When to Move Your India Team From an EOR to Your Own Entity
The arithmetic behind the switch, what incorporation actually involves for a foreign parent, how a captive is paid, and how to move employees without resetting their service.
- The switch is arithmetic: per-person fees against the fixed cost of running a company.
- Incorporation takes seven to ten working days with clean documents, and 100% foreign ownership is automatic in most sectors.
- A resident Indian director is the requirement that most often delays a foreign parent.
- Transfer the team with service continuity intact, or you reset gratuity and goodwill at once.
Do the arithmetic before the ambition
An Employer of Record costs a predictable amount per person per month. Your own subsidiary costs a largely fixed amount per year: accounting, audit, statutory filings, and the attention of someone senior enough to own them.
Divide the fixed cost by the per-person fee and you have your crossover headcount. For most companies it lands past twenty to thirty people. Recalculate it with your own salary bands rather than accepting the number a provider gives you, because the provider has an interest in the answer.
What incorporation involves
A wholly owned subsidiary is the normal structure. A foreign parent can hold 100% under the automatic FDI route in most sectors, which means no prior government approval.
- Two directors minimum, at least one resident in India for 182 days or more in the previous calendar year.
- Seven to ten working days with clean documents; name rejections are the usual cause of delay.
- Government filing fees are nil up to Rs 15 lakh of authorised capital, with stamp duty varying by state.
- Share allotment money must arrive within 60 days, and Form FC-GPR must reach the RBI within 30 days of allotment.
How a captive gets paid
A centre that serves only its parent has no external revenue, so it is paid on a cost-plus basis: it recovers its costs plus a margin, and that margin is what India taxes.
Budget 2026 set a uniform 15.5% safe harbour margin for IT and ITeS services and raised the eligibility threshold to Rs 2,000 crore. Electing the safe harbour keeps most new centres out of transfer pricing disputes, which is worth more than the small margin difference a negotiation might win.
Moving the people without resetting them
The transfer is the part that damages trust if handled carelessly. Employees moving from the EOR to your entity should carry their service continuity, because gratuity eligibility and notice terms depend on it, and because asking someone to restart their tenure is a resignation trigger.
Provident fund follows the employee through their UAN, so the account does not change. What does change is the name on the contract, the payroll that pays them, and the entity that owes them. Say so clearly and in writing before the date, not after.
Frequently asked questions
How long does it take to set up an Indian subsidiary?+
Seven to ten working days with clean documents. A foreign parent can own 100% under the automatic FDI route in most sectors, and needs at least two directors with one resident in India.
What margin does an India captive centre charge its parent?+
A cost-plus margin. Budget 2026 set a uniform 15.5% safe harbour for IT and ITeS services, with the eligibility threshold raised to Rs 2,000 crore, which removes most transfer pricing disputes for new centres.
Do employees lose anything when they move from an EOR to our entity?+
They should not. Handled properly the transfer preserves service continuity, which protects gratuity eligibility and notice terms, and provident fund follows the employee through their UAN.
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