The EOR-versus-entity decision is usually framed as a compliance question. It’s also a maths problem with a surprisingly clean answer: at some headcount, running your own legal entity costs less per year than EOR fees, and from that point the entity route pays back your setup investment. This page works through two scenarios from the EOR Break-Even Calculator using 2026 market benchmarks.
When Does an EOR Break Even for 3 UK Employees at £50,000?
The UK is the most forgiving jurisdiction for entity economics. A private limited company costs next to nothing to incorporate (Companies House charges £10–£50 online), the main friction is opening a business bank account as a foreign director, which typically takes 4–12 weeks. Annual compliance for a small foreign-owned Ltd runs £5,000–£10,000 ($6,250–$12,500).
Year-1 cost comparison
| Cost item | EOR route | Own entity route |
|---|---|---|
| Per-employee monthly fee | $699 × 3 = $2,097/mo | — |
| Annual EOR fees | $25,164 | — |
| One-time entity setup | — | $3,750 (typical) |
| Annual compliance cost | — | $8,000 (typical) |
| Payroll bureau (3 employees) | — | $40/mo × 3 = $1,440/yr |
| Total year-1 cost | $25,164 | $13,190 |
| Year-1 saving vs EOR | — | $11,974 |
From year 2 onwards, with setup costs amortised, the saving jumps to $15,724 per year. The one-time setup cost of $3,750 is recovered in under three months of those ongoing savings.
Break-even headcount for the UK
Break-even here means the first headcount at which owning the entity costs less than EOR over three years. That is the rule the calculator applies, so the two always agree. The formula is: (Setup + 3 × annual compliance) ÷ ((EOR monthly fee − payroll bureau per employee) × 36)
= ($3,750 + 3 × $8,000) ÷ (($699 − $40) × 36) = $27,750 ÷ $23,724 = 1.17, which rounds up to 2 employees.
So the UK breaks even at 2 employees, meaning if you are hiring a second UK employee and intend to keep both for more than a year, a local entity already makes financial sense. The main reasons to stick with EOR at this scale are speed-to-market (entity setup takes 3 months) and optionality (you might exit the UK within 12 months).
When Does an EOR Break Even for 5 German Employees at €70,000?
Germany’s entity economics are materially different. A GmbH requires €25,000 minimum share capital (at least €12,500 paid in at registration), notary fees, and commercial register filing; setup runs €4,000–€7,500 ($4,553–$8,537). Annual compliance for a small foreign-owned GmbH costs €8,000–€15,000 ($9,106–$17,074), and that figure covers the mandatory annual financial statements (Jahresabschluss), the corporate tax filing, basic bookkeeping and a registered office. It does not cover running payroll, employment counsel or the time someone on your team spends owning the entity.
Year-1 cost comparison
| Cost item | EOR route | Own entity route |
|---|---|---|
| Per-employee monthly fee | $599 × 5 = $2,995/mo | — |
| Annual EOR fees | $35,940 | — |
| GmbH one-time setup | — | $6,261 (typical) |
| Minimum share capital (tied up) | — | €25,000 ($28,458) |
| Annual compliance cost | — | $13,090 (typical) |
| Payroll bureau (5 employees) | — | $40/mo × 5 = $2,400/yr |
| Total year-1 cost (excl. capital) | $35,940 | $21,751 |
| Year-1 saving vs EOR | — | $14,189 |
The €25,000 share capital is equity in the company, not a sunk cost: you recover it if you ever dissolve the entity. But it does represent working capital tied up for the life of the entity, with an opportunity cost your finance team will want to account for.
Break-even headcount for Germany
= ($6,261 + 3 × $13,090) ÷ (($599 − $40) × 36) = $45,531 ÷ $20,124 = 2.26, which rounds up to 3 employees.
The payroll-bureau figure in that formula is the per-employee cost, $40 a month, and our entity benchmark holds no sourced German figure for it. The answer is insensitive to it: at $32 the sum gives 2.23 and still rounds up to 3. Germany breaks even at 3 employees on a three-year basis, which is what the calculator says too. At 5 employees you are saving over $14,000 in year 1 alone, before factoring in the capital opportunity cost. The bigger friction is time: a fully operational GmbH with tax registration and first payroll typically takes 8–12 weeks to establish.
Which Variables Shift the Break-Even Point?
| Variable | Effect if higher | Effect if lower |
|---|---|---|
| EOR monthly fee | Entity route wins sooner | Entity route takes longer to pay back |
| Annual compliance cost | More employees needed to break even | Fewer employees needed |
| Intended tenure in market | Entity economics improve significantly | EOR optionality has higher value |
| Number of countries | EOR often cheaper across multiple markets | Single-country entity can make sense quickly |
Use the live break-even calculator to plug in your actual EOR quote, local compliance estimates, and planned headcount ramp to see the exact crossover month for your scenario.
UK EOR fee: market median across major providers, May 2026. German EOR fee: the published German from-price for Deel, about €525 ($599) a month, from our own best EOR Germany shortlist, where each provider’s German entity is checked against the Handelsregister. Entity compliance costs: mid-range estimates for a small foreign-owned subsidiary, converted at £1 = $1.25 and the pinned ECB rate €1 = $1.1383 for 2026-07-01. The German payroll-bureau figure is an estimate; our entity benchmark holds no sourced German figure for it. Source: WhichPayroll EOR Entity Benchmark dataset.