scheme is notified. The wage limit for coverage is ₹21,000 per month, and ₹25,000 per month for a person with disability, per the Corporation's coverage page. If the seat is priced above that wage, the line should not be on your invoice, so ask which employees it covers and at what wage.
Gratuity Accrues Monthly and Pays on Exit
Gratuity is a statutory exit payment, and it is the line a monthly price can hide, because it builds while somebody works and is only paid when they leave. It runs at fifteen days' wages for every completed year of service, or part of a year in excess of six months, based on the rate of wages last drawn, and for an employee on fixed term employment it is paid pro rata, under section 53 of the Code on Social Security, 2020.
When it vests, and what the Labour Codes changed about that for fixed term staff, is covered in the published Philippines versus India comparison. The question for a quote is narrower. Ask whether the monthly price carries an accrual for it, or whether it arrives as a separate invoice on the day somebody rolls off your account.
Professional Tax Has a Constitutional Ceiling
Professional tax is a levy a state charges on people who earn a living there, so the slab depends on where the provider's office sits. The ceiling does not. The total payable in respect of any one person to a State, or to any one municipality or other local authority in the State, by way of taxes on professions, trades, callings and employments cannot exceed two thousand five hundred rupees a year, under Article 276 of the Constitution of India. Whatever state a provider quotes from, this line cannot be a meaningful part of a seat.
What the Invoice Says About GST and Getting Paid
An invoice from an Indian provider to a US firm should normally carry no Indian GST, and it is worth knowing why, because the same test is the one an arm of your own firm can fail.
Place of supply comes first. Where either the supplier or the recipient of a service is outside India, the place of supply, other than for the categories listed in sub-sections (3) to (13), is the location of the recipient, under section 13(2) of the Integrated Goods and Services Tax Act, 2017.
Export of services is then a defined term carrying five conditions, and all of them have to hold: the supplier is located in India, the recipient is located outside India, the place of supply is outside India, the payment has been received by the supplier in convertible foreign exchange or in Indian rupees wherever the Reserve Bank of India permits it, and the supplier and the recipient are not merely establishments of a distinct person. That is section 2(6) of the same Act.
An export of services is a zero rated supply, under section 16(1) of the Act. Section 16(3) lets the supplier export without paying integrated tax, under bond or Letter of Undertaking, and claim a refund of its unutilised input tax credit. Section 16(4) lets a notified class pay the integrated tax instead and claim a refund of the tax so paid. So an Indian GST amount on your invoice does not by itself mean the export test failed. Ask which of those two routes the provider is on, and only if it says the supply is not an export at all, ask which sub-section of section 13 it thinks puts the place of supply in India.
The last condition is the one that catches an extension of your own firm. Where one person has an establishment in India and another establishment outside India, the two are treated as establishments of distinct persons, and a person carrying on business through a branch, an agency or a representational office in a territory is treated as having an establishment there, under the Explanations to section 8 of the Act. Supplies between such establishments fail the fifth condition, so the export treatment is not something to assume when the Indian arm is yours.
Currency is not a preference in that list either. Convertible foreign exchange, or rupees where the Reserve Bank permits it, is what the definition requires, so the account you pay into and the currency you pay in belong to the provider's tax position rather than to convenience.
There is also a clock on the money, and it belongs to the provider. It is obligatory on the exporter to realise and repatriate to India the full value of services exported, within nine months from the date of export, per the Reserve Bank of India's Master Direction on Export of Goods and Services. That is why an Indian provider will care about the date your payment lands rather than the date you approved the invoice, and it is worth agreeing terms that sit comfortably inside it.
Employer of Record or Your Own Indian Company
Global capability centre is another market phrase, and what matters under it is the legal form. If the one you are being sold is an Indian company you own, it is the entity route under a newer name, so ask whether it is a company, a branch or a representational office, because the dates that follow are a company's. The four way comparison between an employment wrapper, a certified PEO, a staffing partner and your own entity is already drawn in the published employer of record post. What separates the two live options in India is a calendar.
An Indian company brings a corporate compliance year with fixed dates. The first annual general meeting has to be held within nine months of the close of the first financial year, and every one after that within six months of the close of the financial year, with no more than fifteen months between meetings, under section 96 of the Companies Act, 2013.
Three more dates come with it, two of them every year. A copy of the financial statements goes to the Registrar within thirty days of that meeting, under section 137. The annual return goes within sixty days of it, under section 92. Once, at the start, the Board has to appoint the company's first auditor within thirty days of the date of registration, under section 139. All three sit in the same Act.
That sits on top of the labour registrations and headcount thresholds any Indian employer crosses, which are set out in the published Philippines versus India comparison, and on top of the GST question above.
So the honest decision rule is not about cost per seat. An entity earns its calendar when the headcount and the time horizon justify a permanent finance and compliance function in India, because somebody has to own that calendar every year. A provider relationship earns its fee when you want named people and no calendar, and are willing to inspect somebody else's compliance instead of running your own. There is a third answer that changes the question: buy reviewed output from a provider that employs and supervises its own staff, so the employment question and the review question sit inside one contract.
Questions to Put in Writing Before You Sign
These are the India-specific ones, and each answer is checkable against a rule above.
- Are the people on our pod your own employees, or contract labour supplied into an establishment? The answer decides which document even exists, and an appointment letter for the named person settles it.
- If they are contract labour, are you at or above the fifty worker threshold, and may we see the license and its expiry? A license names the number of contract labour it covers, so that number matters as much as the document.
- Show the per-seat build-up as separate lines: wages, provident fund, insurance where it applies, gratuity accrual, professional tax and your own fee. A single all-in figure cannot be checked against any rule at all.
- Is the invoice raised as an export of services with no Indian GST, and which of the five conditions are you relying on? Ask it in writing, because the reply tells you how carefully the provider has thought about its own tax position.
- Which currency, which bank, and what is your realisation deadline on our invoices? A provider who cannot answer the third part has not looked at its own remittance obligation.
- If a seat ends mid year, what happens to the gratuity accrual we have been paying inside the monthly price? Settle it before the seat ends rather than after.
The Document Beats the Label
In India the phrase on the provider's website is the least informative thing about the arrangement. What is informative is the registration behind the employment, the build-up behind the per-seat number, and the way the invoice is raised, because each of those is fixed by a rule you can read and then ask about by name. Work down those three and you will know, before anybody starts, whether you are buying a compliant employment arrangement or a well designed sales page.
None of it answers the question underneath, which is whether the work will be signable. If capacity is what is driving this, test the work rather than the wrapper. Accountably places trained offshore accountants and tax preparers, working from our own offices in India, inside US CPA and EA firms, ramped on your software and SOPs in about 3 to 4 weeks, with a layered review chain standing in front of the partner's signature. Since 2022 that has meant 20+ US firms and 30+ placements. Don't trust us. Test us. Run a Free 40-Hour Proof Pilot on a fixed block of your own representative work, graded by your own reviewer before a client file is at stake, and if a placement is not a fit in the first 30 days we replace them free.