If you're building a GCC in India, you'll hit this question early: do you hire people yourself, or do you let a partner hire them for you? Here's the short answer. Direct hiring means you own everything, but it takes longer to get going. Managed teams get you moving fast, and you can switch to direct hiring later once things settle.
What Each Model Actually Means
Direct hiring is exactly what it sounds like. You set up your own legal entity in India, and you hire people onto your own payroll. You run HR, you run compliance, you run payroll, and you own every part of the employment relationship. This gives you full control from day one, but it also means you're building the entity, the HR function, and the compliance machinery before you hire a single person. That takes time and money upfront.
Managed teams work differently. A partner hires the people, not you. Sometimes through their own India entity, sometimes through an EOR setup. But here's the part that matters: those people work only for you. They follow your processes, report to your managers, and run on your priorities. The partner handles the paperwork behind the scenes, payroll, compliance, facilities, HR admin, while you run the actual work. You get a dedicated team without setting up an entity first.
Same goal, different path. One puts the legal and admin weight on you from the start. The other lets a partner carry that weight while you focus on building the team.
The Real Trade-offs
Cost — upfront vs. compounding
Direct hiring costs more before you've even hired anyone. Setting up your own entity in India, covering legal, compliance, and lean initial run-rate, usually runs $15,000 to $40,000. That figure doesn't include office space, IT infrastructure, or the cost of actually hiring people, and those add up fast once you cross 20 to 30 employees. Managed teams skip most of the upfront cost. Instead of a flat fee, most providers charge a management or EOR fee of roughly 12% to 25% on top of each employee's salary. In dollar terms, that usually works out to several hundred to well over a thousand dollars per seat per month, depending on the role's seniority, salary level, and city.
Here's the catch. That fee never goes away. It's a margin baked into every seat, every month, for as long as you run the model. Direct hiring flips the math once you scale. As a rough rule of thumb, many companies see the entity route pull ahead somewhere between 20 and 30 people, or around month 16 to 22, though the exact point depends on role mix, city, salary levels, and how you count internal overhead. Below that, managed teams are usually cheaper. Above it, owning your entity tends to start winning.
Control and compliance
With direct hiring, you are the legal employer. Full stop. You carry the labor law risk, you file the compliance paperwork, and you own every HR decision from leave policy to termination.
With managed teams, the partner is the legal employer on paper. They carry the compliance risk, they run payroll, they handle the paperwork that keeps regulators happy. But don't confuse "legal employer" with "who's in charge." You still pick who joins the team, you still run the day-to-day, and you still set the culture and the priorities. The partner runs the back office. You run the work.
Speed and scalability
Setting up your own entity takes 10 to 16 weeks just to register, and that's before you factor in office space and your first job posting. For a pure captive build, without any EOR bridge, most companies are realistically looking at 4 to 8 months end-to-end before someone is actually productive, once you account for parallel hiring, banking setup, and internal approvals. Managed teams cut that down to two to six weeks for a first hire, and some EOR setups move even faster, sometimes just days.
The gap matters more at a small scale. A 10-person pilot team makes no sense as its own entity. You'd be paying for HR infrastructure to manage ten people. But if you're planning to cross 100 people, an entity starts to make sense fast, because the compliance cost per head drops and you're not paying a per-seat margin on a hundred salaries forever.
When to Choose Direct Hiring
Direct hiring makes sense once your GCC has moved past the pilot stage and you know it's here to stay. Pick this route if:
- Your GCC is mature. You've already crossed 20 to 30 people, and the entity cost per head is now cheaper than the per-seat fees you'd pay a partner.
- The work is core or IP-sensitive. If your India team is building a product, writing code that touches your core IP, or handling sensitive data, you want direct ownership from day one, not a contract that flows IP through a third party.
- You're playing the long game. Three years or more, not one. Entity setup costs make sense only if you plan to be there long enough to earn it back.
- You already have infrastructure in place. If you've got HR, legal, and finance functions running in India already, adding a new entity is far less painful.
When to Choose Managed Teams
Managed teams are the right call when speed and flexibility matter more than full ownership. Pick this route if:
- This is your first GCC. You're still learning what India hiring looks like, and you don't want to build an entity before you know the setup actually works for you.
- Your headcount plan isn't locked yet. If you're not sure whether you'll need 10 people or 60 next year, don't commit to entity overhead size for a guess.
- You need people fast. Weeks, not months, from decision to first hire.
- You're testing a new city or region. Before you commit capital to a location, a managed team lets you learn the market with far less risk.
Can You Start with Managed Teams and Move to Direct Hiring Later?
Yes, and this is one of the smartest ways to build a GCC. You start with a managed team to get moving fast, then convert to your own entity once things are working the way you want. This is basically the same logic behind a Build-Operate-Transfer setup: a partner builds and runs the team first, and you take full ownership later, on your terms.
If you go this route, get two things right in the contract from day one. First, IP assignment. Make sure the agreement is clear that all work products and IP belong to you, not the partner, right from the start. Second, a transfer clause. Spell out how employees, equipment, and knowledge move over to your new entity when the time comes, so you're not renegotiating from scratch later.
How do you know it's time to convert? Watch two numbers. Once your headcount crosses roughly 20 to 30 people, or once your ongoing management fees start costing more than running your own entity would, that's your signal, though where exactly that line falls depends on your role mix, city, and salary levels. At that point, ownership stops being a nice-to-have and starts being the cheaper option.
FAQs
What is the difference between a managed team and direct hiring? With direct hiring, your own entity employs the team, and you own compliance, payroll, and HR from day one. With a managed team, a partner is the legal employer, but the team works only for you, follows your processes, and reports to your managers.
Is a managed teams model the same as outsourcing? No. Outsourcing hands work to a vendor's own team, and they decide how it gets done. A managed team is dedicated to you alone. You direct the work, set the priorities, and shape the culture. The partner just handles the employment paperwork behind it.
How long does it take to switch from managed teams to direct hiring? It depends on how your contract is set up, but most companies plan for a few months once they hit the conversion trigger. Getting IP assignment and transfer terms right in the original agreement makes this move much smoother.
Does a managed teams model cost more long-term? Yes, usually. The management fee never disappears, so past a certain headcount, direct hiring becomes cheaper. Below that point, though, managed teams often cost less overall once you factor in entity and HR overhead.
Closing
There's no universally right answer here, only the right answer for where your GCC is today. If you're still figuring out what works, start with a managed team. Once you've got scale and certainty, direct hiring pays for itself.
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