EOR vs. Setting Up Your Legal Entity: Which is a Better Fit for Your Global Workforce Management
When considering international expansion, businesses are often faced with a crucial decision: should they establish a local entity or opt for an Employer of Record (EOR) service?
Here we break down the key differences, helping you make an informed choice that best suits your global ambitions.
Employer of Record (EOR), what is it?
An EOR is an organization that legally employs your international staff, handling all HR tasks, payroll, benefits, and compliance in each country. This ensures compliance with local laws and provides an exceptional global employee experience.
Some of the benefits of using an EOR like Atlas can be found below:
Quick Market Entry: With Atlas, you can start operations in a new country quickly without dealing with the complex processes of setting up a legal entity.
Less Administrative Burden: We handle all HR, payroll, and legal compliance tasks, leaving you to focus on your core business operations.
Reduced Legal Risks: As the legal employer, Atlas handles all legal and compliance issues, reducing your risk exposure.
Cost-Effective: There are no setup costs or the need for a significant initial investment as with establishing a legal entity.
Scalability: Atlas' EOR solution is ideal for companies of all sizes, making it easy to scale operations up or down as needed.
Costs
On top of this, Atlas can enhance employee experience and significantly boost satisfaction, engagement, and retention. We achieve this by offering competitive benefits packages, providing access to over 9,000 courses for continuous learning through Atlas Learning, and facilitating remote and hybrid work options with dedicated local support.
With superior employee experience comes the ability of attracting and retaining top talent, driving long-term business success.
Setting Up Your Own Legal Entity
When a company establishes its legal entity in a foreign country, it assumes all employer responsibilities. This includes handling all HR functions like payroll, managing employee benefits, and ensuring full legal compliance with local labor laws and regulations.
The main challenges of setting up a legal entity are:
Slow Market Entry: Establishing a legal entity in a foreign country can take several months due to requirements like a local physical office and substantial capital in a local bank account, delaying your market entry.
Administrative Burden: Your company has to manage all HR tasks, payroll, and legal compliance in each country.
Increased Legal Risks: If you're not fully aware and stay up to date with local employment laws and regulations, you could face hefty fines and legal issues.
High Costs: Establishing a legal entity requires a significant initial investment and ongoing costs for maintaining the entity.
Difficult to Scale: Scaling up or down can be long and complicated when managing your legal entities.
Inconsistent employee experience: Employee management can have disparities, especially regarding a uniform global benefits coverage.
Employer of Record (Atlas) | Setting up Your Own Legal Entity | |
|---|---|---|
Time to Market | Quick market entry due to established entities in 160+ countries. | Slow market entry due to the time-consuming process of setting up a legal entity. |
Administrative Burden | Atlas handles all HR, payroll, and legal compliance tasks. | Your company is responsible for managing all HR tasks, payroll, and legal compliance in each country. |
Legal Risks | Reduced risk as Atlas, acting as the legal employer, handles all compliance issues. | Increased legal risks due to potential lack of knowledge of local employment laws and regulations. |
Initial and Ongoing Costs | No setup costs. Atlas' service fees are the only costs. | Significant initial investment required to set up a legal entity, plus ongoing costs for maintenance. |
Scalability | Easy to scale operations up or down quickly as needed. | Scaling operations can be a long, complicated process when managing your own legal entities. |
Focus on Core Business | With Atlas handling HR tasks, payroll, and legal compliance, you can focus on your core business. | The burden of HR, payroll, and legal compliance could distract from core business operations. |
Employee Experience | Higher retention and satisfaction; increased ability to attract top talent. | Uneven employee management might lead to higher turnover. |
Why Take the Longer Route, When Atlas is Here to Simplify Your Global Expansion?
Atlas offers a simple, effective, and efficient alternative to setting up your foreign legal entity. Our Employer of Record services take the burden off your shoulders so that you can focus on your core business, while making sure you attract and retain the best talent with superior employee experience.
The choice between setting up a local entity and employing an EOR service boils down to your specific business needs and capacity. While setting up a local entity offers more control over your operations, it also comes with challenges, risks, and expenses.
On the other hand, using an EOR service can significantly reduce costs, save time, streamline processes, and ensure compliance, making it a viable option for businesses looking to fast-track their global expansion.