The Ultimate Guide to EOR Service: Best Model to Start a Business Activity in India
The Ultimate Guide to EOR Service: Best Model to Start a Business Activity in India
India, a land of rich cultural and lifestyle diversity, has marked its presence as a growing economic superpower. About 20 years ago, India transitioned from a socialist state to a liberal marketplace. Today, India stands as the 6th biggest economy globally with a GDP of over $2.6 trillion.
India has a vast talent pool. A recent report of an assessment of 65,000 graduates states that 40% of India’s youth is job-ready. India offers extraordinary and digitally skilled talent at effectively affordable labor costs.
Expanding Business to India
India leads an attractive business destination for global brands owing to its optimistic spending behavior, business-friendly policies, and rich talent pool that can be hired at affordable resource costs. When a business aims at expanding in India, it focuses on establishing an overseas territory and growing its strength to service clients.
Overseas businesses usually promote remote teams and virtual working environments. This is to facilitate their need for infrastructure as no bar. Hiring talent is one part but retaining that resource remains a challenge.
Also, for any company from across the globe willing to set up an operation in India, it is essential to research and navigate local labor laws to steer clear of employment risks. Keeping track of these changes requires you to incorporate finance, HR, and payroll specialists into your team.
Wouldn’t it be easier if you could get away from this nightmare of adhering to complex Indian statutory tax and labor law compliances? Hiring employees in a new country is lengthy, complicated, and expensive. You have to establish a local entity or a subsidiary, and deal with currency conversions and overseas banking. These tasks are tedious and take time away from productive work.
To avoid this hassle, PEO (Professional Employment Organization) and EOR (Employer of Record) concepts were introduced in the early 1970s. For companies operating in a foreign land, PEO became a useful way of outsourcing particular HR functions and reducing costs. Whereas, for businesses looking at hiring talent in other countries without forming a legal entity, EOR became the right fit.
The early version of PEO services: US-based model
In the US domestic model, the early version of the ‘co-employment’ model got recognized by the legislature. It gained popularity as a way of cooperating in the administration of employment contracts between the employing company, an administrative company, and the employee. On a formal basis in law, the PEO agencies began offering more comprehensive services than employee leasing.
The DIY (do-it-yourself) approach of incorporating, registering, and running a local payroll was worthwhile for companies looking at commitment to a country. But for those willing to enter new markets in other countries, leveraging international PEO/ EOR became an ideal alternative.
The modern structure of International PEO/ EOR services
There are small differences between the traditional PEO/EOR model and the International PEO/EOR. Some firms coined the terms International PEO/EOR to describe the services offered globally rather than a country-based model. In short, the difference between the two can be better understood as – in the case of PEO, you must have a local entity in foreign land whereas, for an EOR, you don’t need a local presence.
What is International PEO/EOR?
The international PEO (Professional Employment Organization) Or EOR (Employer of Record) services equip an international business by providing human resources services, including international hiring and employment. It is a business-to-business arrangement between the company and the service provider. The latter handles the defined aspects of the employees on behalf of the company. The service provider is a registered employer of your remote team. You can manage the employee’s day-to-day work and execution responsibilities, and decide who you want to hire.
How does an International PEO/EOR work?
International PEO/EOR service providers have their own legal, registered entities in foreign countries. They employ your staff, provide agreed infrastructure, and make them available to you for exceptional work. International PEO/EOR service providers then manage their monthly payroll, taxation, insurance, HR admin, and related compliance with local laws on your behalf.
This arrangement gives you access to foreign markets where you can build your remote team and onboard local talent. The service provider becomes the best advisor for laws regarding local contracts, worker protections, notice periods, termination rules, and severance pay.
Why use an International PEO/EOR?
Since International PEO/EOR service providers are the legal employers for your team, it eliminates your administrative efforts. You get freedom from handling staffing responsibilities and keeping up with foreign compliance and tax laws. Their services and experience offer superior risk mitigation without forming a business entity abroad.
Increased employee retention: A PEO helps you offer your employees attractive benefit plans. This boosts the employee retention rate.
Experienced management team: You get access to experienced professionals in HR, benefits, payroll, taxation, and other employee management functions.
Better control: You get better control over employment-related regulatory compliance and employee-related disciplinary issues.
Increased access to employee life-cycle: You can provide effective management and access employees online with a self-service portal. This eases the monitoring of employee records, pay sheets, leave tracking, tax deductions, and full tracking of employees wherever required.
For growth-minded companies, international expansion is not an end goal but a start to a challenging new venture. There are many considerations for your business on the eve of international expansion. Companies expanding to India find it relatively easy to form collaborative partnerships with local EOR service providers. How exactly does an international PEO support your business throughout this exciting transition?
Start your business journey in India with EOR
Formality Pty Ltd., an Australia-based company, willing to expand overseas was in search of an India-based partner that would have a smooth and cost-effective operational process. Initially, they had three contractors working for them and this cost them to lose a lot of productive time. In addition, despite support from the local partners, they had to manage logistical issues, expense reimbursements, and individual compliances.
To address these pain points, they were in search of a local service provider and decided to partner with Remunance for EOR services. Remunance created a formal business plan that addressed relevant business, employment, and tax laws. This in itself made for a smoother and more cost-effective operational process.
Most companies fundamentally choose this option of engaging with a local partner who can employ individuals on their infrastructure. It also has a great potential for reward as they do not have to manage HR, benefits, and payroll. However, for businesses moving internationally, costs and risks are involved. Let us understand how setting up a subsidiary becomes a seamless journey when you partner with the right PEO.
As one of the oldest providers of employer of record (EOR) services in India, Remunance has the resource depth, knowledge base, and network to help you. For over 15 years, we have helped clients from North America, Europe, and Asia with 360-degree support services.
Remunance has earned credibility by providing on-the-ground support necessary to thrive In India. As EOR, Remunance helps hire best-fit employees, onboard them smoothly, keeps a check on compliance, and manages their performance and payments. But above all, they focus majorly on improving talent retention. For companies that have a remote team, freelancers, or contractors working for them, Remunance provides customized services and a self-serve platform that helps you take control over the IT, infrastructure, and logistics support.
Remunance helps you explore the option that best suits your needs:
Though most companies prefer our EOR services, Remunance also extends support in the incorporation of offices for businesses that wish to form subsidiaries in India. Let us have a glance at why a selected few businesses chose to extend their business operations in India:
Waltham, a USA-based RTOS-Platform company IntervalZero was seeking developers for Windows-based RTOS. They were on the lookout for a reliable and experienced employer of record to make it the right attempt. After screening through outsourcing partners, joint ventures, vendor consultants, and other types of alliances, they found Remunance.
After the initial discussion with their CTO Brian, Remunance took charge and planned a strategy to locate resources with potential, and trained them as per the job requirement to make them productive. As we built a core team, the operations achieved every milestone that was set out.
For two long years, Remunance handled legal compliance, benefits, payroll, and other HR functions of IntervalZero. With the seamless functioning and credibility added to their brand identity, Jeff (CEO) took a decisive step to form a subsidiary in India using Remunance services. To help them establish a business presence in India, Remunance set up a unique separate office infrastructure. Finally, we smoothly transitioned the core functions to the IntervalZero team.
To learn more about subsidiary formation, check our latest blog.