The difference between an Employer of Record (EOR) and payroll outsourcing is who the legal employer is. With an EOR, the provider’s local entity employs your people, so you don’t need a company in that country. With payroll outsourcing, you employ people through your own local entity, and a provider calculates salaries, deductions and filings for you. You stay the legal employer and keep the legal responsibility.
This guide explains EOR vs payroll outsourcing, what each costs, what you need in place before outsourcing payroll in India, and how growing companies move from one model to the other. Information was checked against the sources listed at the end on 20 October 2026.
EOR vs payroll outsourcing at a glance
| Employer of Record (EOR) | Payroll outsourcing | |
|---|---|---|
| Who is the legal employer | The EOR’s local entity | Your own local entity |
| Do you need a local company? | No | Yes |
| Who signs employment contracts | The EOR | You |
| Who registers for PF, ESI and taxes | The EOR, under its own registrations | You, under your entity’s registrations |
| Who calculates and pays salaries | The EOR | The payroll provider, on your behalf |
| Who carries legal liability for compliance | Mainly the EOR, as employer | You, as employer |
| Time to first hire | Days | Months, if you need to set up an entity first |
| Typical published fee | About $349 to $700 per employee per month | From about $29 per employee per month, plus entity running costs |
| Best for | First hires and small-to-mid teams in a new country | Larger, stable teams where you already have an entity |
What an Employer of Record does
An EOR becomes the legal employer of your team in a country where you have no entity. It:
- Issues compliant appointment letters and employment contracts.
- Registers employees under its own Provident Fund, ESI, professional tax and tax registrations.
- Runs monthly payroll, withholds income tax and pays employer contributions.
- Provides benefits such as health insurance.
- Handles onboarding, leave, exits and final settlements.
You choose the person, direct their work, set their goals and decide on raises. The EOR handles the legal and administrative side. See what is an EOR for the full picture.
What payroll outsourcing covers
Payroll outsourcing means a provider runs payroll for employees you already employ through your own entity. Remote describes its payroll product as being “for paying employees in countries where you own the entity” on its pricing page. A typical service:
- Calculates gross-to-net pay, statutory deductions and employer contributions.
- Prepares payslips and payroll reports.
- Prepares or files statutory returns, such as PF, ESI, tax withholding and professional tax.
- Issues annual tax documents, such as the Form 130 salary certificate in India.
What payroll outsourcing doesn’t do is employ your people. Contracts, HR policies, terminations, disputes and the legal duty to comply stay with your entity.
What you need before outsourcing payroll in India
Payroll outsourcing only works once you can legally employ people yourself. In India, that usually means:
- An Indian company, typically a private limited company or subsidiary, incorporated with the Ministry of Corporate Affairs.
- Tax registrations, including a PAN for the company and a TAN to deduct tax at source from salaries.
- Provident Fund registration under the EPF Act, and ESI registration where it applies.
- Professional tax registration in each state where you have employees, where the state levies it.
- Shops and establishments registration for your workplace under state law.
- A local bank account to pay salaries and statutory dues.
- Labour Code-compliant contracts and policies. Since the Labour Codes took effect on 21 November 2025, every employee needs an appointment letter and basic pay plus dearness allowance must be at least 50% of wages.
- Ongoing company compliance: accounting, audit, annual filings and a registered office.
Setting up an entity typically takes three to six months. Our guide to EOR vs entity in India covers the cost and timeline.
Who is responsible for what
| Task | With an EOR | With payroll outsourcing |
|---|---|---|
| Offer letters and contracts | EOR | You |
| Labour Code salary structure | EOR | You, with advice from the provider |
| Payroll calculation | EOR | Provider |
| Funding salaries | You pay the EOR, which pays employees | You pay employees from your entity’s account |
| PF, ESI and TDS deposits | EOR | You, often prepared by the provider |
| Statutory returns | EOR | Provider prepares, your entity is responsible |
| Health insurance | Usually included by the EOR | You buy a group policy |
| Leave, exits and final settlement | EOR | You |
| Inspections and disputes | EOR, as employer | You, as employer |
| Employee data protection | EOR as data fiduciary for employment data | You as data fiduciary; provider as processor |
EOR vs payroll outsourcing: costs
Payroll outsourcing has a much lower headline fee. Remote’s pricing page lists global payroll from $29 per employee per month, compared with EOR starting at $599. Deel’s pricing page lists EOR at $599 per employee per month and says payroll is included in EOR pricing. StratEdge Global’s EOR starts at $349 per employee per month with health insurance included.
The headline fee isn’t the full cost, though. With payroll outsourcing you also pay to set up and run your own entity: incorporation, accounting, audit, annual filings, a registered office, HR policies, legal advice and the time your team spends managing it all.
Worked example: when does an entity plus payroll outsourcing pay off?
Use this simple framework. The figures below are an illustration, not a quote; your own entity costs will differ.
- EOR fee: $349 per employee per month.
- Payroll outsourcing fee: $29 per employee per month.
- Difference per employee: $320 a month, or $3,840 a year.
- Assumed cost of running an Indian entity: $30,000 a year for accounting, audit, company secretarial work, filings, legal support and benefits administration, before set-up costs.
| Team size | Annual EOR fees | Payroll fees + assumed entity costs | Lower-cost option |
|---|---|---|---|
| 3 employees | $12,564 | $31,044 | EOR |
| 8 employees | $33,504 | $32,784 | About even |
| 15 employees | $62,820 | $35,220 | Entity + payroll outsourcing |
| 30 employees | $125,640 | $40,440 | Entity + payroll outsourcing |
In this illustration, the crossover is around eight employees. In practice, it often comes later, because entity set-up takes months, and many companies value the EOR’s compliance ownership and included benefits. Run the numbers with your real entity costs before deciding.
What your entity must do every month with payroll outsourcing
With your own entity, the compliance calendar is yours, even if a provider does the calculations. A typical India payroll cycle looks like this:
| When | Task | Who does it with payroll outsourcing |
|---|---|---|
| Before month-end | Send joiners, leavers, salary changes, leave and attendance | You |
| Last working days of the month | Process payroll and approve the payroll register | Provider processes, you approve |
| Payday | Pay net salaries from your bank account | You |
| By the 7th of the following month | Deposit income tax withheld from salaries | You pay, provider prepares |
| By the 15th of the following month | Deposit PF and ESI contributions | You pay, provider prepares |
| Monthly or as set by the state | Professional tax deposits and returns | You pay, provider prepares |
| Quarterly | Salary tax withholding returns | Provider files, your entity is responsible |
| Annually, by 15 June | Issue Form 130 salary certificates to employees (India Briefing) | Provider prepares, your entity issues |
| On every exit | Pay final wages within two working days of the last working day | You, with provider calculations |
With an EOR, the same calendar is the EOR’s responsibility. That’s the main thing you’re paying for: not the calculation, but the obligation.
When to choose an Employer of Record
- You don’t have an entity in the country and don’t want to wait three to six months to start.
- Your team is small, typically under 10 to 15 people in that country.
- You’re testing a market and want the option to scale down without closing a company.
- You want one partner to own compliance, including Labour Codes, state rules and exits.
- You don’t have local HR or legal staff to manage contracts, inspections and disputes.
- You want benefits included without buying a group policy yourself.
When to choose payroll outsourcing
- You already have an Indian entity, or a team large enough to justify one.
- You have local HR and finance staff who can manage contracts, policies and compliance.
- You need your own entity for other reasons, such as signing local customer contracts, holding assets or meeting a regulator’s or customer’s requirement.
- Your team is stable and growing, so the fixed cost of an entity is spread over many employees.
The hybrid path most growing companies take
Many companies start with an EOR, then move to their own entity once the team is large and stable, keeping payroll outsourced or managed. A common pattern:
- Months 0 to 18: employ the first 1 to 15 people through an EOR, starting in days.
- When the team is stable: run the numbers on entity vs EOR, including set-up time, ongoing compliance and benefits.
- Set up the entity in parallel while the EOR keeps employing the team.
- Transfer employees to the new entity at the start of a payroll month, with new appointment letters and no gap in benefits.
- Outsource or co-manage payroll under the new entity’s registrations.
How to move from an EOR to your own entity
- Check your EOR terms for notice and any transfer or exit fees. Good providers have none.
- Complete entity registrations first: PF, ESI, professional tax and shops and establishments.
- Issue new appointment letters from your entity, keeping pay, title and benefits at least as good.
- Close out with the EOR. Final wages are due within two working days of the last working day with the EOR under Section 17(2) of the Code on Wages.
- Agree how past service and gratuity are handled, in writing, so employees don’t lose accrued entitlements.
- Move PF under each employee’s existing Universal Account Number.
- Buy a group health policy that starts on transfer day.
- Explain the change to your team early: their manager, role and pay stay the same.
Risks of payroll outsourcing to manage
- Liability stays with you. If a PF deposit is late or a return is wrong, your entity is responsible, even if the provider made the mistake. Check the provider’s error-correction process and contractual liability.
- Rule changes. India changed its labour laws in November 2025 and raised the PF wage ceiling to ₹25,000 in September 2026. Make sure your provider updates salary structures and calculations promptly.
- Data protection. Your entity is the data fiduciary for employee data under the DPDP Act and Rules, and the payroll provider is a processor. Your contract should cover security, breach reporting and deletion.
- Gaps between HR and payroll. Leave, joiners, leavers and salary changes must reach the provider on time, or payroll will be wrong.
Where a PEO fits
A professional employer organisation (PEO) co-employs your staff in a country where you already have an entity, sharing HR and benefits administration. PEOs are common in the US. For most companies building a team in India without an entity, the practical choice is between an EOR and setting up your own entity with payroll outsourced. See our comparison of EOR vs PEO vs staffing agency.
Questions to ask a payroll outsourcing provider in India
| Question | Why it matters |
|---|---|
| Which statutory filings do you file, and which do we file? | Avoids gaps in PF, ESI, TDS and professional tax |
| How do you handle Labour Code salary structures? | The 50% wage rule affects PF and gratuity |
| What’s your cut-off for monthly inputs? | Late inputs cause payroll errors |
| How do you correct errors, and who pays penalties? | Liability stays with your entity |
| Which states do you cover? | State rules differ for professional tax and labour welfare funds |
| How is employee data secured and deleted? | Required under the DPDP framework |
Why StratEdge Global: one partner, one platform
StratEdge Global covers both stages. If you don’t have an Indian entity, we employ your team as your EOR. If you have one, our managed services team can run payroll and HR compliance for your entity, with SLA-backed delivery.
- EOR from $349 per employee per month, with health insurance included and month-to-month terms. See pricing.
- India employees employed through StratGrid Private Limited in Bengaluru.
- Onboarding in as little as 48 hours.
- A clear path to your own entity when you’re ready, without exit fees.
- Real-time visibility of payroll, leave and documents through EmpleYor.
Not sure which model fits? Book a free 30-minute call and we’ll model EOR vs entity costs for your team.
Sources
Official sources
- Ministry of Labour and Employment: four Labour Codes in force from 21 November 2025
- Press Information Bureau: EPF wage ceiling raised to ₹25,000
- EPFO: Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
- Ministry of Corporate Affairs
- Press Information Bureau: Digital Personal Data Protection Rules, 2025
Published pricing and analysis
- Remote pricing: EOR and global payroll
- Deel pricing: EOR
- LiveLaw: Code on Wages and the two-working-day final settlement rule
- India Briefing: Form 130 under the Income-tax Act 2025
All sources checked on 20 October 2026. The entity cost in the worked example is an assumption for illustration; get quotes for your own situation.
This guide is general information, not legal, tax or financial advice.
FAQ
What is the difference between an EOR and payroll outsourcing?
An EOR is the legal employer of your team through its own local entity, so you don’t need a company in that country. Payroll outsourcing runs payroll for employees you employ through your own entity, and you remain the legal employer.
Can I outsource payroll in India without an Indian entity?
Not to employ people directly. Payroll outsourcing in India needs your own entity with PF, tax and state registrations. Without one, use an Employer of Record.
Is payroll outsourcing cheaper than an EOR?
The per-employee fee is lower, from about $29 a month compared with $349 or more for an EOR. But you also pay to set up and run your own entity, so an EOR is usually cheaper for small teams.
At what team size should I switch from an EOR to my own entity?
It depends on your entity costs. In our illustration the crossover is around eight employees, but many companies switch later, at 15 to 30 people, once the team is stable and they have local HR support.
Who is liable for payroll mistakes with payroll outsourcing?
Your entity, as the legal employer. Your contract with the provider should cover how errors are fixed and who pays any resulting penalties.
Can StratEdge Global run payroll for my own Indian entity?
Yes. StratEdge Global’s managed services team can run payroll and HR compliance for companies that already have an Indian entity.
Is a PEO the same as payroll outsourcing?
No. A PEO co-employs your staff and shares HR and benefits administration in a country where you have an entity. Payroll outsourcing only handles payroll processing and filings.
Do I still need HR staff with an EOR?
You still manage your team’s work, goals and performance. The EOR handles employment contracts, payroll, statutory compliance, benefits and exits, so most small teams don’t need local HR staff.