In a world where business cycles change rapidly and talent is the currency of success, Indian companies are increasingly looking beyond traditional hiring models. One such emerging strategy — employee secondment — is not merely a tool for temporary staffing but a smart way to enhance capability, accelerate expansion, and optimize costs.
For CEOs, HR leaders, and business owners, mastering the art of secondment is becoming a competitive necessity — not an optional HR tactic.
This article goes beyond definitions. It explains real-world business value, legal nuances, cost implications, best practices, and practical steps you can implement today — especially in the Indian business context.
What Employee Secondment Really Means for Your Company
At its heart, employee secondment is a temporary assignment of an employee from your company to another organization — often within your corporate group, a partner company, or a joint venture — while the employee remains legally employed by you.
Unlike outsourced staffing or freelance engagements, secondment is strategic — it is about knowledge transfer, project delivery, cultural integration, or preparing leaders for broader roles.
Here’s what secondment is not:
- Not simply a temporary job placement
- Not a contract hire through a staffing supplier
- Not interchangeable with outsourcing or gig workers
Secondment is about retaining employment continuity while placing key talent where they are most needed for a time-bound purpose.
Why Secondment Matters for Indian Businesses
Indian companies — from technology firms in Hyderabad to manufacturers in Ahmedabad — are facing similar challenges:
- Talent shortages in niche skills
- Global expansion without costly local hiring
- Need to transfer know-how across branches
- High cost of recruiting senior talent permanently
Secondment addresses these challenges effectively. Let’s unpack how.
Strategic Benefits That CEOs Should Care About
1. Rapid Deployment of Critical Skill Sets
Instead of struggling to recruit for specialized skills like cloud architecture, cybersecurity, or regulatory compliance, secondment lets you move existing talent into high-priority projects immediately.
2. Cost-Efficient Expansion to New Markets
When entering markets like Singapore, UAE, or Europe, sending an experienced leader on secondment creates momentum quickly without long-term payroll commitments.
3. Strengthened Cross-Team Collaboration
Seconded employees act as bridges between entities, helping standardize practices and unify corporate culture.
4. Talent Development and Retention
High-performers value global or cross-functional experience. Secondment becomes a powerful career development tool that improves retention.
Legal, Tax & Compliance: What You Must Know
Though valuable, secondment isn’t risk-free. In India, its enforcement depends on a web of regulations:
Employment Law
The employee remains under your payroll. You must continue statutory benefits like EPF, ESIC, gratuity, and leave entitlements.
Tax & TDS
If a seconded employee spends significant time overseas, it can create:
- Permanent Establishment (PE) risk for your company
- Dual tax residency issues for the employee
- Transfer pricing scrutiny in related-party arrangements
GST Considerations
GST authorities have taken the position that secondment arrangements — especially between related companies — could be considered supply of manpower services if there’s reimbursement of cost with markup.
This means:
- GST could apply if payroll costs are recharged
- Structuring secondment as cost reimbursement without markup may reduce GST exposure
- Clarity in your contracts matters more than most companies realize
Strategic Decision Matrix: When Employee Secondment Makes Business Sense
The table below is designed to drive real decisions — not just describe secondment superficially. It helps you assess when secondment will yield value, when it could cost you, and which considerations matter most.
| Business Trigger | What It Signals | Risk If Ignored | How Secondment Solves It | Action for Leadership |
| Expansion to new geography | Need trusted leadership presence in new market | Cultural mismatch, slow setup, poor compliance | Deploy experienced internal leader temporarily | Plan tax structure before assignment; limit duration to reduce PE exposure |
| Specialized skill shortage | High-value project lacks expertise | Project delays, revenue loss | Move skilled employee from another entity short-term | Compare cost of hire vs secondment before approving |
| Post-merger integration | Need operational alignment across entities | Process conflicts, inefficiency, resistance | Send culture ambassadors to unify systems | Clearly define reporting authority in agreement |
| Cost pressure | Hiring permanent senior talent is expensive | Fixed payroll burden increases | Temporary deployment reduces long-term liability | Structure reimbursement without markup to reduce GST risk |
| Leadership development gap | Mid-level managers lack exposure | Weak succession planning | Offer structured secondment as growth pathway | Integrate secondment into talent strategy roadmap |
| Cross-border technical supervision | Foreign entity depends on Indian expertise | Risk of creating Permanent Establishment unintentionally | Define limited authority and clear scope of work | Conduct pre-assignment PE and tax analysis |
This table helps leaders weigh business objectives, operational risks, and talent outcomes before they commit to a secondment plan.
Real Examples That Make Sense
Example 1: A Tech Firm Expanding to Europe
A Bengaluru software product company wanting to launch support operations in Germany placed its Head of Customer Success on secondment to the new subsidiary. Benefits included:
- Immediate operational leadership presence
- Faster customer onboarding
- Transfer of company culture to new team
Tax and payroll structuring reduced PE risk and clarified cost allocation.
Example 2: Manufacturing Group With Internal Knowledge Transfer
A Pune-based industrial group sent its top supply chain expert to a newly acquired unit in Gujarat. Outcome:
- Reduced production inefficiencies in 6 months
- Standardized systems across business units
- Improvements in cross-plant KPIs
How to Structure Secondment the Right Way
Secondment agreements must be intentional and precise. Key elements include:
- Assigned term with clear start/end date
- Reporting and accountability structure
- Payroll responsibility — who pays, who bears costs
- Tax obligations for employer and employee
- Confidentiality, IP and non-compete clauses
- Data protection and jurisdiction details
Weak contracts invite tax scrutiny, compliance risk, and HR disputes.
Frequently Overlooked Legal & Compliance Issues in India
GST Risks
If you recharge employee costs to a related party, GST authorities could treat it as a taxable supply. Mitigation includes:
- Using reimbursement clauses instead of marked-up invoices
- Clear cost allocation and documentation
- Separating secondment from manpower supply contracts
Tax Residency
Employees on long-term foreign assignments may become tax residents abroad — triggering tax filing and compliance in multiple jurisdictions.
Social Security
Countries like the UK and EU have strict social security rules. Evaluate whether social security agreements apply.
How to Build Secondment Into Your HR Strategy
Secondment shouldn’t be ad-hoc. It must become part of your strategic workforce planning. Follow this weekly cycle:
- Quarterly talent demand forecast
- Internal talent mapping
- Prioritize strategic assignments
- Legal & tax risk assessment
- Structured onboarding and debriefing
This transforms secondment from reactive outsourcing to proactive capability building.
Final Thought for Indian Business Leaders
Employee secondment is one of the most under-utilized strategic tools for modern organizations. When used thoughtfully, it:
- Removes execution bottlenecks
- Builds internal leadership strength
- Accelerates market entry
- Optimizes talent spend
But when mis-implemented, it creates complexity instead of clarity.
Invest time upfront in planning, structuring, and risk-proofing secondment arrangements. Your business will gain agility, resilience, and a competitive edge that few Indian companies are fully leveraging today.