EOR Cost vs Direct Hire: Is It Worth It in 2025?

Global hiring is accelerating as remote work and workforce mobility become more prevalent. For HR leaders, the question is no longer whether to expand internationally — it’s how to do it efficiently and cost-effectively.

The choice comes down to whether to use an Employer of Record (EOR) service or hire directly. While EORs offer speed and simplicity, those looking to establish a deep local presence may find direct hiring brings them closer to their goals. But it’s vital to compare costs and understand the tradeoffs to make the right call for your business.

With experience helping companies in over 150 countries, Deel has seen the real cost drivers behind both EORs and direct hiring. We share our direct insights with you in this article. Read on to understand the typical fees associated with each approach, where costs differ, and when to consider an EOR.

What is an Employer of Record (EOR)?

An EOR is a third-party organization that can act as the legal employer of your international workforce. While you retain control over day-to-day processes, it handles all the HR, payroll, and compliance for a fixed, monthly fee.

What happens is the EOR hires your overseas workers through a local entity. The worker is registered under the provider’s corporation in the country, but still answers to you. And if any compliance issues arise, the EOR is responsible for penalties and legal action as the official employer on paper.

Businesses usually consider an EOR when they don’t already have an entity in a country and need to hire talent there. You might need this bridge to the local talent market for speed, to save costs, or as an interim solution while you establish your own corporation.

As more companies turn to international hiring, EORs have grown in popularity. 73% of companies used the service to expand their global workforce in 2024. Experts predict that demand will double by 2034 as remote work policies dominate and concerns over global compliance requirements grow.

EOR costs and pricing structure explained

Most EORs charge a flat monthly fee per employee that’s either a fixed charge or a percentage of payroll. Deel has a flat rate, for example.

EOR fees range from as little as $199 per month for basic models to $1,500 for all-inclusive services. They don’t necessarily require a long-term commitment. If you only need to hire workers abroad for a short period, Deel EOR lets you handle contracts month-to-month.

The EOR’s monthly total also depends on your workforce size and location. Averages range across markets because the cost of hiring and admin varies so drastically between countries. For instance, hiring in Germany involves managing a larger administrative workload due to all the individual benefits programmes, and EORs will reflect this in their pricing.

While there may be many separate costs involved, EORs give you a single monthly invoice with a breakdown. You get their monthly fee plus each worker’s salary and benefits in a lump sum, which simplifies managing all these separate expenses.

Direct hire costs explained

Hiring directly through your own company involves managing a range of different expenses. Beyond salaries and benefits, you must budget for the following:

• Entity setup: Incorporation is one of the biggest upfront costs, usually ranging between $5,000 and $25,000
• Licensing: You may need to acquire certain permits depending on your industry
• Ongoing admin: Annual filings and audits are required to keep your business in good standing with the local authorities
• Payroll processing: Local vendors charge a monthly or annual fee to handle payroll and taxes for on-the-ground teams
• Insurance: Most jurisdictions require employers to make mandatory contributions to social security programs
• HR administration: Managing all the contracts, records, and reporting obligations calls for extra effort from your team
• Expert support: You’re likely to rely on local legal and accounting consultants to navigate setup, compliance, and more

Again, direct hiring costs can vary drastically across regions. For example, our employee cost calculator finds that for the same salary, you pay around $54,000 in the US and $58,000 in the UK. That may seem like a small difference, but that sum adds up as you hire more workers.

EOR cost vs direct hire: A side-by-side comparison

How do these fees stack up against each other? Here’s a loose idea of the costs you can expect when hiring five employees for the year through an EOR and an owned entity:

But here’s the same breakdown for hiring 20 workers:

As you can see, an EOR becomes less cost-efficient the more workers you hire in a single location.

But bear in mind that these calculations don’t factor in some unseen costs and savings. For example, an EOR significantly increases your time-to-hire, so essential positions get filled within days. You could save thousands by avoiding a long period of lower productivity.

With the EOR hires, you also get your payroll, benefits administration, and compliance included. You don’t have to invest resources into building out local teams.

To compare costs for a specific location, use our EOR vs entity setup calculator. Enter the country, the number of workers you want to hire, and your contact details for the breakdown.

Is an EOR worth it?

When it comes to deciding whether to use an EOR or an owned entity, neither approach is objectively better than the other. Ultimately, the choice to outsource hiring comes down to your specific business needs and your short and long-term goals.

Here’s when an EOR makes more sense:

Managing remote, distributed teams

When you have a scattered team and don’t require physical offices, it’s not cost-effective to establish entities everywhere you go. You end up paying thousands to incorporate in all the countries where you operate.

An EOR helps you avoid the entity setup costs and pay a predictable per-employee fee for your entire, distributed workforce.

Testing a new market

Unsure whether there’s a demand for your product or service in a location? An EOR means you don’t have to spend resources on entity setup and potentially lose your investment if the market doesn’t pan out.

As a result, your business becomes more resilient because you don’t have to wait until you’ve raised the finances to expand. You can test markets whenever and wherever you sense there’s an opportunity.

Entering markets quickly

Sometimes, you’re sure there’s an opportunity in a new market, but you can’t move fast enough to beat local competitors or make the most of favorable conditions. You’re slowed down by months of entity setup, licensing, and hiring processes.

An EOR like Deel can enable you to hire workers within a matter of days. Instead of waiting and potentially missing out on opportunities, you can enter markets immediately.

Running short-term projects

For temporary assignments, an EOR costs less than setting up and later shutting down an entity. You don’t even have to commit to a year with services like Deel. All you have to do is give us a month’s notice when you’re ready to leave, and you get your final bill for the workers in that location.

Bridging to entity setup

Perhaps you’re ready to establish a local presence, but don’t want to wait until the paperwork is completed to get started. An EOR can enable you to hire workers and build out your offices during this transitional period. Once you’re ready, you can shift your employees from the provider’s entity to your own.

When direct hiring makes more sense

Direct hiring may be more appealing when you want to establish a deeper local presence by setting up offices and facilities. It can also be more effective when you’re trying to build a recognizable brand in the region or apply for specific licenses. All these business activities may involve permanent establishment in certain jurisdictions.

However, many of the same risks and expenses apply. You still need to comply with local labor and employment laws, find a specialist payroll provider, and enroll in mandatory benefits. Finding a global solution like Deel is essential to navigate entity setup, develop a reliable payroll system, and maintain continuous compliance.

Do everything with Deel

Deel is with you throughout every stage of your growth journey. Start by hiring through Deel EOR, entering new markets, and expanding your global presence. When you’re ready for the next step, incorporate in those regions by using our white-glove entity setup service.

And there’s no need to stick to one solution. Deel enables you to manage your operations through our EOR service in some countries and owned entities in others. Everything is unified through Deel Payroll and HR with its single dashboard and compliance features.

Looking to simplify global hiring? Book a call with the Deel team to see how we can support your business through our EOR services, entity setup, and global HR and payroll.