EOR Cost Calculator
EOR vs. Local Entity: The Full Cost Picture
Expanding your workforce internationally presents a critical decision: hire through an Employer of Record (EOR) or establish your own legal entity in the target country. Each approach carries distinct cost implications that extend well beyond the obvious line items. This calculator helps you compare the total cost of ownership for both options over your planned timeframe.
EOR Approach Includes:
- Per-employee monthly management fees
- Compliant employment contracts
- Local payroll processing and tax filings
- Benefits administration
- Rapid onboarding (days, not months)
Entity Setup Includes:
- Legal incorporation and registration
- Local compliance and regulatory fees
- Ongoing accounting and administration
- Local HR staff costs
- Registered agent and legal counsel
How to use this calculator: Configure the number of employees, target region, salary levels, and EOR fees below. Then adjust the entity setup parameters to reflect local incorporation costs. Click "Calculate Costs" to see a full comparison with break-even analysis.
Watch: How to Use This Tool
Compare the costs of hiring through an Employer of Record versus establishing a local legal entity in your target market. Adjust the parameters below for a customized comparison.
EOR providers typically charge between $300 and $700 per employee per month, though pricing varies widely by region, service level, and volume discounts. Entity setup costs depend heavily on the target country's regulatory environment and can range from $5,000 in simpler jurisdictions to over $50,000 in complex ones.
Frequently Asked Questions
What is an Employer of Record (EOR)?
An Employer of Record is a third-party organization that becomes the legal employer for your workers in a foreign country. The EOR handles all employment-related responsibilities including payroll, taxes, benefits, and compliance with local labor laws. Your company maintains day-to-day management of the employee's work, while the EOR handles the administrative and legal aspects of employment. This allows you to hire internationally without setting up your own legal entity in each country.
How much does an EOR typically cost per employee?
EOR pricing varies significantly based on several factors. Most providers charge between $300 and $700 per employee per month as a flat fee model. Some providers use a percentage-of-salary model, typically charging 10-20% of the employee's annual salary. Factors that influence pricing include the target country, the complexity of local labor laws, the number of employees, and the level of service required. Volume discounts are common when hiring 10 or more employees through the same provider.
When should I choose an EOR over setting up a local entity?
An EOR is generally the better choice when:
- You are hiring fewer than 15-20 employees in a single country
- You need to hire quickly and cannot wait months for entity setup
- You are testing a new market before committing to a permanent presence
- You want to avoid the overhead and risk of managing a foreign subsidiary
- You are hiring in multiple countries simultaneously
When does setting up a local entity make more financial sense?
Establishing your own entity typically becomes more cost-effective when you plan to hire 15-30 or more employees in a single country, depending on the region. The break-even point varies based on local setup costs, ongoing compliance requirements, and EOR fees. An entity also provides advantages such as stronger brand presence in the local market, more control over employment terms and benefits design, the ability to contract directly with local vendors, and potential tax benefits depending on the jurisdiction.
What hidden costs should I consider with an EOR?
Beyond the advertised per-employee fee, be aware of potential additional costs such as: onboarding fees for each new employee, offboarding and termination management costs, currency conversion fees on salary payments, benefits markup where the EOR adds a margin on benefits costs, contract amendment fees for salary changes or role modifications, and early termination fees if you end the agreement before the contract period. Always request a complete fee schedule from EOR providers before signing.
How long does it take to set up a foreign entity?
Entity setup timelines vary dramatically by country. In business-friendly jurisdictions like Singapore or the UK, you might complete setup in 4-6 weeks. In more complex regulatory environments like Brazil, India, or China, the process can take 3-6 months or longer. Key steps include company registration, tax registration, bank account opening, establishing payroll, and ensuring compliance with local employment laws. By contrast, an EOR can typically have your first employee onboarded within 1-2 weeks.
What are the compliance risks of using an EOR vs own entity?
With an EOR, you rely on the provider's compliance expertise, which can be both an advantage and a risk. A reputable EOR maintains compliance across labor laws, tax regulations, and benefits requirements in each country. However, if the EOR makes errors, your company may still face reputational consequences. With your own entity, you have direct control over compliance but bear full responsibility and need in-house or outsourced legal expertise. In both cases, staying current with changing regulations in the target country is critical.
Can I transition from an EOR to my own entity later?
Yes, many companies start with an EOR and transition to their own entity as they scale. This is a common and pragmatic approach. However, the transition requires careful planning. Employees need to be offboarded from the EOR and re-hired by your entity, which may trigger termination payments, benefit resets, and new probationary periods depending on local law. Some EOR providers offer transition support services. It is best to negotiate transition terms as part of your initial EOR contract to ensure a smooth handover when the time comes.