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Your First Hire in a New Country: Entity Setup vs. EOR

Expanding across borders. It sounds daring, doesn’t it? The thrill of bringing your company’s vision to an entirely new place, the rush of building that first link in a foreign land. But beneath the headlines and ambitions, there’s this: “How do I actually hire someone over there?” For most Series B or C startups and established IT firms, it comes down to a binary choice: set up a local entity, or hire using an Employer of Record (EOR).

Both methods solve the international hiring puzzle, but they take very different paths. Each option creates its own web of challenges, risks, costs, and timelines. Ask any HR director or global mobility manager—the decision can feel overwhelming. Let’s walk through what matters, what might surprise you, and occasionally share a story or an opinion. For companies working with Enterprise Workforce Solutions (EWS Limited), questions about EOR vs entity setup surface at the start of almost every international growth conversation. So, here’s a clear-eyed look at what those terms really mean for you.

Why companies even face this choice

Imagine your business is thriving. You’ve eyed a new market, sized up the opportunity, and found your ideal candidate for an overseas role. Now comes the critical fork in the road: do you establish your own company in this new country, or do you hire that person through an EOR provider? This is when things start to get, well, complicated.

• You might prefer full control, so an entity feels natural.
• You might need speed and simplicity, pointing toward EOR.
• Your board asks about cost, risk, compliance, and timing.
• Meanwhile, your dream candidate is waiting.

It’s rarely one-size-fits-all. The right answer shifts based on company stage, hiring urgency, and appetite for risk. Still, the decision always revolves around the same considerations—timelines, compliance, cost, flexibility, and control.

Setting up a local entity: what it means in practice

A “local entity” is more than just a government form. It’s the process of building a registered presence in another country—usually a subsidiary, branch office, or sometimes something even more specialized. That entity becomes the legal employer for your in-country team.

Think rules, paperwork, registrations, bank accounts, tax numbers, and a dozen tiny steps nobody tells you about. The specifics vary from place to place, but a few truths show up everywhere.

• It’s slow. To set up an entity can easily take three to six months, sometimes more for trickier jurisdictions. See recent studies on timelines and the administrative process.
• It’s costly. Registration, office space, legal support, tax advice…the bill adds up—often before your first hire is even onboarded.
• Ongoing admin is heavy. Regular filings, payroll registrations, and compliance checks require dedicated effort and often, local expertise.

Local entities are marathons, not sprints.

In many countries, having an entity is required to issue payroll, sponsor visas, or even open a bank account. That sounds like the “proper” way—until you run the numbers or hit your first bureaucratic wall.

Steps in entity creation

1. Legal registration. Filing the papers to establish your company, such as articles of association.
2. Tax setup. Getting a tax ID or VAT number, depending on the country’s requirements.
3. Corporate banking. Opening a local account, which is often trickier than you’d expect.
4. Employment setup. Registering as an employer so you can run payroll compliantly.
5. Ongoing compliance. Maintaining local accounts, filings, and paperwork—sometimes for years, even after you stop operating locally.

For a deeper guide, you can see the step-by-step process outlined in this guide to opening a company abroad published by EWS.

The true cost: money, time, and flexibility

While costs can vary based on country and company size, there’s a trend. Setting up a local company remains a significant investment. Initial fees can reach tens of thousands of dollars, with ongoing costs (tax filings, audits, HR administration, bank fees) stacking up monthly. More subtle costs include lost time—the kind that eats into your speed and agility. For many startups or rapidly-scaling tech firms, that’s the bigger price to pay.

Speed often makes the difference between a deal won and a deal lost.

What is an Employer of Record, really?

The EOR route is entirely different from the traditional entity setup. When you use an Employer of Record, you partner with a third-party provider (like EWS Limited) who acts as the legal employer of your overseas team. You still call the shots on day-to-day work, goals, and performance; but officially, the EOR holds the employment contract.

• The EOR manages all statutory employment, from contracts to payroll to taxes.
• Your company directs the employee’s work as if they were on your staff.
• There’s no need to register your own company in-country.

According to research examining global EOR adoption, the main appeal is that the EOR model helps companies reduce legal and administrative risks, while also saving time.

The EOR is your bridge into the country, so you can focus on the person, not the paperwork.

The EOR model is especially attractive for businesses seeking to test new markets, hire remote teams, or add a few key hires in several countries—without the anchor of a local entity everywhere.

How EOR services work, step by step

1. Select a provider. Usually, your partner will have a presence or network in your target country.
2. Offer and contracting. You choose a candidate, and the EOR issues a compliant employment contract.
3. Onboarding and payroll. The EOR enrolls the hire into payroll, manages tax and social security, and handles all statutory filings.
4. Ongoing relationship. You give instructions and supervise work just as you would with a direct hire, while the EOR handles bureaucracy.

Many companies working with EWS appreciate the single point of contact and flexibility to scale teams up or down with minimal legal fuss.

Where the EOR model shines

It’s natural to be cautious. Perhaps EOR seems “less official,” or maybe you’re worried about control. But there’s a reason so many international hiring experts recommend Employer of Record services for early hires:

• Speed: Hiring through an EOR can often be completed in less than two weeks (see hiring timelines compared to entity setup).
• Risk management: EORs handle compliance with local labor laws (backed up by studies).
• Cost-effective: Companies have reported up to a 30% cost saving when using EORs instead of setting up their own entity (see resource allocation research).
• Simplicity: No legal footprint, so you reduce your exposure and future exit costs.

Compliance without the headaches

For highly regulated sectors, or where employment laws change quickly, EORs are able to keep up with compliance requirements so you don’t have to. They handle local payroll calculations, tax withholdings, filings, and insurance—down to the last detail. This kind of compliance management isn’t just convenient. According to studies on DIY global hiring, doing it in-house adds hidden risks and burdens that most businesses aren’t equipped to manage.

Payment in local currency (including for independent contractors), navigating benefits, or covering country-specific leave entitlements—all wrapped into a clean monthly invoice. Studies show EORs can simplify global payroll considerably.

Where setting up your own entity makes sense

Let’s be fair: the old-school entity approach still has its place.

• You want to make a substantial long-term investment in a market.
• Your clients or partners require you to have a locally registered company.
• Your headcount will quickly grow beyond the limits typically set by EORs (often 10-20 employees).
• You need the ability to sponsor visas or import/export directly.
• You seek maximum control over branding, benefits schemes, or tailored employment contracts.

In these cases, while the process is slower and carries higher upfront and ongoing costs, direct local presence is sometimes unavoidable. For some companies, it’s a statement—not just of their ambition, but of their willingness to make a meaningful, sustained commitment to a new market.

The permanence (and limits) of an entity

When you register a legal entity, you’re making an ongoing commitment. Even if your headcount shrinks, filing, auditing, and compliance costs keep coming. And winding down a local company can be, honestly, even more complex and expensive than setting it up. If you think of international expansion as a test rather than a permanent stretch, this rigidity can be a drawback.

Flexibility doesn’t always survive legal paperwork.

Comparing costs: the numbers companies care about

Let’s talk money. Having run cost models with a variety of EWS clients, I’ve seen budgets unravel when they encounter unexpected fees—tax advisor retainers, notarial costs, employment insurance, or just random government surcharges.

• Entity setup fees: Typically $15,000 to $30,000 upfront, depending on jurisdiction complexity.
• Ongoing entity maintenance: Annual fees of $10,000–$20,000 for compliance, payroll, accounting, and legal services.
• EOR services: Typically, EORs charge a per-employee monthly fee, which includes payroll, tax filings, benefits, and support. Total annual cost per employee is usually far below what establishing and then operating a whole entity would be, unless you plan to grow the regional headcount quickly.

Far from being just theory, this is documented in research around EOR cost savings—sometimes cutting expansion expenses by as much as 30%.

Other subtle costs: lost agility, slowed launches, missed sales windows. For many tech companies, especially those looking at their first hire in-country, these “soft” costs eventually matter more than the invoice total.

Compliance: a tale of two headaches

Any hiring outside your home country creates compliance risks. Labor law, tax regulations, social security, even rules about vacation time—they change constantly and are rarely written with global companies in mind.

If you choose entity setup

• You must obey local employment laws, tax codes, and operational rules directly.
• Staying up to date is your responsibility, often necessitating regular expert legal advice.
• Penalties for non-compliance can be severe, including back taxes, fines, and reputational damage.
• If laws change (and they do), you must adapt at your own expense.

If you choose EOR

• The EOR assumes employer liability, so the compliance risk on issues like wrongful termination or misclassification sits with them.
• You receive up-to-date, compliant contracts and ongoing support, reducing the burden on your in-house team.
• This coverage includes proper tax, benefit, and insurance administration.

For business leaders, the difference is stark. As noted in studies of EOR compliance effectiveness, these services often keep companies safer (and out of the headlines) compared to trying to go it alone.

What about payroll and benefits?

Setting up an international payroll system from scratch? That’s a project in itself. Local tax withholding, pension contributions, statutory benefits—every country has its formula, deadlines, and hurdles.

• Running this internally means investing in local payroll software, hiring bilingual staff, syncing with bank cutoffs, and tracking ever-shifting government rates.
• EOR providers already have this infrastructure and expertise in place, making payroll and benefits delivery feel surprisingly simple. Just one line in a global payroll platform.

The right payroll setup means everyone gets paid, every time, without drama.

This is one of the areas where EOR shines for first-country hires (and frequently, for small international teams). For companies like those working with EWS, payroll simplicity is often the “aha” moment that seals the decision.

Flexibility, scaling, and the reality of change

Markets change. Revenue projections rise (hopefully), or sometimes you must shrink back. In these scenarios, how easy is it to scale up and down?

• With an entity, scaling up requires new hires, but scaling down can be hard—closing an entity is not like ending a contract.
• EORs let you flex workforce size in tune with business conditions, without the obligation to maintain a registered local company, or manage layoffs and associated legal costs if things don’t go as planned.
• This flexibility is why so many post-Series B startups and established IT firms trust the EOR model for their first expansion steps.

If you want a snapshot of startup global expansion approaches, this real-world guide from EWS paints a telling picture.

Decision-making: questions to ask before you act

Some companies breeze through this decision. Others agonize for months, worrying about edge cases. Before you make the call, it’s useful to answer a few hard questions:

• How quickly do we need this hire in place?
• Is this a market test, or a permanent presence?
• What’s our budget for setup and ongoing local operations?
• Do we have the in-house expertise to manage compliance, tax, and payroll in-country?
• Are we likely to scale this team up or down within 1–2 years?
• Does local regulation (or clients) require us to have a formal company entity?

To get a sense of the legal implications of hiring in a new country, the EWS guide to international hiring considerations outlines details that catch many teams by surprise.

Real-life situations

A Series C SaaS company: testing a new region fast

Maria, the global expansion lead, needs to hire a sales engineer in Poland—yesterday. The company plans to evaluate the region for six to twelve months, then decide whether to add a local customer success presence.

• She picks EOR. In under seven business days, her new hire signs a compliant contract, payroll is handled, and the test market launch begins. If growth is strong, she can consider an entity setup later.

An established IT firm: building a lasting presence

James is tasked with launching a formal R&D center in India. Regional clients expect local contracts and want to visit an actual office.

• He sets up a local entity, budgets for three months of bureaucracy, and plans for escalating headcount. The company absorbs the startup and ongoing costs for maximum local control.

Most companies begin with EOR for flexibility and speed, then, if things go well, move to entity structures for bigger, more sustained teams. The two aren’t mutually exclusive; they’re parts of a toolkit. Sometimes you’ll use both at once, in different countries.

Common myths and misconceptions

• Myth 1: “EOR isn’t compliant in all sectors.” In reality, leading EORs handle most standard roles, with exceptions only for certain licensing requirements.
• Myth 2: “Setting up an entity is always permanent.” Actually, you can wind it down, but this is often much harder than people expect.
• Myth 3: “You lose all control with EOR.” You set goals, roles, and culture—what changes are the employer-of-record’s responsibilities for contracts and paperwork.
• Myth 4: “EOR is too expensive long-term.” For small teams or flexible hiring, it’s almost always the more cost-effective option.

Thinking for tomorrow

Technology has changed global hiring. Now, it’s rare for only the biggest companies to go multinational. These days, even lean startups seek out talent wherever it appears.

The EOR vs entity setup question surfaces most frequently for those stepping into international hiring for the first time. By blending speed, compliance, and reduced risk, EOR delivers a low-friction point of entry to new markets—a recurring theme in many EWS client stories, echoed in this look at hiring models for your first overseas employee.

Of course, sometimes the traditional local entity makes the most sense, especially for major, long-term investments and when client agreements require it.

A simple table to compare pros and cons

• Entity setup advantages: ultimate local control, brand presence, full benefits customization, direct contracts, easier to scale large teams.
• Entity setup disadvantages: long setup, high cost, ongoing compliance risk, difficult to exit.
• EOR advantages: fast launch, lower cost for small-to-midsize teams, compliance support, flexibility, easy exit plans.
• EOR disadvantages: less visible local presence, some restrictions on employee types, slightly less control over contract fine print.

Both methods provide a path forward, but the smart companies adapt their approach as their needs shift. Being able to switch from EOR to an entity later (once growth in the new market is proven) is a common strategy.

Last reflections and next steps

There are so many stories of bold expansion followed by hidden challenges. Sometimes success comes by moving quickly and minimizing commitments until you have proof that you belong in a market. Other times, slow and steady wins. You’ll probably second-guess yourself, but that’s normal—it’s a big decision.

The first hire in a new country is the hardest, but it changes everything.

If you’re considering an EOR model, or want to know when you should make the leap from EOR to full entity setup, the EWS perspective on scalable global expansion is packed with the questions to ask and steps to take.

Now is the perfect time to rethink how your company builds its global workforce. Working with an experienced management consultancy like EWS Limited gives you guidance, compliance confidence, and a team that actually understands what’s at stake. Want to connect the dots for your own international growth? Reach out to us and see how our tailored solutions can turn uncertainty into momentum.