Choosing between an EOR and setting up your own entity depends on factors like your business’s growth stage, risk appetite, and long-term strategic goals.
While EORs offer flexibility and ease of market entry, establishing your own entity may be beneficial for a sustained and large-scale presence. As global business dynamics evolve, the decision increasingly hinge on the agility a company needs to navigate the complexities of global expansion.
The optimal choice is a balanced approach, informed by both immediate objectives and visionary foresight, ensuring that your business remains globally competitive while managing risks and reaping the benefits of international operations.
What is an EOR?
An Employer of Record is an organization that legally employs staff on behalf of another company. Essentially, it acts as the official employer for tax purposes while the employee performs work for the contracting company. This arrangement allows businesses to quickly and compliantly onboard international staff without the need to set up a legal entity in the foreign country.
What does setting up your own Entity mean?
Setting up your own entity means establishing a legal business in a new country. This includes registering the business, adhering to local laws, opening bank accounts, obtaining necessary licenses, and setting up a local HR infrastructure to manage payroll, taxes, and compliance.
Comparing EOR vs. Your Own Entity
| Aspect | Employer of Record (EOR) | Setting Up Your Own Entity |
|---|---|---|
| Time to Start | ✅ Quick setup within days or weeks. | ❌ Typically takes months, depending on the country. |
| Cost | ✅ Variable cost; pay for the service provided. | ❌ High upfront and ongoing costs for operations. |
| Legal Compliance | ✅ Handled by the EOR provider. | ❌ Must be managed internally or through consultants. |
| Control | ✅ Shared control; the EOR manages employment tasks. | ✅ Full control over operations and staff management. |
| Risk | ✅ Reduced risk, as the EOR assumes liability. | ❌ Higher risk, as the entity is directly responsible. |
| Expansion Speed | ✅ Fast market entry. | ❌ Slower due to setup and compliance processes. |
| Local Expertise | ✅ Access to EOR’s local knowledge and networks. | ❌ It needs to be developed in-house or acquired. |
| Flexibility | ✅ High; easy to scale up or down. | ❌ Less; changes can be costly and time-consuming. |
| Long-term Presence | ✅ It is ideal for testing markets or temporary projects. | ✅ Signifies a long-term commitment to the market. |
This table will equip you with valuable insights and strategies for making informed choices that align with your business needs and growth trajectories.
Whether leveraging an Employer of Record (EOR) or embracing the setting up of a local entity, the focus is on understanding the process and tailoring final decisions to your company’s circumstances.
How can Horizons EOR help you save costs without setting up a legal entity?
Horizons EOR simplifies global expansion while offering significant cost savings:
01. Reduced Setup Costs
By using Horizons EOR, businesses of all sizes can cut expensive legal fees, registration costs, and administrative expenses associated with establishing a foreign entity.
02. Lower Operational Overheads
There’s no need to maintain a separate HR department, payroll team or compliance staff in a new country, as Horizons EOR covers all these functions for your business.
03. Minimized Risk of Non-Compliance
With expert local knowledge across 180+ countries, Horizons ensures compliance with tax laws and employment regulations, avoiding any fines and legal fees you may be at risk for.
04. Flexibility with Workforce Management
Horizons EOR allows companies to scale their international workforce up or down quickly, without the long-term financial commitments required when you have your entity.
05. Rapid Market Entry and Exit
Companies can expand to new markets and test viability without significant investment. If necessary, they can exit markets without the burden of winding down a legal entity, which can be costly and time-consuming.
