Expanding globally is exciting—but it's also complex. Whether you're hiring your first international employee or scaling across multiple markets, one big question always comes up: Is there a better way to reach new markets other than setting up local entities?
According to our latest Global Atlas Report, 41% of companies have found a smarter alternative for building and managing international workforces: Employer of Record (EOR) services.
With faster market entry, reduced costs, and simplified compliance, EORs are quickly becoming the go-to solutions for global workforce management.
But how does setting up entities compare to an EOR?
Here we break down the key differences, helping you make an informed choice that best suits your global ambitions.
What Are the EOR Advantages for Global Expansion?
An EOR is an organization that legally employs your international staff, handling all HR tasks, payroll, benefits, and compliance in each country you expand to. This ensures compliance with local laws and provides an exceptional global employee experience.
Some of the benefits of using an EOR like Atlas HXM are:
Quick market entry: Set-up operations in a new country quickly without dealing with the complex processes of establishing a legal entity.
Less administrative burden: An EOR handles all HR, payroll, and legal compliance tasks, leaving you to focus on your core business operations.
Reduced legal risks: As the legal employer, an EOR handles all legal and compliance issues, reducing your risk exposure.
Cost-effective: Requires minimal upfront investment compared to establishing a legal entity.
Scalability: An EOR solution is ideal for companies of all sizes, making it easy to scale operations up or down as needed.
Beyond simplifying global hiring, an EOR partner like Atlas HXM plays a key role in elevating employee experience, one of the most critical drivers of retention and engagement today. Atlas does this by offering competitive, locally compliant benefits packages, providing access to thousands of upskilling opportunities through Atlas Learning, and support in 50+ languages.
When employees feel supported and empowered, they stay longer, perform better, and become ambassadors for your brand. That's why investing in employee experience through an EOR isn't just a people strategy—it's a growth strategy.
Challenges of Setting Up Your Own 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 local requirements like a physical office or substantial capital in a local bank account, delaying your market entry.
Administrative burden: Your company must 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, as well as reputational damages.
High costs: Establishing a legal entity requires 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: Employees can have disparity in terms of experience, especially regarding uniform global benefits coverage.
Entity vs Atlas HXM EOR Comparison
Establishing a local entity | Partnering with Atlas | |
|---|---|---|
Cost | Total cost: On average 203.000 dollars* | Total cost: On average 31.500 dollars* |
Timing | On average 20 weeks per country | Completion Within days |
Labor effort | Hiring High-skilled Staff to Run the Entity | Integrated One Partner |
Banking Obligations | Local Bank Account Required | Simple No Local Bank Setup |
Tax Liability | Managing Tax Liabilities | Mitigate Tax Liabilities |
Compliance | Stay Up to Date With Regulation Changes | Team of Regulation Experts |
Termination & Employment Laws | Notice Periods and Severance | Lawful Termination |
* Atlas estimate based on costs associated with setting up and maintaining a legal entity in Germany, excluding salary. Includes executive and financial controller time, legal and compliance fees, entity incorporation, local accounting, VAT registration, payroll, pension, health insurance, and other administrative expenses. Based on a gross annual salary of USD $50,000.
Why Take the Longer Route, When Atlas HXM is Here to Simplify Your Global Expansion?
Atlas HXM 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.