Incorporation vs Employer of Record (EoR) in the Philippines: Key Considerations for Your Business

Comparing Costs and Compliance Risks

Cost of Setting Up an Entity vs. Partnering with an EoR

When comparing the costs of incorporation and using an EoR, it’s important to weigh the upfront expenses of setting up a legal entity against the ongoing costs associated with an EoR service. Incorporation typically requires significant initial capital, including fees for legal counsel, government registrations, and setting up local infrastructure.

On the other hand, using an EoR model involves a service fee that covers employment management, payroll, taxes, and compliance. While the cost of an EoR may seem higher over the long term, it often represents a cost-saving solution for businesses that don’t want the financial burden of establishing a permanent entity.

Compliance Issues and How EoR Mitigates Them

Incorporating a business in the Philippines comes with heavy compliance obligations, including the need to adhere to tax laws, labor regulations, and employee benefits requirements. Businesses must stay up-to-date with changes to labor laws and ensure that they meet all legal obligations to avoid penalties or fines.

An EoR greatly reduces compliance risks by handling these issues on behalf of your business. The EoR provider is responsible for ensuring that all employees are paid according to local wage laws and receive mandatory benefits, including SSS contributions, PhilHealth, and Pag-IBIG Fund membership. By using an EoR, your company can mitigate the risk of non-compliance while focusing on core business operations.

Which Option is Best for Your Business?

Deciding Factors: Business Goals, Scale, and Risk Tolerance

Choosing between incorporation and using an EoR depends largely on your company’s business goals, scale, and risk tolerance. If you plan to establish a long-term presence in the Philippines and want full control over your operations, incorporation may be the better option. It allows for a stronger market presence and offers greater flexibility in how you manage your business.

However, if your primary goal is to enter the market quickly and with minimal risk, partnering with an EoR offers an efficient and cost-effective solution. This model is ideal for companies that want to avoid the regulatory and administrative challenges of incorporation while maintaining flexibility in scaling their workforce.

How AYP Can Help

Expanding into the Philippines doesn’t have to be a complex, time-consuming process. With AYP’s Employer of Record (EoR) services, your business can hire and manage employees in the Philippines without the need to establish a local entity. AYP handles all HR-related tasks, from payroll and tax compliance to benefits administration and legal requirements.

By partnering with AYP, you can focus on growing your business while we ensure full compliance with Philippine employment laws. Whether you’re testing the market or planning a long-term presence, AYP provides a seamless, low-risk solution for expanding into the Philippines.