EOR vs Hiring Locally: A Full Cost Comparison for 10 Key Markets

The question every finance leader asks

EOR is not always cheaper than setting up a local entity. At small headcounts, EOR wins on speed and simplicity. At larger headcounts, the monthly service fees accumulate and entity setup starts to look more attractive. Here's how the math works across 10 key markets.

The entity setup cost baseline

Setting up a local entity typically costs $10,000–$50,000 in legal, registration, and compliance setup fees, plus $5,000–$20,000/year in ongoing accounting, tax filing, and compliance maintenance. In complex markets like Germany or Brazil, total setup and year-one costs often reach $30,000–$60,000.

Break-even analysis by market

United Kingdom

EOR cost: ~£500/month × 12 = £6,000/year. Entity setup: ~£8,000–£15,000 setup + £5,000–£8,000/year ongoing. Break-even: approximately 3–4 employees. Above 4 UK employees, entity setup becomes cost-competitive.

Germany

EOR cost: ~$650/month × 12 = $7,800/year. Entity setup: ~$15,000–$25,000 setup + $8,000–$15,000/year ongoing. Break-even: approximately 3–4 employees. Germany entity setup is complex — many companies continue EOR to 8–10 employees for compliance reasons even after break-even.

India

EOR cost: ~$400/month × 12 = $4,800/year. Entity setup: ~$5,000–$12,000 setup + $4,000–$8,000/year ongoing. Break-even: approximately 2–3 employees. India entity setup is relatively accessible — companies with 3+ employees in India should evaluate a branch or subsidiary.

Brazil

EOR cost: ~$600/month × 12 = $7,200/year. Entity setup: ~$20,000–$40,000 setup + $15,000–$25,000/year ongoing. Break-even: approximately 5–6 employees. Brazil entity costs are high — EOR remains competitive to higher headcounts than most markets.

UAE

EOR cost: ~$650/month × 12 = $7,800/year. Freezone setup: ~$10,000–$25,000 + $5,000–$10,000/year. Break-even: approximately 2–3 employees. UAE entity setup is faster than most markets (6–8 weeks) making entity setup viable earlier.

The conclusion

For most companies, EOR is cost-efficient up to 5–8 employees per country. Beyond that threshold, the ROI of entity setup improves — but the compliance complexity and management overhead of running a local entity should be factored in alongside the pure cost comparison.