How EOR Helps Startups Save Costs in Southeast Asia

Introduction
Employer of Record (EOR) is an outsourced HR solution that allows startups to hire employees in foreign countries without the need to establish a local legal entity. In Southeast Asia, where labor regulations and operational costs vary significantly across countries, EOR offers substantial financial and strategic advantages. This article explores how EOR helps startups reduce costs, stay focused on product development instead of HR management, and provides real-world examples and specific benefits in the context of the Southeast Asian market.

Cost Benefits of EOR for Startups
One of the most immediate cost savings that EOR offers to startups is the ability to avoid the expenses associated with setting up a legal entity. Establishing a subsidiary in countries such as Vietnam, Indonesia, or Thailand often involves significant legal and registration fees, which can run into thousands of dollars depending on the country. In addition, there are ongoing compliance costs related to financial reporting, taxation, and meeting periodic legal obligations. The setup process itself can take several months to a year, delaying market entry and hindering business growth. By acting as the legal employer on behalf of the startup, EOR removes these burdens. For instance, a startup based in Singapore that wants to hire software developers in Vietnam can do so immediately through an EOR without having to open a branch in the country. According to Oyster, the cost of using an EOR is significantly lower than the cost of establishing a legal entity.

Another major advantage is the reduction in human resources and legal compliance costs. Every country in Southeast Asia has its own labor laws governing social security, income tax, and employment contracts. Complying with these regulations requires local expertise and dedicated resources—something most startups lack. EOR providers handle payroll, tax deductions, and ensure that employment contracts comply with local laws, thereby minimizing the risk of penalties or legal disputes. They also manage administrative tasks such as insurance, benefits, and contract termination, allowing startups to operate efficiently without building an internal HR department. Rippling reports that EOR services help companies avoid misclassification of workers and reduce expenses related to legal fees and regulatory risks—issues that are particularly relevant in Southeast Asia, where labor laws can change quickly.

Speed is another key factor. Startups often need to hire quickly to meet product development or market expansion goals. With EOR, startups can onboard employees within days rather than waiting for months. Administrative costs are also minimized because the EOR handles the creation of employment contracts, payroll processing, and tax reporting. This allows startups to avoid the overhead of hiring in-house HR staff. According to Velocity Global, EOR helps startups save internal resources by eliminating the need to build dedicated HR teams for new markets.

EOR also helps optimize operating costs by offering a centralized platform to manage employees across multiple countries. Instead of dealing with multiple vendors or HR systems for different countries, startups can use a single EOR provider for an all-in-one solution. This approach also enables startups to take advantage of lower labor costs in countries like Vietnam or Indonesia without investing in local infrastructure. For example, hiring a software developer in Vietnam can be significantly more affordable than in Singapore, and EORs help businesses tap into this talent pool seamlessly.

Legal risk mitigation is another critical benefit. Non-compliance with local labor laws can result in substantial fines or legal disputes that are financially damaging for startups. EOR providers typically have local legal experts who ensure that all employment practices adhere to local laws, reducing the likelihood of violations. By preventing costly mistakes, such as the misclassification of employees, EORs help startups avoid fines that can reach millions of dollars, according to Rippling.

Real Example: BBMSL and Deel
A real-world example that illustrates these benefits is BBMSL, a payment solutions company that used Deel’s EOR services to expand into Southeast Asia. By partnering with Deel, BBMSL was able to hire over 15 employees across Singapore, Malaysia, and Thailand without establishing local legal entities. Deel enabled the company to generate compliant employment contracts and manage payroll with just a few clicks, removing the need for third-party legal services or extensive research into local labor laws. This allowed BBMSL to focus on capturing business opportunities instead of managing administrative burdens. As a result, the company saved both time and costs while accelerating its expansion in a competitive regional market.

Specific Benefits in the Southeast Asian Context
Southeast Asia is a uniquely diverse region in terms of labor markets, costs, and legal frameworks. Countries like Vietnam and Indonesia offer lower labor costs compared to Singapore or Malaysia, and EOR services help startups access talent in these markets without making heavy investments in infrastructure. Additionally, the labor laws in the region vary greatly—Vietnam, for instance, requires mandatory social insurance, while Singapore enforces strict rules around employment contracts. EOR providers help startups navigate these legal complexities efficiently. Furthermore, Southeast Asia is experiencing rapid digital growth. According to Forbes, the region’s tech startup ecosystem was valued at USD 340 billion in 2020 and is expected to triple by 2025. EOR solutions allow startups to capitalize on this growth by offering a flexible and scalable approach to workforce expansion.

Conclusion
EOR is a powerful enabler for startups operating in Southeast Asia, helping them cut costs and focus on core business activities like product development and market expansion. By eliminating the need to establish legal entities, taking over HR management tasks, and ensuring legal compliance, EOR services reduce operational costs, accelerate hiring, and mitigate legal risks. As seen in the case of BBMSL, EOR enables startups to grow quickly and efficiently without being bogged down by administrative complexity. For any startup looking to explore the vibrant and dynamic markets of Southeast Asia, EOR stands out as an ideal solution.