Almost every foreign company hiring in India runs through the same arc. Hire one engineer on an EOR. Then two, then five. Around employee ten the founder starts asking finance for a cost forecast at scale, runs the maths, and discovers the EOR line item is on track to be one of the larger operating expenses. That's the moment the subsidiary conversation starts.
What each model actually gives you
| Capability | EOR | Own subsidiary |
|---|---|---|
| Hire in <14 days | Yes — usually 7-10 days | Only after incorporation (~30 days) |
| Local payroll, PF, ESI, PT, TDS | Yes (under EOR's licences) | Yes (under your own licences) |
| Issue ESOPs from the foreign parent | Possible but operationally painful | Same — the parent grants directly |
| Open Indian bank account | No | Yes — operating, salary, vendor accounts |
| Physical office / lease in India | No (employee must work from home) | Yes |
| Local GST input credit on expenses | No | Yes |
| Hire interns / contractors locally | Hard (EOR scope limited) | Yes, with same compliance stack |
| Expand into a tech / GCC center | Not really possible | Yes — straightforward |
| Per-employee operating cost at 30+ | High | Low |
The breakeven, computed properly
Three line items drive the comparison: the EOR fee (per head, per month), the fixed cost of running a subsidiary (CA fees, ROC filings, payroll platform, basic HR), and the variable per-employee cost of that subsidiary (the payroll platform's per-head fee, salaries-of-HR-staff-divided-by-headcount, etc.). Plot all three against headcount and you get a clean crossover.
For a typical US-headquartered tech company hiring senior Indian engineers, the crossover sits between 15 and 22 employees. Below that, EOR wins on pure cash. Above that, subsidiary wins — and the gap widens fast.
We'll model your specific breakeven on the call
Bring us your current EOR fee, your hire plan for the next 18 months, and the cities you operate in. We model the cash breakeven, the cap-table simplification, and the operational unlock — and tell you straight whether you should switch this quarter or next year.
Reasons to switch that aren't about cash
- Cap table cleanliness. Once you're doing ESOPs at any scale, having your Indian engineers on YOUR cap-table-aligned plan (vs. EOR-mediated phantom equity) saves your CFO sleep at every fundraise.
- Talent perception. Senior Indian engineers know the difference between an EOR offer and a wholly-owned-subsidiary offer. The same compensation lands differently when the offer letter has the parent company's name.
- Banking and credit. Loans, credit cards and corporate cards for the Indian operation only exist with an Indian entity. So do supplier credit terms.
- Tax planning. STP / SEZ benefits, R&D weighted deductions, GIFT City IFSC schemes — none of these are available to EOR-mediated employees.
- Acquisition optionality. When you're acquired, the buyer wants to inherit an entity, not a contract relationship with an EOR.
The switch — 60 to 90 days
- Days 1-7. Reserve company name. File SPICe+ for incorporation. Two directors needed (one must be an Indian resident — your first engineering hire often takes this role).
- Days 8-21. PAN, TAN, GST, PF, ESI, PT, Shops Act registrations applied in parallel. PAN and TAN turn around in days; PF and ESI take longer.
- Days 22-35. Open the operating bank account. Capitalise the entity from the foreign parent. File FC-GPR with RBI within 30 days of the share allotment.
- Days 36-60. Migrate each employee from the EOR to the new entity on the 1st of a calendar month. UAN, PF history and gratuity provisioning all carry across via the new ECR. Reissue offer letters. Cut the first payroll under the new entity.
- Days 60-90. Quarterly TDS filing (24Q), first PF ECR under the new code, and the first month-end close. Your dedicated FastLegal consultant runs this end-to-end so you see one summary report per month, not 20 statutory notifications.
Frequently asked questions
Can we switch mid-financial-year without complications?+
Yes — most companies switch mid-year. The employee's Form 16 from the EOR covers the months on EOR, and your new entity issues Form 16 for the remaining months. The employee files one consolidated ITR.
What happens to the employee's UAN and PF balance?+
The new employer files the joining ECR with the employee's existing UAN. The PF balance auto-transfers in the next clearance cycle. Aadhaar-verified UAN makes this nearly instant.
Do we need an Indian-resident director?+
Yes — at least one director must be ordinarily resident in India (182+ days in the previous year). This is usually filled by a co-founder relocating, a senior hire, or a professional director on retainer until you have an internal hire who qualifies.
How long until the subsidiary is fully operational?+
From signing the engagement to running the first payroll under your own PF code: 40-55 days with a competent setup partner. FastLegal's typical run is 42 days.
Stop reading circulars. Start running clean payroll.
Every FastLegal plan ships with a dedicated payroll consultant — a real human who runs your PF, ESI, PT, TDS and Form 16 issuance, configured to your salary structure, your state, and your hiring plan. You sign off. We do the rest.