Many global companies see India as a major market destination for hiring remote employees, considering the availability of a vast talent pool in the country. Freelancing/contracting, outsourcing, subsidiary formation, and employer of record (EOR) are popular business models through which overseas businesses hire employees in India.

It’s important to have a complete picture of the cost of hiring remote employees in India for each model before you make a final call for team expansion. If you’re hiring a remote team for a long-term project and may later require expanding the workforce size, you must choose the model that will be cost-effective in the long run. The costs of hiring remote employees become a heavy load when you increase the size of your remote workforce. Although cost remains a primary concern for any business investment, it isn’t the sole deciding factor. You also need to consider other factors, including employee management, operational risks, etc. besides costs.

This guide will help readers understand the cost of hiring Indian professionals using different business models. In other words, knowing the cost of hiring remote employees for each model will help you make an informed decision about the team expansion plan in India.

A Cost Overview of Different Business Models for Remote Hiring in India

No doubt, building remote teams in India ensures two major advantages to foreign businesses—the availability of skilled resources and the low labor cost of the workforce. It means you can find the right workforce in India per your requirements and hire them at reduced costs.

Now, let’s understand the cost of hiring employees in India through different business models—contracting, outsourcing, EOR (local EOR vs multi-country EOR), and subsidiary. The cost structure differs from one model to another and is illustrated in the following example. To illustrate the average cost per hire of employees in India, let’s assume the following conditions.

We calculate the cost of every business model based on the average monthly salary (wages for freelancers) for a 6-member team. You may also consider some additional costs above salary costs, which are prevalent in some business models.

For our analysis convenience, we make some assumptions about the work experiences and different positions in this 6-member team. The team comprises a manager with 8 plus years of work experience, two senior- or mid-level contractors with 5-8 years of experience, and three junior-level contractors with 2-4 years. 

Based on these assumptions, we prepare the estimated costs of every model. See the table below about the cost structures in working with different remote business models in India. We explain each cost structure in detail in the following. 

Tabulation: Cost of Hiring Remote Employees in India

* Indicative per month cost of a team of 6 members. It is the average salary/wages cost of 6 members (1 manager, 2 senior- or mid-level contractors, and 3 junior-level contractors)

Cost of Hiring Freelancers in India

The monthly average cost of hiring freelancers in India will be around USD 9,146.34 for a 6-member team. It means the monthly costs per head will be USD 1,524.39. This is an estimated salary of how much freelancers would earn when their wages are converted into a monthly salary. Freelancers earn their wages based on per hour, project, or job. 

Hiring freelancers in India is way more affordable and convenient for businesses focusing on short-term projects, that normally last for 3 to 9 months. Among business models, freelancing can be considered the cheapest option and you can easily upsize or downsize your workforce with the least costs. However, you must know certain challenges of working with contractors in India. 

You’re liable to pay additional costs applicable to transaction charges and currency conversion fees (CCF) while transferring salaries to the self-bank accounts of your resources. The remittance charges in Indian banks range from USD 10-20 per transaction depending on the amount or type of transaction. 

Also, you need to understand how to navigate the Indian legal complexities. You may face a great risk of legal and financial liabilities if your contractors fail to pay income tax. Since many freelancers aren’t fully aware of the legal taxation system, they often consult a tax advisor. In India, as per the new tax regime, if an employee’s annual income is above USD 8,536.58 (INR 700,000), he/she is liable to pay tax.

Hiring Cost Using Local EOR Services

The average monthly cost of hiring remote employees using a local EOR partner in India would be around USD 10,046.34. This average cost includes service charges (USD 900) and salary costs of your employees of a 6-member team (USD 9,146.34). 

Partnering with a local EOR can easily solve the main issues associated with freelancing, including compliance challenges. EORs have a vast knowledge of the local market and a team of legal experts, who are well-versed in the country’s taxation, accounting system, payroll, etc. 

Besides compliance assistance, you can avail of additional EOR services including recruitment assistance, payroll processing, employee benefits management, and human resources (HR) administration. A local EOR would charge a meager USD 150-200 per person monthly as service fees. So, keeping a 6-member team will cost you around USD 900 per month. 

A local employer of record differs from a multi-national EOR as the former service providers exclusively offer services within one country. A local EOR has extensive knowledge about the pulse of local talent and handling business needs in a particular country. However, both models provide similar services and allow a foreign business to hire employees in India without establishing its entity.

For More  -  Cost of Hiring Remote Employees in India: A Complete Guide