You have found someone brilliant in India. They want the work, you want them, and the obvious thing to do is agree a monthly rate, have them invoice you, and get on with it.
Thousands of UK businesses do exactly this. For a while it works fine. Here is what to understand before you choose it, and what the alternative actually involves.
The contractor route, honestly
Someone overseas invoices you monthly. You pay the invoice. There is no employment contract, no payroll, no statutory contributions, and no third party in the middle.
The appeal is obvious. It is fast, it is cheap, and there is almost no paperwork. For genuinely independent work — a designer delivering a project, a developer on a defined build, anyone working for several clients on their own schedule — it is the correct arrangement and nobody should talk you out of it.
The problem is that most of these relationships do not stay that way.
Where it stops being a contractor relationship
The arrangement drifts. It starts as project work and becomes full-time hours. You start setting their schedule, giving them a company email address, adding them to the team stand-up, telling them when to take leave. They stop taking other clients because you are giving them forty hours a week.
At that point, whatever the contract says, the relationship has the substance of employment. Most jurisdictions — including India — look past the paperwork at what is actually happening: who controls the work, whether the person is integrated into the business, whether there is genuine independence.
If an Indian authority concludes that your “contractor” was really an employee, the consequences land on the business that engaged them: unpaid statutory contributions, potential penalties, and the back-benefits the person should have received. The fact that both sides agreed to the arrangement is not a defence.
There is a second, less dramatic risk that is far more likely to bite you: it is a bad deal for the person. No provident fund, no medical cover, no gratuity, no notice period, no paid leave. Good people work this way when they have to, and they leave when something more stable appears. If you are relying on this person, that is an operational risk, not just an ethical one.
What an Employer of Record does instead
An Employer of Record is a company already legally established in the country where your hire lives. They employ that person properly — real contract, real payroll, real statutory benefits — while you direct the day-to-day work.
Concretely, for a UK business hiring in India:
- Your hire signs an Indian employment contract with the EOR
- They are registered for provident fund and insurance, and gratuity accrues from day one
- Payroll runs in rupees on the local schedule, with income tax deducted at source
- You receive one invoice, in pounds
- You never set up an Indian entity, hold a rupee account, or file anything in India
You still manage them entirely. You set the work, review it, run their one-to-ones, decide about pay rises. What you do not carry is the employment obligation.
The comparison that actually matters
Contractor arrangements are cheaper per month. That is true and worth saying plainly — there are no statutory contributions and no third-party fee.
What you are buying with the difference is threefold: the misclassification risk moves off your business, the person has an actual reason to stay, and the relationship survives contact with reality — someone getting ill, taking leave, or being offered more elsewhere.
For a three-month project, that is not worth paying for. For the person who runs your customer support, it usually is.
How to decide
Ask yourself four questions about the arrangement you actually have, not the one on paper.
- Do they work for you full-time, or nearly? Full-time hours point strongly toward employment.
- Do you control when and how they work? Setting hours and directing methods is employer behaviour.
- Do they work for other clients? Genuine independence usually means several.
- Would you be in trouble if they stopped tomorrow? If yes, you have a dependency you should probably formalise.
Two or more yeses and the contractor label is doing more work than it can bear.
The middle path that does not exist
People often ask whether they can keep the contractor arrangement and just add a better contract. Not really. The paperwork is not what determines the classification — the working relationship is. A carefully drafted contract describing an arrangement that does not match what happens day to day tends to make things worse, not better, because it demonstrates you thought about it.
If the relationship is employment in substance, the honest options are to employ them properly or to genuinely restructure the work so it is independent. Most businesses, once they look at it clearly, find the first is what they wanted anyway.
Thinking about converting someone you already work with? Talk to us about it → — or read how Employer of Record works in India.