The EOR vs company setup decision will make or break your expansion timeline. Most founders think they understand the trade-offs. They don’t. The real differences go way deeper than “EOR is faster, entity is cheaper long-term”.
Your choice determines whether you’ll be hiring next month or next year. It decides who gets sued when labor laws change. And it shapes how much cash you’ll burn before you see any revenue.
Asia represents the world’s biggest growth opportunity right now. The ASEAN economy is predicted to surpass $4 trillion this year. Southeast Asia is forecast as one of the fastest-growing economic regions globally.
But here’s what nobody tells you: market opportunity means nothing if you can’t hire fast enough to capture it. Your competitors aren’t waiting for your entity paperwork to clear.
This guide cuts through the marketing fluff.
You’ll see numbers from companies that tried both approaches. You’ll learn which model actually works for different business situations. And you’ll walk away knowing exactly which path fits your timeline, budget, and risk tolerance.
What You’re Really Choosing Between
An EOR becomes the legal employer of your Asian staff. You control the work. They handle everything else: payroll, taxes, benefits, compliance. Think of it as outsourcing the legal hassles while keeping operational control.
Setting up your own entity means incorporating a subsidiary in each target country. In China, you register a WFOE. In Indonesia, you file for a PT PMA. Different names, same result: you own the legal structure and manage everything directly.
The global EOR market hit $10.45 billion by 2033, up from $5.59 billion in 2024. Here’s what matters: EOR trades control for speed. Entity setup trades speed for control. Neither is universally better.
EOR vs Company Setup: Speed Reality Check
An EOR gets you started fast
EOR cuts your hiring timeline to 1-4 weeks across most Asian markets. In China, you can onboard in 7-10 days. Vietnam and Indonesia show similar speeds. The EOR already has the legal infrastructure. You skip the government approval dance entirely.
Companies report 90% faster market entry with EOR compared to entity setup. Speed matters more than most founders realize. Asian markets move fast. Talent gets snapped up quickly.
Entity setup takes forever
Entity registration in Asia typically takes 3-9 months. In Indonesia, PT PMA incorporation involves multiple Ministry approvals. You’ll wait for licensing, tax registration, and banking approvals before hiring anyone.
China’s WFOE setup takes 3-6 months, depending on your province and business scope. Vietnam entity closure takes 6-12 months if you need to exit later. The bureaucracy isn’t just slow. It’s unpredictable.
The Talk Nobody Wants to Have
Upfront costs
Setting up an entity in Asia requires significant upfront capital. Indonesia requires IDR 10 billion for foreign companies. That’s roughly $611,808 before you hire a single person. Establishing a UK entity costs $78,000-$128,000 in total setup expenses. Spain averages €3,400-€4,300.
An EOR flips this model. You pay minimal upfront costs. Most services charge a flat monthly fee starting around $49.99 per employee. No capital injection, office lease, or registration fees.
EOR vs Company Setup: Monthly Burns
Entity overhead includes ongoing accounting, tax filings, payroll processing, and compliance monitoring. HR costs average 1.47% of operating expenses. Payroll management eats 15-30% of total revenue for most businesses.
In regulated industries, compliance costs exceed $10,000 per employee annually. EOR bundles these costs into the service fee. UK payroll administration costs $56,000-$65,000 yearly with an entity versus $7,188 with an EOR.
But the crossover point matters. Once your team exceeds 10 employees, entity economics start looking better. EOR fees multiply per person. Entity overhead spreads across more people.
Who Actually Owns the Risk of EOR vs Company Setup
Compliance struggles
Asian labor laws vary dramatically between countries. Indonesia’s Omnibus Law simplified some rules but created new challenges around contract employment. Vietnam recently tightened foreign workforce regulations.
EOR takes on legal employer responsibilities. They handle employment contracts, social security contributions, payroll taxes, and statutory benefits. When Thailand or South Korea changes termination laws, it becomes the EOR’s problem, not yours.
The permanent establishment trap
Here’s the dirty secret about EOR: it doesn’t eliminate permanent establishment (PE) risk. Tax authorities focus on your business activities, not your employment structure. If your staff generates local revenue, signs contracts, or negotiates deals, many countries will classify you as having a taxable presence regardless of EOR arrangements.
Once authorities establish PE, you owe back taxes, penalties, and interest as if you’d been operating an entity all along. The only way to eliminate PE uncertainty is to own your own entity.
When EOR Actually Makes Sense
EOR works best for market testing and uncertain timelines. If you want to try Vietnam for 18 months or hire a small Indonesian team without major capital commitment, EOR gives you flexibility.
Small teams benefit most from EOR. If you’re hiring 1-2 remote engineers in the Philippines or a handful of customer support staff in Malaysia, the administrative overhead of a full entity makes no sense.
EOR also works for immediate hiring needs. If you need to start building a team while your entity registration processes, EOR bridges the gap. Project-based work fits EOR perfectly.
When You Need Your Own Entity
Long-term commitment signals favor entity setup. If you’re planning 5+ years in a market, the upfront entity investment pays off through lower ongoing costs and operational control.
Scale tips the economics. When your local team exceeds 10 employees, entity overhead starts spreading more efficiently than per-employee EOR fees.
Control requirements often force entity decisions. If you need local corporate banking, work visa sponsorships, government contracts, or large facility leases, EOR typically can’t deliver. Only registered companies access these resources.
Brand credibility matters in some markets. Local clients and partners often prefer contracting with registered entities over EOR arrangements. Revenue significance also triggers entity needs. When a market generates substantial income, tax authorities scrutinize your presence more closely.
The Hybrid Play
You don’t have to pick one model permanently. Smart companies use phased expansion: start with EOR for speed and market testing, then transition to entity as commitment and scale increase.
This approach maximizes both speed and control. You enter markets quickly through EOR while planning entity setup for successful regions. Some companies run hybrid operations indefinitely.
Timing the transition matters. Entity setup still takes 6+ months, so start the process well before you hit EOR limitations.
Making the Call between an EOR vs Company Setup
How many people will you hire in year one? Under 10 employees usually favor EOR on cost and complexity. Above that threshold, run detailed cost comparisons. What’s your market timeline? Testing for 12-18 months suits EOR perfectly. Building a regional hub for the next decade demands an entity structure.
Do you need local banking, contracts, or government access? These requirements typically force entity decisions regardless of other factors. Can you afford 3-9 months of setup delays? If market timing is critical, EOR becomes your only realistic option.
The biggest mistake is treating this as a forever decision. You can start with EOR and switch later. The second mistake is ignoring hidden costs. Entity expenses go far beyond registration fees. The third mistake is underestimating PE risk with EOR. Just because you use an EOR doesn’t mean tax authorities will ignore revenue-generating activities in their jurisdiction.
Match your choice to your current reality, not your five-year vision. You can always evolve your approach as circumstances change.
Gini Talent handles EOR services across 11 countries, managing compliance, payroll, and local employment so you can focus on growth. Whether you’re testing new markets or scaling fast, we get you started in days, not months.
