Employer of Record Philippines vs Setting Up an Entity
For most Singapore companies making their first few Philippine hires or testing the market, an employer of record (EOR) is faster and cheaper. Setting up your own Philippine entity starts to make sense once headcount, long-term commitment or control needs justify a large fixed cost. On one vendor's published figures, that crossover sits at roughly 6 to 12 employees. If your operation is export-oriented, such as back-office or BPO work serving clients outside the Philippines, the capital rules may be lighter than many guides suggest. Treat this as strategic guidance, not legal or tax advice.
Key takeaways
EOR suits small teams and market tests. Remote People says an EOR is significantly faster and lower-cost for companies testing the market or hiring fewer than 15 employees (source).
Published entity costs vary widely because some estimates count only registration fees while others include capital, staff and running costs.
A worked break-even using Deel's own figures suggests an entity becomes cheaper at around 12 employees in year one and around 6 from year two. Your numbers will differ.
The US$200,000 paid-in capital rule reportedly does not apply to exporters, which matters for back-office and service-delivery set-ups.
There is a third route. Managed outsourcing (BPO) can beat both options when you need output rather than direct employees.
EOR vs your own entity at a glance
| Factor | Employer of record | Own Philippine entity | |---|---|---| | Time to first hire | 1 business day via Deel, by its own estimate (Deel) | 3–4 months, per Deel (Deel) | | Upfront cost | Minimal | Registration, legal, permits, bank set-up, possibly paid-in capital | | Capital requirement | None | Up to US$200,000 for domestic-market companies over 40% foreign-owned; exemptions apply | | Recurring cost | Per-employee monthly fee plus salary and statutory costs | Accounting, audit, payroll, HR, compliance, plus salary and statutory costs | | Control | Day-to-day management is yours; the EOR is the legal employer | Full control of employment, policies and contracts | | IP and client contracts | Needs careful contract drafting with the EOR | Held directly by your entity | | Exit ease | Simple: end the service agreement | Slower: dissolution and deregistration | | Best fit | First hires, pilots, uncertain demand | Larger, permanent teams and long-term commitment |
What does an EOR really cost in the Philippines?
Provider fee models
EOR providers charge in one of two ways:
Flat monthly fee per employee. Commenda reports Philippine EOR fees usually run US$199–699 per employee per month, from RemoFirst at $199 to Oyster and Remote at $699 (Commenda).
Percentage of salary. SelectSoftwareReviews notes some providers charge 8–15% of gross salary instead.
For lower-salary roles, a percentage model can work out cheaper. For senior roles, a flat fee usually wins. Local providers often price differently from global platforms, so compare like for like, including what onboarding, payroll and offboarding services are bundled.
Statutory employer costs
Whichever model you choose, you still pay statutory contributions on top of salary. According to HiveDesk, the employer shares are (HiveDesk):
SSS (social security): 10% of the monthly salary credit, plus 1% employees' compensation
PhilHealth: 2.5% of basic salary
Pag-IBIG (housing fund): 2%, capped at PHP 200 a month
13th-month pay: about 8.33% of annual basic salary
These rates change periodically, so confirm current figures with SSS, PhilHealth and Pag-IBIG before budgeting. The key point is that these costs apply under both options. They do not affect the EOR vs entity decision; only the EOR fee and the entity's fixed costs do.
What does setting up a Philippine entity really cost?
One-off costs
Expect several layers: SEC registration, BIR (tax) registration, local mayor's and barangay permits, a corporate bank account, and legal and incorporation support. Commenda puts SEC registration at about ₱10,000–₱30,000 depending on authorised capital and entity type (Commenda).
The paid-in capital rule and its exemptions
This is the cost layer that changes everything. According to Rippling, a company selling to the Philippine market that is more than 40% foreign-owned needs US$200,000 of paid-in capital. This drops to US$100,000 for companies using advanced technology or employing at least 50 people, and does not apply to exporters (Rippling).
For a Singapore company setting up a back-office, customer support or shared-services team serving overseas clients, the export exemption may be highly relevant. Confirm eligibility under the Foreign Investments Act and with the SEC before structuring around it.
Ongoing costs
Once registered, your entity carries fixed overheads regardless of headcount: bookkeeping, statutory audit, tax filings, payroll processing, HR administration, resident officer requirements and office costs.
Why published estimates range so widely
You will see entity costs quoted from around US$2,000 to over ₱2 million. The gap is mostly about scope. Low figures typically cover registration fees only. Higher figures, such as Deel's estimate of ₱2,283,860 upfront and ₱2,506,399 a year to run (Deel), appear to include far more of the operating cost stack. When comparing quotes, always ask what is included.
When does an entity become cheaper than an EOR?
A simple break-even formula
Break-even headcount = entity fixed costs ÷ EOR fee saved per employee
Salaries and statutory contributions cancel out because you pay them either way.
A worked example using Deel's figures
Deel estimates a Philippine entity at about ₱4,790,259 for year one (setup plus running costs) and its own EOR fee at ₱408,480 per employee a year (Deel). Applying the formula:
| Scenario | Entity fixed cost | EOR fee per head per year | Break-even headcount | |---|---|---|---| | Year one (setup + running) | ₱4,790,259 | ₱408,480 | ~11.7 employees | | Year two onward (running only) | ₱2,506,399 | ₱408,480 | ~6.1 employees |
Assumptions and caveats:
These are a vendor's estimates, not independent figures. Deel sells EOR services.
We assume Deel's entity figures are fixed costs that do not scale with headcount. If they include staff salaries, the real break-even is lower.
Paid-in capital is not a running cost, but it ties up cash. If you need US$200,000 locked in, factor in its opportunity cost.
A cheaper EOR (Commenda cites fees from US$199 a month) pushes break-even higher. A lean, export-exempt entity pushes it lower.
The practical reading: below about 6 employees, an EOR is almost always the better deal. Between about 6 and 12, it depends on your time horizon. Above that, and with a multi-year commitment, an entity usually pays off.
Factors that aren't about cost
Speed: an EOR can hire in days; an entity takes months.
Client requirements: some enterprise clients want contracts with a local legal entity.
IP and data: direct employment simplifies ownership of work product.
Certainty: if demand is unproven, the exit cost of an entity is a real risk.
What should Singapore companies consider specifically?
Subsidiary, branch or representative office?
A subsidiary is a separate Philippine company. A branch is an extension of your Singapore entity. A representative office generally cannot earn income locally. Each carries different liability, capital and tax consequences, so the right choice depends on whether you are selling into the Philippines or delivering services out of it.
Export-oriented and back-office set-ups
If your Philippine team serves your Singapore HQ or overseas clients, you may qualify for the export exemption from the capital rule, and potentially for economic zone incentives. Verify eligibility with a Philippine adviser.
Tax and transfer pricing
A Singapore parent with a Philippine subsidiary will need to price intercompany services at arm's length and consider withholding tax and treaty relief. This is specialist territory: have a qualified tax adviser in both jurisdictions review your structure. Our management consultancy team can help design the operating model that sits around it.
Is there a third option?
Yes. If what you need is output, such as customer support, data entry, admin or back-office processing, rather than employees you manage directly, business process outsourcing can beat both routes. You avoid the entity's fixed costs and the EOR's per-head fee, and the provider handles recruitment, supervision and continuity.
BPO works best for well-defined, repeatable processes. It is less suitable when roles require deep integration with your product or proprietary knowledge. For a role-by-role comparison, see our guide on Philippines outsourcing vs Singapore hiring.
How do you move from an EOR to your own entity?
Many companies start with an EOR and transition later. A practical checklist:
Start entity setup 4–6 months ahead, given Deel's 3–4 month time-to-hire estimate.
Review your EOR contract for notice periods and any conversion fees.
Plan the employment transfer so tenure, leave balances and benefits carry over, and get local legal advice on how to document it.
Register with SSS, PhilHealth and Pag-IBIG as an employer before the transfer date.
Set up payroll and HR policies in the new entity.
Communicate early with employees to protect retention.
Reassign IP and client contracts to the new entity where needed.
Making the decision
There is no universal headcount threshold. The right answer depends on your fee quotes, your time horizon, whether you serve the Philippine market or export from it, and how much control your clients expect. Because I-BG Group operates across Singapore and the Philippines and does not sell EOR services, we can model your break-even point neutrally and compare it against entity, branch and outsourcing routes. If you are weighing your options, our market entry support team is happy to talk it through.
Figures in this article come from third-party vendor sources and should be verified against official Philippine sources (SEC, BIR, SSS, PhilHealth, Pag-IBIG) before you act on them.
Frequently asked questions
How much does an employer of record cost in the Philippines?
Commenda reports flat fees of about US$199–699 per employee per month, while some providers charge 8–15% of gross salary instead. Salary and statutory contributions (SSS, PhilHealth, Pag-IBIG and 13th-month pay) are paid on top.
At what headcount is a Philippine entity cheaper than an EOR?
Using Deel's own figures, break-even is roughly 12 employees in year one and about 6 from year two onward. Your result depends on actual EOR quotes, entity running costs and whether you need paid-in capital.
Do foreign companies need US$200,000 to set up in the Philippines?
According to Rippling, companies over 40% foreign-owned that sell to the Philippine market need US$200,000 paid-in capital, reduced to US$100,000 in some cases. Exporters are reportedly exempt, so confirm with the SEC and a local adviser.
How long does it take to set up a company in the Philippines?
Deel estimates 3–4 months to make your first hire through your own entity, compared with as little as one business day through its EOR. Timelines vary with entity type and document readiness.
Can I move employees from an EOR to my own entity later?
Yes, this is a common path. Plan several months ahead, check your EOR contract's notice terms, and take local legal advice so tenure and benefits carry over smoothly.
Is outsourcing a better option than an EOR or entity?
It can be when you need defined outputs such as customer support, data entry or back-office work rather than directly managed staff. Outsourcing avoids both entity overheads and per-head EOR fees.
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