Reducing HR outsourcing cost per employee with EOR: A smarter way to build teams in India

Global companies are under pressure. As they scale, HR outsourcing cost per employee continues to rise. But the real problem isn’t just cost. You pay premium rates for unguaranteed quality from people you can't control. Your payroll gets processed wrong three months in a row. Your customer service team can't access your CRM because of "security restrictions.”

Most companies miss these hidden costs:

• Training fees for basic software access
• Communication platform licensing per user
• Compliance audit charges (quarterly)
• Data security breach insurance premiums

A $30,000 employee becomes $45,000 after all the extras. You're funding vendor profits, not getting better talent.

EOR (Employer of Record) works differently. You hire people directly. They work for you, not a vendor.

At Kaamwork, we have seen this shift first-hand. Global leaders use our platform not just to reduce costs but to build strong, long-term teams.

In this blog, we'll look at why outsourcing gets expensive, the hidden costs leaders often miss, and how the EOR model helps companies hire in India with cost transparency and complete control.

Why HR outsourcing cost per employee becomes unsustainable

Main reasons to outsource are cost savings, expert knowledge, and advanced tech. But reality is that outsourcing fees scale unpredictably with headcount.

What starts as a manageable $150 per employee monthly becomes $250 during expansion. Then $350 when you need custom reporting. Companies think they're paying for simplicity, but get hit with compound cost increases.

CFOs tell us their biggest frustration: outsourcing cost savings are a myth. You save an average of 22% by outsourcing HR operations — but only in Year 1. After that, costs climb faster than headcount.

Take our client who started with 15 employees at $2,250 monthly total cost. By month 18, the same headcount cost $4,500 due to "necessary upgrades" and compliance add-ons. For every extra service, be it payroll, background check, tax documents, or compliance, the hidden fees pop up. So, by the time you reach the expansion, pricing gets worse.

Every service comes with separate charges. Need employee onboarding materials with your branding? Extra fee. Want faster customer support? Premium tier required. Multi-state payroll? Geographic expansion charges apply.

This is how vendors operate: they stay competitive at the start. Once you are locked in, switching costs are high, so they raise prices.

At Kaamwork, we keep pricing simple and transparent. Like we take a flat fee of $599 per month for employee management and HR, which covers:

• Full EOR service
• Payroll and compliance management
• Your company branding on all materials
• Offer letters, payroll, compliance, and tax filings
• Background checks
• 24/7 support
• No cost creeps as you scale

With EOR, you know exactly what you're paying and what you're getting. Also, HR outsourcing cost per employee stays predictable and tied to actual salaries.

Why Kaamwork is different from global EORs?

Most global EORs operate like plug-and-play compliance vendors. They’ll set up payroll, handle contracts, and stop there. Kaamwork, on the other hand, is built around talent and long-term team success. Here’s why we are better than the vanilla EORs in the market:

Our talent-centric model drives results

Global EOR providers treat employees as compliance items. We treat them as the foundation of your success. Our proven ability to attract and retain top talent — from leadership to junior levels — separates us from transactional EOR services.

Attracting A-players requires A-level positioning

Want to hire from top blue chips like Google, Amazon, or Microsoft? That kind of talent expects clarity, opportunities, and alignment with their ambitions. And here, Kaamwork goes the extra mile that most vanilla EORs won’t. We position your brand as a sustainable career choice in the Indian market.

Sourcing that actually works

Our recruiter network delivers profiles within 24 hours with a 50%+ interview-to-offer rate. More importantly, we communicate your brand vision to convince top talent of long-term career sustainability — critical for building lasting teams.

Creating genuine belonging from day one

Your company owns 100% of interviews, appraisals, and promotions. We handle the operational details that make people feel included, like:

• Company-branded platform interface
• Hiring description for LinkedIn
• Your logo on offer letters
• Welcome kits with your branding
• Onboarding documents

We go Beyond Remote Setups

From Grade A branded office spaces, meetups to offsite events, we help companies evolve from remote-only setups to effective hybrid cultures.

Hidden costs that make outsourcing more expensive than it seems

Let’s rip off the band-aid and show you what you're really paying for.

Salary markups of 35–100% above actual employee pay

Your vendor quotes $40/hour for a customer service specialist. Sounds fair, right? Here's what they don't tell you: that person actually earns $20-25/hour. The rest goes to vendor profits.

This markup game is everywhere. A developer making $30,000 annually gets billed to you at $50,000-60,000. That's too high an HR outsourcing cost per employee. You're not paying for better talent — you're funding someone else's business model.

The worst part? You have no idea what your team actually earns. When vendors refuse salary transparency, it's because the markups would shock you. Some staffing companies charge 100% markups on specialized roles, meaning half your budget disappears before reaching actual talent.

Attrition and rehiring costs that vendors don't disclose.

Here's the domino effect nobody warns you about. Your assigned specialist leaves mid-project. With them, knowledge also walks out the door. Now, your new person doesn't understand your processes, your systems, or your quirks. They spend weeks asking questions your previous specialist already knew.

Meanwhile, your internal team becomes trainers. They're hand-holding, fixing errors, rebuilding trust.

So, you end up paying in your time, lost productivity, and customer service gaps that take months to recover from.

Lack of salary transparency leading to budget leakage.

The biggest secret in outsourcing is what your people actually earn. You see an invoice of $150 per employee per month, but the worker on the ground may be earning half that. Without visibility, you can’t tell how much of your budget funds real salaries versus vendor margins.

The benefit of offshoring is that you can set transparent benchmarks, they can pay above local averages, still save compared to home markets, and attract top talent from firms like Amazon, TCS, or Microsoft.

Integration and setup surprise charges

You won’t realise, but the setup fee is one of the biggest hidden fees that businesses must not ignore. Services like:

• HRIS access licenses
• Compliance monitoring fees
• Data storage charges
• Integration maintenance
• Security audits

…are not optional, and together they can inflate your bill by 30–50% annually.

If you're an SME, you end up paying $300-$500 for that. Large institutes pay $1000-5000. And big MNCs and corporates end up paying $10k-12k due to complex payroll & HR needs. Basically, the vendors cover their profits through integration fees that should have been included from day one.

Exit costs that trap you in bad relationships

Finally, if you are not satisfied and want to switch, the bill follows you out the door. Early termination penalties, data extraction fees, and even "handover assistance" are charged. Walking away often costs more than staying stuck.

Performance babysitting costs

You need someone full-time just managing the vendor relationship. Quality checks, status calls, fixing their mistakes. You're paying to manage people you don't even employ.

Building your own team: Why EOR is the smarter alternative for global employers

By now, you would have gotten a clear idea of outsourcing and its hidden costs. But there's more. Add language barriers, time zone differences, currency issues for payments, coordination issues (that outsourcing has), and legal compliance.

Suddenly, that "cost-effective" solution looks expensive and risky. So what's the alternative? Build your own team with EOR. Here's why EOR is beneficial:

Faster than setting up an entity

Traditional subsidiary setup in India requires:

• Minimum paid-up capital requirements
• Two local directors (or one foreign + one resident)
• Registered office address with utility bills
• Digital signature certificates and director identification numbers
• ROC (Registrar of Companies) approval process
• PAN, TAN, and GST registrations

This bureaucratic maze takes 6-12 months and will cost you money before you even hire someone. With EOR, you can launch teams, start work in weeks, not months.

Ownership of talent

Say goodbye to vendor dependency. With EOR, employees work exclusively for you. They use your tools, follow your processes, and align with your company culture. So you get ownership + loyalty — not vendor costs.

Compliance guaranteed

Indian employment law is complex. You need to handle:

• Provident Fund (PF): These are mandatory retirement savings where both employee and employer contribute 12% each.
• Employee State Insurance (ESI): Healthcare coverage for employees earning under ₹25,000/month
• Gratuity: Severance benefit paid after 5 years of service
• Professional Tax: State-level employment tax varying by location

EOR providers handle all statutory requirements automatically. You get guaranteed compliance without legal headaches.

Cost efficiency

EOR means you pay only actual payroll + statutory benefits. Here's the math that matters:

India's cost and talent advantage, when paired with EOR

We saw how cost is a major driver. The average cost per hire in the US is around $4,000. In India, companies can often hire top talent for a fraction of that amount, while still paying above local benchmarks to attract and retain the best employees.

When paired with an Employer of Record (EOR), global employers can tap into and gain the following advantages:

• Strong English-speaking talent pool
• Cultural alignment with Western workplaces
• Overlapping working hours with US and Europe (4-6 hours overlap with the US East Coast)
• Deep expertise in technology, analytics, and product roles

The best part - EOR unlocks these benefits instantly, without entity setup headaches.

Why leading companies are building, not outsourcing

That said, the trend is clear. Big players aren't signing outsourcing contracts. They are opening offices.

I hope you heard the news that the creator of ChatGPT, OpenAI just announced its first India office in New Delhi. Of Europe, Australia, or other global hubs, they chose India. What more big signal do you need when the biggest AI developer company is putting bets on India's talent and market potential?

In fact, according to public reports, the company's CEO, Sam Altman, stated that the move is a commitment to "build AI for India, and with India," recognizing the country's potential to become a global leader in AI.

This isn't an isolated case. Kyndryl also announced growth plans in India. They are investing $2.25 billion to set up a new AI lab in Bengaluru. And global consulting firm Alvarez & Marsal is planning to triple its India headcount at its Global Capability Center. These companies are massive commitments because they want control and superior talent.

They have learned that you can't truly own a project or a team when it's sourced. By building teams, they get a direct pipeline to top experts and a more sustainable model with lower turnover. After all, if outsourcing were so efficient, why would the most prominent players build teams instead?

The smarter way forward: Build your own office in India with Kaamwork EOR model

Look, the math is simple. Traditional outsourcing promised savings but delivered headaches. Rising HR outsourcing cost per employee, hidden fees, and zero control over your team. That's exactly why top companies like Microsoft, Goldman Sachs, OpenAI, etc, are all building their teams and not hiring some freelancer from a BPO with no clarity on their work quality.

Here's what changed: technology made direct hiring possible without the legal nightmare.

Outsourcing = outdated, inefficient, costly

You pay vendor markups. Deal with shared resources. Accept whoever gets assigned to your project. Watch costs spiral as you scale.

Kaamwork EOR model = fast, transparent, scalable, sustainable

You hire directly. Pay actual salaries plus our flat fee. Keep full control. Scale without surprise costs.

The companies moving fastest are the ones ditching vendor relationships for direct teams. They get better talent, pay less total cost, and build something lasting.

Stop paying rising HR outsourcing costs per employee. Build your own team in India with Kaamwork. Talk to us to see how much you can save while gaining complete control over your global team.