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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.
Hold that second proposal against our own entity benchmark and it looks padded. Across the 38 countries we cost, incorporation runs $900 to $18,000 and annual compliance $1,200 to $25,000. A quote at three times the top of either range is buying you something more than compliance, and you are entitled to ask what.
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 by jurisdiction, but not as wildly as the proposals suggest. Across our benchmark the whole world sits between $900 and $18,000, and the government filing fee is almost never the largest line. Legal counsel, registered office and capital deposits are what move the number.
United Kingdom: $2,500-$6,250 (£2,000 to £5,000). 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: $4,553-$8,537 (EUR 4,000 to EUR 7,500). That is the notary, register and advisory bill. Separately, a GmbH needs EUR 25,000 of share capital, of which EUR 12,500 has to be paid in before the company can register.
The capital is equity you still own, not a fee, and conflating the two is what produces the $25,000 setup quotes you will see elsewhere.
Timeline runs six to twelve weeks to a registered entity, and two to three months to a first compliant payroll.
Singapore: $1,100-$2,200 (SGD 1,500 to SGD 3,000). 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: $5,000-$10,000. Among the most complex incorporations, though the professional fees are mid-range: it is the elapsed time and the number of separate registrations that hurt, not the invoice.
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: $5,000-$9,000. 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: $2,000-$5,000. 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.
The invoiced compliance bill: $1,200 to $25,000 a year. That is the full spread across the 38 countries we cost, from New Zealand at the bottom to Japan, Korea and Israel at the top. The six jurisdictions in this guide sit inside it: the UK at $5,000 to $12,000, Germany at $9,106 to $17,074, Singapore at $10,000 to $15,000, Brazil at $8,000 to $20,000, India at $5,000 to $10,000, Australia at $5,000 to $12,000.
That money buys a specific and fairly short list: statutory annual accounts, the corporate tax return, basic bookkeeping and a registered office. It is what an accountant invoices you for keeping the company legally alive and filing on time.
What it does not buy. Running payroll, employment counsel, insurances, HR administration and the hours someone on your team spends owning a foreign entity all sit outside that figure. We have never sourced a cost for that internal time in any of the 40 countries we hold, so we do not publish one.
Neither should the proposal on your desk. If a quote comes in at four or five times the numbers above, it is not a different opinion about compliance, it is a different scope, and you should make the firm itemise it.
Audit is not automatic, and Germany is the example. A small GmbH is exempt from statutory audit under the HGB size classes, and our benchmark notes say the same for small Austrian and Dutch companies. Check the size thresholds where you are incorporating before you budget for an audit you may never need, because the compliance figures above already assume you do not.
Dormant entities still cost money. Exit the market but keep the company open and you still owe annual filings, registered office fees and a tax return. We hold no sourced figure for a dormant company anywhere, so treat any number you are given as that firm's quote rather than a benchmark.
Winding down properly costs more: across the 26 countries where we cost dissolution it runs $750 to $20,000, and it takes months rather than weeks.
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 $199/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, and it arrives far earlier than most proposals imply. We modelled Germany at $599 per employee per month, the published German from-price for Deel and Remote, against the German entity costs in our benchmark.
Over three years a German GmbH costs about $45,500 in invoiced setup and compliance. Three years of EOR fees cost $21,564 per employee. That puts the crossover at 2 to 3 employees.
At two people the two routes are within a few thousand dollars of each other; at five the entity is about $62,000 cheaper over three years, and at fifteen about $278,000. The other five countries here land in the same place: 1 to 2 employees in the UK, 2 to 3 in Singapore, 2 to 4 in Brazil and India, 1 to 3 in Australia. Across all 34 countries where we hold a sourced break-even, not one sits above five.
Read those savings for exactly what they are. They set invoiced compliance against EOR fees and nothing else. Add half an operations person to own the entity, roughly $40,000 a year, and the crossover moves out to around seven.
That cost is real and most companies pay it, but we have never been able to source it, so we will not dress it up as a benchmark.
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 $750 to $20,000 over 6 to 18 months if you exit the market. Two of those three figures are ours; the local-director and transfer-pricing lines are market estimates we have not re-verified this cycle, so treat them as indicative.
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, and it costs time you cannot buy back. The asymmetry is not really in the money.
Setting a European entity up takes 2 to 16 weeks; unwinding one takes 6 to 18 months, and in Germany the statutory creditor-notice year alone is longer than the whole setup. Model the exit before you sign anything, because the decision you are actually making is about how long you would be stuck, not about the closing invoice. 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 more than a couple of people in one country and you intend to keep them. The crossover on invoiced cost arrives at 2 to 3 employees, so above that the arithmetic favours the entity and keeps favouring it. What should make you wait is not the spreadsheet but the confidence behind the projection: entity costs are fixed, and you pay them whether the hires arrive or not.
At 20 employees over five years in Germany, the entity saves roughly $647,000 in invoiced cost compared with EOR at $599 a month. It is a startling number precisely because it excludes the operations work the entity route hands back to you.
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. One or two people in a country you are still testing. 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.
WhichPayroll view
On invoiced cost, an owned entity overtakes EOR at 2 to 3 employees in most countries we benchmark, and all six in this guide sit in that band.
That is not the same as telling you to incorporate at three hires. The cost that keeps EOR ahead never appears on an invoice: someone has to own the entity, and half an operations person moves the crossover out to around seven.
So the real test is commitment, not headcount. If the country is a market you are sure about, incorporate early and the maths rewards you quickly. If the projection is soft, the asymmetry of exit costs is brutal.
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?
At 1 to 2 employees. UK setup is $2,500 to $6,250 and annual compliance $5,000 to $12,000, while one employee on EOR at $599 a month costs $7,188 a year. A single hire almost pays for the company on its own, which is why the UK has the earliest crossover in our benchmark.
The caveat is scope: that comparison covers invoiced compliance, not the time someone spends running the entity.
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 and annual compliance costs come from our own EOR entity benchmark dataset, which covers 40 countries and was last reviewed in June 2026. Euro figures are converted at the pinned ECB reference rate for 2026-07-01, €1 = $1.1383. German EOR pricing is the published from-price for Deel and Remote on our best EOR Germany shortlist, where each provider's German entity is checked against the Handelsregister.
Break-even models assume a three-year horizon with stable headcount and cover invoiced setup and compliance only; they exclude internal operations time, which we have not sourced. Guide reviewed quarterly.