Knowledge base

Offshore Hiring & EOR Glossary

Clear, sourced definitions of the offshore hiring, Employer of Record, global payroll, and compliance terms US companies encounter when building teams in India.

A

Attrition Rate: Attrition rate is the percentage of employees who leave an organisation over a period. In offshore engineering markets it is a key quality and cost metric, because replacing a departed hire carries recruiting, onboarding, and lost-productivity costs that often exceed retention investment.

B

Basic Salary: Basic salary is the fixed core component of an employee's compensation in India, before allowances. It is the base on which several statutory contributions such as provident fund and gratuity are calculated, so its share of CTC affects both take-home pay and employer cost.
Build-Operate-Transfer(BOT): A Build-Operate-Transfer arrangement has a partner build and run an offshore team, then transfer it to the client's own entity once it is established. It is a bridge between using a service provider and owning a captive centre.

C

Captive Center: A captive center is an offshore facility wholly owned and operated by the company it serves, rather than by a third-party vendor. It gives maximum control and integration but requires the company to set up and run its own legal entity, payroll, and compliance.
Cost to Company(CTC): Cost to Company is the total annual amount an employer spends on an employee in India, including base salary, employer statutory contributions, benefits, and allowances. Because CTC includes employer costs the employee never receives as cash, in-hand (net) pay is meaningfully lower than CTC.

D

Dedicated Team: A dedicated team is a group of professionals who work exclusively for one client on a full-time basis, as opposed to shared or project-based resources. The model favours continuity, deeper product knowledge, and stronger retention over transactional staffing.

E

Employees' Provident Fund(EPF): The Employees' Provident Fund is India's mandatory retirement savings scheme under the EPF Act, 1952. Employees and employers each contribute 12% of basic wages; a portion of the employer share funds the Employees' Pension Scheme. It is a core statutory cost of employing staff in India.
Employees' State Insurance(ESI): Employees' State Insurance is India's contributory health and social-security scheme under the ESI Act, 1948, covering medical, sickness, and maternity benefits. It applies to employees earning up to a wage ceiling, with the employer contributing 3.25% and the employee 0.75% of gross wages.
Employer of Record(EOR): An Employer of Record is a third-party organisation that legally employs staff on behalf of another company. The EOR handles payroll, tax, benefits, and statutory compliance in the worker's country, while the client directs the day-to-day work. It lets companies hire abroad without establishing their own local legal entity.

G

Global Capability Center(GCC): A Global Capability Center (also called a Global In-house Center) is a company-owned offshore office that delivers technology, operations, or R&D for its parent organisation. Over 1,800 GCCs operate in India. Setting one up requires establishing a local entity, which an EOR model avoids.
Gratuity: Gratuity is a statutory lump-sum benefit paid to employees in India on exit after five or more years of continuous service, under the Payment of Gratuity Act, 1972. It is calculated as fifteen days' wages for each completed year of service.

I

In-hand Salary: In-hand (or take-home) salary is the amount an employee actually receives after deductions from gross pay — employee provident fund, professional tax, and income tax. It is lower than both gross salary and Cost to Company.
Intellectual Property Assignment(IP assignment): IP assignment is the contractual transfer of ownership of work product — code, designs, inventions — from the person or entity that created it to the client. Compliant offshore employment structures ensure IP created by offshore staff vests cleanly with the client.

M

Misclassification: Worker misclassification is incorrectly engaging someone as an independent contractor when the working relationship legally constitutes employment. It exposes companies to back-taxes, penalties, and benefit liabilities, and is a primary reason firms use compliant EOR employment for long-term offshore staff.

N

Nearshore: Nearshore refers to outsourcing to a country in a similar or adjacent time zone to the client, as opposed to offshore (a distant time zone). The trade-off is typically greater time-zone overlap nearshore versus a larger talent pool and lower cost in major offshore markets like India.
Notice Period: A notice period is the length of time an employee or employer must give before ending employment, set by the employment contract rather than a single statute. In India it commonly ranges from 15–30 days during probation to one to three months for confirmed and senior roles.

O

Offshore Development Center(ODC): An Offshore Development Center is a dedicated team based in a lower-cost country that functions as an extension of the client's in-house engineering organisation, typically with its own workspace, tooling, and processes aligned to the client.
Onboarding: Onboarding is the process of integrating a new hire into an organisation — provisioning, orientation, compliance paperwork, and initial ramp-up. In offshore engagements, structured onboarding materially affects time-to-productivity and early retention.

P

Professional Employer Organization(PEO): A PEO enters a co-employment relationship with a client company, sharing employer responsibilities such as payroll and benefits. Unlike an EOR, a PEO typically requires the client to already have its own legal entity in the country, and the client remains a co-employer of record.
Professional Tax: Professional tax is a small tax on income from employment levied by individual Indian state governments, deducted from salary by the employer. It is constitutionally capped at ₹2,500 per year and varies by state; some states and union territories do not levy it.

R

Recruitment Process Outsourcing(RPO): Recruitment Process Outsourcing is delegating all or part of the hiring process — sourcing, screening, and coordination — to an external provider that operates as an extension of the client's talent function, rather than a per-placement staffing agency.

S

Staff Augmentation: Staff augmentation is an outsourcing model where external professionals are added to a client's existing team on a temporary or ongoing basis, working under the client's direction. It differs from project outsourcing, where a vendor owns the deliverable rather than supplying individuals.
Statutory Compliance: Statutory compliance is adherence to the employment laws and mandatory contributions of the country where staff are employed — in India, obligations such as EPF, ESI, gratuity, professional tax, and labour-law filings. Non-compliance carries financial and legal penalties for the employer of record.

T

Tax Deducted at Source(TDS): Tax Deducted at Source is India's mechanism for collecting income tax at the point of payment. Employers deduct estimated income tax from employee salaries each month and remit it to the government, reconciling against the employee's annual tax liability.
Time Zone Overlap: Time zone overlap is the window during which a distributed team and its client are both working. India offers roughly four to eight hours of live overlap with US Eastern time, enough for daily synchronous collaboration while retaining follow-the-sun advantages.

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