Linx Team · 3/23/2026
Expanding globally requires a key decision: open a foreign entity or use an Employer of Record (EOR). While setting up a subsidiary offers control, it comes with high costs and complexity. An EOR provides a faster, simpler, and more flexible way to hire internationally. Understanding the cost and operational differences helps businesses choose the right global expansion strategy.
Companies expanding internationally face an important operational decision early in the process:
At first glance, opening a subsidiary may appear to offer greater control and long-term cost advantages. However, once leadership teams begin evaluating the real financial and operational implications, many discover that establishing a foreign entity is significantly more complex and expensive than expected. Understanding the true cost difference between Employer of Record services and setting up a local entity is essential for companies planning global hiring strategies.
An Employer of Record (EOR) is a service provider that legally employs workers in a specific country on behalf of another company. Instead of creating a subsidiary, the EOR becomes the official employer responsible for:
While opening a legal entity may seem straightforward on the surface, the reality is far more complex. Establishing a subsidiary requires navigating legal, financial, and administrative requirements that vary widely between countries. For many organisations, the true cost of setting up an international entity extends far beyond initial registration fees.
The first step involves legally incorporating a company in the target country. This process often requires:
Once a company entity is established, the administrative responsibilities do not end. Most countries require businesses to maintain ongoing corporate compliance, including:
Operating a legal entity also requires establishing a compliant payroll structure in the country. This includes:
Perhaps the most overlooked factor is time. Creating a foreign subsidiary can take anywhere from 8 weeks to 6 months, depending on the country’s regulatory framework. For fast-growing companies trying to secure top talent quickly, this delay can create major hiring bottlenecks.
Employer of Record services simplify global hiring by eliminating the need for entity formation. Instead of establishing legal infrastructure, companies pay a predictable monthly fee for employment management. Typical Employer of Record pricing models include:
This fee typically includes:
Let’s consider a scenario where a company wants to hire five employees in a new international market.
Expense Category Estimated Cost Legal incorporation $20,000 Corporate documentation $8,000 Accounting and compliance $25,000 annually Payroll system setup $7,000 Total first-year cost: $60,000+
Despite the higher costs, there are situations where setting up a foreign subsidiary makes strategic sense. Companies may choose to establish a local entity when:
For many organisations, an Employer of Record solution provides the fastest and most efficient path to global hiring. EOR services are particularly valuable when:
Remote work and digital collaboration have permanently changed how companies build teams. Access to global talent is no longer limited by geography. However, international employment still requires navigating local regulations, tax systems, and labor laws. Employer of Record solutions have emerged as a critical layer of infrastructure that enables companies to expand globally without building legal entities in every country. For many modern organizations, the question is no longer whether to hire globally, but how to do it efficiently and compliantly.