Can You Employ People in India Without an Entity? Your Three Real Options
The question comes up in almost identical words: "We want four people in Bangalore. We do not want to set up an Indian company. What are our options?"
There are three, and they are genuinely different — not three brandings of the same thing. Choosing badly is recoverable, but it usually costs a year.
Option one: incorporate and employ directly (a GCC)
You set up an Indian entity, most commonly a wholly-owned private limited subsidiary, and it employs the staff. They are your employees, on your payroll, under your policies.
What you take on: incorporation under the Companies Act, FEMA filings through the RBI portal (FC-GPR on share issue, the annual FLA return), corporate income tax as an Indian resident entity, transfer pricing documentation because your only customer is your own parent, TDS under Section 195 on payments abroad, plus Provident Fund and ESI registration, a Shops & Establishments licence, and an internal committee under the POSH Act, 2013.
Choose it when: you need the Indian presence for its own sake, you are operating at a scale where fixed compliance cost per head is negligible, or a regulatory or contractual obligation requires the workforce to be directly employed by you. We have written separately on what a GCC costs before the first hire.
Option two: an employer of record (EOR)
A third-party company legally employs the person in India on your behalf. You choose who gets hired, you direct their work day to day, and the EOR handles payroll, statutory benefits, and employment compliance. You pay the EOR a fee, usually per employee per month.
This is a real and legitimate structure, and it solves a specific problem well: you have already found the person you want, and you need a compliant way to pay them without an entity.
What it does not solve: the EOR is an employment wrapper, not a talent partner. Recruiting, screening, and technical evaluation are still yours. So is management, replacement when someone leaves, and covering the gap while you find a successor. If the person resigns in month four, you are back to sourcing — and the EOR's fee bought you compliance, not continuity.
Choose it when: you have identified specific individuals — often people you already know, or a team you are acquiring — and the constraint is purely legal rather than one of finding talent.
Option three: staff augmentation
An existing Indian company employs the team and provides their services to you under a services agreement. The people work to your priorities, in your tools, on your tickets — but the employment relationship, the payroll, the statutory compliance, and the responsibility for keeping the seat filled all sit with the vendor.
What you take on: one vendor invoice. No FEMA filings, no transfer pricing, no PF and ESI registration, no POSH committee, no Indian tax position at all. You are buying a service, not becoming an employer.
The difference from an EOR is the part people miss. An EOR employs the person you found. A staff augmentation partner finds the person, employs them, replaces them when they leave, and carries the bench that makes replacement fast. With an EOR, attrition is your problem. With staff augmentation, it is the vendor's — and that distinction shows up sharply in year two.
Choose it when: you need capability rather than specific named individuals, you want to start below the scale that justifies an entity, or you want to prove the offshore model works before committing structurally.
The comparison in one table
| Your own GCC | Employer of record | Staff augmentation | |
|---|---|---|---|
| Indian entity required | Yes | No | No |
| FEMA / transfer pricing exposure | Yes | No | No |
| Who finds the talent | You | You | The vendor |
| Who carries attrition risk | You | You | The vendor |
| Who directs the work | You | You | You |
| Minimum viable size | Large | One person | One person |
| Exit | Company wind-up | Notice period | Notice period |
The mistake worth avoiding
The most expensive error is not picking the wrong option. It is picking the permanent one first.
Incorporating before you know whether the offshore model works for your business means you find out — after a year of compliance overhead — whether the answer was yes. Starting with staff augmentation or an EOR and incorporating later means you find out first and commit second. Because IT and IT-enabled services sit on India's automatic route for 100% foreign direct investment, deferring the entity does not close the door on it.
If you want to see how the augmentation route is structured in practice — engagement models, what transfers well, and where we would tell you a GCC serves you better — that is on our IT staff augmentation service page.
