EOR vs setting up your own Indian entity
There are two ways to legally employ engineers in India as a non-Indian company: hire through an Employer of Record, or incorporate your own Indian subsidiary. The right answer depends almost entirely on how many people you plan to employ in India over the next 24 months — not on philosophy.
Rough rule: below ~15 India FTEs, an EOR wins on every dimension. Above ~25 FTEs, your own entity starts to win on unit economics. The middle is where most founders sit, and it's the most interesting comparison.
The head-to-head
| EOR (e.g. TWF Labs) | Your own Indian entity | |
|---|---|---|
| Time to first hire | Days | 4–8 weeks for incorporation |
| Setup cost | $0 | ~$5–15k incorporation + legal |
| Ongoing compliance | Included in monthly fee | ROC filings, statutory audit, FEMA, transfer pricing — done by you |
| Per-engineer running cost | EOR fee ($129/month) on top of salary + statutory | Salary + statutory only |
| Permanent establishment risk | Structured to mitigate | You manage |
| Equity (ESOP) | Possible but messier | Native |
| Independent India brand | None | Real India presence |
| Exit cost | Just stop the engagement | Wind-up the entity (months) |
| Right level for | 1–15 India FTEs | 15+ India FTEs |
The break-even math
The EOR fee is the variable cost that flips the calculation. At $129/engineer/month, an EOR costs $1,548 per engineer per year, times headcount. A wholly-owned subsidiary costs roughly $25–60k/year in compliance overhead (ROC, audit, transfer pricing, payroll software, an in-house finance person at part-time) plus the one-time incorporation cost amortised over your planning horizon.
That break-even sits at roughly 12–20 engineers, depending on the entity overhead you can absorb and the EOR rate you negotiate.
When EOR is the obvious choice
- You're hiring your first 1–10 engineers in India.
- You're testing whether India will be a long-term hub.
- You want to be hiring next month, not in two months.
- You're Series A–C and your finance team is one person.
When your own entity is the obvious choice
- You're past 20+ India FTEs and growing.
- You want to issue ESOPs natively to Indian employees on your Indian cap table.
- You're generating India-sourced revenue and need GST registration anyway.
- You want a public, Indian brand presence (recruiting, marketing).
The often-missed middle: EOR now, entity later
The cleanest pattern: start with EOR, then transfer to your own entity at ~15+ heads. Done well, it's a documented handover — employment contract novation, PF transfer, leave balance carryover, gratuity continuation. TWF Labs does not charge a clawback fee on that transition.
Where TWF Labs is honest about its weaknesses
EOR is not the right answer if:
- You need ESOPs on a clean Indian cap table.
- You're hiring 50+ Indian engineers in the next 12 months — the per-engineer fee adds up.
- You want a public India brand for recruiting.
For most Series A–C founders hiring 1–15 senior engineers in India, EOR is the right call.
Run the numbers
The cost calculator shows the full loaded cost per engineer under EOR. Multiply by headcount, compare to roughly $40k/year of entity overhead at your planning headcount, and the decision is usually clear in under five minutes.