EOR Services vs. Setting Up a Business Entity

May 01, 2023
6 min read
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Due to the developing technology and the growing economies, globalization is now pushing companies to scale and acquire exceptional talents across borders. To comply with legalities, most business owners think they can only enter a new market by setting up their own entity, which can be time-consuming and costly. However, another option is gaining its spotlight these past few years—the Employer of Record or EOR services.

Companies often engage with an EOR to simplify human resource operations’ complexities and deal with the legal requirements when outsourcing from another country. Let’s look at what setting up a new business entity looks like vs. partnering with an Employer of Record company in this article.

Setting up an entity when managing remote teams

When managing remote teams across borders, there are specific labor laws that you need to follow. This is why most companies consider setting up an entity in the country to comply with legal requirements. It usually takes months to process, incur processing costs, and may even require a good percentage of foreign and local ownership.

However, there are standard requirements that companies must prepare for before setting up a new business entity in the Philippines:

  • Physical address aside from remote workplace
    First, you need to have a physical address in the country that you will either rent, lease, or own. You also have to note that buying a property as a foreign investor poses a limitation on foreign ownership of your business.
  • Registration with local tax and labor authorities
    Aside from that, a company needs to comply with its legal obligations to register with local tax and labor authorities, which undergo complex and timely processes.
  • Bank account
    You should also set up a local bank account which costs a lot of time and effort complying with the bank requirements as a foreigner. Here, you need to deposit a specific amount as leverage and proof that you can hire foreign employees and set up an entity.
  • Local Payroll
    Payroll in a foreign country can be a complex endeavor. Local rules and regulations around payroll need to be strictly followed. This will require knowledge of local labor laws and expertise. Not following local rules and regulations may result in legal issues and cost your business more.
  • Employment consultants and tax accountants
    Some hidden costs may also occur for accounting and tax filing as each business is required to do their monthly, quarterly, and annual tax filing from the date of their business registration.
  • High Capital
    When setting up an entity in the Philippines with foreign ownership, the most common paid-up capital is a minimum of USD 200,000.

The cost of setting up an entity always boils down to a large amount of taxes and fees that the company must pay in the process.

Due to these complexities, many foreign companies and investors avoid setting up an entity in the Philippines and opt to use other outsourcing options. To simplify their outsourcing strategy, businesses consider partnering with outsourcing companies to take over these complex responsibilities.

This is where the role of an  Employer of Record (EOR) comes into play.

EOR services

What is an Employer of Record or EOR services?

When thinking about outsourcing, a lot of people automatically think about Business Process Outsourcing or BPO. However, Employer of Record or EOR services is a more convenient option that gives you freedom in choosing your employees and managing them according to your preferences.

Employer of Record is an employment solution that allows a third-party provider to be legally responsible for the employment processes of your company. It makes for a smoother and quicker method to employ Filipino employees lawfully without setting up a legal entity.

This means that EOR services will manage employment relationships, provide government-mandated benefits and other HR administrative tasks. They will also be liable for withholding tax and social contributions as well as payroll management.

The client will still have full control of managing the time and day-to-day responsibilities of their employees.

How can EOR services benefit your company?

Unlike setting up a local entity in a foreign country, partnering with an EOR company is more efficient and practical. EOR services will take over most of your complex employment responsibilities, which can be time-consuming and costly.

Here are some of the benefits that you could get from getting EOR services:

You have more time and savings when managing remote teams.

Due to the complexities of the Filipino labor laws, having an in-depth understanding of it for setting up entities may be difficult and time-consuming. But why would you bother spending too much time and money if your initial goal is hiring and managing remote teams to lift off a chunk of your workload efficiently? In this case, an employer of record can help and provide you the option of having a convenient outsourcing experience in a much lesser time.

You have a localized payroll.

Having a localized payroll means that you won’t need to worry about payroll complexities such as night shift differentials and holiday pay, amongst others. An EOR is specialized to handle these challenges for you and improve the engagement of your team.

You have more freedom.

By partnering with an EOR company, you’ll have more discretion and freedom with how you want to manage your employees. With EOR services, you will have the freedom to work with your team in the Philippines, like managing your team in your home country. Unlike BPOs, you are not limited in your day-to-day management decisions, who you want to hire, fire, or promote.

You have an engaged team

Employer of record

Employees in the Philippines are usually covered for health insurance by their employer. An EOR can help you secure additional benefits for your employees, resulting in a happier and more engaged team.

You have an HR extension in the Philippines

An EOR is at your service to manage all employee queries and arrange payroll, government-mandated benefits, and HR administrative tasks for your team. Your EOR should also offer end-to-end assistance in purchasing laptops for your employees, from procurement to securing accountability documents to deliver right at their doorsteps.

Simplify your operations when managing remote teams

EOR services take away the complexities and simplify the entire hiring process for you. Engaging with an EOR means that you will not have to think about local HR, compliance, attendance tracking, payroll, and reporting so you can focus on what is most important: growing your business.

Engage with EOR services now!

Knowing the difference between setting up a business entity and engaging with EOR services for scaling your team in a strategic market, you might already be thinking of hiring with an EOR. Finding a reliable Employer of Record that is good for your business, your employees, and the community is the key to the success of managing your remote teams.

To know more about how an Employer of Record company can help you scale your team in a strategic market, check out the services we offer at Remotify.

About Remotify

Remotify is your next-generation solution to managing your remote team conveniently and cost-effectively in the Philippines.

Through our Employer of Record service, Remotify will employ and payroll your workers in the Philippines and do the heavy lifting for you. We will take care of local HR, compliance, attendance tracking, payroll, and reporting so you can focus on what is most important: growing your business.

This means you can quickly and securely hire employees in the Philippines, attracting top talents and keeping them engaged through the process. At the same time, you avoid the overhead of establishing your own entity.

From complex local tax and labor laws to in-country capital requirements and compliant HR management, payroll, and benefits disbursement, getting started in a new country to tap on its low cost and great talents can be a time-consuming endeavour. But with the right partner, it doesn’t have to be. Remotify is here to keep things simple for you, check out our services page to learn more.

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