1. Overview and Characteristics of Contract Types

Unlike the common practices of "establishing a local corporation," "outsourcing," and "staffing" in hiring overseas talent, EOR takes responsibility for payroll, taxes, and social insurance processing, significantly reducing the complex compliance with local laws that companies must handle.

2. Comparison of Cost Structure and Initial Preparation

EOR

• Initial Cost: Relatively low due to no need for establishing a corporation. There are often setup costs and monthly fees payable to the EOR provider upon implementation.

• Operational Cost: Only payroll and social insurance reimbursements (EOR bears the cost → billed to the company) and fees. The total fee may increase when hiring large numbers of employees.

• Point: Suitable for those who wish to utilize Indian personnel on a small scale and for the short term. Can start quickly, but costs tend to rise as the number of employees increases.

Outsourcing

• Initial Cost: Generally limited to the creation of contracts and estimates for projects.

• Operational Cost: Often paid on a deliverable basis, but additional costs may arise if requirements change.

• Point: Because it is based on predetermined projects or deliveries, it is not suitable for continuous use of personnel or detailed daily instructions. There is also the risk of becoming a "disguised contract" if direct commands are issued.

Staffing

• Initial Cost: When accepting as a staffing recipient, procedures in accordance with domestic labor dispatch laws, such as contract signing, are necessary. International staffing becomes even more complicated.

• Operational Cost: The staffing fee includes the staffing company's margin, so total costs can become significant over long durations.

• Point: Focused on complying with Japanese domestic staffing laws. When dispatching overseas personnel in Japan, issues such as residency qualifications become difficult, making it less applicable for utilizing remote personnel from India.

Establishing a Local Corporation

• Initial Cost: Corporation registration fees, payments to lawyers and accountants, capital, etc., can range from several hundred thousand to several million yen.

• Operational Cost: Fixed costs such as annual audits and tax filings, office rent, and placement of HR and labor personnel can be high.

• Point: The more employees hired, the lower the cost per person, but there is a need to thoroughly manage operational burdens and governance. This option is suitable for companies considering long-term large-scale expansion.

3. Comparison of Labor and Risk Management

・EOR

The legal employer is the EOR provider, so payroll calculations, labor law compliance, and social insurance procedures are managed by the EOR.

There is no need to understand India’s unique complex legal regulations, minimizing compliance risks.

However, operations that EOR does not handle (such as visa acquisition support) need to be consulted separately.

・Outsourcing

Because it is a contract based on deliverables, there is generally no employment risk. However, if continuous direction is given, it may become a "disguised contract," which carries the risk of being deemed illegal.

Compliance is managed by the contracting company, but if there are issues with quality or progress, it requires contract-based negotiations due to the lack of an employment relationship.

・Staffing

The employer is the staffing company, and the client company gives direct instructions to the workers.

In Japan, detailed rules of the labor dispatch law are established, with many regulations regarding duration limitations and scope of work. International staffing is even more complicated and not very common.

・Establishing a Local Corporation

Since the company becomes the employer, compliance with labor laws and social insurance is mandatory. There are significant risks if specialized staff or consultants are not hired.

Be aware that management operations related to responding to troubles and building personnel systems increase with local corporation operations.

4. What Types of Companies are Recommended?

• Want to test overseas expansion:

Companies interested in the Indian market but want to start with a small number of personnel for development or research.

• Want to secure excellent IT engineers:

Startups or small to medium enterprises that want to utilize highly skilled personnel unique to India as soon as possible.

• Lacking resources for establishing a local corporation:

Cases where establishing a corporation suddenly poses a high hurdle in terms of costs or know-how.

• Concerned about labor management:

If there is no personnel knowledgeable about Indian labor laws and tax matters within the company.

5. Summary

India EOR is a new scheme that allows employment and utilization of Indian personnel without having a corporation in the local area. The legal employer is the EOR provider, releasing Japanese companies from complex labor management and compliance obligations. For companies aimed at securing excellent engineers and speedy overseas expansion, this option is a low-barrier and low-risk choice.