For one hire, or a few, and a short trial, an employer of record (EOR) is usually the cheaper and simpler route. An EOR employs your staff abroad on paper and runs their local payroll for a monthly fee. Your own local company can win later, as headcount and years grow. As of November 2026 the sources show no universal break-even point, because it depends on country, pay, benefits and how long you'll hire there 1.
Is an employer of record or your own company abroad cheaper?
For a small team on a short horizon, an EOR is usually cheaper. You pay per head and skip the yearly costs of keeping a company alive. Your own company starts to pay off as headcount grows, but there's no single break-even figure 1.
Three things decide it: how many people you hire, which country they're in, and how long you expect to stay 1. Pay and benefits shift it further. If you plan to be in a country for years with a growing team, run the numbers early. If you're testing a market with one person, the EOR usually wins by default.
For the basics of how each model works, see our briefing on employer of record vs local entity. This post sticks to the money and the risk.
What does an employer of record really cost per employee?
The headline EOR fee is only one line of the bill. You also pay the salary, the destination country's employer taxes and contributions, and often extras such as currency markups, deposits and exit fees [6]7.
Here are published starting prices, as of autumn 2026:
Then the extras reported across the market, as of October 2026 [7]:
Reported extras: setup of $0-$500 (up to $2,000 in complex cases), a currency (FX) markup of about 1-3%, benefits administration at 5-15% of premiums, termination or offboarding fees of about $150-$1,000, deposits of one to three months of payroll, and some 12-month minimum terms 7.
The employer taxes in the destination country aren't a provider fee at all. They're the local statutory cost, and Boundless says it bills fees alongside payroll and statutory costs 9. Deel says country-specific costs, deposits and other charges need a quote and contract 6, so get them in writing before you compare anything.
Example (illustrative figures): say you hire three people at a fee of US$599 per head per month 8. That's 3 × $599 × 12 = $21,564 a year in fees alone, before salaries, employer taxes, FX or any deposit. A deposit of one to three months of payroll 7 can tie up a fair chunk of cash on day one. Somebody's accountant will notice.
What does running your own company abroad cost each year?
Your own company has a one-off setup cost, then a yearly bill for routine entity costs that keeps coming whether you hire one person or ten. In the Netherlands, for example, a small BV is about €3,000-€5,500 to set up and about €2,500-€6,000 a year in routine entity costs, excluding payroll service 3. Most comparisons show the setup and stop there. That's like pricing a car on the showroom sticker and forgetting the insurance.
The yearly items include the accountant, registered office, statutory filings, payroll, sometimes an audit, and in some countries a locally resident director [10]11.
| Country | Setup (local currency, est.) | Routine annual running cost (local currency, est.) | Extra to note | As of / source |
|---|---|---|---|---|
| Netherlands (small BV) | €3,000-€5,500 | €2,500-€6,000, excluding payroll service | One 2026 provider package quotes €33 per employee per month for payroll | Oct 2026 3 |
| Germany (subsidiary) | €3,000-€7,500 | €8,000-€15,000, excluding payroll | Market estimates, not quotes | Sep 2026 11 |
| Singapore | Not given in sources | SGD 1,558-4,060 compliance estimate | Locally resident director required; NomineeSomeone named as a director or shareholder on behalf of the real owner. services estimated at roughly SGD 2,000-4,000 a year | Aug 2026 10 |
Example (illustrative figures): a small Dutch BV at the top of its range costs about €6,000 a year to run 3. Add payroll for three staff at €33 each a month: 3 × €33 × 12 = €1,188. That's about €7,188 a year, before salaries and employer taxes, on top of €3,000-€5,500 to set up 3.
Closing the company later costs money too, and the sources reviewed don't price a wind-down, so don't assume it's free. Ask for a written estimate of exit costs before you set up.
Where are the grey areas?
Two of the biggest risks here turn on tests with no fixed number. One is whether your business has a taxable presence abroad. The other is where a company is really run from, which is a question of facts rather than a formula. Both can go either way.
- Assuming an EOR removes permanent establishment riskarguable
Why it's greythe EOR is the legal employer, but a PE can still arise if the worker habitually concludes contracts for your company, and some treaties use broader wording [4]
What it could meanthe foreign country could treat your company as taxable there, depending on its rules and the applicable treaty [4]
- Relying on a local director or foreign board meetings to prove a company is run abroadarguable
Why it's greyboard-meeting location is evidence, not a rule, and HMRC looks for who actually makes the top decisions [12]
What it could meanthe company could be treated as UK resident if central management and control sits in the UK [5]
- A UK-resident founder using a foreign company while still controlling it from the UK
Why it's greywhere a company is set up doesn't settle where it's resident, and HMRC says an overseas-incorporated company can be UK tax-resident if its central management and control is actually exercised in the UK [5]
What it could meanthe company could be treated as UK resident, with UK tax consequences depending on the facts
Grey areas turn on the details: where you live, how the money moves and what paperwork you keep. On a free 30-minute call we look at your own situation and tell you plainly how strong your position would be, before you commit to anything.
Assuming an EOR removes permanent establishment risk
The contested pointwhether the worker has and habitually exercises authority to do business on the company's behalf, or plays the principal role in concluding contracts [4]
The EOR holds the employment contract. But the PE test looks at what the worker does for your company, not whose payroll they're on [4]. A dependent agent need not be an employee, so the treaty text matters [4].
A UK-resident founder using a foreign company while staying in the UK
The contested pointwhether the highest-level decisions are actually made in the UK [5]
The company is registered abroad. HMRC tests where central management and control is actually exercised, at the top level, not day-to-day operations [5]. If you make those calls from the UK, the company can be UK resident [5].
Does using an EOR remove permanent establishment risk?
Not automatically. A Permanent establishment (PE)A fixed place of business, or someone regularly signing deals, that lets a country tax part of a foreign company's profits., or PE, is a taxable presence your company can have in another country. An EOR employs the worker, but a PE can still arise from what that worker actually does for you. For example, the UK's own domestic test looks at a fixed place of business or an agent who habitually exercises authority to do business for the company 4. That's the UK's test, not a global one: each country applies its own rules and treaties, so check the ones that apply to you.
The UK's own test (Corporation Tax Act 2010, section 1141) asks about two things. One is a fixed place of business through which your business is carried on. The other is an agent who has and habitually exercises authority to do business for your company 4. Independent agents are excluded (section 1142) 4. That's the UK rule. The country your worker sits in applies its own rules and its treaty with the UK, and some treaties go wider 4.
There are three checks worth making, all drawn from the tests above:
- Contract authority. Can the worker bind your company, and do they do it habitually? 4
- Treaty wording. Some treaties cover a person who plays the principal role leading to routinely concluded contracts, even if someone else signs 4.
- Fixed place. Is the business carried on through a fixed place there? 4
If the answer to any of them is yes, that suggests the EOR may be handling payroll without removing your tax exposure. Read the actual treaty, not just the provider's FAQ page.
Where is a company run from the UK actually resident?
A company registered abroad can still be UK tax resident if its Central management and controlWhere a company's real strategic decisions are taken, usually where the directors actually meet and decide. is exercised in the UK 5. HMRC looks at where the top-level decisions are really made, and by whom. Where the company was set up doesn't decide it 5.
This matters most if you're a UK-resident founder running a foreign company. Hiring a local director doesn't settle it on its own: if the directors only follow someone else's instructions, HMRC looks for the person who actually exercises control 12. If that person is you, working from the UK, the company's residence could be affected 5.
Board meetings help, but they're evidence, not a rule. They carry weight when the board has the controlling power and uses it there. They matter less where the formal meetings happen in one place and the real decisions are made somewhere else 12.
What to do: make sure the people with real authority use it where the company is based, and that the decisions really are taken there. Keep accurate records of them. Be honest about who really decides.
What would a worked example look like, and where is the break-even?
There's no universal break-even point. It depends on the country, pay, benefits and how long you'll be hiring 1. You can still see how the numbers move once you write your assumptions down.
Now move the inputs. Many EOR fees are higher than €175. Deel lists EOR from US$599 per employee per month as a starting fee 6, and Remote lists US$599 per employee per month on annual contracts 8. A higher fee pulls the break-even down. A pricier country pushes it up. Germany's routine annual entity costs are estimated at about €8,000-€15,000 before payroll 11. Singapore requires a locally resident director, with nominee director services estimated at roughly SGD 2,000-4,000 a year, on top of an annual compliance estimate of SGD 1,558-4,060 10. The sources reviewed say there is no reliable universal break-even point, as it depends on country, employee pay, benefits and expected duration of hiring 1.
Build your own version with your real quotes. Then add the costs this table leaves out.
Can you offer benefits to staff abroad either way?
Yes. Under an EOR, though, benefits usually come through the provider and can carry a markup. Reported benefits administration charges run about 5-15% of premiums 7.
Say you buy health cover costing €2,000 a year per person. A 5–15% admin charge adds €100–€300 per person a year 7. With your own company you arrange benefits locally and pay the provider directly, but you also take on the admin yourself, so price that time too.
Whichever route you pick, ask for benefits costs as a separate line in the quote. "Benefits included" can mean a lot of things.
When should you switch, and who is this not for?
Switch when your own numbers show the entity is cheaper over the period you'll actually stay, and you can run it properly. That means real local management and clean paperwork. The sources reviewed say there is no reliable universal break-even point, as it depends on country, employee pay, benefits and expected duration of hiring 1. Reported EOR terms can include 12-month minimums and termination or offboarding fees 7, so plan the exit from the EOR before you sign up with it.
There are three things to check before you move:
- Minimum term. Some EOR contracts have 12-month minimums 7.
- Exit charges. Termination or offboarding fees are reported at about $150-$1,000 7.
- Deposits. Deposits of one to three months of payroll are reported as an EOR extra 7, so confirm when you get yours back. Remote says it has no standard deposit, but a refundable reserve may be required in some circumstances 8.
For the basics of each route, see our briefing on employer of record vs local entity.
- Moving to your own company likely suits you if you have several staff in one country and plan to stay for years [1]
- It can suit you if your EOR fees are well above the entity's running costs in your own model
- It works better if real decisions can be made by local management where the company is based [5]
- Probably not if you have one or two hires or a short pilot [1]
- Probably not if you, a UK resident, would make every key decision from the UK [5]
- Probably not yet if you're inside an EOR minimum term with exit fees to pay [7]
FAQ
Is an employer of record cheaper than setting up my own company? For one or a few hires, or a short pilot, usually yes. An own entity can become cheaper as headcount and time grow, but there's no universal break-even 1.
What does an employer of record cost per employee? Published monthly charges run about $199–$699 per employee, or about 10–20% of salary, before salary and employer taxes 2. These figures aren't a verified market average.
Does an EOR avoid permanent establishment risk? Not automatically. A PE can arise if the worker has and habitually uses authority to do business for your company, and some treaty wording is broader than the UK test 4.
Can a UK founder run a foreign company from the UK without it becoming UK resident? Only if central management and control isn't exercised in the UK. HMRC looks at where the top decisions are really made and by whom [5]12.
What hidden costs come with an employer of record? Reported extras include deposits of one to three months of payroll, FX markups of about 1–3%, benefits markups of 5–15% and termination fees 7. Check the order form and the main contract.
What does it cost to run a small company abroad? A small Dutch BV is estimated at about €3,000–€5,500 to set up and €2,500–€6,000 a year before payroll 3. German subsidiaries are estimated higher 11. These are planning ranges, not quotes.
What to do next
The right answer depends on your own numbers: where your staff are, what they're paid, how long you'll stay, and where you make decisions. You can book a free call to have it mapped out.
