Three ways to hire in India, compared for founders, CTOs and COOs: who employs and manages the person, who owns the IP, where the tax risk sits, what each costs and how to change course.
Last reviewed: · Not legal or tax advice
The real difference between these models is how much of the employer's job you keep. With an EOR you keep almost all of it except the legal contract and payroll. With staff augmentation you keep only the direction of the work. With build-operate-transfer you hand it all over for a few years, then take everything back, including the company.
Weighing freelancers, project outsourcing or a captive centre too? Start with our broader comparison of offshore hiring models.
An employer of record legally employs a person in India on your behalf. It issues the employment contract, runs payroll, withholds tax and pays statutory contributions. You find the person, decide to hire them and manage their work.
It does not recruit, vet, house or replace anyone. The person usually works from home on equipment you supply.
In staff augmentation, a provider recruits, vets, employs, equips and houses full-time people who work only for you. You interview the shortlist, choose who joins and direct the work every day.
You pay one monthly rate per person. This is the model Offshore1st runs from its delivery centre in HITEC City, Hyderabad.
In build-operate-transfer, a provider sets up a centre for you (often inside a new Indian entity), hires and runs the team for an agreed period, then transfers the entity, staff and assets to you.
It is a multi-year commitment with a planned handover, not a way to add two engineers next month.
Read across each row and mark the jobs you would have to staff yourself.
In all three models the person is employed by someone other than your company, at least at first, so IP reaches you through a chain of two contracts. The employment contract moves rights from the person to their employer; the services or EOR agreement moves them from that employer to you.
Indian law helps with the first link. Under section 17 of the Copyright Act, 1957, for work made in the course of employment under a contract of service, the employer is the first owner of the copyright unless they agree otherwise. That default covers employees, not independent contractors, which is one more reason not to engage full-time people as freelancers.
The second link is pure contract. Your agreement with the EOR, provider or BOT partner must assign everything the person creates for you to your company, and confidentiality obligations should bind both the company and each individual. In a BOT, check that IP created during the operate phase is assigned to you as it is created, not only at transfer.
Offshore1st signs individual NDAs, assigns all IP to the client and runs work on company-managed encrypted devices behind VPN and MFA, in an office with biometric access. Our controls are aligned with ISO 27001 and SOC 2; we are not certified. Details are on our security page.
Misclassification means treating someone as an independent contractor when, in substance, they work as your employee. Signs include full-time hours for one client, your tools and schedule, and no business of their own. The risk is back payments of statutory contributions, termination disputes and weaker IP ownership. All three models avoid it the same way: the person is a proper employee of a local employer.
Permanent establishment (PE) is a tax concept. Tax treaties generally let a country tax a foreign company's business profits only if the company has a PE there. HMRC's guidance describes the two main routes: business carried on through a fixed place of business, such as an office or branch, and an agent who regularly acts for the company, and notes that the definition has the same broad effect as Article 5 of the OECD Model Tax Convention.
Under the 2017 version of the OECD Model, a dependent agent PE can arise where a person habitually concludes contracts, or habitually plays the principal role leading to contracts, for the foreign company. India's treaties differ in wording, so the exact test depends on your home country.
In practice: keep sales and contract authority with your home company, avoid titles that suggest offshore staff act for your company in India, and let the EOR or provider be the party that supplies services to you. A BOT ends with your own Indian subsidiary, a taxable company in its own right, so plan its transfer pricing with a chartered accountant before handover.
The three models bill different things, so compare total cost per productive person, not the headline number. Our guide to employee cost in India breaks down salary and statutory costs, which are the base of every model.
For an EOR, add what the fee does not cover: recruiting, a laptop, security software, coworking and manager time on HR tasks. For a BOT, get the operate margin and transfer price formula in writing before you sign.
Offshore1st's all-inclusive rates depend on seniority, not on the technology. Run your own numbers in the offshore cost calculator or see the full pricing page.
Offshore1st works with no long-term contract and no placement fee, and offers a free replacement within the first two weeks. Every candidate passes our 4-stage vetting process before you see them; about 1 in 12 applicants pass.
Tick what is true for you. The list with the most ticks is usually the right starting point; if two tie, start with the one that is easier to reverse.
Be honest about the EOR case. If you already have a strong candidate, a recruiting process that works and security built for remote staff, an EOR is often simpler and cheaper.
Be equally honest about BOT. If you know you want a large centre you will own, a well-run BOT can cost less over its life than a service margin paid indefinitely. It is the wrong choice for a team of five.
Staff augmentation now, your own centre later. This is a common path. Start with a few people, prove the work, and grow. When the team is large and stable, open an Indian entity directly or through a BOT-style agreement, and move people across with their consent. Our guide to building a GCC in India covers entity setup, cost and transfer terms.
EOR now, entity later. Companies with a few hand-picked hires often use an EOR until headcount justifies a subsidiary, then re-employ the same people under the new entity. Plan the change of employer with advisers.
Whatever the path, write the exit into the first contract: notice periods, whether and how you may hire people directly, how repositories, devices and accounts are handed back, and what any transfer costs.
An EOR only employs someone you have already found and runs their payroll and compliance. A staff augmentation provider also recruits and vets the person, provides an office, equipment and IT security, handles HR and replaces people who leave. In both cases you direct the work.
The EOR invoice is often lower per person, because it covers salary, statutory costs and a service fee only. Recruiting, laptops, software, workspace and your management time are extra. Compare total cost per productive person.
Under Indian copyright law the employer is the default first owner of work made in the course of employment, so ownership first sits with the EOR, the provider or the BOT entity. Your contracts must then assign it to your company, and your code should live in accounts you control.
It can, depending on what the people do and the tax treaty involved. The risk rises when someone in India concludes contracts or plays the principal role in winning them for your company, or when a fixed place is at your disposal. Keep sales authority out of the offshore team and take tax advice.
When you are sure you want a large, permanent centre in India that you will own, and you can commit to several years. For a handful of people or an uncertain plan, setup cost and lock-in usually outweigh the benefit.
Yes. A common path is to start with a dedicated team, prove the work, then open an entity or a GCC once the team is large and stable. Agree up front how people could move to your entity and what notice applies.
This guide explains general concepts and is not legal or tax advice. Employment, tax and treaty rules change; check your situation with a qualified adviser.
Tell us who you need and how the team may grow. We will tell you whether a dedicated team fits, or whether an EOR or your own entity would suit you better.
