The EOR Break-Even Point in India: At What Headcount Does Your Own Entity Get Cheaper.
Every company expanding into India eventually asks the same question should we keep using an Employer of Record or set up our own entity? The answer almost always comes down to headcount.
An EOR charges a per-employee monthly fee. That fee covers payroll processing, statutory compliance, tax filings, employee contracts, and legal liability all without the company needing to incorporate in India. For a team of five or ten, this model is significantly cheaper than bearing the fixed costs of a private limited company registration, local accounting, legal counsel, registered office, and annual ROC filings.
But EOR costs scale linearly. Every new hire adds the same monthly fee. Entity costs, on the other hand, are largely fixed after setup. The compliance infrastructure that supports 15 employees supports 50 with minimal additional overhead.
The break-even typically falls somewhere between 15 and 25 employees for India, depending on your EOR provider's pricing and the complexity of your compensation structures. Below that range, an entity is an expensive overhead you don't need. Above it, you're paying a premium for a service you've outgrown.
There's a timing layer too. Entity incorporation in India takes 4-8 weeks when everything goes smoothly. Companies that wait until they've crossed the break-even point lose months of savings during the transition window.
The smartest approach is starting with EOR, scaling without incorporation risk, and transitioning to your own entity when the numbers justify it.
If you're exploring EOR for your India entry or evaluating when to transition, TM Services' EOR in India offers flexible Employer of Record solutions helping you hire compliantly from day one and scale at the pace your business demands.
