Expanding your company's presence in foreign markets is a very exciting development that also brings a few obstacles that should be survived, especially in the case of new country operations as in the Philippines. One of the main decisions for companies is whether they should establish a local company or use a service of a Philippine Employer of Record. The article will argue the cost reduction of a Philippine EOR inwards the establishment of a local entity, educating you on a prudent pick.
Understanding Employer of Record (EOR) Services
EOR is a third-party service provider that acts as the employer of your employees on your behalf and looks after all the legal matters that come with it. That is to say, the service provider not only manages the payroll; benefits administration; tax filing, and compliance with regulations but also ensures that the employees are hired and transferred to the company's headquarters in the Philippines promptly.
Cost Implications of Setting Up a Local Entity
- Initial Setup Costs: Creating a local entity in the Philippines demands an enormous amount of money from the start. This itemizes expenditures such as lawyer's fees, registration of the company, establishment of a physical office, and recruitment of local administrative staff. The process is full of loopholes and can last for a long time, usually several months or more.
- Operational Costs: The entity being in place which staff will be required to handle some of the day-to-day functions like phone systems, office rent, utilities, local workers' salaries, and staff administration. Moreover, the businessperson will be in charge of doing payroll, the remaining taxes, and compliance in-house, which can be hard and costly.
- Compliance Costs: A company's labor law compliance and tax compliance in the case of the Philippines entail the need for special persons and materials. The company cannot operate the way it wants to, if it is not compliant the company can be fined and have legal problems adding up the costs.
Cost Benefits of Using a Philippine Employer of Record
- Lower Initial Investment: Through this tool, a company can save not only time but also money. The local entity will not have to go through the process of setting up an office so that money and time are not spent on that. You can hire employees immediately after forming the EOR, thus you will have a quicker market entry and spend money on the initiation stage.
- Reduced Operational Costs: To sum up, an EOR relieves you of the administrative workload. He/she is engaged in all the work that one may be involved in this sector during the staffing period, complaint processing, processing of payrolls and compliances, benefits, etc. Therefore, it is not only the case that you do not need a physical office to rent or hire extra people to carry out these functions. Besides, you will also be saving your company from many operational costs.
- Compliance Management: As your EOR, the company should be in compliance with the labor laws of the local area and adhere to the tax regulations. This way it reduces the possibility of penalties and legal troubles which will be expensive and time-consuming to solve.
- Scalability and Flexibility: EOR will give you the ability to change your staff members whenever you want, in case your business requirements change, without the associated hiring and firing headaches. This is what you have to do when you directly staff. This capability is the main factor that ensures the company is able to respond to market changes smoothly and in the most cost-effective way possible.
Comparing the Costs: EOR vs. Local Entity
- Time and Resources: One of the big elements of setting up a local entity is the time investment that is needed for registration, setting up operations, and understanding local laws. An EOR, on the other hand, allows you to bypass these steps and focus on your core business activities.
- Hidden Costs: Apart from the actual cost, managing a local entity also has such hidden costs like legal fees, potential fines for non-compliance, and the need for local HR expertise. An EOR keeps these aspects within its service fees, thus providing more predictable and manageable costs.
- Long-Term Commitments: A local entity takes a long-term solid commitment which might not be the best if you are testing a new market. An EOR offers a more flexible approach, which gives you the option to enter and exit the market.
Conclusion
Employers of Record services in the Philippines offer a lot of financial benefits not only compared to local setups but also for companies in Thailand and South East Asia who want to enter the market quickly and efficiently. With the help and services of an EOR, you can avoid the risks and save on initial investment and operational expenses at the same time ensuring compliance with the local laws. This low-cost solution allows you to concentrate on the growth of your business in the Philippines without the hassles and costs of establishing a local presence.