1. What is EOR (Employer of Record)?

EOR (Employer of Record) is a system where, instead of the company being a direct employer, an EOR provider acts as a legal employer, managing the workforce on behalf of the company, including payroll and social insurance procedures.

• Company (Client): Focus on business instructions and project management

• EOR provider: Responsible for labor and procedures as the employer under the employment contract
  
  

Unlike commonly seen options for hiring overseas talent such as establishing a local corporation, outsourcing, or temporary contracts, because the EOR handles payroll, tax, and social insurance processing, the company can significantly reduce the complexity of local legal compliance.

2. Features of EOR in India

2-1. Can hire without establishing a local corporation

Generally, hiring employees overseas involves establishing a local corporation that hires the employees. However, by utilizing EOR, you can hire engineers and staff without needing to have your own corporation. The EOR provider’s Indian corporation (or partner company) becomes the legal employer, and the Japanese company only needs to provide business requests and directions.

2-2. Reduction of labor risks

India's unique labor laws, social insurance systems, and tax regulations are complex, and there is always a risk of compliance violations on-site. EOR will handle all employment procedures, payroll calculations, and insurance premium payments through the local corporation (EOR), significantly reducing labor risks and management costs.

2-3. Rapid talent acquisition

If you want to quickly secure talented Indian engineers or professionals, using EOR may allow you to hire local staff in a few weeks to a month. Compared to waiting to establish a corporation or obtaining licenses, the speed of initial implementation is remarkably fast.

3. Benefits of Implementing EOR in India

Benefit 1: Cost reduction without a local corporation

Establishing a corporation incurs initial costs ranging from hundreds of thousands to millions of yen and ongoing maintenance costs, such as monthly audit and accounting fees. With EOR, you can cut these fixed costs, and the operational expenses only consist of the EOR service fees, allowing for small-scale implementations and test operations.

Benefit 2: Peace of mind regarding labor and tax compliance

India's labor laws and tax declarations are complex, and bearing the burden of hiring specialized personnel in-house can be substantial. With EOR, the EOR provider handles payroll and social insurance procedures, as well as withholding tax (TDS) management, and will support you in case of troubles.

Benefit 3: Improved speed of hiring and management

Many EOR providers offer recruitment and recruiting functions, making it easy to gather talented engineers and staff in a short period. They can also take care of onboarding after hiring and provide local support, allowing Japanese companies to focus on development and business operations.

Benefit 4: Differences from labor dispatch and outsourced contracts

• Outsourcing: Primarily focused on contracts for deliverables, and if the actual situation is closer to labor dispatch, there is a risk of illegality.

• Dispatch: Requires dispatch licenses and responsibilities, and involves not only Japanese dispatch laws but also other regulations abroad.

With EOR, the employment relationship exists with the EOR provider, and it is not structured so that the Japanese company is a direct “employer”, which helps reduce risks associated with overseas dispatch or unauthorized introduction.

4. Which companies are recommended?

✔Want to test overseas expansion:

　Companies interested in the Indian market but want to start with a small team for development and research.

✔Want to secure talented IT engineers:

　Startups and SMEs wanting to utilize highly skilled talent unique to India at an early stage.

✔Insufficient resources for establishing a local corporation:

　When the costs or know-how required to establish a corporation are too high to do immediately.

✔Worried about labor management:

　When there is no one in the company familiar with India’s labor laws or tax issues.

5. Conclusion

EOR is a new scheme that allows you to hire and utilize Indian talent without having a local corporation. The legal employer will be the EOR provider, freeing the Japanese company from complex labor management and compliance obligations. For companies aiming to secure talented engineers and expand overseas rapidly, it can be said to be a valuable option with a low barrier to entry and reduced risks. Phinx provides India-specific EOR by utilizing a strong local network and extensive project experience, supporting the employment of talented personnel.