Account Manager, ADT

 

Simran works with global clients across the hiring lifecycle, from initial discussions to onboarding and execution. She supports organizations in setting up and managing compliant workforce structures across countries.

 

Expanding internationally often begins with a simple decision:

 

Use an Employer of Record (EOR) or set up a local entity.

 

In the early stages, the answer is usually clear.

An EOR allows companies to hire quickly without establishing a legal presence.

 

But as teams grow, especially in the 10–20 employee range—the decision becomes less obvious.

 

Not because EOR stops working.

But because the company’s operating model changes.

 

This is where the question shifts from:

 

“How do we hire?”
to
“How do we structure our workforce for scale?”

 

The Early Stage: Global Employment Without Entity Setup

 

For companies hiring their first few employees internationally, an EOR solves immediate constraints.

 

It enables:

• global employment without entity setup

• faster onboarding

• built-in compliance coverage

 

This is particularly useful when:

• market entry is still being tested

• hiring plans are uncertain

• internal HR and finance capabilities are limited

 

At this stage, scaling an international team without an entity is not only possible—it’s often the right approach.

 

What Changes After 10–15 Employees

 

As teams approach 10–20 employees in a single country, several structural changes begin to appear.

 

1. Cost Visibility Becomes Critical

 

At smaller team sizes, EOR pricing is acceptable because it simplifies operations.

But as headcount grows, leadership begins comparing:

• employer of record cost vs entity cost

• per-employee EOR fees vs fixed entity costs

 

EOR pricing scales linearly.

 

Entity costs, however, include:

• accounting

• payroll infrastructure

• legal and compliance support

 

These are largely fixed.

 

This is why companies start evaluating the cost of setting up a foreign legal entity more seriously at this stage.

 

2. EOR Limitations at Scale

 

An EOR works well for early hiring.

 

But at scale, certain limitations become more visible:

 

• limited control over employment terms

• dependency on third-party processes

• constraints in customizing benefits and compensation structures

 

These are not immediate blockers.

 

But they begin to matter when teams grow and local operations become more established.

 

3. Compliance Ownership Shifts

 

With an EOR:

• employment responsibility is external

• compliance is managed by the provider

•  

With an entity:

• compliance becomes internal

• the company assumes full responsibility

 

This includes:

• payroll tax filings

• local labor law compliance

• employee classification

 

As teams grow, companies begin assessing EOR compliance risks as the team grows, especially in relation to:

• audit readiness

• reporting accuracy

• long-term governance

 

4. Permanent Establishment Risk Considerations

 

Another factor that becomes more relevant at scale is permanent establishment risk with EOR.

 

While EOR structures can help mitigate some exposure, certain conditions—such as:

 

• revenue-generating employees

• long-term operational presence

 

may trigger tax and regulatory implications.

 

This is one of the reasons companies revisit their global workforce expansion strategy beyond initial hiring.

 

When to Set Up a Foreign Entity

 

There is no fixed rule.

But several signals consistently indicate when it may be time to consider a foreign subsidiary setup.

 

Common indicators:

 

• Hiring plans are stable and predictable

• Headcount is expected to grow beyond 15–20 employees

• Internal finance and HR capabilities are established

• Long-term presence in the market is confirmed

 

At this stage, companies begin evaluating:

 

• when to set up a foreign entity

• foreign subsidiary setup requirements

• internal readiness for compliance ownership

 

Switching from EOR to Your Own Entity

 

The transition from EOR to entity is not a switch.

It is a structured process.

 

Companies must plan for:

• employee contract transitions

• payroll migration

• compliance continuity

• regulatory filings

 

This is often referred to as switching from EOR to own entity, and it requires coordination across:

• HR

• finance

• legal

 

When done correctly, the transition is smooth.

When rushed, it can create operational disruption.

 

How Many Employees Justify a Local Entity?

 

This is one of the most common questions:

How many employees justify a local entity?

 

There is no universal threshold.

 

However, most companies begin evaluating entity setup when:

 

• headcount reaches 10–20 employees

• hiring becomes predictable

• cost optimization becomes relevant

 

This is why employer of record for 10–20 employees is often considered the transition zone.

 

The Real Decision

 

The EOR vs entity decision is often framed as a cost comparison.

But in practice, it is about alignment.

 

Alignment between:

• hiring plans

• operational capability

• compliance readiness

 

The goal is not to choose the cheapest model.

 

It is to choose the model that fits your current stage of growth.

 

Final Thought

 

EOR is not a temporary workaround.

And entity setup is not a default next step.

 

Both are valid structures.

 

The difference lies in timing.

 

Companies that scale effectively revisit this decision as their context evolves—rather than locking into a structure too early.

 

If your team is approaching the 10–20 employee range in a new market, it may be useful to review:

 

• cost structure

• compliance ownership

• timing of entity setup

 

We work with companies evaluating:

 

• EOR vs entity decisions

• workforce structure at scale

• transition planning

 

You can reach out to the ADT team for a structured discussion.

 

Get in touch with us:

 

Netherlands (HQ) : +31 97010207974

 

UK (HQ) : +44 7401131349

 

Belgium : +32 460254634

Follow us on:

 

LinkedIn : https://www.linkedin.com/company/dhi-adt/