EOR vs. Setting Up Your Legal Entity: Which is a Better Fit for Your Global Workforce Management

When planning for international expansion, businesses face an important choice: should they set up a local entity or utilize an Employer of Record (EOR) service?

Here, we outline the main differences to help you make an informed decision that aligns with your global goals.

What is an Employer of Record (EOR)?

An EOR is a company that legally employs your international workforce, managing all HR responsibilities, payroll, benefits, and compliance in each respective country. This ensures adherence to local regulations while providing an excellent experience for employees worldwide.

Benefits of Using an EOR like Anemone HR:

1. Rapid Market Entry: With Anemone HR, you can quickly initiate operations in a new country without navigating the complexities of establishing a legal entity.

2. Reduced Administrative Workload: We take care of all HR, payroll, and legal compliance tasks, allowing you to concentrate on your primary business activities.

3. Lower Legal Risks: As the legal employer, Anemone HR manages all compliance and legal matters, minimizing your risk exposure.

4. Cost Efficiency: You won’t incur setup costs or require a large initial investment as you would when creating a legal entity.

5. Scalability: EOR solution is suitable for businesses of any size, making it simple to adjust operations as needed.
   

Establishing Your Own Legal Entity

When a company creates a legal entity in a foreign country, it takes on all employer responsibilities. This includes managing HR functions such as payroll, administering employee benefits, and ensuring compliance with local labor laws and regulations.

Key Challenges of Setting Up a Legal Entity:

1. Slow Market Entry: The process of establishing a legal entity can take several months due to requirements like having a physical office and maintaining a substantial amount of capital in a local bank account, which can delay your entry into the market.

2. Administrative Burden: Your company will need to oversee all HR tasks, payroll, and legal compliance in each country where it operates.

3. Increased Legal Risks: If you're not fully informed and up-to-date with local employment laws and regulations, you could encounter significant fines and legal complications.

4. High Costs: Setting up a legal entity involves a considerable initial investment as well as ongoing expenses for maintaining the entity.

5. Challenges in Scaling: Adjusting the size of your operations can be lengthy and complicated when managing multiple legal entities.

6. Inconsistent Employee Experience: Managing employees can lead to inconsistencies, particularly in providing uniform global benefits coverage.

	Employer of Record (Anemone HR)	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	Anemone HR 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 Anemone HR, 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	Without a need to set up your own entity in the country, Anemone HR’s 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 Anemone HR 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.