Employment & Compliance

Employer of record vs setting up your own entity in the Philippines

27 June 2026 · 6 min read

In short

An employer of record lets you hire in the Philippines within weeks, with no capital requirement. A widely used rule of thumb puts the switch to your own entity at roughly 10 to 15 people. Setting up your own entity needs around USD 200,000 in paid-up capital and months of setup, but lowers per-head cost at larger scale. Most companies start with an EOR and convert later.

If you want to employ people in the Philippines, you have two real options: use an employer of record, or set up your own local entity. Here is how they compare and when each makes sense.

The employer of record route

An employer of record (EOR) already has a compliant Philippine entity and employs your people on your behalf. You direct the work; they handle the contract, payroll, tax, and statutory benefits. You can be up and running in weeks, with no capital to lock up.

The own-entity route

Building your own entity means you are the legal employer directly. For a foreign-owned company selling locally, that generally means around USD 200,000 in paid-up capital under the Foreign Investments Act, plus registration, legal, and up to 5 months of setup before anyone starts. See the Baker McKenzie Philippines guide for the legal detail.

How they compare on cost

At small scale, the EOR route is far more affordable all-in, because you avoid the capital requirement and setup cost entirely. As your team grows, the per-head EOR fee adds up, and at a certain size, running your own entity becomes lower cost per person.

When to switch

Most companies start with an EOR to move fast and stay light, then consider their own entity once the team reaches roughly 10 to 15 people. That figure is a rule of thumb rather than a threshold in law. On running cost alone the crossover arrives earlier, because entity overhead of USD 2,000 to 5,000 per month is fixed while per-seat fees are not. What pushes the real decision later is the USD 200,000 capital lock, the setup time, and needing a local finance and HR function to run the entity. The good news is you can transition an existing team from an EOR onto your own payroll when the time comes.

Which should you choose?

If you are hiring your first few people, or you want speed and flexibility, start with an EOR. If you already know you will build a large team and want maximum control, an entity may be worth the upfront investment. When in doubt, start light and convert later.