1. What is EOR? - A Review

EOR is a system that allows companies without a local base to hire local talent. The EOR provider becomes the "legal employer" and handles payroll and social insurance procedures, enabling companies to secure talent without establishing a local corporation.

• Speedy recruitment of talent

• Reduction of labor risks

• Relatively low initial costs

2. Reasons Japanese companies choose EOR

2-1. There was a need to secure advanced IT talent in a short period.

As the shortage of IT talent in Japan intensifies, there are many companies that want to increase development speed, both large enterprises and startups. When time and funds are insufficient to establish a local corporation, using EOR can allow for placement of Indian engineers in less than a month.

2-2. Balancing compliance and business speed

The labor laws and tax regulations in India are complex, and if a company becomes the direct employer, compliance risks increase. With EOR, the provider takes on the responsibility for legal procedures and employment contracts, allowing companies to focus on their business.

2-3. Indian talent as a test market

Before establishing a base, many companies have the need to test-hire a small number of employees to assess the market and working styles—such needs align well with EOR.

3. Success stories (Case Studies)

Case 1: IT Venture Company A

Overview: Hired 3 engineers from India for product development.

Challenges:

1. Even when hiring domestic engineers, the company brand is weak, leading to few applications.

2. There is no room to set up an overseas corporation with significant funds.

Choice: Introduced EOR at an early stage and completed hiring in a few weeks with the support of the EOR provider.

Result:

• Secured experienced Indian engineers at about two-thirds the cost of domestic engineers.

• Strengthened communication through online meetings and chat tools, managing to shorten the development period by one month compared to the plan.

Case 2: Mid-sized Manufacturer Company B

Overview: Hired several overseas engineers to develop a new software product.

Challenges:

1. There is no in-house staff knowledgeable about overseas labor.

2. There may be a possibility of establishing a local corporation in the future, but they want to start with a trial.

Choice: Contracted with an EOR provider to have local engineers fully participate remotely in Company B's system development.

Result:

• The EOR provider handled all procedures, minimizing Company B's labor risks.

• Smoothly progressed with hiring and secured the release timing of the new product.

Case 3: Major Consulting Firm C

Overview: Has multiple consultants in India and wants to utilize them for new service development.

Challenges:

1. As a consulting firm, there is a high demand for global talent from clients.

2. Establishing bases in multiple countries is too costly.

Choice: Utilized India EOR to place local talent per project.

Result:

• Quickly secured strong Indian consultants for global projects, successfully winning large project contracts.

• It improved proposal capabilities to clients and became a step to enhance their presence in the Indian market.

4. Key Points to Success

4-1. Establishing communication systems

Even when utilizing EOR, the company will handle daily work instructions and communications. To smoothly cover time differences and language issues, it is important to establish online meeting tools, chat apps, project management tools, and clarify assignment of responsible personnel.

4-2. Confirming the contractual details with the EOR provider

• The scope of payroll and social insurance procedures

• Trouble handling and support contents

• Setting initial costs and monthly fees

Clarifying these matters can prevent future troubles. Particularly, understand the responsibilities involved in procedures for residency qualifications (in cases where there are work instructions from Japan) and labor issues that may arise.

4-3. Team management

Even though Indian talent has high English proficiency and technical skills, there may be differences in culture and business practices. Establishing onboarding support and internal communication rules, and ensuring the team can collaborate smoothly is key to success.

4-4. Linking with future plans

EOR is suitable for speed-focused small-scale hiring, but if the employee count is expected to increase in the future and aims for large-scale deployment, there may come a time when it is more cost-effective to establish a local corporation. It is advisable to first test with EOR and then develop strategies to transition to corporate establishment.

5. Summary

For Japanese companies to secure excellent talent from India in a short period while managing labor risks and advancing global expansion, India EOR can be an effective means.

• Establish communication systems and onboarding,

• Clearly define the contractual scope with the EOR provider,

• Implement an operational plan considering future expansions

can greatly enhance the chances of success.

What becomes clear through the examples is that companies introducing EOR prioritize "speed," "risk management," and "minimum necessary costs." As globalization accelerates, EOR will increasingly attract attention as an option to flexibly utilize India's talented workforce.

Phinx leverages its extensive know-how regarding talent acquisition and EOR utilization in India to fully support the business expansion of companies. We can provide comprehensive support from local research to contracts, labor management, and onboarding.

If you want to start with a small test introduction or are unsure about establishing a local corporation in the future, please feel free to consult with us.

Phinx will robustly support your global strategy.