EOR vs Setting Up Entity in UAE: Complete Comparison 2025

An Employer of Record is a third-party organization that becomes the legal employer of your workers in the UAE. While your company manages day-to-day work, the EOR handles employment contracts, visa sponsorship, WPS payroll processing, tax and social insurance compliance, and benefits administration.

Establishing a legal presence gives you full control but requires significant investment. Options include Mainland LLC (100% foreign ownership allowed, access anywhere in UAE), Free Zone Company (100% foreign ownership, within specific zone), Branch Office (for existing multinationals), or Representative Office (marketing only, no trading).

EOR requires only a service agreement and can be operational within 1-2 weeks. Own entity requires trade license, memorandum of association, visa quota applications, corporate bank account (4-8 weeks alone), and physical office space or Flexi-desk arrangement.

With EOR, the provider handles all compliance, payroll, and visa matters. With own entity, you manage everything directly or through service providers - offering more control but requiring more internal capability or vendor management.

With EOR, employees are technically employed by the EOR company - your company name doesn't appear on visas or contracts. With own entity, employees are directly yours with full branding and relationship control.

Monthly service fees range from AED 1,500-4,000 per employee. Setup fees are typically AED 0-5,000 one-time. Visa processing is often included or costs AED 3,000-5,000. For 5 employees, Year 1 total runs AED 90,000-240,000.

Trade license costs AED 10,000-50,000/year. Office space ranges AED 15,000-100,000+/year. Additional costs include visa quota deposits (AED 3,000/employee), PRO services (AED 2,000-5,000/month), bank charges, accounting, and legal compliance. For 5 employees, Year 1 total runs AED 120,000-400,000+.

EOR is more cost-effective for 1-5 employees. At 5-10 employees, costs become comparable depending on specific rates. Above 10-15 employees, own entity typically becomes more economical. Break-even usually occurs at 8-15 employees.

With EOR, the provider handles WPS using their bank relationship. With own entity, you're responsible for WPS setup, SIF file generation, and MOHRE reporting through your corporate bank account.

This is critical to understand: with EOR, your employees typically count toward the EOR's Emiratisation quota, not yours. If you later establish an entity, you'll need to build your own quota from scratch. Clarify this with any EOR provider.

EOR uses their visa quota to sponsor your employees. With own entity, you secure and manage your own visa quota with full control over sponsorship decisions.

You're testing the UAE market before full commitment, hiring fewer than 10 employees, need to hire quickly (within weeks), are uncertain about long-term UAE presence, don't want to manage UAE compliance internally, have a short-term project (1-2 years), or have a remote team without physical UAE needs.

You have long-term commitment to UAE market, plan for 10+ employees, need local contracts with UAE clients, want full control over employment, are building brand presence in the region, your industry requires a licensed entity, or you pursue government contracts (often require local entity).

Many companies use both strategically: start with EOR for initial market entry, establish entity once market is validated, transition employees to own sponsorship, and keep EOR for temporary or project staff.

Entity setup takes 2-4 months. Bank account opening adds 4-8 weeks. Visa quota approval takes 2-4 weeks. Employee transfer requires 2-4 weeks per employee. Total transition typically takes 4-6 months.

Establish entity while maintaining EOR (don't cancel yet). Open corporate bank account. Secure visa quota. Coordinate employee transfers with proper notice. Cancel EOR visas and issue new visas under your entity. Transfer payroll to own WPS. Terminate EOR agreement per contract terms.

Entity setup runs AED 15,000-50,000. Visa cancellation and reissuance costs AED 3,000-5,000 per employee. EOR exit fees vary by contract. Expect 1-2 months of overlap with double costs during transition.