Converting From EOR to Your Own Entity in India: When It Makes Sense
The transition from EOR to owned entity is a real project, transferring employment, re-registering payroll, and timing it around notice periods and statutory continuity.
Moving employees from an EOR arrangement to a newly incorporated subsidiary isn't a simple contract swap, it's technically a change of employer, which under Indian labour law requires careful handling to preserve employees' continuity of service (relevant for gratuity eligibility, leave balances, and other tenure-linked benefits) and needs each employee's informed consent to the transfer.
Practically, this means the new subsidiary needs its own payroll, PF, ESI, and Shops & Establishments registrations fully operational before the transition date, and the transition itself is usually best executed at a clean payroll cycle boundary (start of a month) with clear communication to affected employees well in advance.
The trigger point for making this move is usually headcount and commitment level, once a company has enough India staff, or high enough conviction about the market, that the subsidiary's compliance overhead is clearly justified by what EOR can't offer (direct contracting, IP ownership, local licenses), that's the signal to start planning the transition, not to wait until an operational problem forces it.