Hire in India. Without an entity.

1. TL;DR: the 5-step answer

You want to hire an engineer in India. You don't want to set up an Indian Pvt Ltd. The answer is an Employer of Record (EOR). Here is the 5-step path:

1. Sign an MSA with an India-native EOR. Versatile, Wisemonk, Multiplier · any of the India-specialists works. ~30 minutes to review and sign. No setup fee with most India-native peers.
2. Send the EOR your hire's details. Name, role, salary in USD, start date, contract type (permanent / fixed term / probation period). The EOR drafts an India-compliant offer letter from their Indian entity.
3. Your hire signs the offer letter. Submits PAN, Aadhaar, bank details, prior employment documents. The EOR registers them with EPFO (PF) and ESIC.
4. You pay the EOR one USD invoice per month. That invoice covers salary + statutory contributions (PF, ESIC, gratuity, profession tax) + EOR fee. Your books stay in USD; the EOR handles INR.
5. You manage your hire normally. They report to you on Slack, attend your standups, follow your engineering workflow. The EOR is invisible to them after onboarding · except for payslips, Form 16, and any compliance question.

That's it. The 5-step process is the same across every India-native EOR. The differences are in how each step is executed: how fast, how compliant, how supportive, and how transparent on pricing. Our pillar guide compares the top 7.

2. Why "just hire them as a contractor" usually backfires

The first instinct for most US/UK founders is to hire the India engineer as a B2B contractor on Deel or directly. Pay them in USD, no India compliance to deal with. This works for ~6 months and then breaks. Here's why:

• Misclassification risk. India's Code on Wages (2019) and the four labour codes (2020) tightened the contractor-vs-employee definition. If the engagement looks like full-time employment · fixed hours, sole employer, your branded laptop, your Slack, your roadmap · Indian tax authorities can reclassify the relationship retroactively. The EOR (the deemed employer) gets back-billed for PF, ESIC, gratuity, and Income Tax going back to start date. Penalties of 100-300% of unpaid contributions are routine.
• Permanent Establishment risk (PE). If your US/UK entity is found to have "fixed place of business" in India because of an engineer working there full-time on your behalf, India can claim PE. Suddenly your US parent owes Indian corporate tax on a portion of global revenue. PE is recoverable, but the diligence question alone derails fundraising rounds.
• Compliance gaps that surface in due diligence. Any Series A+ investor will diligence your India workforce. "Are these 8 engineers contractors or employees?" is question one. "Why aren't they on payroll?" is question two. "What's your India payroll compliance exposure?" is question three. The answer "we have an EOR" is what investors want to hear.
• Talent retention. The best India engineers · the ones you actually want · prefer full-time employment with PF, ESIC, group health, and gratuity. Contractor offers from offshore companies are increasingly seen as a sign the employer is unwilling to invest. The top 10% of Indian engineering talent has options; they pick the employer who treats them like a real employee.

"We hired our first 3 engineers in India as contractors on Deel. By month 6, two of them had asked to be moved to full-time employment because the contractor structure was hurting their home loan applications. We migrated to Versatile in week 7." · Founder, US AI startup (anonymized)

If you want to hire engineers and keep them, hire them as employees from day one. EOR makes that possible without setting up an Indian Pvt Ltd.

3. What an Indian EOR actually does for you

An India EOR is your legal employer of record in India. Concretely, they:

• Sign the offer letter from their Indian entity (e.g., Foo Falcon Technologies Pvt Ltd). The contract is governed by Indian labour law, written in English, with IP-assignment language vesting all work product to your US/UK parent.
• Register the employee with EPFO for PF (Provident Fund) contributions. The employee gets a UAN (Universal Account Number) that follows them across employers.
• Register with ESIC for health insurance (mandatory if gross salary ≤ ₹21,000/month; in practice, optional for higher-paid engineers but recommended).
• Run monthly payroll. Calculate gross-to-net for India, deduct PF (12% on basic), ESIC if applicable, Profession Tax (state-specific), TDS (Income Tax withholding). Provision gratuity. Generate the payslip.
• File all statutory returns. ECR (Electronic Challan-cum-Return) for PF. ESIC challans. Profession Tax remittance. Quarterly TDS returns to the IT department.
• Issue Form 16 annually · the India equivalent of a W-2.
• Handle inspections. EPFO and ESIC half-yearly inspections happen at the EOR's office, not yours.
• Process F&F (Full & Final settlement) when the employee exits. Notice period, gratuity payout, asset recovery, experience letter.
• Bill you in USD once a month. One invoice covering salary + statutory contributions + EOR fee. Your auditor sees a clean GL line item.

4. The 8 statutory items every India payroll handles

1. EPF (Provident Fund). 12% of Basic + DA deducted from employee, 12% matched by employer. Vests immediately.
2. ESIC (Employees' State Insurance). 0.75% employee + 3.25% employer, for hires earning ≤ ₹21,000/month gross. Provides medical + cash benefits.
3. Profession Tax (PT). State-specific slab (₹150-₹250/month typical) deducted from employee.
4. TDS (Tax Deducted at Source). Income Tax withheld monthly per slab. Filed quarterly to the IT department.
5. Gratuity. 4.81% of Basic provisioned monthly, paid out after 4.67+ years of service.
6. Labour Welfare Fund (LWF). Small state-specific contribution (~₹10-100/month).
7. Shops & Establishments registration. City-specific license. Required for any establishment employing workers in a commercial setting.
8. New Labour Code 2025-26 compliance. India consolidated 29 federal labour laws into 4 codes (Wages, IR, Social Security, OSH). All EORs must comply with the new wage structure (Basic + DA ≥ 50% of CTC).

Every payslip we issue runs through all eight items. If an EOR doesn't show you all eight on the invoice, ask them to.

5. The 5-day onboarding timeline

The fastest documented onboarding is 3 days. The typical first-hire onboarding is 5 business days. Here's what happens each day:

• Day 1. You sign the EOR MSA. You send us your hire's details (name, role, salary, start date). We draft the India-compliant offer letter and send it for your review.
• Day 2. Offer letter goes to your hire. They review, sign, and submit their KYC (PAN, Aadhaar, bank details, prior employment proof, education proof).
• Day 3. Signed contract returned. We register them with EPFO. UAN issued. We register with ESIC if applicable.
• Day 4. Group health and life cover starts (₹5L floater, family included). Devices ordered if part of the MSA. Slack invite sent.
• Day 5. First paycheck scheduled for the month-end cycle. Welcome call with the named compliance lead. Documentation handed over (policy walkthrough, leave policy, escalation contacts).

6. What it costs end-to-end (real numbers)

For a $40,000 USD/year India engineer (mid-level, Bangalore or Hyderabad), here's the all-in monthly cost:

• Salary (gross, USD equivalent): ~$3,333/month
• Employer PF + gratuity provision: ~$200/month (built into CTC structure)
• Group health + life cover: ~$60/month (often included)
• EOR fee (Versatile or India-native peer): $99-$399/month
• Total monthly USD invoice: ~$3,700-$4,000/month per hire
• Annual all-in: ~$44,000-$48,000/year per hire (for a $40K USD nominal salary)

The "loading factor" · what you pay above the headline salary · for an India hire on EOR is ~10-20%. Compare to a US W-2 hire where loading is typically 25-35% (FICA + benefits + workers comp). India is structurally cheaper to employ in.

7. How to pick an India EOR in 30 minutes

If you want to short-circuit the research, here's the 30-minute version:

1. Make a shortlist of 3. Versatile + Wisemonk + one other India-native peer (Multiplier or Skuad). Ignore global generalists for now · they're easy to fall back on if the India-natives don't fit.
2. Ask each one for their CIN, GSTIN, and PF establishment code. In writing, within 24 hours. Real India-native EORs will share. Resellers will hedge.
3. Ask for the MSA. Read the indemnity clauses. Real ones include IP assignment to your parent, business indemnity, misclassification risk coverage. Fake ones say "best efforts."
4. Ask for one customer reference. Real EORs will give you a name and an email. You then ask that customer: "How fast does the compliance lead reply? Have you had any notices? Did you migrate from another EOR · if yes, was it clean?"
5. Sign with the one that answers fastest. Speed of response in the sales cycle is a leading indicator of speed of response when an EPFO notice arrives at month three.

8. IP assignment and equity for India hires

IP assignment. Every Versatile-issued offer letter includes an IP Assignment clause that vests all work product (code, designs, documents, inventions) directly to your US/UK parent. Sub-clauses include confidentiality, trade secret protection, post-termination non-disclosure, and return of materials. This is the structural answer to "how do I make sure the IP my India engineers produce belongs to my US Delaware C-corp?"

Equity / ESOPs. The cleanest path is for your US/UK parent to issue ISO/NSO grants directly to the India-resident employee. We handle the RBI reporting (LRS or specific routes) and perquisite tax computation. A phantom-equity bonus structure paid through Versatile payroll is the alternative for early-stage companies where the cap table is too small to issue real equity. Either path works · pick based on your stage.

9. When you outgrow EOR (and what comes next)

EOR is the right answer until you're at 25-30 India hires. Above that, your own Indian Pvt Ltd subsidiary becomes structurally cheaper · but you take on director liability, statutory inspections at your own office, and the operational overhead of an India CA, CS, and (eventually) a part-time CFO. Most founders stay on EOR until 40-50 hires before making the migration, then move to a Build-Operate-Transfer structure.

Versatile handles the EOR-to-entity migration at $0 fee. We've done four of these to date. UAN continuity is preserved (the employee's PF account stays the same; only the employer code changes). Gratuity vesting does not reset. The engineer continues on the new entity's payroll the next pay cycle.

For the full math + timeline, see our EOR vs Entity guide.