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EOR vs Entity Setup Cost Comparison
Your CFO is reviewing two proposals on the same desk. The first is from an EOR provider: $599 per employee per month, all-in, employees onboarded in two weeks.
The second is from legal counsel: $15,000 to $40,000 upfront for entity incorporation, plus $3,000 per month in ongoing compliance costs, with a four-month timeline before you can hire anyone.
The EOR looks expensive per head. The entity looks expensive upfront.
Neither proposal tells the full story, and the real cost gap between these two models only becomes clear when you model them over time, across headcounts, and account for the expenses that neither sales team mentions in their pitch deck.
We built this comparison using entity formation costs from legal advisory firms and government fee schedules across six countries, EOR pricing from verified provider pages, and break-even modelling at four headcount levels over a three-year horizon.
What follows is the cost picture we wish someone had shown us before our first international hire.
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What does entity setup actually cost in different countries?
Entity formation costs vary dramatically by jurisdiction. The headline filing fee is the smallest part: real costs include legal counsel, government filings, registered office, and capital deposits. Buyers underestimate total setup cost by 40-60% when anchoring on the filing fee alone.
United Kingdom: $5,000-$12,000. Companies House registration is fast and cheap, but legal structuring, VAT registration, PAYE setup, and employer liability insurance push the real cost well above the filing fee.
Most companies are operational within 4-6 weeks.
Germany: $15,000-$30,000. A GmbH requires a minimum share capital of EUR 25,000, notarised articles of association, commercial register entry, and a German business address. Factor in legal counsel, tax advisor setup, and trade office registration.
Timeline runs 6-10 weeks in practice.
Singapore: $3,000-$8,000. One of the fastest and cheapest jurisdictions globally. ACRA registration completes in 1-2 days, and the full setup including corporate secretary appointment, registered address, and bank account opening takes 2-4 weeks.
Minimum paid-up capital is just SGD 1.
Brazil: $20,000-$40,000. Among the most complex and expensive incorporations.
Federal tax registration (CNPJ), state and municipal registrations, social security enrolment, and labour ministry filings each carry separate requirements.
The process takes 2-4 months with experienced local counsel.
One People Ops lead told us she had to delay a strategic hire by three months because the Brazilian entity was still awaiting CNPJ clearance: the candidate accepted another offer on week ten.
India: $8,000-$18,000. Private limited company registration through the MCA portal is straightforward, but GST registration, PF/ESI enrolment, professional tax registration, and shop and establishment licences add up.
Expect 6-8 weeks from start to first hire.
Australia: $6,000-$15,000. ASIC registration is efficient, but you will need an ABN, GST registration, superannuation fund setup, and workers compensation insurance before hiring.
Most companies are operational within 4-6 weeks.
What ongoing entity compliance costs should you budget for?
Formation costs get the attention, but ongoing compliance overhead determines whether an entity makes financial sense. These costs run regardless of headcount and some persist even if you reduce to zero employees.
Local accounting and bookkeeping: $1,000-$3,000/month.
Statutory accounting standards differ by country, and your home-country finance team cannot manage a German HGB-compliant ledger or a Brazilian fiscal book system remotely.
You need a local accounting firm, and their fees scale with transaction volume and reporting complexity.
Payroll processing: $500-$1,500/month. Running payroll in a foreign entity means calculating and remitting employer contributions, withholding employee taxes, filing periodic payroll returns, and managing statutory leave accruals under local rules.
Most companies outsource this to a local payroll bureau.
Annual statutory audit: $3,000-$15,000/year. Many jurisdictions require an annual audit for foreign-owned entities regardless of size.
Germany, France, and India all impose audit requirements that add meaningful cost even for small subsidiaries.
Corporate tax return and compliance: $2,000-$8,000/year. Local corporate tax filing, transfer pricing documentation, and intercompany transaction reconciliation require specialist tax advice.
Transfer pricing alone can cost $5,000-$15,000 annually if you have significant intercompany flows.
Registered office and company secretary: $1,000-$5,000/year. Required in most jurisdictions. The registered office receives official correspondence and legal notices.
A company secretary handles board minutes, annual returns, and statutory registers.
Dormant company compliance: $3,000-$8,000/year. If you exit a market but keep the entity open, you still owe annual filings, audit fees, registered office costs, and tax returns. In Germany, a dormant GmbH costs $3,000-$8,000 per year to maintain.
Winding down the entity costs $10,000-$30,000 more and takes 6-18 months.
How do EOR fee structures compare to entity overhead?
EOR pricing consolidates most employment costs into a single per-employee fee, but “all-in” varies by provider. Equity plan administration, supplementary benefits above statutory floors, and visa support are almost always billed separately.
Flat per-employee fee. The most common model. You pay a fixed monthly amount per employee regardless of their salary level.
Current market rates range from $299/month at budget providers to $699/month at enterprise-tier platforms, with most mid-market providers clustering at $500-$599/month. This model favours employers hiring highly paid staff, since the fee is the same whether the employee earns $40,000 or $150,000.
Compare providers on our EOR pricing models page.
Percentage of salary. Some providers charge a percentage of gross salary instead of a flat fee, typically 10-20%. This model is cheaper for low-salary hires but becomes expensive quickly for senior roles.
A 15% charge on a $120,000 salary works out to $1,500/month, nearly three times the flat-fee alternative.
What is included. Most EOR fees cover employment contract management, payroll processing, tax withholding and remittance, statutory benefits administration, and basic HR compliance.
What typically costs extra: equity plan administration, supplementary benefits beyond statutory minimums, immigration and visa support, and dedicated HR advisory services.
What is not in the headline. Employer statutory contributions (social security, pension, health insurance) sit on top of the EOR fee and on top of gross salary.
These range from 15% of gross in the UK to 45% in France.
The EOR collects and remits them, but they are your cost. Factor them into any comparison with entity models.
EOR vs entity cost break-even: how many employees tip the balance?
The break-even depends on country, EOR rate, and time horizon. We modelled Germany at a mid-market EOR rate of $599/employee/month, one of the more expensive jurisdictions for both setup and maintenance.
At 5 employees over 3 years, EOR costs ~$107,820 versus ~$187,000 for an entity (EOR saves $79,000). At 10 employees, the models are near break-even. At 15 employees the entity saves ~$64,000; at 20 employees it saves ~$136,000 over three years. Germany is one of the more expensive jurisdictions; in Singapore the break-even falls to ~8-10 employees, in Brazil it can be 20 or more.
What hidden costs catch buyers on both the EOR and entity side?
Both models carry costs that rarely appear in initial proposals. These items close the gap between a model that looks favourable and one that actually is.
EOR hidden costs: currency conversion markups of 1-3%; deposit requirements of 1-3 months; offboarding fees of $500-$2,000 per employee; and price escalation clauses allowing 5-10% annual increases. See our EOR contract red flags guide.
Entity hidden costs: local director requirements ($5,000-$15,000/year); transfer pricing documentation ($5,000-$15,000/year); employer liability insurance; and wind-down costs of $10,000-$30,000 over 6-18 months if you exit the market.
The cost nobody models: if headcount drops below break-even after entity setup, you pay ongoing compliance costs on a structure that no longer works. Maintaining costs money; winding down costs more. With an EOR, reducing headcount reduces your bill with no residual overhead.
When does entity setup make more financial sense than EOR?
Entity setup wins the comparison only at sustained headcount above break-even. Several conditions tip the balance even when the spreadsheet is borderline.
You have 15+ employees in a single country with a 3+ year commitment. Once you cross the break-even threshold and have confidence in your headcount projections, the annual savings compound.
At 20 employees over five years in Germany, the entity saves roughly $250,000 compared to EOR at $599/month.
If you are evaluating EOR providers for smaller teams, our guide on how to choose an EOR covers the evaluation framework.
You need direct control over the employment relationship. IP-intensive companies, particularly in software and biotech, sometimes prefer direct employment because it gives them cleaner IP assignment chains without the two-step transfer that EOR structures require.
While most EOR providers handle IP assignment competently through their compliance guarantees, some legal teams prefer the certainty of direct employment.
You are building a permanent market presence.
If the country is a core market, not a satellite office or a remote-work accommodation, the entity signals commitment and gives you more flexibility on benefits, compensation structures, and local HR practices.
When EOR remains the better choice. Teams under 10 employees in any single country. Market-testing before committing to a permanent presence.
- Countries where entity setup is prohibitively complex or slow (Brazil, China, Saudi Arabia)
Situations where headcount may fluctuate significantly. And any scenario where you need to hire within weeks rather than months.
We find the EOR case is hardest to argue against when the headcount projection has genuine uncertainty attached, because the asymmetry of exit costs is brutal if an entity turns out to be premature.
Whichapp view
For most companies hiring under 12 people in a single country, EOR is cheaper across any realistic three-year horizon.
The entity case becomes credible above 15 employees with stable headcount and a confirmed long-term market commitment.
Below that threshold, the break-even maths only works if you use the most optimistic entity cost estimates and the highest EOR rates simultaneously, which is not how either model typically performs in practice.
If you are anywhere near the borderline, model the wind-down cost before you sign anything.
Frequently asked questions
At what headcount does entity setup become cheaper than EOR in the UK?
In the UK, entity setup costs are relatively low ($5,000 to $12,000) and the break-even against EOR fees at $599 per employee per month typically arrives around 8 to 10 employees over a three-year horizon.
How should you model the cost comparison if headcount is uncertain?
Run three scenarios: a base case at your expected headcount, a downside case where you reduce to 30% fewer employees, and an upside case where you grow to 50% more.
What should you ask an EOR provider to include in a cost comparison proposal?
Ask for the total landed cost per employee including platform fee, employer statutory contributions, FX markup, any deposit requirement, and per-employee offboarding costs.
Is there a cost penalty for switching EOR providers rather than transitioning to an entity?
Yes, though the size varies by provider and country.
How do statutory employer contributions change the cost comparison between EOR and entity?
Statutory employer contributions apply equally under both models: whether your entity or the EOR employs the worker, you owe the same pension, social security, and health insurance contributions.
Tools for this topic
- EOR vs Entity Break-Even Modeler: model the full cost comparison with your own numbers
- Employer Cost & Burden Calculator: calculate the employer cost baseline for each country
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How we built this cost comparison
Entity setup costs from legal advisory firms and government fee schedules across six jurisdictions (UK, Germany, Singapore, Brazil, India, Australia). EOR pricing from verified provider pages as of April 2026; mid-market rate of $599/employee/month used for modelling. Break-even models assume a 3-year horizon with stable headcount. Guide reviewed quarterly.