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Remote working is the way to function post-pandemic. But how did it begin in the first place?
Working with remote teams is not a new concept. It has evolved over the years through various business models. It is a tried and tested working model which has proved to be helpful for companies planning to expand their operations in foreign countries.
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PEO Vs Legal Entity
The post-pandemic’s ‘new normal’ has popularized remote working. Research experts suggest employees would happily choose remote work. They would happily work remotely if given a choice between remote work and working from the office. So when you are thinking of tapping into the talent pool in India for your global business expansion strategy. Let’s walk through this article to gather an overview of the best-suited option for your international market expansion while entering India. Whether it would be engaging with a professional employer organization or forming a legal entity.
This five-minute read will help you evaluate the best alternative concerning the time to start your business in India. Accompanied by the ease of operations and cost aspects while comparing the PEO and legal entity route.
What is a PEO (professional employment organization)?
A PEO (professional employment organization) will step in as the legal employer for your remote employees in India. Your employees will be under the payroll of the PEO and the direct control of your company. The PEO agency will efficiently take care of non-core operations like administrative headaches, HR management, and payroll. This will allow your company to focus on the core business.
What is a legal entity?
A legal entity, also known as a subsidiary company can be established in two ways. Either as a WOS (wholly-owned subsidiary with 100% investment) or a partially owned subsidiary (the parent company needs to own at least 51% stock ownership). The parent/holding company exercises control over the subsidiary company.
Undoubtedly, setting up a legal entity has become more convenient today compared to traditional times. But it is best you should procrastinate on forming one and engage with a PEO organization first till you can do without a subsidiary for a considerable time. Once you are content with the response and potential, you can decide on establishing your Indian office and outreaching your brand. If you wish to tap into the Indian market in the future, having a legal entity here is the best option eventually.
Drawing a comparison between a PEO and a legal entity will depend on your business goals, objectives, and unique circumstances. To know more about forming a subsidiary company in India, visit https://www.remunance.com/blog/five-things-to-know-before-you-form-a-subsidiary-company-in-india/. To assess the two methods of business growth, we evaluate them concerning time, ease of operations, and costs.
PEO vs legal entity- Time, ease of operations, and cost
Time to start business operations
A PEO company can offer you its services within a few weeks without spending additional time and resources. Once you have identified your business resources, a PEO service can kickstart your business operations in 24 hours. Whereas setting up a business entity in India will take around 2-4 months. This is because of all the decisions will need approval from your parent company.
Global PEOs offer the best turnaround times. As your legal employer for India, Remunance will ensure your business becomes operational speedily. We have a better understanding of the Indian pulse, market, and fluctuating trends. We also take care of your employee compliance, employment tax, and employee benefits.
Ease of operations
Engaging with a PEO means handing over all your compliance concerns to them. They will hire resources for you and manage complete end-to-end HR services for onboarding employees in India. They will scout talent, set up their bank accounts, process payrolls, handle taxation, disburse employee benefits, and administer insurance.
With the creation of a legal entity in India, you will be liable to pay taxes for all transactions and operations. You will need a dedicated accounting team to handle your employee compliance, taxation, and accounting. This may become an inconvenient task.
At Remunance, we achieve flawless local compliance with the use of software processes and adhere to timelines. We make spotless configurations with our experience in dealing with government portals. We offer a smart PEO model customized for your operational requirements. We also offer extended services such as recruitment, IT infrastructure support, and logistical support to your team.
Cost aspects
A PEO will charge you per employee per month. The net costs of a PEO are economical compared to a legal entity. There are two ways in which PEO cost differs. They include straight costs and percentage costs. The straight costs will range from somewhere around $100 to $500 whereas the percentage costs of the employee salary range anywhere between 8% -18%. There are no overheads of resource management and business compliance as they are handled by the PEO.
Whereas forming a legal entity along with added required registrations will cost you anywhere from $2500 (approximately 1,94,425 rupees) to $5000 (3,88,851 rupees) approximately. Accompanied by business operation cost, legal, and taxation compliances.
Your ideal pathway to global business expansion- PEO or a legal entity?
In a nutshell, a foreign startup or SME can greatly benefit from going through the PEO route in the initial stages of business expansion. It would be ideal to test the waters before getting into the hassles of establishing a legal entity in India.
You can consider setting up a legal entity when you feel your business is growing rapidly. Accompanied by a large employee headcount in the new territory. To justify the investment of money and resources. As a foreign SME, you may like to take advantage of the tax holidays, and benefits, and realize your business has outgrown the PEO model. This is mainly because setting up a legal entity is a time-consuming and tedious process.
In most cases, companies prefer to enter a new territory via the PEO route and then set up a legal entity at a later stage if all goes well.
Remunance, your co-partner for both services
Remunance has a mission to inspire foreign companies to build successful businesses in India. Remunance has pioneered its way into offering a unique basket of PEO services and subsidiary formation to overseas businesses. We offer end-to-end services like HR, insurance, benefits, payroll, and risk management. Unlike any other PEO agency, we go one step further to provide extended services. The services include leaving management, recruiting, employee training, office infrastructure, and HR support. Our founder, Mr. Rajendra Vaidya has done extensive research, identified loopholes, and devised a business model. This business model works in the best interest of a compliant PEO business for overseas companies only.
So, whether you’re a foreign startup or SME planning business expansion to India, Remunance’s PEO service is exactly what your business needs. Remunance is regarded as one of the most reputed Indian PEOs. The team of experts at Remunance is also very well equipped to handhold you in setting up a legal entity in India, We ensure seamless transfer of power and resources to the new local entity once it becomes the need for the business.
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The post-pandemic’s ‘new normal’ has popularized remote working. Research experts suggest employees would happily choose remote work. They would happily work remotely if given a choice between remote work and working from the office. So when you are thinking of tapping into the talent pool in India for your global business expansion strategy. Let’s walk through this article to gather an overview of the best-suited option for your international market expansion while entering India. Whether it would be engaging with a professional employer organization or forming a legal entity.
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The best route for global business expansion in India
The idea of starting a business in India is observed to be a profitable one from various aspects. India is one of the best countries to expand your business internationally! Before thinking of starting any business, a clear understanding of the location of doing business, its market, the culture of work, and the benefits to your business is necessary. It is also important to know which route to be adopted to kickstart a business. We will be doing exactly that through this blog!
Keep reading as we will take you through how India has become a dream destination for business expansion. We will also make you aware of the business models which can be used by small and medium-sized enterprises (SMEs) for establishing the business in India.
What is the best route for expansion in India?
Indian culture
India is always known for its heritage and traditions. It is one of the oldest civilizations that harbors a unique and complex diversity, that gracefully embraces change and growth.
When we say India, the beautiful Taj Mahal, and the serene Bay of Bengal come to our mind. But as we explore more, we see that India offers a kaleidoscopic variety not just in culture but also in art, spirituality, philosophy, and trade. Twenty-seven states of India have their dance forms, music, craft, cuisine, and languages, making India the perfect marketplace of South Asia.
As of today, India is the second-most populous country. It is one of the fastest-growing economies in the world and is showing all-rounded progress since its independence. India’s development can be seen from its research, education system, space programs, technological advancements, and trade activities.
India is catching up with other developed countries and creating better work and employment opportunities. Be it work-life balance, work environment, or relationship with other employees, India is always providing a relaxed, productive, and progressive working culture for every employee in India.
Coming to the business ethos of India, the government has played a key role in empowering various industries and sectors. These emerging industries in India, offer tremendous growth opportunities for small and medium-sized businesses (SMEs).
Government initiatives for business development in India
The government of India is playing an important role in empowering businesses in India. It is constantly inculcating new programs and initiatives for growing business opportunities in every city and state in the country.
For instance, the government of India is leading by developing mobile-friendly websites and apps for citizens, giving a push to the ‘mobile-first’ mindset. This has inspired every business to make a shift towards using online platforms with a mobile-focused approach, making Indian customers and businesses tech savvy.
The government has launched the National Broadband Mission for providing broadband access to all villages by 2022. You may have also heard about the widely promoted ‘Make In India’ initiative. It is designed to transform India into a global manufacturing hub. The government’s India Innovation Growth Programme 2.0 (IIGP), Startup India along with Make in India programs are enhancing the tech skills of the population of India and encouraging young entrepreneurs and inventors to foster innovation.
In addition, India has set a goal of developing 10 Million future-ready tech professionals through the Ministry of Education’s Digital Skilling program where it has designed apprenticeship programs in private partnerships with private sector corporates in 72 different areas including Artificial Intelligence, Cloud Computing, and Cybersecurity. In fact, the program ‘Digital India’ introduced by the government has given a solid boost to digitization in India. It has motivated many companies to function remotely and transform their ways of doing business. This proved to be helpful for companies to flourish their business, especially in tough times such as the COVID-19 pandemic.
The government digital platform, CoWIN is a shining example. It is a digital application used extensively for obtaining information regarding vaccine drives during the COVID-19 pandemic.
SahiPay is another digital platform that aims to provide easy access to insurance services. It has pushed the Fintech industry revolution further, by giving doorstep services for banking, insurance, mutual funds, EMI collection, and travel booking.
To understand and appreciate new India better, it is important to note its economic growth in recent years.
Economic changes in India
The Indian economy has the distinction of being one of the fastest-growing economies in the world. Political stability after 2014, liberalization and progressive business policy have unleashed the growth of the Indian economy.
As per the Reserve Bank of India, the economic growth rate for 2022-23 is projected to be at 7.8%. India is currently a middle-income country and is the world’s fifth-largest economy. According to the EY-FICCI (The Ernst & Young and Federation of Indian Chambers of Commerce and Industry) report, the GDP ratio is expected to reach 0.4% by 2025 from 0.38% in 2019.
The service and industrial sectors account for 54% and 18% respectively, of the country’s GDP. India is trying to recover from the hit it took during the pandemic and has also retained its position as the third-largest in the world in terms of purchasing power parity (PPP).
Emerging businesses sectors In India
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India is now a business powerhouse for entertainment, pharmaceuticals, healthcare services, education, agriculture, logistics, Information technology, telecommunication, textile, and infrastructure. In recent years, India has shown huge development in fields such as space technology, entertainment, and even trade. A closer look at these emerging industries in India provides a better picture.
Information Technology
India is known globally to have a technologically driven knowledge economy due to its Information Technology (IT) industry. The IT industry plays an important role in enhancing the productivity of almost every other country sector. Over the last decade, India has become an IT hub for many software companies across the world. It is now known as the world’s largest sourcing destination for the IT industry. The growth of the IT and business service market in India is projected to reach $19.93 billion, by 2025.
Telecommunication
The Indian telecom industry has grown at a rapid pace post-liberalization. New technology such as Wi-max, Virtual Private Network (VPN), and data services have been instrumental in enhancing business in the IT and BPO sectors. It is estimated that over the next few years, the rising use of mobile phones and reduction in data costs will add 500 million new internet users approximately, thereby creating various new business opportunities in India. Additionally, by 2025, India will start to have 5G-centric technologies such as robotics, cloud computing, AI, etc.
Entertainment
The entertainment industry in India has grown out of its black-and-white era and entered multiplex and Over-The-Top (OTT) platforms such as Netflix, Amazon Prime, etc. This is because of the advances in virtual reality and the use of 3D and special effects by developers.
This has also provided new business opportunities to ancillary sectors such as dubbing, recording studios, animation, cinematography, and other content-creating options.
Aerospace and Defense
India is the third largest military spender. It is also known to have the second largest armed force in the world. India is revolutionizing its defense sector, by empowering startups and research projects. The government has also designed a few schemes such as DTIS (Defence Testing Infrastructure Scheme) and iDEX (innovations for Defence Excellence) to uplift the defense and private sectors.
Commercial space sector
India’s commercial space stands out as one of the most promising business sectors in the world. India’s space program, ISRO (Indian Space Research Organization), is the sixth largest space agency in the world, harboring a large fleet of remote sensing and communication satellites. India’s space sector has earned worldwide recognition for its successful Mars mission lunar probes and for launching 104 satellites in one mission for fraction of the cost of western nations.
Fintech India
Fintech or BFSI (Banking, financial services, and insurance) has revolutionized the way financial services are provided in India. The fintech startup ecosystem saw a huge capital inflow to reach $4.6 billion funding across 160 deals in the first half of 2020. Fintech is also bringing in newer trends in various industries. In addition, government financial initiatives such as Jan Dhan Yojana and India Stack are accelerating the digital revolution even in rural parts of the country.
Textile
India is now among the world’s largest producers and consumers of cotton. As per the Ministry of Textiles, India recorded its highest-ever textile and apparel exports of $44.4 billion, in the financial year 2021-22. Availability of raw materials and skilled manpower, increasing domestic market, and the rise of e-commerce are a few growth drivers of the textile industry in India.
Agriculture
The agricultural sector is a major source of employment for India’s population and hence proves to be an important driving factor of the Indian economy. The agriculture sector accounts for 28% of the country’s GDP. The increasing adoption of drones, remote sensing technologies, and advanced irrigation systems have provided a boost to the agricultural market in India.
Trade routes of India
India is constantly exploring overseas markets to develop new business opportunities. The Department of Commerce has strategized various policies and procedures for the expansion of trade and export services.
You will find it interesting to know that Indian export is not limited to spices and cotton, but has crossed all barriers and become a major exporter of electronics and electrical equipment, pharmaceutical products, AI technology, vehicles, and various software services.
As of 2020, India is at number 18 in total exports and is also the world’s largest exporter of diamonds. It has also established markets in countries such as the U.S, Singapore, China, the Netherlands, Australia, Turkey, and so on. For more in-depth information regarding India’s top trade partners, refer to the Observatory of Economic Complexity. It also provides information regarding the import and export evaluation of India.
Service exports have taken a large leap in recent years. The IT and Information Technology Enabled Services (ITES) are contributing almost 50% of India’s total export services. The service exports scaled up to $148.3 billion in the year 2020-21. This growth was despite the effect of COVID-19 pandemic on India’s travel, tourism, aviation, and hospitality sectors.
The new-age digital business in India
With the availability of smartphones and high-speed Internet connectivity, India is on its way to becoming a digitally advanced country. Emerging technologies such as Artificial Intelligence (AI), Cloud, and autonomous systems have caused a rapid digital transformation and led to business expansion in India.
This transformation has helped in the development of various sectors. For instance, in the healthcare sector, the development of teleconsultation and telemedicine has made it easy to provide healthcare services in remote and rural areas of India.
The use of advanced banking applications and websites has made it easy to perform online transactions at any time of the day through smartphones and tablets. UPI payment options like PhonePe, Google Pay, and BHIM have saved our time and efforts. The time when we stood in lines for paying our bills has definitely ended!
Digital payments are used frequently for purchasing entertainment and sports tickets. Moreover, digitization has led to the growth of e-commerce and therefore led to global business expansion in India. You name any brand for buying any product, from merchandise, jewelry, footwear, and other accessories to furniture and housing appliances. You search for it and it’s available on every digital platform.
There are many startup ideas that took the digital route and developed successful business models. There are 105 Indian startups that have already made it to the unicorn club as of July 2022.
One such startup example is Dream11, a fantasy sports platform founded in 2008. The company is developed to let customers play fantasy sports such as hockey, cricket, football, and many more. It has raised over $400 million and became the first Indian fantasy sports platform to enter the unicorn list in 2019.
India as a business destination for all
India has an open economy and hence provides many investment opportunities for FDI in many sectors. As per United Nations Conference on Trade and Development (UNCTAD), India scaled up to the 7th position for Foreign Direct Investment (FDI) in the world. India has also jumped 14 places and landed in 63rd position on the World Bank’s Doing Business 2020 study.
The ease of doing business in India and its advantages for SME
For many years, India is considered one of the most profitable destinations for testing business. Factors like digital advancements, adapting to remote working, and the high availability of a skilled and educated workforce have encouraged various business enthusiasts to establish their businesses in India. A few examples of such companies are Procter & Gamble (P&G), Sony Corporation, Nike, CITI Group, Amazon, Uber, Unilever, and Google. The ease of doing business in India can be best understood by the success story of Google Pay.
Google Pay, was initially designed as a Google wallet. It was launched in India as Tez app in September 2017 and later rebranded to Google Pay in August 2018. Within a year from its debut, Google Pay was being used by more than 22 million people and businesses every month and recorded transitions worth over $30 Billion.
Sundar Pichai, the CEO of Google, said that the debut of Google Pay in the Indian market has been instrumental in understanding how to revamp its digital payment model globally. As of 2021, using the India model, Google Pay was launched in 42 countries worldwide. In addition, with the rising number of online payments and UPI transactions, the Indian economy is known as one of the leading innovators in digital finance.
It is now clear, how India offers an attractive market for testing foreign businesses. So how can you establish your business in India? What are the different business models being used to expand your business in India?
There are multiple options available for you. At the end of this blog, we have shared the evolution of business models and also an emerging business model, International PEO/EOR.
Remote hiring, a new way of conducting business in India
Now, well into the pandemic, employees were able to set a precise workflow by using online portals and tools like Zoom meetings. Companies in India have also gotten accustomed to remote hiring and onboarding. If this interests you then please, refer to our blog Building remote teams in India. It will give you a comprehensive overview of everything you need to know about hiring remote employees in India.
Evolution of business models in India
For many years, the conventional way of expanding your business in India was by either directly set up an entity or through outsourcing. These were the ideal options many foreign companies used for doing business in India.
For instance, International Business Machines (IBM) company, re-entered India in 1987. Since then, it has expanded its operations by setting up offices in different cities and states of India. Uber is another notable example that expanded its business operations in India. It entered India in 2013 and has been constantly growing in the ride-sharing space. It has now become one of the most valuable startups in the world.
Recently, India has witnessed tremendous change and transition in ways of conducting business. It has now evolved from franchising, e-commerce, outsourcing, subsidiary formation, and freelancing options to newer models such as International PEO services or EOR and remote hiring.
From our experience at Remunance, we can see that most of the startups and SMEs are making the best use of these new models to build their remote teams in India. SMEs from more than 16 countries have taken this quick and cost-effective path to build remote teams of various sizes ranging from anywhere between 4 to 50 employees. These new business models will definitely change the way business is conducted by tapping into the Indian workforce.
How an International PEO/EOR works?
Professional Employer Organization in India or EOR in India provides services to foreign companies who wish to establish their business in India. These services are a better alternative to outsourcing. This is because PEO/EOR handles all the legalities and compliance issues that are usually faced while outsourcing.
To know more about how PEO services are a better option for entering the Indian market, refer to our blog PEO..better alternative to outsourcing
International PEO/EOR is by far the best option for any small and medium business who wishes to test the Indian market. The PEO/EOR company will be the legal employer in India, for foreign companies and take care of all the HR services including employee recruitment and training, employee benefits, and payroll.
How Remunance helps in expanding your business in India
Every business is different and therefore needs tailor-made business strategies to align with your goals. Remunance’s PEO/EOR services, will do exactly the same and provide you with a unique basket of services that suit your business needs!
Remunance understands the Indian market and its trends. With our technologically advanced and transparent solutions, we can help you get started in no time!
Remunance will provide you with comprehensive solutions and streamline your entire journey of establishing your remote team in India.
#company formation in india#business setup consultants in india#best peo companies for small business#subsidiary company registration in india
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HIRING EMPLOYEES IN INDIA: A GUIDE FOR FOREIGN COMPANIES
Are you on the lookout to set up your remote team from a huge pool of talent and highly qualified individuals? Is India your prospective location considering its potential attraction? Then let us guide you on understanding the employment culture, the process of hiring employees in India for your foreign company, and how a PEO (Professional Employer Organization) can serve as the best alternative for your hiring process.
Hiring employees in India of high-caliber talent
Esteemed businesses like Zapier, GitLab, Buffer, and Hubstaff are known for hiring 100%, remote teams. Research suggests that 95% of employees are hired locally in India by foreign firms. Considering these statistics and by following the lead, you will have access to the second-largest English-speaking population with a high literacy rate. A 1.3 billion dynamic market to choose from and where business is primarily conducted in English. A great tech talent, with 4000 engineering colleges churning out a remarkable 1.5 million engineers every year.
Also “Indians are perceived as ready to adapt to different cultures, diligent and increasingly open to relocating”, as quoted by Kamal Karanth, Managing Director of the Indian arm of global recruiting agency Kelly Services.
While sourcing talent from India, considering the following aspects will come in handy for your foreign company’s hiring process.
Decoding the employee mindset in India
While staffing employees in India, it is important to understand the Indian work culture. Indian employees working for Indian or multinational companies like to enjoy 10% to 50% hikes annually. Accompanied by favorable taxation, incentives, travel allowances, health insurance coverages, etc. They prefer five working days, and 15-30 days of public holidays. They also like modern office spaces and futuristic office spaces for more comfortable working conditions.
Recruitment or staffing scenario in India
As a foreign company owner, you will need to understand the Indian business culture that will determine your company’s HR practices. You will have to take into account the employees’ cultural and religious backgrounds to devise a strategic HR practice to deal with them.
Indian employees value job security, so they look for long-lasting and secure opportunities. For most of the employed population, their designations or positions are very important. It is seen as social status and also a criterion for being eligible for a mortgage. The ‘freelancing’ concept is not seen as a desirable state of employment here and contracts employment is approached as the last resort. The salary packages include all elements of pay in a corporate structure known as a CTC (cost to company) with differing tax requirements like the PF ( Provident Fund).
You can offer your employees perks like stock options, overtime compensations, incentives, and internet allowances to make them feel valued. So if you are looking to hire employees from India, you must offer them attractive salaries, benefits, and a long-tenured job offer.
2. Understanding the work hours, holidays, and overtime pay in India
Your remote employees will work for you for 8-9 hours per day or a max of 12 hours as per the new government labor laws. You will also have to consider the Indian calendar holidays while designing the leave management system since many festivals are celebrated here. Also, you will have to pay your employees for overtime as per the Minimum Wages Act, of 1948. To know about it more in detail, visit https://labour.gov.in/wagess for more information. So if you wish for your remote employees to work for you after COB (closing of business) hours, you will have to consider the Indian employment working laws, their festivals, and overtime compensations.
3. Ways of hiring employees in India– India’s online job portals and social media-based recruitment
Online job sites are a great way to source junior to mid-level executives. According to Statista research, 21% of employers in India look out for candidates on job portals as of 2020 data. You can selectively choose from a high volume of responses from these portals. You can save time by specifying the job description and qualifications. It is ideal to tailor the job descriptions and compensations to the expectations of the candidates by studying the Indian market trends. You can use platforms like Indeed (https://in.indeed.com/?r=us), Fresherslive ( https://www.fresherslive.com/), Naukri (https://www.naukri.com/), and Toptal (https://www.toptal.com/). to directly reach out to prospective candidates.
Finding the right talent through social media recruiting platforms has been a growing trend. LinkedIn showcases a database of 65,090,000 people recruited from India as of 2019. You can use platforms like LinkedIn, Facebook career pages, Twitter, Google+, and Branchout to source both active and passive candidates.
4. PEO/ EOR in India is the best option for hiring employees for foreign companies
If setting up your subsidiary company is not your first step, then engaging with a PEO or EOR i.e. a Professional Employer Organization or Employer of Record as co-employment will be beneficial. A PEO is a great way of going about hiring employees in India without forming an Indian office. These organizations offer the best of both worlds by becoming a legal employers for your Indian staff. A PEO will source the right candidate for you. They know the Indian market well and have better access to the talent pool here. With the PEO model, your company can focus on the core business and let the administrative headaches be handled by the PEO service companies.
The PEO alternative will prove as a great stepping stone to your business expansion strategy without having the need to form a foreign subsidiary immediately.
Remunance, your partner in hiring employees
At Remunance, we know the relevance of maintaining and retaining talent for a successful business. Remunance services help global companies to enter the Indian market. We maximize risk management capacity by being your ally in India. We will kickstart your business operations with complete HR Admin, and office infrastructure support all over India. Our team of HR professionals follows a structured recruitment process to improve hiring efficiency. We will ensure you a winning team culture by suggesting an ideal selection process.
Take your business to the next level and leave the hiring concerns to us.
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Working at your own pace and at leisure is something that every employee prefers. Day-to-day functions are easier and the companies receive greater output from their employees.
Hence, even after the COVID-19 pandemic, the hybrid working arrangement is yet on every company’s agenda. Many companies became good hybrid work model examples by replacing traditional working models.
This blog will take you through the evolution of the hybrid work model and the benefits it offers. We will also provide an overview of how Employer of Record services or International PEO services can help your business grow using this hybrid work model.
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4 Criteria to Select a PEO in India
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HOW PEO CAN BENEFIT STARTUPS
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#company formation in india#international peo companies#International PEO#business setup consultants in india#best peo companies for small business
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