Comparing EOR vs. Setting Up a Local Entity: Which is Right for Your Business?

Expanding into international markets is a strategic move for businesses looking to access new opportunities and talent. However, choosing the right approach to establish a presence in a foreign country can be challenging. Companies often decide between working with an Employer of Record (EOR) or setting up a local entity—each option comes with advantages and limitations.

In this blog, we’ll explore the key differences between an EOR and a local entity, helping you make an informed decision for your business expansion.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of a company in a foreign country. While the business manages day-to-day operations and assigns tasks, the EOR handles employment contracts, payroll, compliance, and tax obligations.

Key Benefits of Using an EOR

Quick market entry without needing entity registration
Compliance with local labor laws without legal risks
Cost-effective expansion with minimal administrative burden
Payroll, benefits, and HR administration managed seamlessly
Flexibility to hire remote talent in different regions

What is a Local Entity?

A local entity is a legally registered business structure in a foreign country, such as a subsidiary, branch, or representative office. This setup provides full control over operations but requires compliance with local regulations, tax laws, and HR responsibilities.

Key Benefits of Setting Up a Local Entity

Full operational control over business decisions
Direct employer-employee relationships under local law
Stronger presence and credibility in the local market
Long-term scalability for business growth

Comparing EOR vs. Local Entity: Key Differences

Feature	Employer of Record (EOR)	Local Entity
Setup Time	Fast (weeks)	Lengthy (months)
Legal Compliance	Managed by EOR	Requires local legal expertise
Payroll & Tax Administration	Handled by EOR	Must be managed in-house
Costs	Lower upfront costs	High setup & operational costs
Flexibility	Ideal for short-term or remote teams	Best for long-term presence
Risk & Liability	Reduced employer liability	Full legal responsibility
Market Presence	Limited brand presence	Strong local credibility

Which Option is Right for Your Business?

Choose an EOR if:

Set Up a Local Entity if:

How EOR Services Benefit Businesses Expanding to India

India has emerged as a prime destination for global businesses, offering a vast talent pool and cost-effective workforce. However, setting up a local entity in India requires navigating complex labor laws, tax regulations, and compliance requirements.

By partnering with an EOR in India, businesses can:

Hire local talent without entity registration
Ensure compliance with India’s employment laws
Manage payroll, benefits, and taxation seamlessly
Expand operations flexibly without long-term commitments

Conclusion

Both Employer of Record (EOR) and setting up a local entity offer unique advantages, and the right choice depends on your business goals. If you need fast and compliant hiring with minimal administrative burden, an EOR is the ideal solution. However, for businesses seeking long-term market presence and full operational control, establishing a local entity might be more beneficial.

By carefully assessing your expansion strategy, costs, and compliance needs, you can determine the best approach to successfully grow your business in new markets.