How much an Employer of Record costs, and when your own entity is cheaper

You found the right person abroad and now have to decide how to employ them. The two options are an Employer of Record, which hires them on your behalf for a per-seat fee, or opening your own legal entity in that country. The list fee makes the EOR look expensive. For your first hires it is almost always the cheaper choice, and here is the math.

Both options share the same employment cost

Whichever route you take, you pay the gross salary plus the employer-side statutory contributions for that country. In Germany that burden is about 21%, so a 5,000 dollar a month gross costs roughly 6,050 dollars a month before either model adds anything. That part is identical, so it is not what the decision turns on.

What each model adds on top

• EOR: a flat per-seat fee, around 599 dollars per employee a month at published list rates. It scales linearly: every extra hire adds another fee.
• Your own entity: a one-time setup of roughly 20,000 dollars in Germany, plus about 2,600 dollars a month in running payroll, accounting and compliance. That fixed cost barely moves whether you have one employee or ten.

One hire in Germany, year one

• Through an EOR: about 79,800 dollars (the 6,050 dollar employment cost plus the 599 dollar fee, over twelve months).
• Through your own entity: about 123,800 dollars (the same employment cost, plus a full year of overhead, plus the one-time setup).

For a single hire the EOR is roughly 44,000 dollars cheaper in the first year, because you are not paying to stand up and run a legal entity for one person.

Where your own entity wins

The EOR fee grows with every seat; the entity fixed cost does not. They cross when the stacked per-seat fees overtake the entity overhead plus amortised setup, which on the German baseline is around five to six employees in that one country. Below that, the EOR is cheaper. Well above it, your own entity is, and the gap widens with each extra hire.

The other reason the entity question arrives: legal time limits

That five-to-six-person crossover is a cost answer. There is a second, separate reason you may have to open an entity, and it can arrive with a single hire long before the cost lines cross: several countries cap how long one person can stay on an EOR at all. These limits are set by the country labour and staffing law, not by the provider, so you cannot negotiate them away, and switching EOR providers does not reset the clock, because the limit attaches to the employee-and-client relationship rather than the vendor.

• Germany: an EOR assignment to the same client is capped at 18 consecutive months, after which it must end or pause for at least three months before the person can be reassigned to you.
• Poland: a maximum of 18 months of assignment to the same client within any 36-month window, and changing providers does not restart it.
• France: the temporary arrangement (portage salarial) gives a longer runway but is still capped, commonly around 36 months.
• Croatia: assignment to the same client is capped at about 36 months, with reassignment only after a break or a genuine change of role.
• Norway: an EOR can be used only for time-bound project work, with a general three-year maximum.

When the limit is reached the compliant options are the same two the cost math eventually points to anyway: convert the person to direct employment through your own local entity, or end the engagement. So a country cap can pull the entity decision forward regardless of headcount, turning a single long-term hire into the trigger. The figures above are examples and the rules move, so before you assume you can keep someone on an EOR indefinitely, check the specific limit in their country and treat it as a hard date in the plan, not a detail to sort out later.

The contractor route, and its catch

Engaging the person as an independent contractor skips the employer burden and carries a much smaller fee, so the monthly cost drops sharply. It is only legitimate where the relationship is genuinely independent. If it is really employment in all but name, misclassification penalties can dwarf everything you saved, so treat it as a real option only when the work truly is independent.

What the per-seat fee does not include

The roughly 599 dollar figure is the platform fee. Three real lines sit outside it, and they are what catch people out when the first invoice lands.

• A refundable security deposit. Many EORs hold a deposit, often around one month of gross salary per employee and up to a few months in some countries, to cover final pay, severance and tax true-ups. It is returned after the employee offboards, so it is not money you lose, but it is cash locked up before your first payroll.
• A currency markup. If you fund in one currency and the employee is paid in another, the conversion usually carries a markup over the mid-market rate, often a couple of percent, built into the exchange rate rather than itemised as a fee.
• Statutory extras and benefit markups. The gross-plus-employer-contributions baseline still has to carry whatever the country mandates on top, such as a 13th-month payment in some markets, and supplemental benefits like private health or dental often add an administration markup on the provider side.

None of these flip the conclusion: for your first hires the EOR is still the cheaper route. They are the lines to ask about in writing before you sign, so the quote you compare against your own entity is the real all-in number, not just the headline fee.

The currency markup, quantified, and the lever that zeroes it

Of those three lines the currency markup deserves its own look, because it is both the easiest to miss and the easiest to remove. It is never a line on the invoice. When you fund payroll in one currency and the employee is paid in another, the EOR converts at its own rate and keeps a spread over the mid-market rate. Deel prices this off a forward rate from its banking partners rather than a fixed percentage, and independent breakdowns put the effective spread at roughly 0.6 to 2 percent, folded into the exchange rate rather than shown as a fee. Remote does the same through a fixed monthly Remote FX Rate whose markup over the mid-market rate it does not publish, and it charges a separate 50 dollars a month per employee for a non-local or linked-currency salary arrangement on top of that.

The figure is small as a percentage and real as an annual number. On the 5,000-a-month salary in the German example, a 2 percent spread is about 1,200 dollars a year, sitting quietly next to the 599-a-month platform fee you were comparing. Across a team it compounds: a 1 percent spread on a million dollars of non-domestic payroll is 10,000 dollars a year that shows up nowhere as a fee.

The lever is straightforward, and Deel states it plainly in its own help documentation: to reduce or avoid the FX charge, pay each invoice in the currency it is issued in. If you already hold the employee pay currency, or top up a multi-currency account and fund the EOR in that currency, the conversion, and its spread, never happens. So the practical steps before you sign are to ask each provider for its FX rate methodology in writing, and to decide whether to fund in the pay currency yourself rather than let the EOR convert your home currency at its own rate every cycle. It does not change which route is cheaper, but on a cross-border payroll it is real money you can keep.

The other variable: a flat fee or a percentage of payroll

The 599 dollar figure is a flat per-seat fee, and that is the model the established providers like Deel and Remote use: roughly 199 to 699 dollars a month whatever the salary. A smaller set of EORs price instead as a percentage of gross payroll, commonly in the 5 to 15 percent range and often 8 to 10 percent. Which model you are quoted changes the math, because a flat fee ignores salary and a percentage grows with it.

• The two models cross at the fee divided by the rate. A 599 dollar flat fee against an 8 percent rate breaks even at about 7,500 dollars a month gross: below that the percentage is cheaper, above it the flat fee is.
• As a rough guide, a percentage tends to win for lower-paid roles and a flat fee for mid to senior salaries. On the 5,000 dollar German hire above, an 8 percent rate would be about 400 dollars a month against the 599 flat fee, so the pricing model, not just the provider, moves the number.
• A percentage fee also rises every time you give a raise, while a flat fee does not, which is why the flat model has become the default for stable teams.

It also shifts where your own entity wins. The five to six employee crossover above assumes a flat 599 dollar seat. Under a percentage model the per-seat cost climbs with each senior salary, so for a well-paid team the stacked fees reach the entity overhead sooner, at fewer heads. Quote both models against the entity line in the tool, not just a headline flat fee.

The point

An EOR is not the expensive option; it is the option that avoids a fixed cost you cannot justify for one or two people. The honest answer depends on your country, salary and how many people you plan to hire there, so put your own figures in and read where the two lines cross.