Build Your Offshore Team in India: 2026 US Guide

Building an offshore team in India means hiring and managing skilled professionals in India who work as an extension of your company. Many global businesses struggle with high development costs, slow hiring cycles, and limited access to top talent in their home markets. This guide will explain why India is the leading destination, what models you can choose, the compliance factors you must know, and how to set up, and scale your offshore team successfully.

Why should you set up an offshore team in India?[toc=Why India is Ideal Destination]

If you’re a global business looking to build your offshore team in India, the biggest reasons are access to a massive pool of skilled developers, significant cost savings, and the ability to accelerate project timelines without compromising quality. India has become the global hub for offshore software development because it offers both scale and depth of talent at competitive rates.

From our experience helping companies worldwide, here’s why India stands out:

1. Global talent pool at scale: India produces over 1.5 million engineers annually (AICTE, 2024), giving businesses an unmatched choice of skilled developers, project managers, and dedicated teams for software development projects.
2. Cost efficiency without compromise: Development costs in India are 50–70% lower compared to Western countries, while maintaining high-quality outputs through specialized offshore development centers.
3. Mature offshore ecosystem: Thousands of offshore development companies and dedicated offshore development centers (ODCs) operate in India, offering everything from software development services to stringent security protocols for global businesses.
4. Time zone advantage: With a 9–12 hour difference from North America and Europe, your offshore team in India can extend project progress into a near 24/7 cycle, reducing technical debt and accelerating project timelines.
5. Proven offshore success stories: Companies like Microsoft, Google, and countless startups have already built dedicated offshore teams in India, leveraging the country’s cost-effective solutions and competitive advantage.

According to Deloitte’s Global Outsourcing Survey, 59% of businesses outsource to cut costs, and India consistently ranks as the top offshore development destination thanks to its skilled workforce and cost effectiveness.

How to set up an offshore team in India?[toc=How to Set Up]

To set up an offshore team in India, you generally choose between two paths: hiring through an Employer of Record (EOR) for speed and low compliance risk, or establishing a Wholly Owned Subsidiary (Captive Unit) for full control and long-term scale. Once the model is picked, the process involves selecting a location (like Bangalore or Hyderabad), recruiting talent, and establishing a rigorous remote-work culture.

Setting up in India is less about "outsourcing" these days and more about building a value-driving extension of your US headquarters. Here is the step-by-step process of building an offshore team in India:

Step 1: Choose Your Engagement Model (The "Buy vs. Build" Decision)

This is the most critical decision you will make. You essentially have two main options depending on your risk appetite and scale.

1. The "Fast Track" (Employer of Record - EOR): If you want to hire 1–20 people quickly without legal headaches, use an EOR. Companies like Deel, Remote, or local Indian EOR specialized providers like Wisemonk act as the legal employer. They handle payroll, taxes, and benefits in India, while you manage the employee's day-to-day work.
   • Pros: Live in weeks, zero legal liability in India, no entity setup required.
   • Cons: Higher cost-per-head (service fees); you don't build your own company assets/brand in India locally.
2. The "Empire Builder" (Captive Unit / Subsidiary): If you plan to hire 50+ engineers or want full operational control, you incorporate a Private Limited Company in India. This is your company, your culture, and your assets.
   • Pros: Lower long-term costs, full control over IP and culture, prestige.
   • Cons: Takes 3–6 months to set up; creates a "Permanent Establishment" tax exposure (requires strict transfer pricing compliance).

Step 2: Pick Your City (It’s Not Just Bangalore)

While Bangalore is the "Silicon Valley of Asia," it also has Silicon Valley-level attrition. US companies are increasingly looking at "Tier 1.5" cities to balance talent quality with loyalty.

• Bangalore/Bengaluru: Best for deep tech, AI, and startups. High talent density, but higher costs and traffic.
• Hyderabad & Pune: Massive enterprise hubs (Google, Microsoft are here). Great infrastructure and slightly lower costs than Bangalore.
• Chennai: Known for SaaS and serious, loyal engineering talent with lower attrition rates.

Step 3: Navigate the Legal & Financial Plumbing

If you are setting up your own entity, you cannot skip the red tape. You will need:

• PAN & TAN: Tax identification numbers for the company.
• GST Registration: Even if you export 100% of your services (which is zero-rated GST), you must be registered.
• Bank Account: Opening a corporate bank account in India can be surprisingly bureaucratic.
• Transfer Pricing: Crucial for US Companies. You must prove to tax authorities that your US HQ pays your Indian subsidiary a "fair market price" (usually Cost + Mark-up) to avoid tax penalties.

Step 4: The Talent Hunt (Cultural Alignment is Key)

Don't just look for "Python developers." Look for "Product Engineers." In India, the resume volume is high, so your filter mechanism matters.

• Filter for Communication: Ensure candidates are comfortable pushing back. In some traditional Indian work cultures, saying "no" to a boss is taboo. You need a team that feels safe challenging a bad idea.
• Use Local Recruiters: The job boards in India (Naukri, LinkedIn India) are noisy. A specialized local recruiter like Wisemonk is often worth the fee to cut through the volume.

Step 5: Operationalize the "Golden Overlap"

The biggest failure point is the time zone gap (9.5 to 12.5 hours). You cannot run a team effectively if you only talk via email.

Enforce a "Golden Overlap" of 2–3 hours. Typically, this means the Indian team works 11:00 AM – 8:00 PM IST, and the US East Coast team starts at 8:00 AM EST. This gives you a solid window for Zoom calls, stand-ups, and unblocking issues.

A common friction point for US managers is the "Indian Yes." Culturally, Indian employees may say "yes" to a deadline to be polite or helpful, even if they know it's impossible.

Don't ask "Can you do this by Friday?" (The answer will always be yes). Instead ask, "Walk me through how you will get this done by Friday." This reveals the actual feasibility without forcing a confrontation.

Companies that follow a structured offshore setup process report up to 30% faster project timelines and better outcomes compared to ad-hoc outsourcing (PwC Global Sourcing Report, 2024).

What legal, tax, and compliance issues should you watch out for?[toc=Legal & Compliance]

When you set up an offshore team in India, compliance is not optional. To avoid penalties, lawsuits, or permanent establishment (PE) risks, global businesses must ensure their offshore team follows Indian labor laws, payroll rules, and tax obligations from day one.

Here are the key compliance areas you should be aware of:

1. Employment Laws and Contracts

Every offshore team member needs a valid employment contract that aligns with Indian labor laws. This should cover job roles, salary, termination clauses, and statutory benefits. Without compliant contracts, companies risk disputes and non-compliance fines.

2. Payroll Taxes and Withholding

Employers must deduct income tax (TDS) from salaries and remit it to the government. This is a critical part of payroll compliance in India. Non-compliance can lead to penalties and interest charges.

3. Employees' Provident Fund (EPF)

EPF is mandatory for most employees in India. Employers contribute 12 percent of basic wages, matched by the employee, to a retirement savings fund. If your offshore team is on your payroll, PF compliance is non-negotiable.

4. Employee State Insurance (ESI)

For employees earning below a certain salary threshold, companies must contribute toward medical and social security through ESI. This provides health insurance benefits and is a key part of statutory compliance.

5. Gratuity

Employees who complete five years of continuous service are entitled to gratuity. It is a lump sum paid at the time of exit or retirement. Offshore companies must account for this liability if building long-term dedicated teams in India.

6. Shops and Establishments Act

Every offshore development center or office must register under the state-specific Shops and Establishments Act. This regulates working hours, leave policies, and working conditions for your offshore software development team.

7. Permanent Establishment (PE) Risk

If your offshore operations are structured incorrectly, your company may be considered a taxable entity in India. This can expose you to corporate tax liabilities. Partnering with an Employer of Record (EOR) or offshore development company helps avoid PE risk.

8. Data Protection and Security

Global clients often require compliance with GDPR, HIPAA, or other international security frameworks. Your offshore partner should have stringent security protocols to safeguard sensitive business processes and client data.

‍According to EY, over 40 percent of global companies expanding into India face compliance challenges due to PF, ESI, and labor law complexities. Having a local compliance expert or offshore partner can help avoid costly mistakes.

How can you recruit and retain top talent in India?[toc=Recruiting Top Talent]

To build your offshore team in India successfully, you need to attract skilled developers and keep them motivated for the long haul. Recruitment is about more than posting jobs; it’s about tapping into the right channels and creating a work culture that makes your offshore team members want to stay.

1. Use Proven Recruitment Channels

• Job Portals: Platforms like Naukri.com, Indeed India, and LinkedIn are leading sources for software development and project management roles.
• Talent Networks: Many offshore development companies have pre-vetted pools of skilled developers ready to join dedicated offshore development teams.
• Specialized Recruiters: Partnering with local agencies or EOR providers like Wisemonk helps you find niche talent faster, especially for technical development projects.

2. Offer Competitive Compensation

Salary expectations in India vary by role and city. For example:

• Software developers with 3–5 years of experience earn an average of INR 8–15 lakhs per year (approx. USD 10K–18K).
• Senior developers and project managers can command INR 20–35 lakhs per year (USD 24K–42K).
  Offering competitive pay aligned with market standards ensures you attract top talent from the global talent pool.

3. Provide Clear Career Growth

Retention is easier when offshore team members see a future. Offer:

• Training and development programs
• Opportunities to lead parts of the development process
• Performance-based promotions and salary hikes

4. Build a Strong Company Culture

Your offshore team in India should feel like an extension of your onshore team. Use collaboration tools like Slack or Microsoft Teams to integrate daily workflows and encourage seamless collaboration.

• Regular team building activities (both virtual and in-person)
• Open communication to avoid communication gaps
• Recognition programs to keep the team motivated

5. Focus on Retention Levers

• Offer flexible work arrangements for remote teams
• Provide health insurance and retirement benefits (through PF and gratuity)
• Maintain transparent communication around business goals and project timelines

How can you scale and optimize your offshore team over time?[toc=Scaling Your Offshore Team]

Once your offshore team in India is established, the next challenge is scaling it without losing efficiency. Scaling is not just about adding more offshore developers, it’s about optimizing processes, maintaining culture, and ensuring cost effectiveness while supporting your business goals.

1. Standardize Processes Early

• Document workflows, coding standards, and business processes.
• Use project management software like Jira or Asana to create repeatable systems for new offshore team members.
• This minimizes technical debt and accelerates onboarding of future team members.

2. Build Leadership Within the Offshore Team

• Promote experienced offshore developers into lead roles or project managers.
• Local leadership reduces reliance on onshore managers and helps in successful offshore team management.
• Leaders on the ground ensure quicker decisions and smoother collaboration.

3. Optimize Communication Structure

• As your dedicated development team grows, avoid overwhelming the onshore team with direct communication.
• Create pods or sub-teams managed by project managers to streamline updates.
• This ensures project progress remains clear and organized even with larger offshore development teams.

4. Invest in Training and Development

• Upskill your offshore software development team with regular training in new technologies.
• Provide access to global certifications and learning resources.
• Skilled developers who grow with your company are more likely to stay long-term.

5. Monitor KPIs and Performance Metrics

• Track delivery timelines, code quality, and cost efficiency with measurable KPIs.
• Use project management platforms to generate performance reports and identify areas for optimization.
• Regular reviews help keep your offshore team motivated and aligned with company goals.

6. Expand Gradually with a Strategic Plan

• Don’t scale too fast without ensuring collaboration tools, security, and compliance are ready.
• Consider transitioning from a dedicated offshore development team to a full offshore development center if your growth requires larger teams and more infrastructure.
• Partnering with the right offshore development company can make scaling smoother.

Scaling a remote offshore team is about building systems, empowering local leaders, and tracking performance. With the right strategy, you can expand seamlessly while keeping your offshore team efficient, motivated, and aligned with your business goals.

How does Wisemonk help in building your offshore team in India?[toc=How Wisemonk helps]

Wisemonk is a leading Employer of Record (EOR) service provider in India, dedicated to helping global businesses smoothly build & manage their offshore teams. Our expertise lies in simplifying the complexities of offshore team setup, ensuring smooth compliance with local labor laws, and providing reliable support so you can focus on driving your software development projects and business goals.

Wisemonk's Services for Building an Offshore Team in India:

• Streamlined Hiring Process: Our extensive talent network helps 500+ global companies hire faster and build dedicated offshore teams without delays.
• Robust Payroll Management: With $20M+ in payroll under management, we ensure accurate salary processing, compliant tax handling, and timely benefits administration every month.
• Hassle-Free Compliance: Supporting 300+ companies with complete legal, payroll, and statutory compliance so offshore teams operate smoothly within India’s regulatory framework.
• Dedicated HR Support: Managing 2K+ employees with ongoing HR assistance, employee engagement support, and day-to-day operational guidance to keep teams productive.
• Transparent Pricing: With clear, competitive pricing, you get a cost-effective solution for offshore team management without hidden fees.

Beyond core EOR services, we also offer comprehensive solutions, including HR outsourcing, company registration, background verification checks, Global Capability Center (GCC) setup, and global expansion support, making us your trusted partner for scaling your workforce internationally with confidence and ease.

With Wisemonk, you don’t just hire offshore developers, you get a trusted India-native partner who takes care of compliance, payroll, and people management, letting you focus entirely on business growth and project success. Contact us today!